-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NGtUcoGiwpX3QxMOGyT7eAQt0au6Wo/1/6VkXQYU2uFuBTj3v1LD9sX2x8r+U9o9 zSdKACxn9X0B8lD0YcT8gA== 0000891618-97-002702.txt : 19970625 0000891618-97-002702.hdr.sgml : 19970625 ACCESSION NUMBER: 0000891618-97-002702 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19970328 FILED AS OF DATE: 19970624 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMANTEC CORP CENTRAL INDEX KEY: 0000849399 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770181864 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17781 FILM NUMBER: 97629095 BUSINESS ADDRESS: STREET 1: 10201 TORRE AVE CITY: CUPERTINO STATE: CA ZIP: 95014 BUSINESS PHONE: 4082539600 MAIL ADDRESS: STREET 2: 10201 TORRE AVENUE CITY: CUPERTINO STATE: CA ZIP: 95014 10-K 1 FORM 10-K FOR THE YEAR ENDED MARCH 28, 1997 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (MARK ONE) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES --- EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 28, 1997. OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES --- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______. COMMISSION FILE NUMBER 0-17781 - -------------------------------------------------------------------------------- SYMANTEC CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 77-0181864 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10201 TORRE AVENUE, CUPERTINO, CALIFORNIA 95014-2132 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (408) 253-9600 - -------------------------------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: NONE NONE (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $0.01 PER SHARE (Title of class) 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 by check mark if disclosure of delinquent filer pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the Symantec common stock on June 1, 1997 as reported on the Nasdaq National Market and with respect to the Delrina exchangeable stock on the Toronto Stock Exchange: $1,046,855,373 Number of shares outstanding of each of the registrant's classes of common stock, including 2,919,312 shares of Delrina exchangeable stock, as of June 1, 1997: 55,323,964 DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held September 18, 1997 are incorporated by reference into Part III. ================================================================================ 2 SYMANTEC CORPORATION FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1997 TABLE OF CONTENTS PART I.
Page Item 1. Business.................................................. 1 Item 2. Properties................................................ 9 Item 3. Legal Proceedings......................................... 9 Item 4. Submission of Matters to a Vote of Security Holders....... 9 PART II. Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................................... 10 Item 6. Selected Financial Data................................... 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 12 Item 8. Financial Statements and Supplementary Data............... 23 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................... 23 PART III. Item 10 Directors and Executive Officers of the Registrant........ 24 Item 11 Executive Compensation.................................... 26 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 26 Item 13. Certain Relationships and Related Transactions............ 26 PART IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................................. 27 Signatures........................................................ 55
3 PART I ITEM 1: BUSINESS. FORWARD-LOOKING STATEMENTS. - --------------------------- The following discussion contains forward-looking statements that are subject to risks and uncertainties. There are several important factors that could cause actual results to differ materially from those anticipated by the forward-looking statements contained in the following discussion. Readers should pay particular attention to the risk factors set forth in this section and in the section of this report entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." GENERAL. - -------- Symantec Corporation ("Symantec" or the "Company") develops, markets and supports a diversified line of application and system software products designed to enhance individual and workgroup productivity. Approximately 80% of Symantec's net revenues are derived from products that operate on Microsoft Corporation's ("Microsoft") MS-DOS, Windows, Windows 95 and Windows NT operating systems for personal computers. Symantec also offers products for use on the Apple Macintosh, Power Macintosh and IBM OS/2 operating systems. The Company's predecessor, C&E Software, Inc., a California corporation, and that predecessor's operating subsidiary, Symantec Corporation, a California corporation, were formed in September 1983 and March 1982, respectively. The Company was incorporated in Delaware in April 1988 in connection with the September 1988 reincorporation of the Company's predecessor and its operating subsidiary into a single Delaware corporation. Since Symantec's initial public offering on June 23, 1989, the Company has completed acquisitions of the following companies:
Software or Activity Companies Acquired Date Acquired Acquired - ------------------ ------------- -------------------- Fast Track, Inc. ("Fast Track") May 28, 1996 Network Management Utilities Delrina Corporation ("Delrina") November 22, 1995 Remote Productivity Solutions Intec Systems Corporation ("Intec") August 31, 1994 Applications Central Point Software, Inc. ("Central Point") June 1, 1994 Security and Assistance SLR Systems, Inc. ("SLR") May 31, 1994 Internet Tools Fifth Generation Systems, Inc. ("Fifth Generation") October 4, 1993 Security and Assistance Contact Software International, Inc. ("Contact") June 2, 1993 Remote Productivity Solutions Certus International Corporation ("Certus") November 30, 1992 Security and Assistance MultiScope, Inc. ("MultiScope") September 2, 1992 Internet Tools The Whitewater Group, Inc. ("Whitewater") September 2, 1992 Internet Tools Symantec (UK) Ltd. ("Symantec UK") April 3, 1992 Marketing Entity Zortech Ltd. ("Zortech") August 31, 1991 Internet Tools Dynamic Microprocessor Associates, Inc. ("DMA") August 30, 1991 Remote Productivity Solutions Leonard Development Group ("Leonard") August 30, 1991 Applications Peter Norton Computing, Incorporated ("Norton") August 31, 1990 Security and Assistance
All of these acquisitions were accounted for as poolings of interest. Accordingly, all financial information has been restated to reflect the combined operations of these companies and Symantec with the exception of Fast Track, Intec, SLR, MultiScope and Whitewater, which had results of operations that were not material to Symantec's consolidated financial statements. Symantec's business strategy is to satisfy customer needs by developing and marketing products across multiple operating platforms that make customers productive and keep their computers safe and reliable - anywhere, anytime. During fiscal 1997, in a move to focus the Company's product offerings on customer needs, Symantec sold its FormFlow product line, acquired as part of the Delrina acquisition, to JetForm Corporation and sold the assets 1 4 comprising its networking business unit to the Hewlett-Packard Company. See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations. Symantec has a 52/53-week fiscal accounting year. Accordingly, all references as of and for the periods ended March 31, 1997, 1996 and 1995 reflect amounts as of and for the periods ended March 28, 1997, March 29, 1996 and March 31, 1995, respectively. PRODUCTS AND SERVICES. - ---------------------- Symantec's products, comprising both application software and system software, are currently organized into the following three major product groups: Remote Productivity Solutions, Security and Assistance and Emerging Businesses and Other. The following table summarizes Symantec's principal products by product group: Principal Products - ------------------------------------------- REMOTE PRODUCTIVITY SOLUTIONS ACT!(R) Internet FastFind(TM) WinFax(R) PRO pcANYWHERE(R) SECURITY AND ASSISTANCE Norton AntiVirus(R) Symantec AntiVirus for Macintosh (SAM(R)) Norton Your Eyes Only(TM) Norton Utilities(R) Norton Commander(R) Healthy PC.com(TM) PC Handyman(TM) CrashGuard(TM) EMERGING BUSINESSES AND OTHER Symantec Cafe(TM) Visual Cafe(TM) Visual Cafe(TM) PRO Visual Page(TM) REMOTE PRODUCTIVITY SOLUTIONS The Remote Productivity Solutions business is focused on helping remote professionals remain productive - anytime, anywhere. This business unit focuses on customer needs to access information, applications and data from any location. ACT! is an easy-to-use contact database with a graphical activity schedule, a full-featured word processor that links Microsoft Word and Wordperfect and a report generator. ACT! manages and integrates a user's contacts, calendar and communication through the use of integrated e-mail messaging. In addition, it has a drag-and-drop to link any file to any contact. ACT! runs on the Windows, Windows 95, Windows NT, MS-DOS, Macintosh, Newton, Psion, Lotus Notes and palmtop operating systems. Internet FastFind allows the user to use all of the top search engines at once as well as locate specific files on the Internet. Other features include "Notify" which automatically tracks and alerts when changes occur to favorite folders, FTP and Web sites and "PatchConnect" which identifies your system's hardware and software and automatically connects you to the appropriate Internet sites. Internet FastFind also uses Symantec's LiveUpdate to download and install the latest free updates. Internet FastFind runs on the Windows 95 and Windows NT operating systems. 2 5 WinFax PRO allows users to send, receive and manage faxes. WinFax PRO provides background faxing, which allows users to continue working on other applications while sending a fax via the Internet or any fax machine in the world. WinFax PRO also provides enhanced file compression, which increases the speed at which faxes are transmitted. Other features include "Delrina Pager," which allows a computer to page a user to alert him or her of incoming voice and fax messages and "call identify," which allows a user to view the incoming fax or phone number on the user's computer screen before answering the phone. In addition, WinFax PRO for Networks offers comprehensive support for the most common e-mail packages, enabling users to receive faxes directly to their e-mail address. It also uses Symantec's LiveUpdate to download and install the latest free updates. WinFax PRO runs on the Windows, Windows 95 and Windows NT operating systems. pcANYWHERE offers reliable, fast and flexible PC-to-PC remote computing via serial or modem connection. pcANYWHERE lets the user remotely control one PC from the keyboard of another PC. The offsite remote PC, laptop or PC terminal controls the operation of the distant host PC. The software allows the user to run any MS-DOS, Windows, Windows 95, Windows NT or Windows CE application remotely, transfer files and perform other data operations. In addition to allowing a remote user to run a distant PC, pcANYWHERE optionally allows users at the host (distant) machine to view the operations being conducted from the remote site. This makes pcANYWHERE ideal for support of users as a remote helpdesk function for both problem solving and application training. SECURITY AND ASSISTANCE The Security and Assistance business is dedicated to being indispensable to customers' daily use of computers by increasing productivity and keeping computers safe and reliable. Norton AntiVirus/Symantec AntiVirus for Macintosh (SAM) are programs for the protection, detection and elimination of computer viruses under the MS-DOS, Windows, Windows 95, Windows NT, Macintosh, Power Macintosh and OS/2 operating systems. They provide virus protection, detection and repair capability, recognize virus-like behavior and prevent most known or unknown viruses from infecting a system. They detect viruses and disinfect infected files and disks during normal computer use. They also detect and disinfect floppy boot-track viruses, stealth and encrypted viruses and remove active viruses from memory. They are designed to prevent viruses with a unique, comprehensive, multi-layered line of defense that combines scanning, virus sensing and inoculation. They also use Symantec's LiveUpdate to download and install the latest free updates. Norton Your Eyes Only offers comprehensive 32-bit security designed specifically for the Windows 95 operating system, "on-the-fly" automatic encryption using RSA Data Security, Inc.'s public key encryption technology, optional access control during boot-up to prevent unauthorized access to data on the hard disk and configurable automatic time-out blanking of the screen if the computer system is idle for a specified period of time. The administrator version provides configuration, distribution and management for an entire network from a central location. Norton Utilities are a set of "tools" designed to address the system-level operations of the MS-DOS, Windows, Windows 95, Windows NT, Macintosh and Power Macintosh operating systems. Norton Utilities provides disk and data recovery, security, performance optimization, system and .ini-file monitoring and preventive maintenance functions. The Norton Utilities can restore the structure of a disk and files under certain conditions and can also provide for file de-fragmentation, system operation information, file unerasing and other file and system operation improvements. It also uses Symantec's LiveUpdate to download and install the latest free updates. Norton Commander is designed to provide a character-based graphical approach and mouse capability for operations such as copy, move and delete. Norton Commander includes a MCI mail facility, file compression, Commander Link and a PC-to-PC file transfer function. Norton Commander includes a wide range of file viewers, application launching functions, a customizable menuing facility and a variety of network utilities and editor associates. Norton Commander runs on the MS-DOS, Windows, Windows 95 and Windows NT operating systems. 3 6 Healthy PC.com is an Internet site operated by Ziff-Davis' ZDNet division that consists of two separate services which include a free advice and consultation area maintained by ZDNet and the Healthy PC.com Health Club, a subscription based membership service which provides access to Symantec's AntiVirus, disk repair and LiveUpdate software. Healthy PC.com runs on the MS-DOS, Windows, Windows 95 and Windows NT operating systems. PC Handyman works continuously in the background to fix all kinds of PC operation problems such as screen freezes and hard drive crashes, and to keep important PC functions running smoothly. This product also provides the user with a trouble-shooting screen to help pinpoint computer problems and identify solutions. PC Handyman runs on the Windows 95 operating system. CrashGuard allows users to unfreeze most applications using the familiar Ctrl-Alt-Del keystroke combination, even when the system is hung or otherwise not responding. This program notifies you when a crash has been intercepted and provides a recommendation for fixing the crash. It also uses Symantec's LiveUpdate to download and install the latest free updates. CrashGuard runs on the Windows 95 and Windows NT operating systems. EMERGING BUSINESSES AND OTHER The Emerging Businesses and Other business includes products providing an easy to use Java development environment, as well as revenue streams from the sale of certain of the Company's software product lines and revenues from products nearing the end of their life cycle. Symantec Cafe features a native Java compiler that allows the building of Java programs. It provides a Class Browser, an introduction to Java programming book and over 35 sample applets that help developers get started quickly using Java in their web pages. In addition, Symantec Cafe provides a fully integrated graphical debugger for Java, allowing developers to do source level debugging of their Java standalone applications or applets that are embedded inside an HTML web page. This product runs on the Windows 95, Windows NT, Macintosh and Power Macintosh operating systems. Visual Cafe provides developers with a fast and productive visual programming environment for creating Java applets and applications. It includes many application components like buttons, text boxes and dialog boxes to create your own templates to reuse on future projects. In addition, it provides drag-and-drop visual programming for quick application development with minimal coding as well as a powerful, integrated graphical debugger to quickly debug applications at the source level. This product runs on the Windows 95, Windows NT, Macintosh and Power Macintosh operating systems. Visual Cafe PRO provides the complete Visual Cafe Java Rapid Application environment as well as the tools to create database applets and applications to allow the user to build Web pages with interactive database links in one complete, fully-integrated environment. It represents data structures graphically and uses wizards to instantly create dialogs and applications (including master/detail joins) with live connections to database tables. This product runs on the Windows 95, Windows NT, Macintosh and Power Macintosh operating systems. Visual Page allows business users to create documents on a web page for other people to access. Visual Page provides the user with a "Standard" Word Processor Toolbar with easy to use features to change type face sizes, align text and set styles. It also contains a Site Window which allows easy link setup and shows all pages, anchors and images in one convenient window. Other features include support for Java Applets, Netscape plug-ins and embedded Quicktime movies as well as an interface to support Apple Java Virtual Machine (VM) to make Java applets "alive". This product runs on the Windows 95, Windows NT, Macintosh and Power Macintosh operating systems. SALES, INTERNATIONAL SALES AND CUSTOMER SUPPORT. - ------------------------------------------------ Symantec markets its products worldwide utilizing a multi-channel strategy of direct sales and indirect sales through independent software distributors, major retail chains and resellers. SALES AND MARKETING Symantec utilizes both direct and indirect sales forces to encourage end users to adopt Symantec's products as corporate standards. The direct sales force focuses primarily on site license sales where a license for multiple workstations is sold to a customer at a negotiated price. The sales cycle with respect to site license sales may be lengthy and may be subject to integration and acceptance by the customer. The Company also employs an indirect sales force that works closely with its major distributor and reseller accounts to manage the flow of orders, 4 7 inventory levels and sell-through to retail chains as well as promotions and other selling activities. At March 31, 1997, Symantec had approximately 120 people in its North American direct and indirect sales force. Symantec maintains distribution relationships with major independent distributors. These distributors stock Symantec's products in inventory for redistribution to independent dealers, consultants and other resellers. Symantec also maintains relationships with major retailers, including CompUSA and Best Buy. Symantec markets to these retailers through independent distributors. Additionally, Symantec sells product upgrades and certain of its products to end users through direct mail campaigns and the Internet. Approximately 34% of Symantec's net revenues in the year ended March 31, 1997 were derived from Symantec's two largest distributors. Ingram Micro, Inc. represented 27%, 27% and 22% of Symantec's net revenues in fiscal 1997, 1996 and 1995, respectively, while Merisel Americas, Inc. represented 7%, 10% and 11% of Symantec's net revenues in fiscal 1997, 1996 and 1995, respectively. Agreements with distributors are generally nonexclusive and may be terminated by either party without cause. Such distributors are not within the control of Symantec, are not obligated to purchase products and also represent other vendors' product lines. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations Business Risks - Distribution Channels.) Symantec's return policy allows its distributors, subject to certain limitations, to return purchased products in exchange for new products or for credit towards future purchases. End users may return products through dealers and distributors within a reasonable period from the date of purchase for a full refund, and retailers may return older versions of products. Various distributors and resellers may have different return policies that may negatively impact the level of products which are returned to Symantec. Product returns occur when the Company introduces upgrades and new versions of products or when distributors order too much product. In addition, competitive factors often require the Company to offer rights of return for products that distributors or retail stores are unable to sell. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks - Product Returns.) Symantec's marketing activities include advertising in trade, technical and business publications, cooperative marketing with distributors, resellers and dealers, periodic direct mailings to existing and prospective end users and participation in trade and computer shows. Additionally, the Company typically offers two types of rebate programs, volume incentive rebates and rebates to end users. Volume incentive rebates are made available to Symantec's largest distributors and resellers whereby the distributor or reseller earns a rebate based upon their purchases or the volume of product they sell to end users. Volume incentive rebates are accrued when revenue is recorded. The amount of these rebates as a percentage of net revenues has been consistent for all periods presented and has not had a material impact on the Company's liquidity. From time to time, Symantec makes available rebates to end users of various products who acquired the products through major retailers. End user rebates are accrued when revenue is recorded. INTERNATIONAL SALES International revenues represented approximately 29%, 32% and 31% of Symantec's net revenues in fiscal 1997, 1996 and 1995, respectively. At March 31, 1997, Symantec had approximately 140 sales, marketing and related personnel in its international sales organization. The majority of Symantec's net revenues from certain European regions are derived from sales by affiliates of Symantec's major United States distributors. In other countries, Symantec sells its products through authorized distributors. In some countries, these distributors are restricted to specified territories. Symantec typically adapts products for local markets, including translating the documentation and software where necessary, and prepares marketing programs for each local market. Symantec has established marketing offices in Australia, Brazil, Canada, France, Germany, Holland, Hong Kong, Italy, Japan, Korea, Mexico, New Zealand, Russia, Singapore, South Africa, Sweden, Switzerland, Taiwan and the United Kingdom. These local offices facilitate Symantec's marketing and distribution in international markets. The Company's international operations are subject to certain risks common to international operations, such as government regulations, import restrictions, currency fluctuations, repatriation restrictions and, in certain jurisdictions, reduced protection for the Company's copyrights and trademarks. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks - Foreign 5 8 Operations.) Information with respect to international operations and export sales may be found in Note 12 of the Notes to Consolidated Financial Statements in Part IV, Item 14 of this Form 10-K. CUSTOMER SUPPORT Symantec's product support program provides a wide variety of free and fee-based technical support services to its customers. Symantec provides its customers with free support via electronic and automated services as well as 90 days free telephone support for selected products. Symantec accrues the cost of providing this free support at the time of product sale. In August 1996, Symantec introduced LiveUpdate, which provides free, instant access to on-line updates, enhancements, support tips and other useful information for selected products. In addition, Symantec offers both domestic individual users and domestic corporate customers a variety of fee-based options designed to meet their technical support requirements. These fee-based support programs are revised from time to time as customer requirements change and as market trends dictate. Fee-based technical support services did not generate material revenues in any fiscal years presented and are not expected to generate material revenues in the near future. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks - Rapid Technological Change and Development Risks and Fluctuations in Quarterly Operating Results.) PRODUCT DEVELOPMENT AND ACQUISITIONS. Symantec uses a multiple products sourcing strategy that includes internal development, acquisitions of product lines or companies and licensing from third parties. Symantec typically develops new products and enhancements of existing products in one of its two core product groups (Remote Productivity Solutions and Security and Assistance) and in selected product areas targeted as emerging business opportunities. Each group's responsibilities include design, development, documentation and quality assurance. Independent contractors are used for certain aspects of the product development process and elements of certain Company products are licensed from third-party developers. Symantec uses strategic acquisitions, as necessary, to provide certain technology, people and products for its overall product strategy. The Company has completed a number of acquisitions and dispositions of companies and products and may acquire and dispose other companies and products in the future. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks Management of Expanding Operations.) The Company is devoting substantial efforts to the development of software products that are designed to operate on various operating systems. Symantec's total research and development expenses were approximately $89 million, $95 million and $71 million in fiscal 1997, 1996 and 1995, respectively. Research and development expenditures are charged to operations as incurred. In fiscal 1997, Symantec capitalized approximately $8 million of capitalized software development costs, primarily related to network administration technology, which was sold to Hewlett-Packard in March 1997, resulting in the write off of approximately $7 million of unamortized costs during fiscal 1997. No material software development costs have been capitalized by the Company in fiscal 1996, while prior to being acquired by Symantec, Delrina capitalized approximately $6 million in software development costs in fiscal year 1995. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks - Operating System and Uncertainty of Research and Development Efforts.) COMPETITION. The microcomputer software market is intensely competitive and is subject to rapid changes in both technology and the strategic direction of major microcomputer hardware manufacturers and operating system providers. The Company's competitiveness depends on its ability to enhance its existing products and to offer new products on a timely basis. The Company has limited resources and must restrict its product development efforts to a relatively small number of projects. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks - Rapid Technological Change and Development Risks.) Operating system vendors such as Microsoft have added features to new versions of their products that provide some of the same functionality traditionally offered in Symantec's products. Symantec believes this trend may continue. Microsoft may incorporate advanced features in future versions of operating systems that may decrease the demand for certain of the Company's products, including those currently under development. A number of software developers have integrated antivirus capabilities into their Internet products. While Symantec plans to continue to improve its products with a view toward providing enhanced functionality over what may be provided in 6 9 operating systems, there is no assurance that these efforts will be successful or that such improved products will be commercially accepted by software users. Symantec will also attempt to work with operating system vendors in an effort to make its products compatible with those operating systems, yet differentiate those utility products from features included in the operating systems. However, there is no assurance that these efforts will be successful. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations Business Risks - Operating System.) The Company competes with at least one product from many of the major independent software vendors, including Borland International, Inc. ("Borland"), CyberMedia ("CyberMedia"), Dr Solomon's ("Dr Solomon's"), ELAN Software Corporation ("ELAN"), International Business Machines Corporation ("IBM"), McAfee Associates, Inc. ("McAfee"), Microcom, Inc. ("Microcom"), Microsoft, Norton-Lambert Corporation ("Norton-Lambert"), Phoenix Technologies Ltd. ("Phoenix"), TouchStone Software Corporation ("TouchStone"), Traveling Software, Inc. ("Traveling Software"), Starfish Software, Inc. ("Starfish") and SofNet, Inc. ("SofNet"). For example, Norton Utilities competes with operating systems, such as Microsoft's Windows 95 and MSDOS and IBM's DOS, which offer file recovery, anti-virus and backup features, First Aid from CyberMedia and other products from various other utilities vendors. Norton AntiVirus competes with PC-cillin 95 from TouchStone, Dr Solomon's Anti-Virus Toolkit from Dr. Solomon's and Viruscan from McAfee. Symantec's pcANYWHERE competes mainly with Laplink from Traveling Software, Carbon Copy from Microcom, Close Up from Norton Lambert and NetRemote from McAfee. ACT! competes with Lotus Organizer for Windows from IBM, Outlook from Microsoft, GoldMine from ELAN, Sidekick from Starfish and many other personal information managers produced by various software developers. Delrina WinFax PRO competes with products offered by Phoenix, Traveling Software and SofNet, as well as Microsoft's Windows 95 operating system. Cafe mainly competes with products from Microsoft. In addition, these and other Company products compete less directly with a number of other products that offer levels of functionality different from those offered by Symantec's products or that were designed for a somewhat different group of end users than those targeted by Symantec. Symantec also competes with microcomputer hardware manufacturers that develop their own software products. Further, Symantec competes with other microcomputer software companies for access to the channels of retail distribution and for the attention of customers at the retail level and in corporate accounts. Finally, Symantec competes with other software companies in its efforts to acquire products or companies and to publish software developed by third parties. Symantec believes that competition in the industry will continue to intensify as most major software companies expand their product lines into additional product categories. Some of the Company's competitors have substantial financial, marketing and technological resources. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks Rapid Technological Change and Development Risks, Operating System and Distribution Channels.) MANUFACTURING AND BACKLOG. Symantec's product development organization produces a set of master diskettes and documentation for each product. Most of Symantec's domestic manufacturing is performed by outside contractors under the supervision of Symantec's manufacturing organization. Purchasing of most raw materials and fulfillment of most orders is done by Symantec personnel in Symantec's Sunnyvale, California facility. The manufacturing steps that are subcontracted to outside organizations include the duplication of diskettes and CD-ROM's, printing of documentation materials and assembly of the final package. Symantec performs diskette duplication and assembly of the final package in its Dublin, Ireland manufacturing facility for most products distributed outside of the United States, Canada and Latin America. Symantec has often been able to acquire materials on a volume-discount basis and has had multiple sources of supply for certain materials. To date, Symantec has not experienced any material difficulties or delays in production of its software and related documentation and packaging. However, shortages may occur in the future. For example, shortages of certain materials may occur when Microsoft introduces new operating systems. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks - Supply Risk.) Symantec normally ships products within one week after receiving an order. Thus, Symantec does not consider backlog to be a significant indicator of future performance. 7 10 PRICE COMPETITION. Price competition is intense in the microcomputer business software market and is expected to continue to increase and become even more significant in the future. See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations. SEASONALITY. While Symantec's diverse product line has tended to lessen fluctuations in quarterly net revenues, these fluctuations have occurred and may occur in the future. These fluctuations may be caused by a number of factors, including the timing of announcements and releases of new or enhanced versions of Symantec's products and product upgrades, the introduction of competitive products by existing or new competitors, reduced demand for any given product, seasonality in the retail software market in foreign markets, customer end-of-period buying patterns and the market's transition between operating systems. These factors may cause significant fluctuations in net revenues and, accordingly, operating results. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks - Fluctuations in Quarterly Operating Results.) PRODUCT PROTECTION. Symantec regards its software as proprietary and relies on a combination of copyright, patent and trademark laws and license agreements in an attempt to protect its rights. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations Business Risks - Intellectual Property Rights.) EMPLOYEES. As of March 31, 1997, Symantec employed approximately 2,000 people, including 1,000 in sales, marketing and related staff activities, 600 in product development and 400 in management, manufacturing, administration and finance. None of the employees is represented by a labor union, and Symantec has experienced no work stoppages. Symantec believes that its employee relations are good. Competition in recruiting personnel in the software industry is intense. Symantec believes that its future success will depend in part on its ability to recruit and retain highly skilled management, marketing and technical personnel. Symantec believes that it must provide personnel with a competitive compensation package, which necessitates the continued availability of stock options and requires ongoing shareholder approval of such option programs. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations Business Risks - Employee Risk.) 8 11 ITEM 2: PROPERTIES. Symantec's principal locations, all of which are leased, are as follows:
Approximate Expiration Size of Location Purpose (in square feet) Lease - -------- ------- ---------------- ---------- North America Cupertino, California Corporate Headquarters Administration, sales and marketing 87,000 2003 Emerging Business and Research and development 161,000 2003 Remote Productivity Solutions Symantec Technology Future expansion * 143,000 2003 Center Sunnyvale, California Manufacturing 78,000 1998 Santa Monica, California Research and development and 71,000 2000 marketing Eugene, Oregon Customer service and technical 136,000 2006 support Beaverton, Oregon Research and development and 45,000 2001 marketing Melville, New York Research and development and 24,000 2000 marketing Toronto, Canada Research and development and 63,000 2005 technical support International Leiden, Holland Administration, sales and marketing 7,000 1997 and technical support Dublin, Ireland Administration, manufacturing 74,000 2026 and translations
Symantec's principal administrative and sales and marketing facility, as well as certain research and development and support facilities, are located in Cupertino, California. The Company leases a number of additional facilities for marketing and research and development in the United States and for marketing in Australia, Brazil, Canada, France, Germany, Holland, Hong Kong, Italy, Japan, Korea, Mexico, New Zealand, Russia, Singapore, South Africa, Sweden, Switzerland, Taiwan and the United Kingdom. Symantec believes its facilities are adequate for its current needs and additional or substitute space will be available as needed to accommodate any expansion of its operations. * The Symantec Technology Center is currently under construction, with anticipated completion in fiscal 1999. ITEM 3: LEGAL PROCEEDINGS. Information with respect to this Item may be found in Note 11 of Notes to Consolidated Financial Statements in Part IV, Item 14 of this Form 10-K. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of the security holders during the quarter ended March 31, 1997. 9 12 PART II ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Symantec's common stock is traded on the Nasdaq National Market under the Nasdaq symbol "SYMC". The high and low closing sales prices set forth below are as reported on the Nasdaq National Market.
Fiscal 1997 Fiscal 1996 --------------------------------------------- --------------------------------------------- Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, 1997 1996 1996 1996 1996 1995 1995 1995 ---------- -------- -------- --------- --------- --------- -------- --------- High $ 18.38 $ 16.38 $ 12.75 $ 18.13 $ 22.63 $ 29.38 $ 33.00 $ 29.50 Low 12.63 9.88 8.75 11.00 10.31 21.50 23.75 20.63
Delrina exchangeable stock has been traded on the Toronto Stock Exchange under the symbol "DE" since the acquisition of Delrina by Symantec on November 22, 1995. The high and low closing sales prices set forth below are in Canadian dollars as reported on the Toronto Stock Exchange. Delrina exchangeable stock is exchangeable at the option of the stockholders on a one-for-one basis into Symantec common stock.
Fiscal 1997 Fiscal 1996 --------------------------------------------- --------------------- Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, 1997 1996 1996 1996 1996 1995 (In Canadian dollars) --------- --------- --------- --------- --------- --------- High $ 24.35 $ 22.00 $ 17.70 $ 25.00 $ 31.00 $ 37.25 Low 17.55 13.00 12.00 15.50 16.50 29.38
As of March 31, 1997, there were approximately 852 stockholders of record, including approximately 45 holders of record of Delrina exchangeable shares. The Company has never paid cash dividends on its stock with the exception of cash distributions to stockholders of acquired companies. Symantec anticipates that it will continue to retain its earnings to finance the growth of its business. In addition, the Company's bank line of credit and outstanding convertible subordinated debentures limit the payment of cash dividends on common stock (See Notes 4 and 5 of Notes to Consolidated Financial Statements in Part IV, Item 14 of this Form 10-K). 10 13 ITEM 6: SELECTED FINANCIAL DATA. The following selected financial data is qualified in its entirety by and should be read in conjunction with the more detailed consolidated financial statements and related notes included elsewhere herein. During fiscal 1997, Symantec acquired Fast Track, Inc. ("Fast Track") in a transaction accounted for as a pooling of interests. As the results of operations of Fast Track were not material to Symantec's consolidated financial statements, amounts prior to the date of acquisition were not restated to reflect the combined operations of the companies. Additional acquisitions accounted for as poolings of interest include Delrina Corporation in fiscal 1996, Intec Systems Corporation, Central Point Software, Inc. and SLR Systems, Inc. in fiscal 1995, Fifth Generation Systems, Inc. and Contact Software International, Inc. during fiscal 1994, and Certus International Corporation, MultiScope, Inc., The Whitewater Group, Inc. and Symantec (UK) Ltd. during fiscal 1993. The Company has never paid cash dividends on its stock with the exception of distributions to stockholders of acquired companies. FIVE YEAR SUMMARY
Year Ended March 31, (In thousands, except --------------------------------------------------------------------- net income (loss) per share) 1997 1996 1995 1994 1993 - ---------------------------- -------- --------- -------- --------- --------- Statement of Operations Data: Net revenues $472,183 $ 445,432 $431,268 $ 403,206 $ 382,911 Acquisition, restructuring and other expenses 8,585 27,617 9,545 56,094 23,836 Operating income (loss) 26,289 (48,279) 40,286 (47,290) (59,792) Net income (loss) 26,038 (39,783) 33,409 (44,421) (46,304) Distributions to stockholders of acquired companies -- -- -- -- 162 Net income (loss) per share - primary $ 0.47 $ (0.76) $ 0.65 $ (0.96) $ (1.09) Net income (loss) per share - fully diluted $ 0.47 $ (0.76) $ 0.61 $ (0.96) $ (1.09) Shares used to compute net income (loss) per share - primary 55,407 52,664 52,181 46,270 42,624 Shares used to compute net come (loss) per share - fully diluted 55,841 52,664 56,491 46,270 42,624
March 31, --------------------------------------------------------------------- (In thousands) 1997 1996 1995 1994 1993 - -------------------------- -------- -------- -------- -------- -------- Balance Sheet Data: Working capital $129,569 $134,643 $143,405 $101,644 $100,075 Total assets 341,673 285,027 306,126 262,335 257,584 Long-term obligations, less current portion 15,066 15,393 25,413 25,967 28,152 Stockholders' equity 217,979 180,317 184,874 129,193 139,056
11 14 ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY EFFECT FUTURE RESULTS The following discussion contains forward-looking statements that are subject to risks and uncertainties. There are several important factors that could cause actual results to differ materially from those anticipated by the forward-looking statements contained in the following discussion. Readers should pay particular attention to the risk factors set forth within this section. Nothing in this report shall impose upon Symantec or any person a duty to update any forward looking statement. OVERVIEW Symantec develops, markets and supports a diversified line of application and system software products designed to enhance individual and workgroup productivity. Founded in 1982, the Company has offices in the United States, Canada, Asia, Australia, Europe, Africa and Latin America. During the last three fiscal years, Symantec has acquired the following companies:
Shares of Acquired Symantec Company Common Stock Stock Options Companies Acquired Date Acquired Issued Assumed - ------------------ ------------- ---------- --------- Fast Track, Inc. ("Fast Track") May 28, 1996 600,000 -- Delrina Corporation ("Delrina") November 22, 1995 13,684,174* 1,271,677 Intec Systems Corporation ("Intec") August 31, 1994 133,332 -- Central Point Software, Inc. ("Central Point") June 1, 1994 4,029,429 707,452 SLR Systems, Inc. ("SLR") May 31, 1994 170,093 --
* Includes Delrina exchangeable stock that is traded on the Toronto Stock Exchange. Delrina stockholders received Delrina exchangeable stock in exchange for Delrina common stock at a rate of 0.61 per share. Delrina exchangeable stock may be converted into Symantec common stock on a one-for-one basis at each stockholder's option. All of these acquisitions were accounted for as poolings of interest. Accordingly, all financial information has been restated to reflect the combined operations of these companies and Symantec with the exception of Fast Track, Intec and SLR, which had results of operations that were not material to Symantec's consolidated financial statements. 12 15 RESULTS OF OPERATIONS The following table sets forth each item from the consolidated statements of operations as a percentage of net revenues and the percentage change in the total amount of each item for the periods indicated.
Period-to-Period Percentage Increase (Decrease) ------------------ Year Ended March 31, 1997 1996 ----------------------- Compared Compared 1997 1996 1995 to 1996 to 1995 ----- ----- ----- -------- -------- Net revenues 100% 100% 100% 6% 3% Cost of revenues 20 25 21 (14) 20 ----- ----- ----- Gross margin 80 75 79 13 (1) Operating expenses: Research and development 19 21 17 (6) 34 Sales and marketing 47 52 44 (4) 21 General and administrative 7 7 7 4 12 Acquisition, restructuring and other non- recurring expenses 2 6 2 (69) 189 ----- ----- ----- Total operating expenses 75 86 70 (8) 28 ----- ----- ----- Operating income (loss) 5 (11) 9 * * Interest income 2 2 1 (4) 33 Interest expense -- -- -- (6) (38) Other income (expense), net -- (1) -- (21) * ----- ----- ----- Income (loss) before income taxes 7 (10) 10 * * Provision (benefit) for income taxes 1 (1) 2 * * ----- ----- ----- Net income (loss) 6% (9)% 8% * * ===== ===== =====
- --------------------- * percentage change is not meaningful. NET REVENUES. Net revenues increased 6% from $445 million in fiscal 1996 to $472 million in fiscal 1997. Net revenues increased 3% from $431 million in fiscal 1995 to $445 million in fiscal 1996. PRODUCT GROUPS. During fiscal 1997, the Company experienced increased net revenues from each of its core product groups: Remote Productivity Solutions and Security and Assistance. The Remote Productivity Solutions product group is focused on helping remote professionals remain productive, by addressing customer needs to access information, applications and data from any location. The Security and Assistance product group is dedicated to being indispensable to customers' daily use of computers by increasing productivity and keeping computers safe and reliable. The market's acceptance of the Windows95 and Windows NT operating systems, as well as the further expansion of personal computer sales, enabled Symantec to experience strong fiscal 1997 sales of its Windows 95 products first introduced during the last half of fiscal 1996 and Windows NT products introduced in fiscal 1997. The most significant product line sales growth was related to the Norton AntiVirus products from the Security and Assistance product group and pcANYWHERE products from the Remote Productivity Solutions product group. During fiscal 1997, the financial impact of product price reductions for Symantec's core products was more than offset by the increase in the volume of products sold, resulting in increased net revenues. Symantec's third business unit is the Emerging Business and Other product group, which includes products providing an easy to use Java development environment, as well as revenue streams from the sale of certain of 13 16 the Company's software product lines and revenues from products nearing the end of their life cycles. Fiscal 1997 net revenues for the Emerging Business product group decreased from fiscal 1996, largely as the result of declining sales from products which Symantec no longer actively develops or markets. Symantec expanded its line of Java development tools in fiscal 1997 in response to wider acceptance of the Java development environment, resulting in an increase in net revenues for the Java product line during fiscal 1997. The Emerging Business and Other product group also recorded approximately $6 million of consulting net revenues in fiscal 1997, resulting from a non-recurring consulting contract which was completed during the fiscal year. As a result of the sale of its electronic forms software products and related tangible assets to JetForm Corporation ("JetForm") for approximately $100 million in fiscal 1997, the Emerging Business and Other product group recognized revenue of approximately $18 million during the 1997 fiscal year and is contractually entitled to quarterly revenue payments through the June 2000 quarter. JetForm has the option to tender payment in either cash or in registered JetForm common stock, within a contractually defined quantity threshold. Due to the uncertainty regarding the ultimate collectibility of these installments, Symantec is recognizing the related revenue as payments are due and collectibility is assured from JetForm. During the fourth quarter of fiscal 1997, Symantec also sold the software products and related tangible assets of its Networking Business Unit to the Hewlett-Packard Company ("Hewlett-Packard"), resulting in the receipt of approximately $1 million of revenue and $2 million research and development expense reimbursement by the Emerging Business and Other product group. Additionally, over the next two years, Hewlett-Packard is contractually obligated to pay to Symantec a royalty stream not to exceed the present value of $27 million, which is contingent upon future sales of certain products by Hewlett-Packard. Due to the uncertainty regarding the amounts upon which these royalties will be determined, Symantec is recognizing these amounts as they are estimable. During fiscal 1996, the Company experienced increased net revenues from its Security and Assistance product group, offset in part by decreased revenues from its Remote Productivity Solutions product group and products which Symantec no longer actively develops or markets. Symantec experienced an increase in net revenue from the introduction of several Windows 95 products; however, this increase was substantially offset by a decrease in net revenues related to Windows 3.1 and DOS products. Symantec markets its products through a number of distribution channels, including retail, site licenses, OEM, direct marketing and upgrades and the Internet. The retail channel is Symantec's single largest product channel and comprises approximately 60% of total product revenues. INTERNATIONAL. Net revenues from international sales were $138 million and $142 million and represented 29% and 32% of total net revenues in fiscal years 1997 and 1996, respectively. The decrease in international net revenue as a percentage of total net revenue is the result of domestic revenue growth outpacing international revenue growth during the fiscal year. Additionally, international revenues for fiscal 1996 includes the one time recognition of approximately $7 million, previously deferred Central Point revenue. Foreign exchange rate fluctuations during fiscal 1997 did not materially contribute to the fluctuation in results from fiscal 1996 to fiscal 1997. Net revenues from international sales increased by $7 million in fiscal 1996, from $135 million in fiscal 1995 to $142 million in fiscal 1996. This increase was largely the result of the one-time recognition in fiscal 1996 of approximately $7 million of previously deferred Central Point revenue. PRODUCT RETURNS. The level of actual product returns and related product return provision are largely a factor of the level of product sell-in (gross revenue) from normal sales activity and the replacement of obsolete quantities with the current version of the Company's products. Changes in the levels of product returns and related product return provision are generally offset by changing levels of gross revenue and, therefore, do not typically have a material impact on reported net revenues. The Company's product return provision typically fluctuate from period to period based upon the level and timing of product upgrade releases and changes in product sell-in. The product return provision for fiscal 1997 was higher than the provision for fiscal 1996 due to increased returns exposure for Windows 95 products due to additional product sell-in during fiscal 1997. The product return provision for fiscal 1996 was higher than the provision for fiscal 1995, due to the introduction of Symantec's Windows 95 products during the last three quarters of fiscal 1996, which had unusually high sell-in volumes. 14 17 GROSS MARGIN. Gross margin represents net revenues less cost of revenues. Cost of revenues consists primarily of manufacturing expenses, costs for producing manuals, packaging costs, royalties paid to third parties under publishing contracts and amortization and write-off of capitalized software. Prior to fiscal 1997, accounting rules requiring capitalization of certain software development costs did not materially affect the Company, except for amounts capitalized by Delrina prior to its acquisition by Symantec in fiscal 1996. Amounts capitalized during fiscal 1997 primarily related to the networking business unit which was sold to Hewlett-Packard in March 1997, at which time the amounts were written off. Amortization of capitalized software, including amortization and the write-off of both purchased product rights and capitalized software development expenses, totaled $10 million, $19 million and $13 million for fiscal 1997, 1996 and 1995, respectively. Included in the fiscal 1997 total is approximately $7 million of unamortized capitalized software development expenses and $1 million of unamortized purchased software product rights related to network administration technology written off as part of the sale to Hewlett-Packard in March 1997. The fiscal 1997 write-off of unamortized FormFlow technology sold to JetForm was immaterial. Amortization expense in fiscal year 1997 was lower than in 1996 due to capitalized software write-offs in fiscal 1996 related to de-emphasized products and Delrina Windows 3.1 products. The fiscal 1996 amortization of capitalized software expense included the aforementioned write-offs, resulting in the significant increase in expense from fiscal 1995. Gross margins increased to 80% of net revenues in fiscal 1997 from 75% in fiscal 1996 and from 79% in fiscal 1995. The increase in gross margin percentage in fiscal 1997 compared to fiscal 1996 was due to the decrease in capitalized software amortization and write-offs noted above. In addition, revenues, with no related cost of revenues, from JetForm totaling $18 million and from Hewlett-Packard totaling $1 million were included in net revenues during fiscal 1997. The decline in the gross margin percentage in fiscal 1996 compared to fiscal 1995 was due to an increase in the amortization and write-off of purchased product rights and capitalized software development expenses noted above and increased inventory reserves related to Delrina products designed to operate on Windows 3.1 and other products de-emphasized by Symantec during fiscal 1996. Due to an anticipated reduction in software amortization and the recognition of the potential future revenue streams from JetForm and Hewlett-Packard, for which there will be no associated costs, Symantec believes that the gross margin percentage may increase to approximately 81% to 84% in fiscal 1998, unless there is a significant change in Symantec's net revenues. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses decreased 6% to $89 million or 19% of net revenues in fiscal 1997 from $95 million or 21% of net revenues in fiscal 1996 and were $71 million or 17% of net revenues in fiscal 1995. The decrease in research and development expenses in fiscal 1997 as compared to fiscal 1996 is due primarily to decreased product development efforts associated with the Company's decision to cease developing certain software products, and an increase in capitalized software development costs. In fiscal 1997, Symantec capitalized approximately $8 million of software development costs, primarily related to network administration technology, which was subsequently sold to Hewlett-Packard in March 1997 and resulted in the write off of approximately $7 million in unamortized costs during the fourth quarter of fiscal 1997. In addition, a $2 million research and development expense reimbursement was received from Hewlett-Packard in fiscal 1997 under the aforementioned agreement, which further reduced fiscal 1997 research and development expenses. The increase in research and development expenses in fiscal 1996 as compared to fiscal 1995 was primarily the result of increased product development efforts associated with Symantec's and Delrina's development of new products designed to operate on the Windows 95 operating system. Research and development expenditures are charged to operations as incurred. Prior to fiscal 1997, capitalization of certain software development costs in accordance with Statement of Accounting Standards No. 86 did not materially affect the Company, except for amounts capitalized by Delrina prior to its acquisition by Symantec in fiscal 1996. Delrina did not capitalize any software development costs in fiscal 1996 and capitalized approximately $6 million in software development costs in fiscal year 1995. 15 18 SALES AND MARKETING EXPENSES. Sales and marketing expenses decreased 4% to $221 million or 47% of net revenues in fiscal 1997 from $230 million or 52% of net revenues in fiscal 1996. The decrease in sales and marketing expenses in fiscal 1997 as compared to fiscal 1996 is due primarily to the elimination of duplicative sales and marketing expenses as a result of the acquisition of Delrina by Symantec and the elimination of sales and marketing expenses related to the electronic forms software products which were sold to JetForm in September 1996. Reductions in expenditures for products no longer actively marketed by Symantec were offset by increased spending for new products released during the fiscal year. Sales and marketing expenses increased to $230 million or 52% of net revenues in fiscal 1996 from $190 million or 44% of net revenues in fiscal 1995, due to an increase in sales and marketing expenses associated with the release of Symantec's Windows 95 products. GENERAL AND ADMINISTRATIVE EXPENSES. In fiscal 1997, general and administrative expenses increased by 4% to $34 million or 7% of net revenues from $33 million or 7% of net revenues in fiscal 1996 and from $29 million or 7% of net revenues in fiscal 1995. The increase in general and administrative expenses in absolute dollars in fiscal 1997 as compared to fiscal 1996 is primarily the result of management consulting expenditures, offset by benefits from the elimination of duplicative general and administrative expenses as a result of the acquisition of Delrina by Symantec in fiscal 1996. The increase in general and administrative expenses in absolute dollars in fiscal 1996 as compared to fiscal 1995 was principally due to significant general and administrative expenses incurred by Delrina in the three month period ended September 30, 1995 and certain legal fees incurred by Delrina. ACQUISITION, RESTRUCTURING AND OTHER EXPENSES. Acquisition Expenses. In connection with the acquisitions completed in fiscal 1997, 1996 and 1995 (see Summary of Significant Accounting Policies and Note 10 of Notes to Consolidated Financial Statements), significant acquisition expenses have been incurred. These acquisition expenses principally included fees for legal, accounting and financial advisory services, the write-off of duplicative capitalized technology, the modification of certain development contracts and expenses related to the combination of the companies, including the elimination of duplicative and excess facilities and personnel. These charges approximated $1 million, $20 million and $10 million in fiscal 1997, 1996 and 1995, respectively. Symantec recorded total acquisition charges of approximately $1 million in fiscal 1997 in connection with the acquisition of Fast Track. In connection with the acquisition of Delrina in fiscal 1996, Symantec recorded total acquisition charges of $22 million, which included $9 million for legal, accounting and financial advisory services, $6 million for the elimination of duplicative and excess facilities and equipment, $4 million for personnel severance and outplacement expenses and $3 million for the consolidation and discontinuance of certain operational activities and other acquisition-related expenses. Offsetting these costs was a reduction in accrued acquisition, restructuring and other expenses of $2 million, as actual costs incurred related to the acquisitions of Central Point and SLR were less than costs previously accrued by the Company. In connection with the acquisitions of Central Point and SLR, Symantec recorded total acquisition charges of $10 million in fiscal 1995. The charges included $4 million for legal, accounting and financial advisory services, $1 million for the write-off of duplicative product-related expenses and modification of certain development contracts, $1 million for the elimination of duplicative and excess facilities, $3 million for personnel severance and outplacement expenses and $1 million for the consolidation and discontinuance of certain operational activities and other acquisition-related expenses. Restructuring Expenses. In fiscal 1997, the Company recorded a charge of $3 million for costs related to the restructuring of certain domestic and international sales and research and development operations, settlement of the Carmel lawsuit (see Note 11 of Notes to Consolidated Financial Statements in Part IV, Item 14 of this Form 10-K) and other expenses. The restructuring plans have been completed. In February 1995, Symantec announced a plan to consolidate certain research and development activities. This plan was designed to gain greater synergy between the Company's Third Generation Language and Fourth Generation 16 19 Language development groups. During fiscal 1996, the Company completed the consolidation and recorded $2 million for the relocation costs of moving equipment and personnel. Other Expenses. In fiscal 1997, Symantec recorded a $2 million charge in connection with the write-off of an equity investment and a $3 million charge for the write-off of certain in-process research and development acquired by the Company. In fiscal 1996, Symantec sold the assets of Time Line Solutions Corporation, a wholly-owned subsidiary, to a group comprised of Time Line Solutions Corporation's management and incurred a $3 million loss on the sale. In the fourth quarter of fiscal 1996, the Company recorded $2 million for estimated legal fees expected to be incurred in connection with a securities class action complaint filed in March 1996 and other legal matters (See Note 11 of Notes to Consolidated Financial Statements in Part IV, Item 14 of this Form 10-K). As of March 31, 1997, total accrued cash related acquisition and restructuring expenses were $4 million and included less than $1 million for estimated legal fees and expenses, less than $1 million for the elimination of duplicative and excess facilities and $3 million for other acquisition related expenses. INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME (EXPENSE). Interest income was $7 million, $8 million and $6 million in fiscal 1997, 1996 and 1995, respectively. Higher average cash balances during fiscal 1997 compared to fiscal 1996 were offset by lower interest rates on invested cash during the year. Interest income increased 33% in fiscal 1996 over fiscal 1995 due to higher average invested cash balances. Interest expense was $1 million, $2 million and $2 million in fiscal 1997, 1996 and 1995, respectively. The April 1995 conversion of convertible subordinated debentures totaling $10 million, which were originally issued in April 1993, for 833,333 shares of Symantec common stock, resulted in a reduction in interest expense in fiscal 1997 from 1996 and in fiscal 1996 from 1995. Other income (expense) is primarily comprised of foreign currency exchange gains and losses from fluctuations in currency exchange rates. INCOME TAXES. The effective income tax provision for fiscal 1997 was 14%, which compares to an effective income tax benefit of 10% in fiscal 1996 and an effective tax provision of 25% in fiscal 1995. The 1997 income tax provision of 14% is lower than the statutory rate primarily due to the utilization of previously unbenefitted losses. Realization of the $13 million of net deferred tax asset that is reflected in the financial statements is dependent upon the Company's ability to generate sufficient future U.S. taxable income. Management believes that it is more likely than not that the asset will be realized based on forecasted U.S. earnings. A valuation allowance of approximately $40 million was provided in the financial statements. Approximately $22 million of the valuation allowance for deferred tax assets is attributable to unbenefitted stock option deductions, the benefit of which will be credited to equity when realized. Approximately $4 million of the valuation allowance represents net operating loss and tax credit carryforwards of various acquired companies that are limited by separate return limitations and under the "change of ownership" rules of Internal Revenue Code Section 382, and the remaining $14 million of the valuation allowance relates to unbenefitted temporary differences and net operating loss and tax credit carryforwards. Symantec projects the effective tax rate to be 23% in fiscal 1998. This rate is lower than the expected U. S. federal and state combined statutory rate of 40% is due to a lower tax rate from the Company's Irish operation and the utilization of previously unbenefitted losses. However, this projection is subject to change due to fluctuations in and the geographic allocation of earnings. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks Fluctuations in Quarterly Operating Results.) LIQUIDITY AND CAPITAL RESOURCES Cash, short-term investments and restricted investments increased $79 million to $208 million at March 31, 1997 from $129 million at March 31, 1996. This increase was largely due to cash provided from operating activities, net proceeds from the exercise of stock options and the sales of common stock under the Employee Stock Purchase Plan, and improved cash collections of trade accounts receivable. Cash provided by operating activities was partially offset by the reclassification of $47 million to restricted investments, a non-current asset. The restricted investment balance relates to collateral requirements under lease agreements entered into by Symantec during the current fiscal year. Symantec is obligated under lease agreements for two existing office buildings, one parcel of land and one office building under construction in Cupertino, California to maintain a restricted cash balance invested in U.S. treasury notes with maturities not to exceed three years. In accordance with the lease terms, these 17 20 funds would not be available to meet operating cash requirements. Net cash provided by operating activities was $94 million and was comprised of the Company's net income of $26 million and non-cash related expenses of $37 million and a net decrease in assets and liabilities of $31 million. Trade accounts receivable decreased $11 million from $59 million at March 31, 1996 to $48 million at March 31, 1997 primarily due to improved cash collections during the year. On April 29, 1997, the Board of Directors of Symantec authorized the repurchase of up to 1,000,000 shares of Symantec common stock by June 13, 1997. The shares will be used for employee stock purchase programs and option grants. As of June 13, 1997, management completed the repurchase of 500,000 shares at prices ranging from $16.57 to $17.00 per share. The Company has a $10 million line of credit that expires in March 1998. The Company was in compliance with the debt covenants at March 31, 1997. At March 31, 1997, there were no borrowings outstanding under this line and there were less than $1 million of standby letters of credit outstanding under this agreement. Future acquisitions by the Company may cause the Company to be in violation of the line of credit covenants; however, the Company believes that if the line of credit were canceled or amounts were not available under the line, there would not be a material adverse impact on the financial results, liquidity or capital resources of the Company. Symantec is obligated under lease agreements for two existing office buildings, one parcel of land and one office building under construction in Cupertino, California to maintain a restricted cash balance invested in U.S. treasury notes with maturities not to exceed three years. In accordance with the lease terms, these funds would not be available to meet operating cash requirements. If Symantec were to sustain significant losses, the Company could be required to reduce operating expenses, which could result in product delays, reassessment of acquisition opportunities, which could negatively impact the Company's growth objectives, and/or pursue further financing options. The Company believes existing cash and short-term investments will be sufficient to fund operations for the next year. (See further discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks - Fluctuations in Quarterly Operating Results and Management of Expanding Operations.) BUSINESS RISKS The preceding discussion contains forward-looking statements that are subject to significant risks and uncertainties. There are several important factors that could cause actual results to differ materially from historical results and percentages and results anticipated by the forward-looking statements contained in the following discussion. RAPID TECHNOLOGICAL CHANGE AND DEVELOPMENT RISKS. The Company participates in a highly dynamic industry. Future technology or market changes may cause certain of Symantec's products to become obsolete more quickly than expected and the trend towards server-based applications in networks and over the Internet could have a material adverse effect on sales of the Company's products. The impact of the market's acceptance and adoption rate of Symantec's products may result in reduced revenues, gross margins and net income, as well as significant increases in the volatility of Symantec's stock price. STOCK PRICE VOLATILITY. The Company's earnings and stock price have been and may continue to be subject to significant volatility, particularly on a quarterly basis. Symantec has previously experienced shortfalls in revenue and earnings from levels expected by securities analysts, which has had an immediate and significant adverse effect on the trading price of the Company's common stock. This may occur again in the future. Additionally, as a significant portion of the Company's revenues often occur late in the quarter, the Company may not learn of revenue shortfalls until late in the fiscal quarter, which could result in an even more immediate and adverse effect on the trading price of the Company's common stock. PERSONAL COMPUTER AND HARDWARE GROWTH RATES. Fluctuations in customer spending from software to hardware as the result of technological advancements in hardware or price reductions of hardware have in the past and may in the future result in reduced revenues which would have a material adverse effect on operating results. FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. While Symantec's diverse product line has tended to lessen fluctuations in quarterly net revenues, these fluctuations have occurred in the past and are likely to occur in the future. These fluctuations may be caused by a number of factors, including the introduction of competitive products by new competitors, reduced demand for any given product, seasonality in the retail software market, the market's 18 21 transition between operating systems, the impact of the Internet and general economic conditions. These factors may cause significant fluctuations in net revenues and, accordingly, operating results. MANAGEMENT OF EXPANDING OPERATIONS. Symantec continually evaluates its product and corporate strategy and has in the past and will in the future undertake organizational changes and product and marketing strategy modifications which are designed to maximize market penetration, maximize use of limited corporate resources and develop new products and product channels. These organizational changes increase the risk that objectives will not be met due to the allocation of valuable resources to implement changes. Further, due to the uncertain nature of any of these undertakings, there can be no assurance that these efforts will be successful or that the Company will realize any benefit from these efforts. Symantec has completed a number of acquisitions and may acquire other companies in the future. Acquisitions involve a number of special risks, including the diversion of management's attention to assimilation of the operations and personnel of the acquired companies in an efficient and timely manner, the retention of key employees, the difficulty of presenting a unified corporate image, the coordination of research and development and sales efforts and the integration of the acquired products. The Company has lost certain key employees of acquired companies, and, in some cases, the assimilation of the operations of acquired companies took longer than initially had been anticipated by the Company. In addition, because the employees of acquired companies have frequently remained in their existing, geographically diverse facilities, the Company has not realized certain economies of scale that might otherwise have been achieved. Symantec typically incurs significant expenses in connection with acquisitions, which have a significant adverse impact on the Company's profitability and financial resources. These expenses may have a significant adverse impact on the Company's future profitability and financial resources. FOREIGN OPERATIONS. A significant portion of Symantec's revenues, manufacturing costs and marketing is transacted in foreign currencies. As a result, the Company may be materially and adversely affected by fluctuations in currency exchange rates, as well as increases in duty rates, exchange or price controls or other restrictions on foreign currencies. The Company's international operations are subject to certain risks common to international operations, such as government regulations, import restrictions, currency fluctuations, repatriation restrictions and, in certain jurisdictions, reduced protection for the Company's copyrights and trademarks. PRICE COMPETITION. Price competition is intense in the microcomputer business software market and is expected to continue to increase and become even more significant in the future, resulting in reduced profit margins. Should competitive pressures in the industry continue to increase, Symantec may be required to reduce software prices and/or increase its spending on sales, marketing and research and development as a percentage of net revenues, resulting in lower profit margins. There can be no assurance these changes will be successful. DISTRIBUTION CHANNELS. Approximately 34% of the Company's net revenues in fiscal 1997 were from sales to two large retail distributors. These customers tend to make the majority of their purchases at the end of the fiscal quarter, in part because they are able, or believe that they are able, to negotiate lower prices and more favorable terms. This end-of-period buying pattern means that forecasts of quarterly and annual financial results are particularly vulnerable to the risk that they will not be achieved, either because expected sales do not occur or because they occur at lower prices or on less favorable terms to the Company. The Company's retail distribution customers also carry the products of Symantec's competitors. The distributors have limited capital to invest in inventory, and their decisions to purchase the Company's products is partly a function of pricing, terms and special promotions offered by Symantec as well as by its competitors over which the Company has no control and which it cannot predict. Agreements with distributors are generally nonexclusive and may be terminated by either party without cause. Such distributors are not within the control of Symantec, are not obligated to purchase products and may also represent competitors' product lines. There can be no assurance that these distributors will continue their current relationships with Symantec on the same basis, or that they will not give higher priority to the sale of other products, which could include products of competitors. Additionally, certain distributors and resellers have experienced financial difficulties in the past. There can be no assurance that distributors that account for significant sales of the Company will not experience financial difficulties in the future. Any such problems could lead to reduced sales and could adversely affect 19 22 operating results of the Company. There can be no assurance that Symantec will be able to continue to obtain adequate distribution channels for all of its products in the future. Due to the rapid change in software distribution technology as demonstrated by the increase in volume of software distributed through the Internet, there can be no assurance that Symantec will be able to develop an effective method of distributing its software products utilizing each of the available distribution channels or that Symantec will develop distribution channels for those channels which are ultimately accepted by the marketplace. The presence of new channels could adversely impact existing channels and/or product pricing, which could have a material adverse impact on the Company's net revenues and profitability. The Company operates with relatively little backlog; therefore, if near-term demand for the Company's products weakens in a given quarter, there could be an immediate, material adverse effect on net revenues and on the Company's operating results, which would likely result in a precipitous drop in stock price. CHANNEL FILL. The Company's pattern of revenues and earnings may be affected by "channel fill." Channel fill occurs following the introduction of a new product as distributors buy significant quantities of the new product in anticipation of sales of such product. Software upgrades typically result in an increase in net revenues during the first three to six months following their introduction due to purchases by existing users, usually at discounted prices, and initial inventory purchases by Symantec's distributors. Following such purchases, the rate of distributors' purchases often declines in a material amount, depending on the rates of purchases by end users or "sell-through." As the desktop applications market has become more saturated, the sales mix is shifting from standard retail products to lower priced product upgrades. This trend is likely to continue. Channel fill may also occur in anticipation of price increases or in response to sales promotions or incentives, some of which may be designed to encourage customers to accelerate purchases that might otherwise occur in later periods. Channels may also become filled simply because the distributors do not sell their inventories to retail distribution or end users as anticipated. If sell-through does not occur at a sufficient rate, distributors will delay purchases or cancel orders in later periods or return prior purchases in order to reduce their inventories. Such order delays or cancellations can cause material fluctuations in revenues from one quarter to the next. The impact is somewhat mitigated by the Company's deferral of revenue associated with inventories estimated to be in excess of appropriate levels in the distribution channel; however, net revenues may still be materially affected favorably or adversely by the effects of channel fill. Between the date Symantec announces a new version or new product and the date of release, distributors, dealers and end users often delay purchases, cancel orders or return products in anticipation of the availability of the new version or new product. Channel fill did not have a material impact on the Company's revenues in fiscal 1997, 1996 or 1995 but may have a material impact in future periods, particularly in periods where a large number of new products are simultaneously introduced. PRODUCT RETURNS. The Company estimates and maintains reserves for product returns. Product returns can occur when the Company introduces upgrades and new versions of products or when distributors have excess inventories. Symantec's return policy allows its distributors, subject to certain limitations, to return purchased products in exchange for new products or for credit towards future purchases. End users may return products through dealers and distributors within a reasonable period from the date of purchase for a full refund, and retailers may return older versions of products. Symantec prepares detailed analyses of historical return rates, as well as taking into consideration upcoming product upgrades, current market conditions, customer inventory balances and any other known factors when estimating anticipated returns and maintains reserves for product returns. Symantec has experienced, and may experience in the future, significant increases in product returns above historical levels from customers of acquired companies after an acquisition is completed. The impact of actual returns on net revenues, net of such provisions, has not had a material effect on the Company's liquidity as the returns typically result in the issuance of credit towards future purchases as opposed to cash payments to the distributors. However, there can be no assurance that future returns will not exceed the reserves established by the Company or that future returns will not have material adverse effect on the operating results of the Company. UNCERTAINTY OF RESEARCH AND DEVELOPMENT EFFORTS. Symantec believes research and development expenditures will be necessary in order to remain competitive. While the Company believes its research and development 20 23 expenditures will result in successful product introductions, due to the uncertainty of software development projects, these expenditures will not necessarily result in successful product introductions. Uncertainties impacting the success of software development project introductions include technical difficulties, market conditions, competitive products and customer acceptance of new products and operating systems. The length of Symantec's product development cycle has generally been greater than Symantec originally expected. Although such delays have undoubtedly had a material adverse effect on Symantec's business, Symantec is not able to quantify the magnitude of net revenues that were deferred or lost as a result of any particular delay because Symantec is not able to predict the amount of net revenues that would have been obtained had the original development expectations been met. Delays in future product development are likely to occur and could have a material adverse effect on the amount and timing of future revenues. Due to the inherent uncertainties of software development projects, Symantec does not generally disclose or announce the specific expected shipment date of the Company's product introductions. While the Company performs extensive usability and beta testing of new products, there can be no assurance that any products currently being developed by Symantec will be technologically successful, that any resulting products will achieve market acceptance or that the Company's products will be effective in competing with products either currently in the market or introduced in the future. OPERATING SYSTEM. The release and subsequent customer acceptance of current or enhanced operating systems are particularly important events that increase the uncertainty and increase the volatility of Symantec's results. Microsoft has incorporated advanced utilities including telecommunications, facsimile and data recovery utilities in Windows 95 and may include additional product features in future releases of Windows 95 and Window NT that may decrease the demand for certain of the Company's products, including those currently under development. Should the Company be unable to successfully or timely develop products that operate under existing or new operating systems, the Company's future net revenues and operating results would be immediately and significantly adversely affected. In addition, as the timing of delivery and adoption of many of Symantec's products is dependent on the adoption rate of these operating systems, which the Company and securities analysts are unable to predict, the ability of Symantec and securities analysts to forecast the Company's net revenues has been and will continue to be adversely impacted. As a result, there is a heightened risk that net revenues and profits will not be in line with analysts' expectations in the periods following the introduction of existing or new operating systems. INTELLECTUAL PROPERTY RIGHTS. Symantec regards its software as proprietary and relies on a combination of copyright, patent and trademark laws and license agreements in an attempt to protect its rights. Despite these precautions, it may be possible for unauthorized third parties to copy aspects of Symantec's products or to obtain and use information that Symantec regards as proprietary. All of Symantec's products are protected by copyright, and Symantec has several patents and patent applications pending. However, existing patent and copyright laws afford limited practical protection. In addition, the laws of some foreign countries do not protect Symantec's proprietary rights in its products to the same extent as do the laws of the United States. Symantec's products are not copy protected. As the number of software products in the industry increases and the functionality of these products further overlap, Symantec believes that software developers will become increasingly subject to infringement claims. This risk is potentially greater for companies, such as Symantec, that obtain certain of their products through publishing agreements or acquisitions, since they have less direct control over the development of those products. In addition, an increasing number of patents are being issued that are potentially applicable to software, and allegations of patent infringement are becoming increasingly common in the software industry. It is impossible to ascertain all possible patent infringement claims because new patents are being issued continually, the subject of patent applications is confidential until a patent is issued, and it may not be apparent even from a patent that has already been issued whether it is potentially applicable to a particular software product. This increases the risk that Symantec's products may be subject to claims of patent infringement. Although such claims may ultimately prove to be without merit, they are time consuming and expensive to defend. Symantec has been involved in disputes claiming patent infringement in the past, is currently involved in such disputes and litigation and may be involved in such disputes and/or litigation in the future. If Symantec is alleged to infringe one or more patents, it may choose to litigate the claim and/or seek an appropriate license. If litigation were to commence and a license were not available 21 24 on reasonable terms or if another party were found to have a valid patent claim against Symantec, it could have a material adverse effect on Symantec (See Note 11 of Notes to Consolidated Financial Statements). LITIGATION. Symantec is involved in a number of other judicial and administrative proceedings incidental to its business (See Note 11 of Notes to Consolidated Financial Statements). The Company intends to defend and/or pursue all of these lawsuits vigorously and, although an unfavorable outcome could occur in one or more of the cases, the final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on the financial position of the Company. However, depending on the amount and timing of an unfavorable resolution of these lawsuits, it is possible that the Company's future results of operations or cash flows could be materially adversely effected in a particular period. SALES AND MARKETING AND SUPPORT INVESTMENTS. Symantec believes substantial sales and marketing efforts are essential to achieve revenue growth and to maintain and enhance Symantec's competitive position. There can be no assurance that these increased sales and marketing efforts will be successful. BUSINESS DISRUPTION. Much of the Company's administration, sales and marketing, manufacturing and research and development facilities are located on the west coast of the United States. Future earthquakes or other natural disasters could cause a significant disruption to the Company's operations and may cause delays in product development that could adversely impact future revenues of the Company. Order entry and product shipping are geographically separated both domestically and internationally. A disruption in communications between these facilities, particularly at the end of a fiscal quarter, would likely result in an unexpected shortfall in net revenues and could result in an adverse impact on operating results. SUPPLY RISK. Symantec has often been able to acquire materials on a volume-discount basis and has had multiple sources of supply for certain materials. To date, Symantec has not experienced any material difficulties or delays in production of its software and related documentation and packaging. However, shortages may occur in the future. For example, shortages of certain materials may occur when Microsoft introduces new operating systems. EMPLOYEE RISK. Competition in recruiting personnel in the software industry is intense. Symantec believes that its future success will depend in part on its ability to recruit and retain highly skilled management, marketing and technical personnel. Symantec believes that it must provide personnel with a competitive compensation package, which necessitates the continued availability of stock options and requires ongoing shareholder approval of such option programs. 22 25 ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ANNUAL FINANCIAL STATEMENTS. See Part IV, Item 14 of this Form 10-K. SELECTED QUARTERLY DATA. During fiscal 1996, Symantec acquired Delrina in a transaction accounted for as a pooling of interest. All financial information has been restated to reflect the combined operations of Symantec and Delrina. (In thousands, except net income (loss) per share; unaudited)
Fiscal 1997 Fiscal 1996 ---------------------------------------------- ---------------------------------------------------- Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, 1997 1996 1996 1996 1996 1995 1995 1995 -------- -------- -------- -------- -------- --------- --------- --------- Net revenues $129,706 $124,081 $109,178 $109,218 $115,960 $111,097 $108,510 $109,865 Gross margin 100,352 102,105 88,448 87,734 95,363 80,027 73,420 87,647 Acquisition, restructuring and other expenses * -- -- 7,290 1,295 2,000 25,688 -- (71) Net income (loss) ** 8,269 13,852 882 3,035 7,943 (36,806) (17,786) 6,866 Net income (loss) per share - primary $ 0.15 $ 0.25 $ 0.02 $ 0.06 $ 0.15 $ (0.69) $ (0.34) $ 0.13 fully diluted $ 0.15 $ 0.25 $ 0.02 $ 0.06 $ 0.15 $ (0.69) $ (0.34) $ 0.12
* See Note 10 of Notes to Consolidated Financial Statements. ** Quarterly operating results for the period ended March 31, 1997, includes revenue and charges related to the sale of Symantec's networking business unit (see Note 9 of Notes to Consolidated Financial Statements). ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 23 26 PART III ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information required by this Item with respect to Directors may be found in the section captioned "Election of Symantec Directors" appearing in the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held on September 18, 1997 (the "Proxy Statement"). Such information is incorporated herein by reference. Information required by this Item with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, may be found in the section captioned "Section 16(a) Beneficial Ownership Reporting Compliance" appearing in the Proxy Statement. EXECUTIVE OFFICERS OF THE REGISTRANT: The executive officers of the Company are as follows:
NAME AGE POSITION - ---- --- -------- Gordon E. Eubanks, Jr. 50 President and Chief Executive Officer Howard A. Bain III 51 Vice President, Worldwide Operations and Chief Financial Officer Mark W. Bailey 38 Senior Vice President, Business Development/Emerging Businesses Enrique T. Salem 31 Vice President, Security and Assistance Business Unit and Chief Technical Officer Dieter Giesbrecht 53 Vice President, EMEA Dana E. Siebert 37 Vice President, Americas Christopher Calisi 37 Vice President, Remote Professional Tools Derek Witte 40 Vice President, General Counsel and Secretary
Executive officers are chosen by and serve at the discretion of the Board of Directors. There is no family relationship between any director or executive officer of Symantec and any other director or executive officer of Symantec. GORDON E. EUBANKS, JR. is the President and Chief Executive Officer of Symantec. He has served as a director of Symantec since November 1983 and as the President and Chief Executive Officer of Symantec since October 1986. Mr. Eubanks also served as Symantec's Chairman of the Board from November 1983 to October 1986 and from November 1990 to January 1993. Previously, Mr. Eubanks was Vice President of Digital Research, Inc.'s commercial systems division where he was responsible for the development and marketing of all system software products. He left Digital Research, Inc. in September 1983. Mr. Eubanks founded Compiler Systems, Inc. and authored its products: CBASIC, one of the first successful languages on personal computers, and CB80, a compiled version of CBASIC. Compiler Systems, Inc. was acquired by Digital Research, Inc. in August of 1981. Mr. Eubanks received his Bachelor of Science degree in Electrical Engineering from Oklahoma State University. He received his Masters degree in Computer Science from Naval Postgraduate School in Monterey, California. Mr. Eubanks was a commissioned officer in the United States Navy from 1970 to 1979 serving in the Nuclear Submarine Force. Mr. Eubanks is also a director of NetFrame Systems, Inc. He is a member of the IEEE and ACM. HOWARD A. BAIN III is currently Vice President, World-Wide Operations and CFO, at Symantec Corporation. Mr. Bain has over twenty-five years of experience in all phases of corporate operations and challenges. Prior to joining Symantec in October 1991 as Vice President, Finance, he was CFO for several private venture financed technology companies (RTP semiconductor manufacturing equipment, BiCMOS SRAM's, laser-based large screen projection systems for HDTV and computer graphics applications, and high performance 5-1/4" disk drives for personal computers) where he assisted those management teams in growing their businesses through raising over $50 million in venture capital and controlling hyper-growth. His previous experience includes senior financial and 24 27 accounting management positions with Fairchild Camera and Instrument Corporation and as a consultant with Arthur Andersen & Company. Mr. Bain is a CPA and holds a B.S.B.A. from California Polytechnic University. MARK W. BAILEY is Senior Vice President, Business Development and Emerging Businesses of Symantec. Mr. Bailey has led Symantec's mergers and acquisitions and alliances effort since December 1989. Prior to that, Mr. Bailey was an associate partner with one of the early investors in Symantec, Kleiner Perkins Caufield & Byers. Before attending graduate school, Mr. Bailey worked at Hewlett Packard. Mr. Bailey received a Bachelor of Science degree cum laude in electrical engineering and computer science from Princeton University and an MBA from Harvard University's Graduate School of Business Administration. ENRIQUE T. SALEM is Vice President, Security and Assistance Business Unit and Chief Technical Officer. Mr. Salem joined Symantec in April 1990 and has held numerous positions including Director of Development and General Manager of Advanced Utilities Group. Previous to joining Symantec, he was Vice President in Security Pacific National Bank, Merchant Bank Division, where he was responsible for the development and deployment of a global trading system. Mr. Salem holds a Bachelor of Arts degree in Computer Science from Dartmouth College. He is a member of the Board of Directors of the Software Council of Southern California and a member of the IEEE. Mr. Salem became an executive officer of Symantec in October 1996. DIETER GIESBRECHT is Vice President, EMEA (Europe, Middle East and Africa) of Symantec. Mr. Giesbrecht joined Symantec in September 1996. From 1995 until joining Symantec, he was Vice President of Attachmate Europe based in Paris, France and was responsible for the EMEA region. From 1991 to 1995, he held several executive functions within Lotus Development Europe including Managing Director UK and Managing Director Central Europe. He has a degree in Electronics Engineering from the Technical University of Furtwangen located in Germany. Mr. Giesbrecht is a member of the Institute of Directors. DANA E. SIEBERT is Vice President, Americas. Previously, Mr. Siebert served as Vice President, Worldwide Sales of Symantec and prior to that, Vice President, Worldwide Services of Symantec. Mr. Siebert joined Symantec in September 1987. From 1985 to 1987, he was a Sales Manager at THINK Technologies where he was responsible for U.S. corporate, OEM and international sales. Previously, he held a number of sales management positions in high technology companies including Wang Laboratories, Computerland Corporation and Burroughs Corporation. Mr. Siebert holds a Bachelor of Science degree in Business Administration from the University of New Hampshire and is a member of the Software Publishers Association. CHRISTOPHER CALISI is Vice President, Remote Professional Tools of Symantec. From 1992 to 1996, Mr. Calisi held several positions within Symantec's Remote Access Business Unit, including Development Manager, Director of Development, General Manager and most recently, Vice President, Communication Products. Mr. Calisi joined Symantec in 1992 from Unify Corporation, a relational database and 4GL tools vendor where he served as the Manager of Sales Engineers. Prior to Unify Corporation, Mr. Calisi held development positions with several relational database vendors, including Britton Lee, Oracle and Computer Associates. Mr. Calisi holds a Bachelor of Science degree from the State University of New York at Empire State and has received executive training at the Wharton School. Mr. Calisi holds several copyrights for software innovations from 1981 through 1986 and is an associate of the IEEE Committee. Mr. Calisi became an executive officer of Symantec in May 1996. DEREK WITTE is Vice President, General Counsel and Secretary of Symantec. Mr. Witte joined Symantec in October 1990. From October 1987 until joining Symantec, Mr. Witte was Associate General Counsel and later Director of Legal Services for Claris Corporation, a software subsidiary of Apple. Between January and October 1987, Mr. Witte was Assistant General Counsel at Worlds of Wonder, Inc. Previously, Mr. Witte practiced law with the San Francisco-based law firms of Brobeck, Phleger & Harrison and Heller Ehrman White and McAuliffe during the periods between 1981 and 1983 and 1983 and 1987, respectively. Mr. Witte holds a law degree and a Bachelor of Arts degree in Economics from the University of California at Berkeley. Mr. Witte has been a member of the California bar since 1981. 25 28 ITEM 11: EXECUTIVE COMPENSATION. Information with respect to this Item may be found in the section captioned "Executive Compensation" appearing in the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held on September 18, 1997. Such information is incorporated herein by reference. ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information with respect to this Item may be found in the section captioned "Security Ownership of Certain Beneficial Owners and Management" appearing in the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held on September 18, 1997. Such information is incorporated herein by reference. ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information with respect to this Item may be found in the section captioned "Executive Compensation - Certain Transactions" appearing in the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held on September 18, 1997. Such information is incorporated herein by reference. 26 29 PART IV ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. Upon written request, the Company will provide, without charge, a copy of the Company's annual report on Form 10-K, including the consolidated financial statements, financial statement schedules and any exhibits for the Company's most recent fiscal year. All requests should be sent to: Lori A. Barker Investor Relations Symantec Corporation 10201 Torre Avenue Cupertino, California 95014-2132 408-446-8990 (a) The following documents are filed as part of this report:
Page Number 1. Consolidated Financial Statements. Report of Ernst & Young LLP, Independent Auditors.............. 33 Report of Price Waterhouse, Independent Auditors............... 34 Consolidated Balance Sheets as of March 31, 1997 and 1996...... 35 Consolidated Statements of Operations for the Years Ended March 31, 1997, 1996 and 1995............................... 36 Consolidated Statements of Stockholders' Equity for the Years Ended March 31, 1997, 1996 and 1995......................... 37 Consolidated Statements of Cash Flow for the Years Ended March 31, 1997, 1996 and 1995............................... 38 Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements........................... 39 2. Financial Statement Schedules. The following financial statement schedule of Symantec Corporation for the years ended March 31, 1997, 1996 and 1995 is filed as part of this Form 10-K and should be read in conjunction with the Consolidated Financial Statements of Symantec Corporation. Schedule II Valuation and Qualifying Accounts........................ 56
Schedules other than that listed above have been omitted since they are either not required, not applicable, or the information is otherwise included. 3. Exhibits. The following exhibits are filed as part of, or incorporated by reference into, this Form 10-K: 3.01 The Registrant's Restated Certificate of Incorporation. (Incorporated by reference to Annex G filed with the Registrant's Joint Management Information Circular and Proxy Statement (No. 000-17781) dated October 17, 1995.) 3.02 The Registrant's Bylaws, as currently in effect. (Incorporated by reference to Exhibit 3.02 filed with the Registrant's Registration Statement on Form S-1 (No. 33-28655) originally filed May 19, 1989, and amendment No. 1 thereto filed June 21, 1989, which Registration Statement became effective June 22, 1989.) 4.01 Registration Rights Agreement. (Incorporated by reference to Exhibit 4.02 filed with the Registrant's Registration Statement on Form S-4 (No. 33-35385) initially filed June 13, 1990.) 4.02 Amendment No. One to Registration Rights Agreement (Incorporated by reference to Exhibit 4.03 filed with the Registrant's Annual Report on Form 10-K for the year ended April 2, 1993.) 4.03 Amendment No. Two to Registration Rights Agreement (Incorporated by reference to Exhibit 4.04 filed with the Registrant's Annual Report on Form 10-K for the year ended April 2, 1993.)
27 30 4.04 Plan of Arrangement and Exchangeable Share Provisions related to the acquisition of Delrina. (Incorporated by reference to Annex D filed with the Registrant's Joint Management Information Circular and Proxy Statement dated October 17, 1995.) 4.05 Support Agreement dated July 5, 1995 between Symantec and Delrina. (Incorporated by reference to Annex E filed with the Registrant's Joint Management Information Circular and Proxy Statement dated October 17, 1995.) 4.06 Form of Voting and Exchange Trust Agreement dated July 5, 1996 between Symantec and Delrina. (Incorporated by reference to Annex F filed with the Registrant's Joint Management Information Circular and Proxy Statement dated October 17, 1995.) 10.01 Amended Agreement Respecting Certain Rights of Publicity. (Incorporated by reference to Exhibit 10.04 filed with the Registrant's Registration Statement on Form S-4 (No. 33-35385) initially filed June 13, 1990.) 10.02 Non-Competition and Non-Solicitation Agreement between Registrant and Peter Norton and Ronald Posner. (Incorporated by reference to Exhibit 10.06 filed with the Registrant's Registration Statement on Form S-4 (No. 33-35385) initially filed June 13, 1990.) 10.03* 1988 Employees Stock Option Plan, as amended to date. (Incorporated by reference to Exhibit 4.02 filed with the Registrant's Registration Statement on Form S-8 (No. 33-88694) filed January 23, 1995.) 10.04* 1989 Employee Stock Purchase Plan, as amended to date. (Incorporated by reference to Exhibit 4.01 filed with the Registrant's Registration Statement on Form S-8 (No. 333-18353) filed December 20, 1996.) 10.05* Form of Stock Option Agreement and Form of Stock Option Exercise Request, as currently in effect, under the Registrant's 1988 Employees Stock Option Plan. (Incorporated by reference to Exhibit 10.10 filed with the Registrant's Registration Statement on Form S-4 (No. 33-35385) initially filed June 13, 1990.) 10.06* 1988 Directors Stock Option Plan, as amended to date. (Incorporated by reference to Exhibit 10.09 filed with the Registrant's Annual Report on Form 10-K for the year ended April 2, 1993.) 10.07* 1993 Directors Stock Option Plan, as amended. (Incorporated by reference to Exhibit 10.07 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994) 10.08* Form of Stock Option Grant and Stock Option Exercise Notice and Agreement under the Registrant's 1988 Directors Stock Option Plan. (Incorporated by reference to Exhibit 10.12 filed with the Registrant's Registration Statement on Form S-4 (No. 33-35385) initially filed June 13, 1990.) 10.09* 1994 Patent Incentive Plan. (Incorporated by reference to Exhibit 4.01 filed with the Registrant's Registration Statement on Form S-8 (No. 33-60141) filed June 9, 1995.) 10.10* Symantec Corporation 1996 Equity Incentive Plan. (Incorporated by reference to Exhibit 4.01 filed with the Registrant's Registration Statement on Form S-8 (No. 333-18355) filed December 20, 1996.) 10.11* Symantec Corporation Deferred Compensation Plan dated as of November 7, 1996. 10.12 Participation Agreement dated as of October 18, 1996, by and among Symantec Corporation, Sumitomo Bank Leasing and Financing, Inc., The Sumitomo Bank, Limited, San Francisco Branch and the other Various Financial Institutions Identified Herein and the Sumitomo Bank, Limited, San Francisco Branch. (Incorporated by reference to Exhibit 10.01 filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended September 27, 1996.) 10.13 Appendix A to Participation Agreement, Master Lease, Lease Supplements Loan Agreements, Pledge Agreement, Lessor Mortgages, and Guaranty. (Incorporated by reference to Exhibit 10.02 filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended September 27, 1996.) 10.14 Master Lease and Deed of Trust, as amended, dated as of October 18, 1996 between Symantec Corporation and Sumitomo Bank Leasing and Finance, Inc. 10.15 Guaranty dated as of October 18, 1996, made by Symantec Corporation in favor of Various Financial Institutions and The Sumitomo Bank, Limited, San Francisco Branch. (Incorporated by reference to Exhibit 10.05 filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended
- ---------------------- * Indicates a management contract or compensatory plan or arrangements. 28 31 September 27, 1996.) 10.16 Pledge Agreement dated as of October 18, 1996, made by Symantec Corporation, in favor of Sumitomo Bank, Limited, San Francisco Branch for the benefit of the Lenders, and Donaldson, Lufkin, Jenrette Securities Corporations, as collateral agent. (Incorporated by reference to Exhibit 10.06 filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended September 27, 1996.) 10.17 Assignment of Lease and Rent, as amended, dated as of October 18, 1996, from Sumitomo Bank Leasing and Finance, Inc., to The Sumitomo Bank, Limited, San Francisco Branch. 10.18 Agreement of Purchase and Sale of Cupertino City Center One between Cigna Property and Casualty Insurance Company and Symantec Corporation. 10.19 Agreement for Purchase and Sale and Escrow Instructions of 10201 Torre Avenue, Cupertino, CA. 10.20 Agreement for Purchase and Sale and Escrow Instructions, as amended, dated as of May 31, 1996. 10.21 Loan Agreement dated as of October 18, 1996, among Sumitomo Bank Leasing and Finance, Inc., Various Financial Institutions Identified Herein and The Sumitomo Bank, Limited, San Francisco Branch. 10.22 Construction Agency Agreement dated as of March 3, 1997, between Sumitomo Bank Leasing and Finance, Inc., and Symantec Corporation. 10.23 Symantec - CC5 Office Building and Parking Structure, as amended, dated as of May 5, 1997, made by and between Symantec Corporation and Webcor Builders. 10.24 Office building lease dated as of April 10, 1991, between the Registrant and Maguire Thomas Partners Colorado Place regarding property located in Santa Monica, California. (Incorporated by reference to Exhibit 10.25 filed with the Registrant's Annual Report on Form 10-K for the year ended March 31, 1991.) 10.25 Office building lease dated as of February 27, 1991, between the Registrant and Kim Camp No. VII regarding property located in Sunnyvale, California. (Incorporated by reference to Exhibit 10.26 filed with the Registrant's Annual Report on Form 10-K for the year ended March 31, 1991.) 10.26 Office building lease dated as of April 19, 1995, between the Registrant and CIGNA Property and Casualty Insurance Company regarding property located in Cupertino, California. (Incorporated by reference to Exhibit 10.16 filed with the Registrant's Annual Report on Form 10-K for the year ended March 31, 1995.) 10.27 Office building lease, as amended, dated as of December 1, 1995 between Delrina (Canada) Corporation and Sherway Centre Limited regarding property located in Toronto, Canada. (Incorporated by reference to Exhibit 10.01 filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended December 29, 1995.) 10.28 Form of Indemnity Agreement with Officers and Directors. (Incorporated by reference to Exhibit 10.17 filed with the Registrant's Registration Statement on Form S-1 (No. 33-28655) originally filed May 19, 1989, and amendment No. 1 thereto filed June 21, 1989, which Registration Statement became effective June 22, 1989.) 10.29* Full Recourse Promissory Note and Pledge Agreement between the Company and Gordon E. Eubanks, Jr. (Incorporated by reference to Exhibit 10.19 filed with the Registrant's Annual Report on Form 10-K for the year ended April 2, 1993.) 10.30* Form of Promissory Note and Pledge Agreement between the Company and certain executives. (Incorporated by reference to Exhibit 10.20 filed with the Registrant's Annual Report on Form 10-K for the year ended April 2, 1993.) 10.31* Form of Housing Assistance Agreement between the Company and certain executives. (Incorporated by reference to Exhibit 10.26 filed with the Registrant's Registration Statement on Form S-4 (No. 33-35385) initially filed June 13, 1990.) 10.32 Note Purchase Agreement, dated April 2, 1993, among Symantec Corporation, Morgan Guaranty Trust Company of New York, as Trustee, J. P. Morgan Investments Management, Inc., as Investment Manager and The Northwestern Mutual Life Insurance Company, including Form of Convertible Subordinated Notes. (Incorporated by reference to Exhibit 10.30 filed with the Registrant's
- ---------- * Indicates a management contract or compensatory plan or arrangement. 29 32 Annual Report on Form 10-K for the year ended April 2, 1993.) 10.33* The Registrant's Section 401(k) Plan, as amended. (Incorporated by reference to Exhibit 10.25 filed with the Registrants Annual Report on Form 10-K for the year ended March 31, 1995.) 10.34* Form of Executive Compensation Agreement between the Company and certain executives. (Incorporated by reference to Exhibit 10.25 filed with the Registrants Annual Report on Form 10-K for the year ended March 31, 1995.) 10.35 Assignment of Copyright and Other Intellectual Property Rights. (Incorporated by reference to appendix to Prospectus/Proxy Statement filed with the Registrant's Registration Statement on Form S-4 (No. 33-35385) initially filed June 13, 1990.) 10.36* Employment and Consulting Agreement among Symantec Corporation, Symantec Acquisition Corp. and Charles M. Boesenberg. (Incorporated by reference to Exhibit 10.32 filed with the Registrant's Annual Report of Form 10-K for the year ended April 1, 1994.) (Confidential treatment has been granted with respect to portions of this exhibit.) 10.37* Stock Option Grant between the Company and Charles Boesenberg. (Incorporated by reference to Exhibit 10.29 filed with the Registrants Annual Report on Form 10-K for the year ended March 31, 1995.) 10.38 Authorized Distributor Agreement between Symantec Corporation and Ingram Micro, Inc. (Incorporated by reference to Exhibit 10.34 filed with the Registrant's Quarterly Report of Form 10-Q for the quarter ended July 1, 1994.) (Confidential treatment has been granted with respect to portions of this exhibit.) 10.39 Authorized Distributor Agreement between Symantec Corporation and Merisel Americas, Inc. (Incorporated by reference to Exhibit 10.35 filed with the Registrant's Quarterly Report of Form 10-Q for the quarter ended July 1, 1994.) (Confidential treatment has been granted with respect to portions of this exhibit.) 10.40* Employment and Non-competition Agreement between Symantec Corporation and Dennis Bennie. (Incorporated by reference to Exhibit 10.02 filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended December 29, 1995.) 10.41 Combination Agreement between Symantec Corporation and Delrina Corporation dated July 5, 1995. (Incorporated by reference to Exhibit 10.01 filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.) 10.42 Asset Purchase Agreement dated as of September 10, 1996 by and between Delrina and JetForm. (Incorporated by reference to Exhibit 2.01 filed with the Registrant's Current Report of Form 8-K filed September 26, 1996.) 10.43 Asset Purchase Agreement, as amended, dated as of March 27, 1997 by and between Hewlett-Packard Company and Symantec Corporation. 10.44 Class action complaint filed by the law firm of Milberg Weiss Bershad Hynes & Lerach in Superior Court of the State of California, County of Santa Clara against the Company and several of its current and former officers and directors. (Incorporated by reference to Exhibit 10.35 filed with the Registrant's Annual Report of Form 10-K for the year ended March 31, 1996.) 11.01 Computation of Net Income (Loss) Per Share. 21.01 Subsidiaries of the Registrant. 23.01 Consent of Ernst & Young LLP, Independent Auditors. 23.02 Consent of Price Waterhouse, Independent Auditors. 27.01 Financial Data Schedule.
30 33 (b) Reports on Form 8-K None (c) Exhibits: The Registrant hereby files as part of this Form 10-K the exhibits listed in Item 14(a)3, as set forth above. (d) Financial Statement Schedules: The Registrant hereby files as part of this Form 10-K the schedule listed in Item 14(a)2, as set forth on page 56. 31 34 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Report of Ernst & Young LLP, Independent Auditors................. 33 Report of Price Waterhouse, Independent Auditors.................. 34 Consolidated Balance Sheets as of March 31, 1997 and 1996......... 35 Consolidated Statements of Operations for the years ended March 31, 1997, 1996 and 1995......................................... 36 Consolidated Statements of Stockholders' Equity for the years ended March 31, 1997, 1996 and 1995............................. 37 Consolidated Statements of Cash Flow for the years ended March 31, 1997, 1996 and 1995......................................... 38 Summary of Significant Accounting Policies........................ 39 Notes to Consolidated Financial Statements........................ 42
32 35 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Stockholders Symantec Corporation We have audited the accompanying consolidated balance sheets of Symantec Corporation as of March 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1997. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We did not audit the financial statements or schedule of Delrina Corporation, which statements reflect net income constituting 14% of the related 1995 consolidated financial statement totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to data included for Delrina Corporation, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Symantec Corporation at March 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, based upon our audits and the report of other auditors, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP San Jose, California April 25, 1997, except for paragraph 6 of Note 11, as to which the date is May 13, 1997 33 36 INDEPENDENT AUDITORS' REPORT August 8, 1995 Auditors' Report To the Shareholders of Delrina Corporation We have audited the consolidated balance sheet of Delrina Corporation as at June 30, 1995 and the consolidated statements of operations, retained earnings (deficit) and changes in financial position for the years ended June 30, 1995 and 1994, all expressed in Canadian dollars. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Delrina Corporation as at June 30, 1995 and the results of its operations and the changes in its financial position for the years ended June 30, 1995 and 1994 in accordance with generally accepted accounting principles in Canada. PRICE WATERHOUSE Chartered Accountants 34 37 SYMANTEC CORPORATION CONSOLIDATED BALANCE SHEETS
March 31, ------------------------ (In thousands) 1997 1996 - --------------------------------------------------------- --------- --------- ASSETS Current assets: Cash and short-term investments $ 160,082 $ 129,199 Trade accounts receivable 47,650 59,340 Inventories 4,476 7,893 Deferred income taxes 12,823 12,875 Other 13,166 14,653 --------- --------- Total current assets 238,197 223,960 Equipment and leasehold improvements 51,610 51,698 Restricted investments 47,448 -- Capitalized software 2,037 4,183 Other 2,381 5,186 --------- --------- $ 341,673 $ 285,027 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 30,328 $ 23,368 Accrued compensation and benefits 16,241 14,888 Other accrued expenses 53,742 47,664 Income taxes payable 8,276 3,329 Current portion of long-term obligations 41 68 --------- --------- Total current liabilities 108,628 89,317 Convertible subordinated debentures 15,000 15,000 Long-term obligations 66 393 Commitments and contingencies Stockholders' equity: Preferred stock (authorized: 1,000; issued and outstanding: none) -- -- Common stock (authorized: 100,000; issued and outstanding: 55,427 and 53,636 shares) 554 536 Capital in excess of par value 291,548 279,508 Notes receivable from stockholders (144) (144) Cumulative translation adjustment (7,580) (7,591) Accumulated deficit (66,399) (91,992) --------- --------- Total stockholders' equity 217,979 180,317 --------- --------- $ 341,673 $ 285,027 ========= =========
The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are an integral part of these statements. 35 38 SYMANTEC CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31, --------------------------------------- (In thousands, except net income (loss) per share) 1997 1996 1995 - -------------------------------------------------- --------- --------- --------- Net revenues $ 472,183 $ 445,432 $ 431,268 Cost of revenues 93,544 108,975 90,935 --------- --------- --------- Gross margin 378,639 336,457 340,333 Operating expenses: Research and development 88,924 94,672 70,706 Sales and marketing 220,811 229,703 190,439 General and administrative 34,030 32,744 29,357 Acquisition, restructuring and other expenses 8,585 27,617 9,545 --------- --------- --------- Total operating expenses 352,350 384,736 300,047 --------- --------- --------- Operating income (loss) 26,289 (48,279) 40,286 Interest income 7,182 7,512 5,648 Interest expense (1,402) (1,495) (2,419) Other income (expense), net (1,691) (2,130) 1,041 --------- --------- --------- Income (loss) before income taxes 30,378 (44,392) 44,556 Provision (benefit) for income taxes 4,340 (4,609) 11,147 --------- --------- --------- Net income (loss) $ 26,038 $ (39,783) $ 33,409 ========= ========= ========= Net income (loss) per share - primary $ 0.47 $ (0.76) $ 0.65 ========= ========= ========= Net income (loss) per share - fully diluted $ 0.47 $ (0.76) $ 0.61 ========= ========= ========= Shares used to compute net income (loss) per share - primary 55,407 52,664 52,181 ========= ========= ========= Shares used to compute net income (loss) per share - fully diluted 55,841 52,664 56,491 ========= ========= =========
The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are an integral part of these statements. 36 39 SYMANTEC CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Notes Capital in Receivable Cumulative Total Common Excess of from Translation Accumulated Stockholders' (In thousands) Stock Par Value Stockholders Adjustment Deficit Equity - -------------- ------ ---------- ------------ ----------- ----------- ------------ Balances, March 31, 1994 $484 $ 226,001 $(149) $(7,054) $(90,089) $ 129,193 Net income -- -- -- -- 33,409 33,409 Acquisition of Intec and SLR: Issued 303 shares of common stock 3 38 -- -- -- 41 Accumulated deficit -- -- -- -- (363) (363) Issued common stock: 2,147 shares under stock plans and other 21 21,351 -- -- -- 21,372 Repayments on notes -- -- 5 -- -- 5 Issued 57 shares to acquire subsidiary -- 1,376 -- -- -- 1,376 Translation adjustment -- -- -- (159) -- (159) ---- --------- ----- ------- -------- --------- Balances, March 31, 1995 508 248,766 (144) (7,213) (57,043) 184,874 Net loss -- -- -- -- (39,783) (39,783) Delrina net loss for the quarter ended June 30, 1995 -- -- -- -- 4,834 4,834 Issued common stock: 2,021 shares under stock plans and other 20 21,101 -- -- -- 21,121 833 shares from conversion of convertible debentures 8 9,641 -- -- -- 9,649 Translation adjustment -- -- -- (378) -- (378) ---- --------- ----- ------- -------- --------- Balances, March 31, 1996 536 279,508 (144) (7,591) (91,992) 180,317 Net income -- -- -- -- 26,038 26,038 Acquisition of Fast Track: Issued 600 shares of common stock 6 (5) -- -- -- 1 Accumulated deficit -- -- -- -- (445) (445) Issued common stock: 1,191 shares under stock plans and other 12 12,045 -- -- -- 12,057 Translation adjustment -- -- -- 11 -- 11 ---- --------- ----- ------- -------- --------- Balances, March 31, 1997 $554 $ 291,548 $(144) $(7,580) $(66,399) $ 217,979 ==== ========= ===== ======= ======== =========
The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are an integral part of these statements. 37 40 SYMANTEC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW
Year Ended March 31, ----------------------------------------- (In thousands) 1997 1996 1995 - ---------------------------------------------- --------- --------- --------- OPERATING ACTIVITIES: Net income (loss) $ 26,038 $ (39,783) $ 33,409 Delrina net loss for the quarter ended June 30, 1995 -- 4,834 -- Acquired companies' net assets (445) -- (1,677) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of equipment and leasehold improvements 22,770 19,717 15,689 Amortization and write-off of capitalized software costs 10,477 19,141 13,360 Write-off of equipment and leasehold improvements 4,010 3,403 1,539 Deferred income taxes 21 (989) 7,267 Net change in assets and liabilities: Trade accounts receivable 11,699 17,554 (15,266) Inventories 3,432 1,450 1,308 Other current assets 1,304 (6,461) 4,008 Capitalized software costs (7,656) (3,286) (1,523) Other assets 2,720 2,465 (6,175) Accounts payable 7,373 (2,368) (11,224) Accrued compensation and benefits 1,502 1,313 (1,042) Accrued other expenses 6,104 (7,203) (1,546) Income taxes payable 5,031 1,211 78 --------- --------- --------- Net cash provided by operating activities 94,380 10,998 38,205 --------- --------- --------- INVESTING ACTIVITIES: Capital expenditures (27,195) (35,767) (24,749) Purchased intangibles (698) (461) (4,293) Purchases of short-term, available-for-sale investments (180,000) (154,500) (166,524) Maturities of short-term, available-for-sale investments 203,098 168,681 122,736 Purchases of long-term, restricted investments (47,448) -- -- Sales of fixed assets and other -- -- (1,505) --------- --------- --------- Net cash used in investing activities (52,243) (22,047) (74,335) --------- --------- --------- FINANCING ACTIVITIES: Principal payments on long-term obligations (354) (475) (889) Net proceeds from sales of common stock and other 12,057 20,770 21,395 --------- --------- --------- Net cash provided by financing activities 11,703 20,295 20,506 --------- --------- --------- Effect of exchange rate fluctuations on cash and cash equivalents 141 2,339 (2,263) Increase (decrease) in cash and cash equivalents 53,981 11,585 (17,887) Beginning cash and cash equivalents 41,777 30,192 48,079 --------- --------- --------- Ending cash and cash equivalents $ 95,758 $ 41,777 $ 30,192 ========= ========= ========= SUPPLEMENTAL CASH FLOW DISCLOSURES: Income taxes paid (net of refunds) during the year $ 392 $ 906 $ (759) Interest paid on convertible subordinated debentures and long-term obligations $ 1,182 $ 1,299 $ 2,070
The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are an integral part of these statements. 38 41 SYMANTEC CORPORATION SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Symantec Corporation ("Symantec" or the "Company") develops, markets and supports a diversified line of application and system software products designed to enhance individual and workgroup productivity. Symantec's products, comprising both application software and system software, are currently organized into the following three major product groups: Remote Productivity Solutions, Security and Assistance and Emerging Businesses and Other. Customers consist primarily of corporations, higher education institutions, government agencies and individual users, which are mainly located in North America, Europe and Asia/Pacific. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Symantec Corporation and its wholly-owned subsidiaries ("Symantec" or the "Company"). All significant intercompany accounts and transactions have been eliminated. Basis of Presentation During fiscal 1997, 1996 and 1995, Symantec acquired various companies in transactions accounted for as poolings of interest. Accordingly, all financial information has been restated to reflect the combined operations of Symantec and the acquired companies with the exception of Intec Systems Corporation ("Intec"), SLR Systems, Inc. ("SLR") and Fast Track, Inc. ("Fast Track"). The results of operations of Intec, SLR and Fast Track were not material to Symantec's consolidated financial statements, and therefore, amounts prior to the year of acquisition were not combined with Symantec's financial statements. Symantec has a 52/53-week fiscal accounting year. Accordingly, all references as of and for the periods ended March 31, 1997, 1996 and 1995 reflect amounts as of and for the periods ended March 28, 1997, March 29, 1996 and March 31, 1995, respectively. The fiscal year ending on April 3, 1998 will be comprised of a 53 week period. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Foreign Currency Translation The functional currency of the Company's foreign subsidiaries is the local currency. Non-current assets and liabilities denominated in foreign currencies are translated using the exchange rate on the balance sheet dates. The cumulative translation adjustments resulting from this process are shown separately as a component of stockholders' equity. Revenues and expenses are translated using average exchange rates prevailing during the year. Foreign currency transaction gains and losses are included in the determination of net income (loss). Revenue Recognition Symantec recognizes revenue upon shipment when no significant vendor obligations remain and collection of the receivable, net of provisions for estimated future returns, is probable. Symantec offers the right of return of its products under various policies. The Company estimates and maintains reserves for product returns. Based on returns experienced, the Company's estimates have been materially accurate. During fiscal 1997, Symantec sold certain software products and related tangible assets to JetForm Corporation ("JetForm") and to the Hewlett-Packard Company ("Hewlett-Packard") (see Note 9 of Notes to Consolidated Financial Statements). Due to the uncertainty regarding the ultimate collectibility of certain contractual installment payments from JetForm, Symantec is recognizing the related revenue as payments are due and collectibility is assured. Due to the uncertainty regarding the amounts upon which the related Hewlett-Packard payments are determined, Symantec is recognizing these amounts as revenue as they are determinable. Revenues related to significant post-contract support agreements (generally product maintenance agreements) are deferred and recognized over the period of the agreements. The estimated cost of providing insignificant post-contract support (generally telephone support) is accrued at the time of the sale and is included in sales and marketing expense. Technical support costs included in sales and marketing expense were $35.1 million, $34.5 million and $28.0 million in fiscal 1997, 1996 and 1995, respectively. 39 42 SYMANTEC CORPORATION SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Symantec recognized approximately $3.0 million of North American net revenues in the March 1995 quarter and $7.2 million of international net revenues in the June 1995 quarter that had been previously deferred by Central Point in accordance with Statement of Financial Accounting Standards No.48. Cash Equivalents, Short-Term Investments and Restricted Investments Symantec considers investments in highly liquid instruments purchased with an original maturity of 90 days or less to be cash equivalents. All of the Company's cash equivalents, short-term investments and restricted investments, consisting principally of commercial paper, corporate notes, U.S. treasury notes and certificates of deposit, are classified as available-for-sale as of the balance sheet date. These securities are reported at amortized cost, which approximates fair value, and therefore, there are no unrealized gains and losses included in stockholders' equity. Realized gains and losses and declines in value judged to be other-than-temporary are included in interest income. The cost of securities sold is based upon the specific identification method. Inventories Inventories are valued at the lower of cost or market. Cost is principally determined using currently adjusted standards, which approximate actual cost on a first-in, first-out basis. Equipment and Leasehold Improvements Equipment and leasehold improvements are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is provided on a straight-line basis over the estimated useful lives of the respective assets, generally the shorter of the lease term or three to seven years. Capitalized Software Purchased product rights are comprised of acquired software ("product rights") and are stated at cost less accumulated amortization. Amortization is provided on the greater of the straight-line basis over the estimated useful lives of the respective assets, generally three to five years, or on the basis of the ratio of current revenues to current revenues plus anticipated future revenues. In fiscal 1997, Symantec wrote off approximately $0.6 million of unamortized purchased product rights related to its network administration technology, as a result of the sale of this business unit to Hewlett-Packard in March 1997. In fiscal 1997, Symantec capitalized approximately $7.7 million of capitalized software development costs, primarily related to network administration technology, which was sold to Hewlett-Packard in March 1997, resulting in the write off of approximately $7.0 million of unamortized costs during the fourth quarter of fiscal 1997 (See Note 9 of Notes to Consolidated Financial Statements). Amortization expense for capitalized software development costs during the fourth quarter of fiscal 1997 totaled approximately $0.3 million. Prior to fiscal 1997, capitalization of certain software development costs in accordance with Statement of Financial Accounting Standards No. 86 did not materially affect the Company, except for amounts capitalized by Delrina prior to its acquisition by Symantec in fiscal 1996. Delrina did not capitalize any software development costs in fiscal 1996 and capitalized approximately $6.3 million in software development costs in fiscal year 1995, which were substantially written off in fiscal 1996 as the result of the de-emphasis of Delrina Windows 3.1 and certain other products. The related amortization expense was approximately $5.6 million and $4.0 million in fiscal 1996 and 1995, respectively. Income Taxes Income taxes are computed in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Net Income (Loss) Per Share Net income (loss) per share is calculated using the treasury stock or the modified treasury stock method, as applicable, if dilutive. Common stock equivalents are attributable to outstanding stock options. Fully diluted earnings per share includes the assumed conversion of all of the outstanding convertible subordinated debentures. Concentrations of Credit Risk The Company's product revenues are concentrated in the personal computer software industry, which is highly competitive and rapidly changing. Significant technological changes in the industry or customer requirements, or 40 43 SYMANTEC CORPORATION SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED the emergence of competitive products with new capabilities or technologies, could adversely affect operating results. In addition, a significant portion of the Company's revenue and net income is derived from international sales and independent agents and distributors. Fluctuations of the U.S. dollar against foreign currencies, changes in local regulatory or economic conditions, piracy or nonperformance by independent agents or distributors could adversely affect operating results. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of short-term investments, restricted investments and trade accounts receivable. The Company's investment portfolio is diversified and consists of investment grade A-1/P-1 securities. The Company is exposed to credit risks in the event of default by these institutions to the extent of the amount recorded on the balance sheet. The credit risk in the Company's trade accounts receivable is substantially mitigated by the Company's credit evaluation process, reasonably short collection terms and the geographical dispersion of sales transactions. The Company generally does not require collateral and maintains reserves for potential credit losses, and such losses have been within management's expectations. Advertising Advertising expenditures are charged to operations as incurred except for certain direct mail campaigns which are deferred and amortized over the expected period of benefit or twelve months, whichever is shorter. Deferred advertising costs have not been material in all periods presented. Advertising expense for fiscal 1997, 1996 and 1995 was approximately $39.1 million, $43.0 million and $41.0 million, respectively. Impairment of Long-Lived Assets Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," applicable for the fiscal year beginning April 1, 1996, did not have a material effect on the Company's consolidated financial condition or results of operations. Common Stock Repurchase On April 29, 1997, the Board of Directors of Symantec authorized the repurchase of up to 1,000,000 shares of Symantec common stock by June 13, 1997. The shares will be used for employee stock purchase programs and option grants. As of June 13, 1997, management completed the repurchase of 500,000 shares at prices ranging from $16.57 to $17.00 per share. Recent Accounting Pronouncements In February 1997, the Finance Accounting Standards Board issued Statement (SFAS) No. 128, "Earnings per Share", which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. The application of the SFAS 128 new "basic earnings per share" calculation results in basic earnings per share of $0.48 for the year ended March 31, 1997, basic loss per share of $0.76 for the year ended March 31, 1996 and basic earnings per share of $0.68 for the year ended March 31, 1995. The Company does not expect the new diluted calculation to be materially different to fully diluted earnings per share. Reclassifications Certain previously reported amounts have been reclassified to conform to the current presentation format. During fiscal 1997, certain deferred revenue amounts which were previously classified as accrued liabilities have been reclassified to accounts receivable. The reclassification amounted to approximately $19.0 million, $13.0 million, and $3.0 million in fiscal 1997, 1996, and 1995, respectively. All financial information has been restated to conform to this presentation 41 44 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BALANCE SHEET INFORMATION
March 31, ------------------------- (In thousands) 1997 1996 - ------------------------------ --------- --------- Cash, cash equivalents and short-term investments: Cash $ 33,755 $ 20,176 Cash equivalents 62,003 21,601 Short-term investments 64,324 87,422 --------- --------- $ 160,082 $ 129,199 ========= ========= Trade accounts receivable: Receivables 51,950 $ 64,356 Less: allowance for doubtful accounts (4,300) (5,016) --------- --------- $ 47,650 $ 59,340 ========= ========= Inventories: Raw materials 1,736 $ 1,969 Finished goods 2,740 5,924 --------- --------- $ 4,476 $ 7,893 ========= ========= Equipment and leasehold improvements: Computer equipment 91,533 $ 79,153 Office furniture and equipment 27,706 25,753 Leasehold improvements 17,697 12,603 --------- --------- 136,936 117,509 Less: accumulated depreciation and amortization (85,326) (65,811) --------- --------- $ 51,610 $ 51,698 ========= ========= Capitalized software: Purchased product rights 591 $ 8,680 Capitalized software costs 2,465 5,623 Less: accumulated amortization of purchased product rights (55) (8,162) Less: accumulated amortization of capitalized software costs (964) (1,958) --------- --------- $ 2,037 $ 4,183 ========= ========= Other accrued expenses: Acquisition and restructuring expenses 3,833 $ 7,833 Deferred revenue 13,825 13,350 Marketing development funds 12,529 11,412 Other 23,555 15,069 --------- --------- $ 53,742 $ 47,664 ========= =========
42 45 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED NOTE 2. BUSINESS COMBINATIONS AND PURCHASED PRODUCT RIGHTS During the three fiscal years ended March 31, 1997, Symantec completed acquisitions of the following companies:
Shares of Acquired Symantec Company Common Stock Stock Options Companies Acquired Date Acquired Issued Assumed - ------------------ ------------- ---------- --------- Fast Track, Inc. ("Fast Track") May 28, 1996 600,000 -- Delrina Corporation ("Delrina") November 22, 1995 13,684,174* 1,271,677 Intec Systems Corporation ("Intec") August 31, 1994 133,332 -- Central Point Software, Inc. ("Central Point") June 1, 1994 4,029,429 707,452 SLR Systems, Inc. ("SLR") May 31, 1994 170,093 --
* Includes Delrina exchangeable stock that is traded on the Toronto Stock Exchange. Delrina stockholders received Delrina exchangeable stock in exchange for Delrina common shares at a rate of 0.61 per share. Delrina exchangeable stock may be converted at any time into Symantec common stock on a one-for-one basis at each stockholder's option. All of these acquisitions were accounted for as poolings of interest. In connection with the acquisitions of the companies listed above, Symantec incurred significant acquisition expenses (See Note 10). Due to differing year ends of Symantec and Delrina, financial information for dissimilar fiscal year ends was combined. Delrina's fiscal year ended June 30, 1995 was combined with Symantec's fiscal year ended March 31, 1995. Accordingly, Delrina's results of operations for the quarter ended June 30, 1995 were duplicated in the combined statements of operations for fiscal 1996 and 1995 and Delrina's net loss for the quarter ended June 30, 1995 was credited to stockholder's equity. Delrina reported net revenues of $19.8 million and net loss of $4.8 million in the quarter ended June 30, 1995. The results of operations of Fast Track were not material to Symantec's consolidated financial statements, and therefore, amounts prior to the date of acquisition were not restated to reflect the combined operations of the companies. NOTE 3. CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS All cash equivalents, short-term investments and restricted investments have been classified as available-for-sale securities. As of March 31, 1997 and 1996, the estimated fair value of the cash equivalents and short-term investments consisted of the following:
Cash equivalents and short-term investments (In thousands) 1997 1996 - ----------------------------------------------------------- ------- ------- Taxable commercial paper $ 64,196 $ 77,392 Money market funds 2,598 21,601 Taxable corporate notes 5,130 5,022 Taxable certificates of deposit 5,030 5,008 Treasury bills 33,648 -- Taxable fixed deposit 15,725 -- -------- -------- $126,327 $109,023 ======== ========
43 46 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED All of the Company's available-for-sale cash equivalent and short-term investment securities as of March 31, 1997 and 1996 have a contractual maturity of less than one year. As of March 31, 1997 and 1996, the estimated fair value of the restricted investments consisted of the following:
Restricted investments (In thousands) 1997 1996 - ------------------------------------------ ------- ------- Maturities of less than one year: Money market funds $ 6 $ -- Treasury bills 19,815 -- ------- ------- $19,821 $ -- ======= ======= Maturities of one to three years: Treasury notes $27,627 $ -- ------- ------- $27,627 $ -- ======= =======
The Company's available-for-sale restricted investments relate to certain collateral requirements for lease agreements associated with the Symantec's corporate Cupertino, California facilities and have maturities of three years or less (See Note 6 of Notes to Consolidated Financial Statements). Fair values of cash, cash equivalents, short-term investments and restricted investments approximate cost due to the nature of the investments and/or their short period to maturity. During the period covered by the financial statements, the Company has not used any derivative instrument for trading purposes. Symantec utilizes some natural hedging to mitigate the Company's transaction exposures and hedges some residual transaction exposures through the use of one-month foreign exchange forward contracts. The Company enters into foreign exchange forward contracts with financial institutions primarily to protect against currency exchange risks associated with certain firmly committed transactions. Fair value of foreign exchange forward contracts are based on quoted market prices. At March 31, 1997, there was a total notional amount of approximately $46.3 million of outstanding foreign exchange forward contracts all of which mature in 35 days or less. The net liability of forward contracts was a notional amount of approximately $45.8 million at March 31, 1997. The fair value of foreign currency exchange forward contracts approximates cost due to the short maturity periods and the minimal fluctuations in foreign currency exchange rates. The Company does not hedge its translation risk. NOTE 4. CONVERTIBLE SUBORDINATED DEBENTURES On April 2, 1993, the Company issued convertible subordinated debentures totaling $25.0 million. The debentures bear interest at 7.75% payable semiannually and are convertible into Symantec common stock at $12 per share at the option of the investor. The debentures are due in three equal annual installments beginning in 1999 and are redeemable at the option of the investors in the event of a change in control of Symantec or the sale of all or substantially all of the assets of the Company. Symantec, at its option, may redeem the notes at any time on 30 to 60 days notice; however, the Company could incur a prepayment penalty for early redemption. The holders are entitled to certain registration rights relating to the shares of common stock resulting from the conversion of the debentures. The Company reserved 2,083,333 shares of common stock to be issued upon conversion of these debentures. The debentures limit the payment of cash dividends and the repurchase of capital stock to a total of $10.0 million plus 25% of cumulative net income subsequent to April 2, 1993. On April 26, 1995, convertible subordinated debentures totaling $10.0 million were converted into 833,333 shares of Symantec common stock, leaving 1,250,000 shares of common stock reserved for future conversion as of March 31, 1997. The estimated fair value of the $15.0 million convertible subordinated debentures was approximately $17.9 million at March 31, 1997. The estimated fair value was based on the total shares of common stock reserved for issuance upon conversion of the debentures at the closing price of the Company's common stock at March 31, 1997, which exceeded the conversion price of $12 per share, plus accrued interest. 44 47 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED NOTE 5. LINE OF CREDIT The Company has a $10.0 million bank line of credit that expires in March 1998. The line of credit is available for general corporate purposes and bears interest at the banks' reference (prime) interest rate (8.50% at March 31, 1997), the U.S. offshore rate plus 1.25%, a CD rate plus 1.25% or London Interbank Offering Rate ("LIBOR") plus 1.25%, at the Company's discretion. The line of credit requires bank approval for the payment of cash dividends. Borrowings under this line are unsecured and are subject to the Company maintaining certain financial ratios and profits. The Company was in compliance with the line of credit covenants as of March 31, 1997. At March 31, 1997, there was approximately $0.3 million of standby letters of credit outstanding under this line of credit. There were no borrowings outstanding under this line at March 31, 1997. NOTE 6. COMMITMENTS Symantec leases all of its facilities and certain equipment under operating leases that expire at various dates through 2026. The Company currently subleases some space under various operating leases which will expire at various dates through 2000. The future fiscal year minimum operating lease commitments were as follows at March 31, 1997:
(In thousands) - ------------------------------------------------------ 1998 $15,800 1999 15,029 2000 13,831 2001 10,612 2002 7,639 Thereafter 24,352 ------- Operating lease commitments 87,263 Sublease income (5,343) ------- Net operating lease commitments $81,920 =======
Rent expense charged to operations totaled approximately $12.4 million, $11.3 million and $9.7 million for the years ended March 31, 1997, 1996 and 1995, respectively. 45 48 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED In fiscal 1997, Symantec entered into lease agreements for two existing office buildings, land and one office building under construction in Cupertino, California. The lease agreements are for seven years and the lease payments per year total approximately $1.0 million in fiscal 1997, $4.1 million in fiscal 1998 and $4.8 million in fiscal years 1999 through 2004. Lease payments are based on the three month LIBOR in effect at the beginning of each fiscal quarter. Symantec has the right to acquire the related properties at any time during the seven year lease period. If at the end of the lease term Symantec does not renew the lease, purchase the property under lease or arrange a third party purchase, then the Company will be obligated to the lessor for a guaranteed residual amount equal to a specified percentage of the Company's purchase price of the property. Symantec would also be obligated to the lessor for all or some portion of this amount if the price paid by the third party is below the guaranteed residual amount. The guaranteed residual payment on the lease agreements for the two existing office buildings totals approximately $38.4 million. The guaranteed residual payment on the lease agreements for the land and office building under construction was approximately $7.0 million at March 31, 1997 and will increase to approximately $31.7 million at the completion of the construction during fiscal year 1999. As security against this guaranteed residual payment, Symantec is required to maintain a corresponding investment in U.S. Treasury securities with maturities not to exceed three years. Symantec is restricted in its use of these investments per the terms of the lease agreement. The investments total approximately $47.4 million and are classified as non-current restricted investments within the financial statements. The Company currently occupies a portion of these office buildings and has assumed the right to sub-lease income provided by the other tenants. The sub-lease agreements have terms expiring in April 1997 through September 2000. NOTE 7. INCOME TAXES The components of the provision (benefit) for income taxes were as follows:
Year Ended March 31, ------------------------------- (In thousands) 1997 1996 1995 - ------------------------------------------ ------- ------- ------- Current: Federal $ 514 $(5,882) $ 998 State 302 130 349 International 3,472 2,149 2,825 ------- ------- ------- 4,288 (3,603) 4,172 Deferred: Federal 565 (1,006) 6,431 State 126 -- 1,761 International (639) -- (1,217) ------- ------- ------- 52 (1,006) 6,975 ------- ------- ------- $ 4,340 $(4,609) $11,147 ======= ======= =======
The difference between the Company's effective income tax rate and the federal statutory income tax rate as a percentage of income (loss) before income taxes was as follows:
Year Ended March 31, ----------------------------- 1997 1996 1995 ------ ------ ------ Federal statutory rate 35.0% (35.0)% 35.0% State taxes, net of federal benefit 2.9 0.3 3.3 Non-deductible acquisition expenses -- 6.8 2.6 Non-deductible acquired in-process R&D -- -- 1.1 Impact of international operations (9.2) -- (11.2) Losses for which no benefit is currently recognizable -- 16.9 -- Benefit of pre-acquisition losses of acquired entities (16.5) -- (6.7) Other, net 2.1 0.7 1.0 -------- -------- -------- 14.3% (10.3)% 25.1% ======== ======== ========
46 49 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED The principal components of deferred tax assets were as follows:
March 31, ------------------- (In thousands) 1997 1996 - ------------------------------ ------- ------- Tax credit carryforwards $ 9,158 $ 8,213 Net operating loss carryforwards 7,969 19,813 Inventory valuation accounts 2,327 2,704 Other reserves and accruals not currently tax deductible 8,570 9,403 Accrued compensation and benefits 2,392 1,916 Deferred revenue 10,187 5,465 Sales incentive programs 5,005 4,054 Allowance for doubtful accounts 984 1,104 Acquired software 2,613 2,979 Accrued acquisition, restructuring and other expenses 1,077 2,364 Other 2,868 579 ------- ------- 53,150 58,594 Valuation allowance (40,327) (45,719) ------- ------- $12,823 $12,875 ======= =======
Realization of the $12.8 million of net deferred tax asset that is reflected in the financial statements is dependent upon the Company's ability to generate sufficient future U.S. taxable income. Management believes that it is more likely than not that the asset will be realized based on forecasted U.S. earnings. Approximately $22.3 million of the valuation allowance for deferred tax assets is attributable to unbenefitted stock option deductions, the benefit of which will be credited to equity when realized. Approximately $4.3 million of the valuation allowance represents net operating loss and tax credit carryforwards of various acquired companies that are limited by separate return limitations and under the "change of ownership" rules of Internal Revenue Code Section 382 and the remaining $13.7 million of the valuation allowance relates to unbenefitted temporary differences and net operating loss and tax credit carryforwards. The change in the valuation allowance for the years ended March 31, 1997, 1996 and 1995 were a net decrease of $5.4 million and net increases of $14.8 million and $1.6 million, respectively. Pretax income (loss) from international operations was approximately $24.9 million, $(4.1) million and $25.9 million for the years ended March 31, 1997, 1996 and 1995, respectively. At March 31, 1997, the Company had tax credit carryforwards of approximately $9.2 million that expire in fiscal 1998 through 2011 and net operating loss carryforwards of approximately $19.3 million that expire in fiscal 1999 through 2012. NOTE 8. EMPLOYEE BENEFITS 401(k) Plan Symantec maintains a salary deferral 401(k) plan for all of its domestic employees. The plan allows employees to contribute up to 15% of their pretax salary up to the maximum dollar limitation prescribed by the Internal Revenue Code. Symantec matches 100% of the first $500 of employees' contributions and then 50% of the employee's contribution up to 6% of the employees' eligible compensation. Company contributions under the plan were $2.0 million, $1.5 million and $1.2 million for the years ended March 31, 1997, 1996 and 1995, respectively. 47 50 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED Employee Stock Purchase Plan In October 1989, the Company established the 1989 Employee Stock Purchase Plan (the "ESPP"). Subject to certain limitations, Company employees may purchase, through payroll deductions of 2 to 10% of compensation, shares of common stock at a price per share that is the lesser of 85% of the fair market value as of the beginning of the offering period or the end of the purchase period. On September 25, 1996, stockholders approved an amendment to the ESPP which included increasing by 1.4 million to 3.4 million the number of shares reserved for issuance under the ESPP. As of March 31, 1997, approximately 1.9 million shares had been issued and 1.5 million shares remain to be issued under the ESPP. Stock Option Plans The Company maintains stock option plans pursuant to which an aggregate total of approximately 17.4 million shares of Common stock have been reserved for issuance as incentive and nonqualified stock options to employees, officers, directors, consultants, independent contractors and advisors to the Company (or of any parent, subsidiary or affiliate of the Company as the Board of Directors or committee may determine). The purpose of these plans are to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company by offering them an opportunity to participate in the Company's future performance through awards of stock options and stock bonuses. Under the terms of these plans, the option exercise price may not be less than 100% of the fair market value on the date of grant, the options have a maximum term of ten years and generally vest over a four-year period. On May 14, 1996, Symantec stockholders approved the 1996 Equity Incentive Plan (the "96 Plan") which superseded the 1988 Option Plan (the "88 Plan") and made available approximately 2.7 million shares. On September 25, 1996, stockholders approved an amendment to the 96 Plan to make available for issuance up to approximately 1.3 million additional shares representing the number of options previously granted pursuant to the 88 Plan that had expired, were canceled or were unexercisable for any reason without having been exercised in full. Stock option and warrant activity was as follows:
Weighted Average Number Exercise (In thousands, except exercise price per share) of Shares Price - ----------------------------------------------- --------- -------- Outstanding at March 31, 1994 8,685 $12.28 Granted 3,799 19.02 Exercised (1,813) 9.53 Canceled (1,682) 20.20 ------ Outstanding at March 31, 1995 8,989 14.36 Granted 5,990 16.56 Exercised (1,601) 10.40 Canceled (3,660) 22.14 ------ Outstanding at March 31, 1996 9,718 13.43 Granted 2,681 13.90 Exercised (684) 9.89 Canceled (2,673) 14.21 ------ Outstanding at March 31, 1997 9,042 13.61 ======
(In thousands) March 31, - ------------------------------------- ------------------ Balances are as follows: 1997 1996 ------ ------ Authorized but unissued 11,901 10,418 Available for future grants 2,859 700 Exercisable and vested 4,066 3,894 Exercised, subject to repurchase -- 1
48 51 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED The following tables summarize information about options outstanding at March 31, 1997:
Outstanding options Exercisable options ---------------------------------------- ------------------------- Weighted average Weighted Weighted Number of contractual average Number of average shares (in life exercise shares (in exercise Range of Exercise Prices thousands) (in years) price thousands) price - ------------------------ ----------- ----------- -------- ---------- -------- $ 1.00 - $ 12.50 2,995 7.27 $ 10.18 1,368 $9.71 $12.56 - $ 14.25 3,104 7.98 13.19 1,415 13.15 $14.31 - $ 39.13 2,943 7.64 17.54 1,283 19.42 ----- ----- 9,042 7.63 13.61 4,066 13.97 ===== =====
These options will expire if not exercised at specific dates ranging from April 1997 to March 2007. Prices for options exercised during the three-year period ended March 31, 1997 ranged from $0.05 to $24.00. Stock Award Plan During fiscal 1996, the Company registered 400,000 shares to be issued under the terms of the 1994 Patent Incentive Plan (the "94 Patent Plan"). The purpose of this plan is to increase awareness of the importance of patents to the Company's business and to provide employees with incentives to pursue patent protection for new technologies that may be valuable to the Company. The Company's executive officers are not eligible for awards under the 1994 Patent Incentive Plan. As of March 31, 1997, approximately 9,000 shares had been issued under this plan. Pro Forma Information The Company has elected to follow APB Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under SFAS No. 123, "Accounting for Stock-Based Compensation," requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB No. 25, because the exercise price of the Company's employee stock options generally equals the market price of the underlying stock on the date of grant, no compensation expense is recognized in the Company's financial statements. Pro forma information regarding net income and earnings per share is required by SFAS No. 123. This information is required to be determined as if the Company had accounted for its employee stock options (including shares issued under the Employee Stock Purchase Plan, collectively called "options") granted subsequent to March 31, 49 52 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 1995 under the fair value method of that statement. The fair value of options granted in fiscal years 1996 and 1997 reported below has been estimated at the date of grant using a Black-Scholes option pricing model assuming no expected dividends and the following weighted average assumptions:
Employee Employee Stock Stock Options Purchase Plan ---------------- ---------------- Range of Exercise Prices 1997 1996 1997 1996 - ----------------------------------- ---- ----- ---- ---- Expected life (years) 4.34 4.34 0.50 0.50 Expected volatility 0.63 0.74 0.74 0.60 Risk free interest rate 6.7% 6.0% 5.4% 5.4%
During March 1996, the Board of Directors authorized the Company to offer to each employee with stock options having an exercise price greater than $13.10 (the "Old Options") the opportunity to cancel the affected grants and receive a new grant for the same number of shares dated March 4, 1996 (the "New Options"). On the date of grant, the New Options have an exercise price equal to $13.10 and a stock price of $12.63. Under the terms of this stock option cancellation and regrant, all options began vesting as of the new grant date and no portion of any regranted options were exercisable until March 4, 1997. Options representing a total of approximately 2.3 million shares of common stock were canceled and regranted. The weighted average fair value of these New Options was $14.79. The President and Chief Executive Officer, the then Executive Vice President, Worldwide Operations and Chief Financial Officer, the majority of the then members of the Executive Staff, and all members of the Board of Directors elected to exclude themselves from this stock option cancellation and regrant. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in the opinion of management, the existing models do not necessarily provide a reliable single measure of the fair value of its options. The weighted-average estimated fair value of employee stock options for fiscal year 1997 and 1996 were $7.81 and $10.44 per share, respectively. The weighted-average estimated fair value of employee stock purchase rights granted under the Employee Stock Purchase Plan during fiscal year 1997 and 1996 were $7.74 and $18.94, respectively. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period (for employee stock options) and the six-month purchase period (for stock purchases under the Employee Stock Purchase Plan). The Company's pro forma information is as follows:
(In thousands, except per share data) Year ended March 31, ------------------- 1997 1996 ------- -------- Net income (loss) - Pro forma $14,123 $(47,015) Net income (loss) per share - Pro forma 0.27 (0.89)
The effects on pro forma disclosures of applying SFAS No. 123 are not likely to be representative of the effects on pro forma disclosures of future years. Because SFAS 123 is applicable only to options granted subsequent to March 31, 1995, its pro forma effect will not be fully reflected until approximately fiscal 2000. NOTE 9. SALE OF PRODUCT RIGHTS During September 1996, Symantec sold its electronic forms software products and related tangible assets to JetForm for approximately $100.0 million, payable over four years in quarterly installments through the June 2000 quarter. JetForm has the option to tender payment in either cash or in registered JetForm common stock, within a contractually defined quantity threshold. Due to the uncertainty regarding the ultimate collectibility of these installments, Symantec is recognizing the related revenue as payments are due and collectibility is assured from JetForm. Symantec recognized revenue of approximately $18.3 million from JetForm during fiscal 1997. 50 53 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED In March 1997, Symantec also sold the software products and related tangible assets of its Networking Business Unit to Hewlett-Packard, resulting in the receipt of approximately $1.0 million of revenue and a $2.0 million research and development reimbursement in the fourth quarter of fiscal 1997. Additionally, a two year quarterly royalty payment stream not to exceed a present value of $27.0 million as of the date of the transaction date will commence beginning in fiscal 1998, which is solely contingent on future sales of certain Hewlett-Packard products. Due to the uncertainty regarding the amounts upon which these royalties will be determined, Symantec is recognizing these amounts as they are estimable. In association with this sale to Hewlett-Packard, during the fourth quarter of fiscal 1997, Symantec wrote off approximately $7.0 million of unamortized software development costs and approximately $0.6 million of unamortized purchased product rights, as well as incurring approximately $2.0 million of legal, accounting and other costs associated with the transaction. NOTE 10. ACQUISITION, RESTRUCTURING AND OTHER EXPENSES Acquisition, restructuring and other expense consists of the following:
Year Ended March 31, ---------------------------------- (In thousands) 1997 1996 1995 - --------------------------------------------------------- -------- ------- ------- Centralization and restructuring expenses $ 3,185 $ -- $ -- Write off of acquired in-process research and development costs 3,050 -- -- Write off of equity investment 1,750 -- -- Fast Track, Inc. acquisition expenses 600 -- -- Delrina acquisition -- 22,000 -- Loss on sale of Time Line Solutions Corporation assets -- 2,653 -- Relocation of certain research and development activities -- 2,229 -- SLR acquisition -- -- 545 Central Point acquisition -- (2,300) 9,000 Legal fees and expenses -- 2,000 -- Other -- 1,035 -- -------- ------- ------ Total acquisition, restructuring and other expenses $ 8,585 $27,617 $9,545 ======== ======= ======
During fiscal 1997, Symantec recorded a $1.8 million charge in connection with the write-off of an equity investment in a privately held company and a $3.1 million charge for the write off of certain in-process research and development costs acquired by the Company. Additionally, during fiscal 1997, the Company recorded a charge of $3.2 million, which included $2.4 million for personnel severence and outplacement charges, for costs related to the restructuring of certain domestic and international sales and research and development operations, settlement of the Carmel lawsuit (See Note 11 to Notes to Consolidated Financial Statements) and other expenses. The restructuring plans were substantially completed during fiscal 1997. Symantec recorded total acquisition charges of $0.6 million in the quarter ended June 30, 1996 in connection with the acquisition of Fast Track, Inc. In connection with the acquisition of Delrina (See Note 2 to Notes to Consolidated Financial Statements) in fiscal 1996, Symantec recorded total acquisition charges of $22.0 million, which included $8.8 million for legal, accounting and financial advisory services, $6.4 million for the elimination of duplicative and excess facilities and equipment, $3.7 million for personnel severance and outplacement expenses and $3.1 million for the consolidation and discontinuance of certain operational activities and other acquisition-related expenses. In November 1995, Symantec sold the assets of Time Line Solutions Corporation, a wholly-owned subsidiary, to a group comprised of Time Line Solution Corporation's management and incurred a $2.7 million loss on the sale. During fiscal 1996, Symantec also expensed $1.0 million, which included a loss on the sale of certain assets and liabilities of a subsidiary and other expenses. In February 1995, Symantec announced a plan to consolidate certain research and development activities. This plan was designed to gain greater synergy between the Company's Third Generation Language and Fourth Generation Language development groups. During fiscal 1996, the Company incurred $2.2 million for the relocation costs of moving equipment and personnel. 51 54 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED In the fourth quarter of fiscal 1996, the Company recorded $2.0 million for estimated legal fees expected to be incurred in connection with a securities class action complaint filed in March 1996 and other legal expenses (See Note 11 to Consolidated Financial Statements). In connection with the acquisitions of Central Point and SLR (See Note 2 to Consolidated Financial Statements), Symantec recorded total acquisition charges of $9.5 million in fiscal 1995. The charges included $3.2 million for legal, accounting and financial advisory services, $1.0 million for the write-off of duplicative product-related expenses and modification of certain development contracts, $0.9 million for the elimination of duplicative and excess facilities, $3.1 million for personnel severance and outplacement expenses and $1.3 million for the consolidation and discontinuance of certain operational activities and other acquisition related expenses. During fiscal 1996, the Company recognized a reduction in accrued acquisition, restructuring and other expenses of $2.3 million as actual costs incurred were less than costs previously accrued by the Company. As of March 31, 1997, total accrued cash related acquisition and restructuring expenses were $3.8 million and included $0.2 million for estimated legal fees and expenses, $0.4 million for the elimination of duplicative and excess facilities and $3.2 million for other acquisition related expenses. NOTE 11. LITIGATION On March 18, 1996, a class action complaint was filed by the law firm of Milberg, Weiss, Bershad, Hynes & Lerach in Superior Court of the State of California, County of Santa Clara, against the Company and several of its current and former officers and directors. The complaint alleges that Symantec insiders inflated the stock price and then sold stock based on inside information that sales were not going to meet analysts' expectations. The complaint seeks damages in an unspecified amount. The complaint has been refiled twice in state court, most recently on January 10, 1997, to reflect changes brought about by Symantec's demurrer to previous complaints. The same plaintiffs have further filed, on January 7, 1997, a complaint in federal court based on the same facts as the state court complaint, for violation of the Securities Act of 1934. Symantec believes that neither the state court complaint nor the federal court complaint has any merit and will vigorously defend itself against both complaints. The Company has accrued certain estimated legal fees and expenses related to this matter; however, actual amounts may differ materially from those estimated amounts. On September 3, 1992, Borland International, Inc. ("Borland") filed a lawsuit in the Superior Court for Santa Cruz County, California against Symantec, Gordon E. Eubanks, Jr. (Symantec's President and Chief Executive Officer) and Eugene Wang (a former Executive Vice President of Symantec and former employee of Borland). The complaint, as amended, alleged misappropriation of trade secrets, unfair competition, including breach of contract, interference with prospective economic advantage and unjust enrichment. Under a confidential joint settlement agreement entered into as of February 25, 1997, this case was fully settled. On June 11, 1992, Dynamic Microprocessor Associates, Inc. ("DMA"), a former wholly-owned subsidiary of Symantec which has since been merged into Symantec, commenced an action against EKD Computer Sales & Supplies Corporation ("EKD"), a former licensee of DMA and Thomas Green, a principal of EKD, for copyright infringement, violations of the Lanham Act, trademark infringement, misappropriation, deceptive acts and practices, unfair competition and breach of contract. On July 14, 1992, the Suffolk County, New York sheriff's department conducted a search of EKD's premises and seized and impounded thousands of infringing articles. On July 21, 1992, the Court issued a preliminary injunction against EKD and Mr. Green, enjoining them from manufacturing, marketing, distributing, copying or purporting to license DMA's pcANYWHERE III or using DMA's marks. On March 18, 1997, the Magistrate assigned to the action issued a non-binding Report and Recommendation recommending that summary judgment be granted in Symantec's/DMA's favor on certain claims and counterclaims. Judge Block has subsequently approved the recommendation, which has disposed of certain claims against Symantec. On April 10, 1997, Trio Systems LLC filed a lawsuit in the United States District Court, Central District of California, against Symantec, for damages, injunctive and declaratory relief and for the imposition of a constructive trust claiming copyright infringement, fraud, misrepresentation and breach of contract, based on Symantec's alleged inclusion, in its Norton Utilities, Norton Your Eyes Only and pcANYWHERE products, of Trio's C-Index code. 52 55 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED No discovery motions have as yet been filed. Symantec believes these claims have no merit and intends to defend this action vigorously. On April 23, 1997, Symantec filed a lawsuit against McAfee Associates in the United States District Court, Northern District of California, for copyright infringement and unfair competition. Symantec believes McAfee Associates copied portions of Symantec's copyrighted software code and unlawfully incorporated such code into certain of McAfee's products. Symantec plans to aggressively pursue its remedies under this lawsuit, which include both injunctive relief and monetary damages. On May 13, 1997, Trend Micro Incorporated filed a lawsuit in the United States District Court, Northern District of California, against Symantec Corporation and McAfee Associates, alleging against Symantec patent infringement by the Symantec product known as Norton AntiVirus for Internet E-mail Gateways. The lawsuit requests damages, injunctive relief and costs and attorney fees. Symantec believes this claim has no merit and intends to defend the action vigorously. Symantec is currently evaluating claims of patent infringement asserted by IBM with respect to certain of the Company's products. While the Company believes that it has valid defenses to these claims, there can be no assurance that the outcome of any related litigation or negotiation would not have a material adverse impact on the Company's future results of operations or cash flows. Symantec is involved in a number of other judicial and administrative proceedings incidental to its business. The Company intends to defend all of the aforementioned pending lawsuits vigorously and although adverse decisions (or settlements) may occur in one or more of the cases, the final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on the financial position of the Company. However, depending on the amount and timing of an unfavorable resolution of these lawsuits, it is possible that the Company's future results of operations or cash flows could be materially adversely affected in a particular period. NOTE 12. SEGMENT INFORMATION Symantec operates in the microcomputer software industry business segment. The Company markets its products in North America and international countries primarily through retail and distribution channels. INFORMATION BY GEOGRAPHIC AREA
Year Ended March 31, ------------------------------- (In thousands) 1997 1996 1995 - ------------------------------ ------- ------- ------- Net revenues: U.S. operations: North American customers $334,210 $303,280 $296,684 International customers 6,451 16,609 16,977 Intercompany 79 6,015 4,625 -------- -------- -------- 340,740 325,904 318,286 Other international operations: Customers 131,522 125,543 117,607 Intercompany 745 11,387 13,865 -------- -------- -------- 132,267 136,930 131,472 Eliminations (824) (17,402) (18,490) -------- -------- -------- $472,183 $445,432 $431,268 ======== ======== ======== Operating income (loss): U.S. operations $ 11,415 $(58,296) $ 17,907 International operations 12,931 8,201 23,449 Eliminations 1,943 1,816 (1,070) -------- -------- -------- $ 26,289 $(48,279) $ 40,286 ======== ======== ========
53 56 SYMANTEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, ------------------------------- (In thousands) 1997 1996 1995 - ------------------------------ ------- ------- ------- Identifiable assets: U.S. operations $284,023 $236,508 $255,748 International operations 57,650 48,519 50,378 -------- -------- -------- $341,673 $285,027 $306,126 ======== ======== ========
Intercompany sales between geographic areas are accounted for at prices representative of unaffiliated party transactions. "U.S. operations" include sales to customers in the United States and exports of finished goods directly to international customers, primarily in Canada. Exports and international OEM transactions are primarily denominated in U.S. dollars. "Other international operations" primarily include export sales from the Irish manufacturing subsidiary to European and Asia/Pacific customers. International revenues, which include net revenues from other international operations and exports made by U.S. operations, were 29%, 32% and 31% of total revenue for fiscal 1997, 1996 and 1995, respectively. SIGNIFICANT CUSTOMERS The following customers accounted for more than 10% of net revenues during fiscal 1997, 1996 and 1995:
Year Ended March 31, ---------------------------- 1997 1996 1995 ---- ---- ---- Ingram Micro, Inc. 27% 27% 22% Merisel Americas, Inc. * 10 11
* Amount is less than 10%. 54 57 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SYMANTEC CORPORATION (Registrant) By /s/ Gordon E. Eubanks, Jr. -------------------------------------- (Gordon E. Eubanks, Jr., President and Chief Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated below.
Signature Title Date --------- ----- ---- CHIEF EXECUTIVE OFFICER: /s/ Gordon E. Eubanks, Jr. President, Chief Executive June 23, 1997 - ------------------------------ Officer and Director (Gordon E. Eubanks, Jr.) CHIEF FINANCIAL OFFICER: /s/ Howard A. Bain III Executive Vice President/ June 23, 1997 - ------------------------------ Worldwide Operations and (Howard A. Bain III) Chief Financial Officer CHIEF ACCOUNTING OFFICER: /s/ Ronald W. Kisling Vice President Controller and June 23, 1997 - ------------------------------- Chief Accounting Officer (Ronald W. Kisling) DIRECTORS: /s/ Charles M. Boesenberg Director June 23, 1997 - ------------------------------ (Charles M. Boesenberg) /s/ Walter W. Bregman Director June 23, 1997 - ------------------------------ (Walter W. Bregman) /s/ Carl D. Carman Chairman of the Board June 23, 1997 - ------------------------------ (Carl D. Carman) /s/ Robert S. Miller Director June 23, 1997 - ------------------------------ (Robert S. Miller) /s/ Robert R. B. Dykes Director June 23, 1997 - ------------------------------ (Robert R. B. Dykes)
55 58 SCHEDULE II SYMANTEC CORPORATION VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
Balance at Charged to Balance at Beginning Costs and End Classification of Period Expenses Deductions of Period - -------------- ---------- ---------- ---------- ---------- Allowance for doubtful accounts: Year ended March 31, 1995 $ 4,814 $ 1,094 $(1,056) $ 4,852 Year ended March 31, 1996 4,852 903 (739) 5,016 Year ended March 31, 1997 5,016 1,599 (2,315) 4,300
56 EX-10.11 2 SYMANTEC CORPORATION DEFERRED COMPENSATION PLAN 1 EXHIBIT 10.11 SYMANTEC CORPORATION DEFERRED COMPENSATION PLAN As Adopted November 7, 1996 1. Purpose. Symantec Corporation hereby establishes this Symantec Corporation Deferred Compensation Plan (the "Plan") for the purpose of providing its eligible employees with a program for deferring compensation that otherwise would be earned during the period of current employment. 2. Eligibility. Employees who (i) are executive staff members or in salary grades S-10, F, or 13 and above, and (ii) earn an annual base salary of $125,000 or greater ("Eligible Employee") are eligible to participate in the Plan. Nonresident aliens shall not be eligible to participate in the Plan unless specifically permitted by the Deferred Compensation Committee (the "Committee"). 3. Election to Defer Compensation. (a) An Eligible Employee may elect (i) to defer a flat dollar amount of such Eligible Employee's base salary for 1996, provided that such dollar amount does not exceed (A) fifty percent (50%) of the Eligible Employee's base salary for 1996, or (B) one hundred percent (100%) of any paycheck received by such Eligible Employee in December 1996 and (ii) to be paid any such base salary as "Deferred Compensation" by filing the Election Form attached hereto with the Company on or before November 25, 1996. The minimum amount an Eligible Employee may elect to defer during December 1996 is $1,000 per paycheck. (b) For years after 1996, an Eligible Employee may elect (i) to defer either a flat dollar amount or a percentage of the Eligible Employee's semi-monthly base salary, quarterly commissions, and annual or quarterly bonuses, provided that such amount does not exceed fifty percent (50%) of the Eligible Employee's semi-monthly base salary, quarterly commissions, and quarterly or annual bonuses in any calendar year, and (ii) to be paid any such base salary, commissions, and bonus as "Deferred Compensation" by filing the Election Form attached hereto with the Company as follows: at any time prior to (A) December 15, or any other date as set by the Committee, of the year preceding any calendar year for which the semi-monthly base salary, 1 2 quarterly commission and annual bonus is earned, or (B) the 15th day of the month, or any other date as set by the Committee, prior to the beginning of any quarter in which any quarterly bonus, quarterly commission is earned. The minimum amount an Eligible Employee may elect to defer is $5,000 during each year of deferral beginning January 1, 1997. (c) Notwithstanding the foregoing, any employee who meets the eligibility requirements set forth in Section 2 above after the deadlines set forth in this Section 3 for filing election forms for the calendar year may elect to defer either a flat dollar amount or a percentage of semi-monthly base salary, quarterly commissions, and annual or quarterly bonuses, which are earned in such remaining year or quarter, provided that such amount does not exceed fifty percent (50%) of the Eligible Employee's semi-monthly base salary, quarterly commissions, and annual or quarterly bonuses in such remaining calendar year, and to be paid any such base salary, commissions, and bonus as "Deferred Compensation" by filing the Election Form attached hereto with the Company prior to the 15th day of the month, or any other date as set by the Committee, prior to the first day of the quarter coincident with or next following the date on which such employee met the eligibility requirements. (d) The Election Form shall specify the time and manner of payment of such Deferred Compensation subject to paragraph 6 below. Once filed with the Committee, an election to defer compensation cannot be changed. 4. Crediting of Deferred Compensation. For purposes of paragraph 6 below, the aggregate amount allocable to the Eligible Employee's account as Deferred Compensation as of the date on which the Eligible Employee receives the lump sum or first installment of Deferred Compensation (the "Total Deferred Compensation") shall be the sum of: (a) the amounts of base salary, commission and bonus that the Employee shall have elected to receive as Deferred Compensation pursuant to paragraph 3 above; and 2 3 (b) the earnings or losses credited to the Eligible Employee pursuant to paragraph 5 below. The Total Deferred Compensation may be held and administered by a custodian appointed by the Committee pursuant to the terms of a trust agreement approved by the Committee (the "Trust Agreement"). The Company will bear the cost of fees charged by the custodian for its performance under the Trust Agreement. An Eligible Employee shall be entitled to receive quarterly statements of account which describe the Total Deferred Compensation and earnings and losses which have accrued thereon during that period. 5. Investment of Deferred Compensation. Amounts treated as Deferred Compensation by the Eligible Employee pursuant to paragraph 3 above, shall be treated as if actually invested by the Company on behalf of the Eligible Employee among investments designated by the Eligible Employee, other than stock of the Company, in such manner as the Committee (as defined in paragraph 2 above) shall determine; provided however, that the Committee may: (a) determine not to take account of such Eligible Employee's designated investments; and (b) determine to have such amounts invested in another manner in the Committee's sole discretion. Eligible Employees may change investment elections periodically in accordance with guidelines set by the Committee. 6. Payment of Total Deferred Compensation. (a) Normal Distribution. Unless otherwise specified in paragraphs 6(b) - 6(d) or paragraph 7 below, the Total Deferred Compensation shall be paid to the participant on the date and manner as designated on the Election Form, but in no event earlier than five years from the January 1st of the year in which the compensation was earned. (a) Termination of Employment. The Total Deferred Compensation shall be payable to the Eligible Employee in one lump sum within 90 days of such Eligible Employee's termination of employment with the Company for any reason other than death, disability or attaining age 65. (b) Death, Disability and Retirement. The Total Deferred Compensation shall be payable to the Eligible Employee (or such Eligible Employee's beneficiary or legal representative) in one lump sum within 90 days of the Eligible Employee's death, total and permanent disability (as 3 4 defined in the Company's long term disability policy), or attainment of 65 years of age, the Company's normal retirement age. (c) Hardship Withdrawals. The Company may, in its sole discretion, accelerate the payment of all or any portion of the Total Deferred Compensation in the event of an unforeseen emergency caused by an event beyond the control of the Eligible Employee that would result in severe financial hardship to the Eligible Employee, but only to the extent of the amount necessary to meet such unforeseen emergency. To qualify for such hardship withdrawal, the participant must have exhausted all other financial resources such as liquidation of assets, insurance reimbursements and loans. The approval of any such financial hardship shall be determined by the Committee. (d) Early withdrawals. The Eligible Employee may request that the Company accelerate the payment of all or any portion of the Total Deferred Compensation for any reason at any time, provided that such amount shall be equal to at least $10,000 or the full amount of the Total Deferred Compensation, if less. In the event of such acceleration of payment, the Eligible Employee shall be subject to a penalty equal to 15% of the amount of the accelerated payment. Such penalty shall be paid to or retained by the Company from the Eligible Employee's Total Deferred Compensation. 7. Change of Control. Notwithstanding anything in this Plan to the contrary, the Total Deferred Compensation shall become payable to the Eligible Employee in one lump sum upon the occurrence of any of the following events: (a) Any consolidation or merger of the Company with or into any other corporation or corporations in which the shareholders of the Company immediately prior to the consolidation or merger do not retain a majority of the voting power of the surviving corporation; (b) As a result of or in connection with any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the 4 5 foregoing, if the persons who were directors of the Company immediately prior to such event no longer constitute a majority of the Company's Board of Directors; (c) Any sale of all or substantially all of the assets of the Company; or (d) Any liquidation or dissolution of the Company. 8. Payments to Beneficiary or Representative. If the Eligible Employee should die before receiving any or all of the Total Deferred Compensation to which he or she is entitled, any such unpaid Total Deferred Compensation shall be paid to the beneficiary last designated by the Eligible Employee or, if no such beneficiary shall survive the Eligible Employee, to the Eligible Employee's estate. If the Company shall find that any person to whom any amount is or was payable hereunder is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then the Company, if it so elects, may direct that any payment due him or her or his or her estate (unless a prior claim therefore has been made by a duly appointed legal representative) or any part thereof, be paid or applied for the benefit of such person (or such person's spouse, children or other dependents), to an institution maintaining or having custody of such person, or to any other person deemed by the Company to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Company may deem proper. Any such payment shall be in complete discharge of the Company's obligations under this Plan. 9. Administration. The Plan shall be administered by the Committee, except as to members of the Board of Directors, in which case the Plan shall be administered by the entire Board of Directors, which shall have full power, discretion and authority to interpret, construe and administer the Plan and any part thereof, and the Committee's interpretation and construction thereof, and actions thereunder, shall be binding and conclusive on all persons for all purposes. The Committee may employ legal counsel, consultants, actuaries and agents as it may deem desirable in the administration of the Plan and may rely on the opinion of such counsel or the computations of such consultant or other agent. The Committee shall provide for the keeping of detailed written minutes of its actions hereunder which shall be reviewed by the legal counsel or the consultant engaged by the Committee prior to their finalization. 5 6 10. Unsecured Funds. All payments of Total Deferred Compensation shall be paid in cash from the general funds of the Company and no special or separate fund, other than any Rabbi Trust Agreement between a bank or trust company and the Company, shall be established and no other segregation of assets shall be made to assure the payment of any Total Deferred Compensation. The Eligible Employee shall have no right, title or interest whatever in or to any investment which the Company may make to aid it in meeting its obligations hereunder, including, but not limited to, deemed investments. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and the Eligible Employee or any other person. To the extent that any person acquires a right to receive payments from the Company hereunder such right shall be no greater than the right of an unsecured creditor of the Company. 11. Other Rights. This Plan shall be in addition to any rights of the Eligible Employee under any other agreement with the Company, if any. 12. Withholding. The Company may withhold from any benefits payable under this Plan all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 13. Employment and Benefits Rights. Any benefit payable under this Plan shall not be deemed salary or other compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of the Company for the benefit of its employees. Neither this Plan nor any action taken hereunder shall be construed as giving to any employee the right to be retained in the employ of the Company or as affecting the right of the Company to dismiss any employee. 14. Binding Effect; Nonassignability. This Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns and the Eligible Employee and the Eligible Employee's designees and estate. Neither the Eligible Employee or the Eligible Employee's designees or estate shall commute, encumber, sell or otherwise dispose of the right to receive the 6 7 payments provided for in this Plan, which payments and the rights thereto are expressly declared to be nontransferable and nonassignable. 15. Amendment. This Plan may be amended, suspended or terminated, in whole or in part, by the Board of Directors of the Company, but no such action shall retroactively impair or otherwise adversely affect the rights of any person to benefits under this Plan which have accrued prior to the date of such action, as determined by the Committee. 16. Governing Law. This Plan shall be governed by the laws of the State of California from time to time in effect. 17. Captions; Entire Agreement. The captions preceding the Sections hereof have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provisions hereof. 7 EX-10.14 3 MASTER LEASE AND DEED OF TRUST 1 EXHIBIT 10.14 EXECUTION COPY ================================================================================ MASTER LEASE AND DEED OF TRUST THIS DOCUMENT SECURES FUTURE ADVANCES Dated as of October 18, 1996 between SYMANTEC CORPORATION, as the Lessee and SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor. ================================================================================ This Master Lease and Deed of Trust is subject to a lien in favor of the Lenders under the Loan Agreement. This Master Lease and Deed of Trust has been executed in several counterparts. To the extent, if any, that this Master Lease and Deed of Trust constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on this Master Lease and Deed of Trust may be created through the transfer or possession of any counterpart other than the original counterpart containing the receipt therefor executed by THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH as the Agent for the Lenders, on or following the signature page hereof. This counterpart is not the original executed chattel paper counterpart. 2 MASTER LEASE MASTER LEASE AND DEED OF TRUST THIS DOCUMENT SECURES FUTURE ADVANCES THIS MASTER LEASE AND DEED OF TRUST (this "Master Lease"), dated as of October 18, 1996, between SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation, as the Lessor (in such capacity, the "Lessor"), and SYMANTEC CORPORATION, a Delaware corporation, as Lessee (in such capacity, the "Lessee"). W I T N E S S E T H: WHEREAS, pursuant to a Participation Agreement dated as of the date hereof (as amended, modified, restated or supplemented from time to time, the "Participation Agreement"), among the Lessee, the Lessor, the various financial institutions (the "Lenders") as are or may from time to time become Lenders under the Loan Agreement, and The Sumitomo Bank, Limited, San Francisco Branch, as Administrative Agent (in such capacity, the "Agent") for the Lenders, the Lenders and the Lessor have agreed to finance the Lessor's acquisition of each Property; WHEREAS, on each Acquisition Date, the Lessor will purchase from one or more third parties designated by the Lessee certain parcels of Land, together with the Improvements thereon, if any; WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee desires to lease from the Lessor, each Property; and WHEREAS, each Property will be subject to the terms of this Master Lease; NOW, THEREFORE, in consideration of the foregoing, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS I.1. Definitions; Interpretation. Capitalized terms used but not otherwise defined in this Master Lease have the respective meanings specified in Appendix A to this Master Lease; and the rules of interpretation set forth in Appendix A to this Master Lease shall apply to this Master Lease. 3 MASTER LEASE ARTICLE II MASTER LEASE II.1. Acceptance and Lease of Property. Subject to the conditions set forth in the Participation Agreement, including without limitation the satisfaction or waiver of the conditions set forth in Article II thereof, the Lessor hereby agrees to accept pursuant to the terms of the Participation Agreement delivery on the Closing the Land together with Improvements thereon, if any, to be delivered by the seller thereof and simultaneously to demise and lease to the Lessee hereunder and under the Lease Supplement for the Lease Term, the Lessor's interest in such Land and in such Improvements together with any Improvements which thereafter may be constructed on such Land pursuant this Master Lease, and the Lessee hereby agrees, expressly for the direct benefit of the Lessor, to lease from the Lessor for the Lease Term, the Lessor's interest in such Land and in such Improvements together with any Improvements which thereafter may be constructed on such Land pursuant and this Master Lease. II.2. Acceptance Procedure. The Lessee hereby agrees that the execution and delivery by the Lessee on each Acquisition Date of an appropriately completed Lease Supplement in the form of Exhibit A hereto covering the Land and all Improvements thereon, if any, to be acquired by the Lessor on such Acquisition Date and all other Improvements which thereafter may be constructed thereon this Master Lease, shall, without further act, constitute the irrevocable acceptance by the Lessee of all of the Property which is the subject of such Lease Supplement for all purposes of this Master Lease and the other Operative Documents on the terms set forth therein and herein, and that such Property, together with any Improvements constructed on such Property pursuant to the this Master Lease, shall be deemed to be included in the leasehold estate of this Master Lease and shall be subject to the terms and conditions of this Master Lease as of the Acquisition Date. II.3. Lease Term. The Base Lease Term (the "Base Lease Term") of this Master Lease with respect to any Property shall (i) begin on the Acquisition Date, and (ii) shall end on the seventh (7th) anniversary of the Documentation Date, unless earlier terminated in accordance with the provisions of this Master Lease and the other Operative Documents. II.4. Title. Each Property is leased to the Lessee without any representation or warranty, express or implied, by the Lessor and subject to the rights of parties in possession, the existing -2- 4 MASTER LEASE state of title (including, without limitation, all Liens other than Lessor Liens) and all applicable Requirements of Law and Property Legal Requirements. The Lessee shall in no event have any recourse against the Lessor for any defect in or exception to title to any Property other than resulting from Lessor Liens. ARTICLE III PAYMENT OF RENT III.1. Rent. (a) During the Lease Term, the Lessee shall pay Basic Rent on each Basic Rent Payment Date, on the date required under Section 20.1(k) in connection with the Lessee's exercise of the Remarketing Option and on any date on which this Master Lease shall terminate with respect to any or all Properties. (b) The Lessee's inability or failure to take possession of all or any portion of any Property when delivered by the Lessor, nor the Lessor's inability or failure to deliver all or any portions of this Property to the Lessee where attributable to any act or omission of the Lessee or any act or omission of the Lessor, or for any other reason whatsoever, shall delay or otherwise affect the Lessee's obligation to pay Rent for such Property in accordance with the terms of this Master Lease. III.2. Payment of Rent. Rent shall be paid absolutely net to the Lessor, so that this Master Lease shall yield to the Lessor the full amount thereof, without setoff, deduction or reduction. III.3. Supplemental Rent. The Lessee shall pay to the Lessor or the Person entitled thereto any and all Supplemental Rent promptly as the same shall become due and payable, and if the Lessee fails to pay any Supplemental Rent, the Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee shall pay to the Lessor, as Supplemental Rent, among other things, on demand, to the extent permitted by applicable Requirements of Law, interest at the applicable Overdue Rate on any installment of Basic Rent not paid when due for the period for which the same shall be overdue and on any payment of Supplemental Rent not paid when due or demanded by the Lessor for the period from the due date or the date of any such demand, as the case may be, until the same shall be paid. The expiration or other termination of the Lessee's obligations to pay Basic Rent hereunder shall not limit or modify the -3- 5 MASTER LEASE obligations of the Lessee with respect to Supplemental Rent. Unless expressly provided otherwise in this Master Lease, in the event of any failure on the part of the Lessee to pay and discharge any Supplemental Rent as and when due, the Lessee shall also promptly pay and discharge any fine, penalty, interest or cost which may be assessed or added under any agreement with a third party for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent. III.4. Method of Payment. Each payment of Rent shall be made by the Lessee to the Agent prior to 11:00 a.m., San Francisco, California time to the Agent's account specified on Schedule II to the Participation Agreement in funds consisting of lawful currency of the United States of America which shall be immediately available on the scheduled date when such payment shall be due, unless such scheduled date shall not be a Business Day, in which case such payment shall be made on the next succeeding Business Day. Payments received after 12:00 p.m., San Francisco time on the date due shall for the purpose of Section 16.1 hereof be deemed received on such day; provided, however, that for the purposes of the second sentence of Section 3.3 hereof, such payments shall be deemed received on the next succeeding Business Day and, unless the Agent is otherwise able to invest or employ such funds on the date received, subject to interest at the Overdue Rate as provided in such Section 3.3. ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT IV.1. Quiet Enjoyment. Subject to Sections 2.4 and 4.2, and subject to the rights of the Lessor contained in Article XV and the other terms of the Operative Documents to which the Lessee is a party, the Lessee shall peaceably and quietly have, hold and enjoy each Property for the Lease Term, free of any claim or other action by the Lessor or anyone claiming by, through or under the Lessor (other than the Lessee) with respect to any matters arising from and after the applicable Acquisition Date. Such right of quiet enjoyment is independent of, and shall not affect the Lessor's rights otherwise to initiate legal action to enforce, the obligations of the Lessee under this Master Lease. IV.2. Right to Inspect. During the Lease Term, the Lessee shall upon reasonable notice from the Lessor (except that no notice shall be required if a Lease Event of Default has occurred and is continuing), permit the Lessor and its authorized representatives to inspect any Property subject to this Master Lease during normal business hours, provided that such -4- 6 MASTER LEASE inspections shall not unreasonably interfere with the Lessee's business operations at such Property. -5- 7 MASTER LEASE ARTICLE V NET LEASE, ETC. -6- 8 MASTER LEASE V.1. Net Lease. This Master Lease shall constitute a net lease. Any present or future law to the contrary notwithstanding, this Master Lease shall not terminate, nor shall the Lessee be entitled to any abatement, suspension, deferment, reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall the obligations of the Lessee hereunder be affected (except as expressly herein permitted and by performance of the obligations in connection therewith) by reason of: (i) any defect in the condition, merchantability, design, construction, quality or fitness for use of any Property or any part thereof, or the failure of any Property to comply with all Requirements of Law and Property Legal Requirements, including any inability to occupy or use any such Property by reason of such non-compliance; (ii) any damage to, removal, abandonment, salvage, loss, contamination of or Release from, scrapping or destruction of or any requisition or taking of any Property or any part thereof; (iii) any restriction, prevention or curtailment of or interference with any use of any Property or any part thereof including eviction; (iv) any defect in title to or rights to any Property or any Lien on such title or rights or on any Property (other than Lessor Liens); (v) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by the Lessor or any Participant; (vi) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to the Lessee, the Lessor, any Participant or any other Person, or any action taken with respect to this Master Lease by any trustee or receiver of the Lessee, the Lessor, any Participant or any other Person, or by any court, in any such proceeding; (vii) any claim that the Lessee has or might have against any Person, including without limitation the Lessor, any Participant, or any vendor, manufacturer, contractor of or for any Property; (viii) any failure on the part of the Lessor to perform or comply with any of the terms of this Master Lease (other than performance by Lessor of its obligations set forth in Section 2.1 hereof), of any other Operative Document or of any other agreement; (ix) any invalidity or unenforceability or illegality or disaffirmance of this Master Lease against or by the Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof; (x) the impossibility or illegality of performance by the Lessee, the Lessor or both; (xi) any action by any court, administrative agency or other Governmental Authority; (xii) any restriction, prevention or curtailment of or interference with the construction on or any use of any Property or any part thereof; or (xiii) any other cause or circumstances whether similar or dissimilar to the foregoing and whether or not the Lessee shall have notice or knowledge of any of the foregoing. The Lessee's agreement in the preceding sentence shall not affect any claim, action or right -7- 9 MASTER LEASE the Lessee may have against the Lessor or any Participant. The parties intend that the obligations of the Lessee hereunder shall be covenants and agreements that are separate and independent from any obligations of the Lessor hereunder or under any other Operative Documents and the obligations of the Lessee shall continue unaffected unless such obligations shall have been modified or terminated in accordance with an express provision of this Master Lease. V.2. No Termination or Abatement. The Lessee shall remain obligated under this Master Lease in accordance with its terms and shall not take any action to terminate, rescind or avoid this Master Lease (except as provided herein), notwithstanding any action for bankruptcy, insolvency, reorganization, liquidation, dissolution, or other proceeding affecting the Lessor or any Participant, or any action with respect to this Master Lease which may be taken by any trustee, receiver or liquidator of the Lessor or any Participant or by any court with respect to the Lessor or any Participant. The Lessee hereby waives all right (i) to terminate or surrender this Master Lease (except as provided herein) or (ii) to avail itself of any abatement, suspension, deferment, reduction, setoff, counterclaim or defense with respect to any Rent. The Lessee shall remain obligated under this Master Lease in accordance with its terms and the Lessee hereby waives any and all rights now or hereafter conferred by statute or otherwise to modify or to avoid strict compliance with its obligations under this Master Lease. Notwithstanding any such statute or otherwise, the Lessee shall be bound by all of the terms and conditions contained in this Master Lease. ARTICLE VI SUBLEASES VI.1. Subletting. Subject to Section 2.1(r) of the Participation Agreement, the Lessee may sublease any Property or any portion thereof to any Person; provided, however, that no sublease or other relinquishment of possession of any Property shall in any way discharge or diminish any of the Lessee's obligations to the Lessor hereunder and the Lessee shall remain directly and primarily liable under this Master Lease as to the Properties, or portion thereof, so sublet. Each sublease of any Property shall expressly be made subject to and subordinated to this Master Lease and to the rights of the Lessor hereunder. ARTICLE VII LESSEE ACKNOWLEDGMENTS -8- 10 MASTER LEASE VII.1. Condition of the Properties. THE LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY "AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR OR THE LENDERS AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE (EXCLUDING LESSOR LIENS), (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW AND PROPERTY LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF OR ON THE ACQUISITION DATE FOR SUCH PROPERTY. NONE OF THE LESSOR OR THE LENDERS HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE (OTHER THAN FOR LESSOR LIENS), VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF) AND NONE OF THE LESSOR OR THE LENDERS SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR LIENS) OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY REQUIREMENT OF LAW OR PROPERTY LEGAL REQUIREMENT. VII.2. Risk of Loss. During the Lease Term the risk of loss of or decrease in the enjoyment and beneficial use of the Properties as a result of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is assumed by the Lessee, and the Lessor shall in no event be answerable or accountable therefor. ARTICLE VIII POSSESSION AND USE OF THE PROPERTIES, ETC. VIII.1. Utility Charges. The Lessee shall pay or cause to be paid all charges for electricity, power, gas, oil, water, telephone, sanitary sewer service and all other rents and utilities used in or on the Properties during the Lease Term. The Lessee shall be entitled to receive any credit or refund with respect to any utility charge paid by the Lessee and the amount of any credit or refund received by the Lessor on account of any utility charges paid by the Lessee, net of the costs and expenses reasonably incurred by the Lessor in obtaining such credit or refund, shall be promptly paid over to the Lessee. VIII.2. Possession and Use of the Property. Each Property may be used in all lawful manners consistent with the business of the Lessee and otherwise as set forth in the applicable -9- 11 MASTER LEASE Appraisal. The Lessee shall pay, or cause to be paid, all charges and costs required in connection with the use of the Properties as contemplated by this Master Lease. The Lessee shall not commit or permit any waste of the Properties or any part thereof. VIII.3. Compliance with Requirements of Law, Property Legal Requirements and Insurance Requirements. Subject to the terms of Article XII relating to permitted contests, the Lessee, at its sole cost and expense, shall (a) comply in all material respects with all Requirements of Law (including all Hazardous Materials Laws), Property Legal Requirements and Insurance Requirements relating to the Properties, including the use, construction, operation, maintenance, repair and restoration thereof and the remarketing thereof pursuant to Article XX, whether or not compliance therewith shall require structural or extraordinary changes in the Improvements or interfere with the use and enjoyment of the Properties, and (b) procure, maintain and comply with all licenses, permits, orders, approvals, consents and other authorizations required for the construction, use, maintenance and operation of the Properties and for the use, operation, maintenance, repair and restoration of the Improvements. Notwithstanding the preceding sentence, the Lessee shall be deemed to be in compliance with all Hazardous Materials Laws for purposes of this Master Lease notwithstanding any Environmental Violation if the severity of such Environmental Violation is less than Federal, state or local standards requiring remediation or removal or, if such standards are exceeded, remediation or removal is proceeding in accordance with all applicable Hazardous Materials Laws. VIII.4. Assignment by Lessee. The Lessee may not assign this Master Lease or any of its rights or obligations hereunder in whole or in part to any Person, except that the Lessee may sublease any Property or portion thereof as permitted under Section 6.1. -10- 12 MASTER LEASE ARTICLE IX MAINTENANCE AND REPAIR; RETURN IX.1. Maintenance and Repair; Return. (a) The Lessee, at its sole cost and expense, shall maintain each Property in good condition (ordinary wear and tear excepted) and make all necessary repairs thereto, of every kind and nature whatsoever, whether interior or exterior, ordinary or extraordinary, structural or nonstructural or foreseen or unforeseen, in each case as required by all Requirements of Law, Property Legal Requirements and Insurance Requirements and in no event less than the standards applied by the Lessee in the operation and maintenance of other comparable properties owned or leased by the Lessee or its Affiliates. (b) The Lessor shall under no circumstances be required to build any improvements on any Property, make any repairs, replacements, alterations or renewals of any nature or description to any Property, make any expenditure whatsoever in connection with this Master Lease (other than for Advances made in accordance with and pursuant to the terms of the Participation Agreement) or maintain any Property in any way. The Lessee waives any right to (i) require the Lessor to maintain, repair, or rebuild all or any part of any Property or (ii) make repairs at the expense of the Lessor pursuant to any Requirement of Law, Property Legal Requirement, Insurance Requirement, contract, agreement, or covenant, condition or restriction in effect at any time during the Lease Term. (c) The Lessee shall, upon the expiration or earlier termination of this Master Lease with respect to any Property (other than as a result of the Lessee's purchase of such Property from the Lessor as provided herein), vacate and surrender such Property to the Lessor in its then-current, "AS IS" condition, subject to the Lessee's obligations under Sections 8.3, 9.1(a), 10.1, 11.1, 14.1(e), 14.2 and 20.1. -11- 13 MASTER LEASE ARTICLE X MODIFICATIONS, ETC. X.1. Modifications, Substitutions and Replacements. During the Lease Term, the Lessee, at its sole cost and expense, may at any time and from time to time make alterations, renovations, improvements and additions to any Property or any part thereof and substitutions and replacements therefor (collectively, "Modifications"); provided, however, that: (i) except for any Modification required to be made pursuant to a Requirement of Law or Property Legal Requirement (a "Required Modification"), no Modification shall adversely affect the value or useful life of such Property or any part thereof from that which existed immediately prior to such Modification; (ii) the Modification shall be done in a good and workmanlike manner; (iii) the Lessee shall comply in all material respects with all Requirements of Law (including all Hazardous Materials Laws), Property Legal Requirements and Insurance Requirements applicable to the Modification, including the obtaining of all permits and certificates of occupancy; (iv) subject to the terms of Article XII relating to permitted contests, the Lessee shall pay all costs and expenses and shall discharge (or cause to be insured or bonded over) within sixty (60) days after the same shall be filed (or otherwise become effective) any Liens arising with respect to the Modification; (v) such Modifications shall comply with Sections 8.3 and 9.1(a); and (vi) the Lessee shall be required to obtain the prior written approval of the Lessor, which approval shall not be unreasonably withheld, and which shall be deemed to have been given if no response from the Lessor to the request for consent is received by the Lessee within ten (10) days of the date of such request, with respect to any alterations that shall Materially affect any structural element of any Improvements. All Modifications shall remain part of the realty and shall be subject to this Master Lease and title thereto shall immediately vest in the Lessor; provided, however, that Modifications that -12- 14 MASTER LEASE (x) are not Required Modifications, (y) were not financed by the Lessor and (z) are readily removable without impairing the value, utility or remaining useful life of the applicable Property, shall be the property of the Lessee and shall not be subject to this Master Lease. So long as no Lease Event of Default has occurred and is continuing, the Lessee may place upon the Properties any trade fixtures, machinery, equipment, inventory or other property belonging to the Lessee or third parties and may remove the same at any time during the Lease Term, subject, however, to the terms of Section 9.1(a); provided, however, that such trade fixtures, machinery, equipment, inventory or other property do not impair the value or useful life of the applicable Property; provided, further, however, that the Lessee shall keep and maintain at the Properties and shall not remove from the Properties any Equipment financed or otherwise paid for (directly or indirectly) by the Lessor or any Participant pursuant to the Participation Agreement. X.2. Notice to the Lessor. If the Lessee reasonably expects the cost of any Modification to any Property to exceed $250,000.00, the Lessee shall deliver to the Lessor a brief written narrative of the work to be performed in connection with such Modification prior to making such Modification. ARTICLE XI WARRANT OF TITLE; EASEMENTS XI.1. Warrant of Title. (a) The Lessee agrees that except as otherwise provided herein and subject to the terms of Article XII relating to permitted contests, the Lessee shall not directly or indirectly create or allow to remain, and shall promptly discharge at its sole cost and expense, any Lien (other than any Lessor Lien), defect, attachment, levy, title retention agreement or claim upon any Property or any Lien, attachment, levy or claim with respect to the Rent or with respect to any amounts held by the Lessor or the Participants pursuant to the Loan Agreement or the other Operative Documents, other than Permitted Property Liens and Liens on machinery, equipment, general intangibles and other personal property not financed by the proceeds of the Loans or Lessor Amounts. (b) Nothing contained in this Master Lease shall be construed as constituting the consent or request of the Lessor, expressed or implied, to or for the performance by any contractor, mechanic, laborer, materialman, supplier or -13- 15 MASTER LEASE vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to any Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NONE OF THE LESSOR OR THE LENDERS IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE, OR TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR OR ANY LENDER IN AND TO ANY PROPERTY. XI.2. Grants and Releases of Easements; Lessor's Waivers. Provided that no Lease Event of Default shall have occurred and be continuing and subject to the provisions of Articles VII, IX and X and Section 8.3 the Lessor hereby consents in each instance to the following actions by the Lessee, in the name and stead of the Lessor, but at the Lessee's sole cost and expense: (a) the granting of easements, licenses, rights-of-way and other rights and privileges in the nature of easements reasonably necessary or desirable for the use, repair, or maintenance of any Property as herein provided; (b) the release of existing easements or other rights in the nature of easements which are for the benefit of any Property; and (c) the execution of amendments to any covenants and restrictions affecting any Property; provided, however, that in each case (i) such grant, release, dedication, transfer or amendment does not materially impair the value or remaining useful life of the applicable Property, (ii) such grant, release, dedication, transfer or amendment that in the Lessee's judgment is reasonably necessary in connection with the use, maintenance, alteration or improvement of the applicable Property, (iii) such grant, release, dedication, transfer or amendment will not cause the applicable Property or any portion thereof to fail to comply with the provisions of this Master Lease or any other Operative Documents and all Property Legal Requirements (including, without limitation, all applicable zoning, planning, building and subdivision ordinances, all applicable restrictive covenants and all applicable architectural approval requirements); (iv) all governmental consents or approvals required prior to such grant, release, dedication, transfer, annexation or amendment have been obtained, and all filings required prior to such action have been made; (v) the Lessee shall remain obligated under this Master Lease and under any instrument executed by the Lessee consenting to the assignment of the Lessor's interest in this Master Lease as security for indebtedness, in each such case in accordance with their terms, as though such grant, release, dedication, transfer or amendment had not been effected and (vi) the Lessee shall pay and perform any obligations of the Lessor under such grant, -14- 16 MASTER LEASE release, dedication, transfer or amendment. The Lessor acknowledges the Lessee's right to finance and to secure under the Uniform Commercial Code, inventory, furnishings, furniture, equipment, machinery, leasehold improvements and other personal property located at the Properties other than Equipment, and Lessor agrees to execute Lessor waiver forms and release of Lessor's Liens in favor of any purchase money seller, lessor or lender which has financed or may finance in the future such items. Without limiting the effectiveness of the foregoing, provided that no Lease Event of Default shall have occurred and be continuing, the Lessor shall, upon the request of the Lessee, and at the Lessee's sole cost and expense, execute and deliver any instruments necessary or appropriate to confirm any such grant, release, dedication, transfer, annexation or amendment to any Person permitted under this Section 11.2 including landlord waivers with respect to any of the foregoing. So long as no Event of Default shall have occurred and be continuing, Lessee is hereby granted an irrevocable power of attorney (coupled with an interest) to execute the types of documents, instruments and agreement referred to in this Section 11.2. In addition, Lessor covenants to cooperate and to execute promptly any documents requested by Lessee under this Section 11.2. ARTICLE XII PERMITTED CONTESTS XII.1. Permitted Contests in Respect of Applicable Law. If, to the extent and for so long as (a) a test, challenge, appeal or proceeding for review of any Applicable Law relating to any Property shall be prosecuted diligently and in good faith in appropriate proceedings by the Lessee or (b) compliance with such Applicable Law shall have been excused or exempted by a valid nonconforming use, variance permit, waiver, extension or forbearance, the Lessee shall not be required to comply with such Applicable Law but only if and so long as any such test, challenge, appeal, proceeding, waiver, extension, forbearance or noncompliance shall not, in the reasonable opinion of the Lessor and the Agent, involve (A) any risk of criminal liability being imposed on the Lessor or any Lender or (B) any risk of (1) foreclosure, forfeiture or loss of such Property, or sale of any Property or any material part thereof, or nonpayment of Rent (2) civil liability being imposed on the Lessor, any Lender, or such Property, or (3) enjoinment of, or interference with, the use, possession or disposition of such Property in any material respect. The Lessor will not be required to join in any proceedings pursuant to this Section 12.1 unless a provision of any -15- 17 MASTER LEASE Applicable Law requires that such proceedings be brought by or in the name of the Lessor; and in that event the Lessor will join in the proceedings or permit them or any part thereof to be brought in its name if and so long as (i) the Lessee has not elected the Remarketing Option and (ii) the Lessee pays all related expenses and indemnifies the Lessor and the Participants with respect to such proceedings. ARTICLE XIII INSURANCE XIII.1. Public Liability and Workers' Compensation Insurance. (a) During the Lease Term, the Lessee shall procure and carry, at the Lessee's sole cost and expense, commercial general liability insurance for claims for injuries or death sustained by persons or damage to property while on the Properties and such other public liability coverages as are ordinarily procured by the Lessee or its Affiliates who own or operate similar properties, but in any case shall provide liability coverage of at least combined single limit for bodily injury or property damage, $5,000,000 per occurrence and aggregate. Such insurance shall be on terms and in amounts that are no less favorable than insurance maintained by the Lessee or such Affiliates with respect to similar properties that they own and that are in accordance with normal industry practice. The policy shall be endorsed to name the Lessor as additional insured. The policy shall also specifically provide that the policy shall be considered primary insurance which shall apply to any loss or claim before any contribution by any insurance which the Lessor may have in force. (b) The Lessee shall in the construction of any Modifications and the operation of the Properties, comply with the applicable workers' compensation laws. XIII.2. Hazard and Other Insurance. During the Lease Term, the Lessee shall keep, or cause to be kept, such Property insured against loss or damage by fire, and other risks on terms and in amounts that are no less favorable than insurance covering other similar properties owned by the Lessee or its Affiliates and that are in accordance with normal industry practices, but at least an amount sufficient to cover the replacement cost of the Improvements. During the construction of any Improvements the Lessee shall also maintain or cause to be maintained builders' risk insurance. All insurance proceeds in respect of any loss or -16- 18 MASTER LEASE occurrence for which the proceeds related thereto are (i) less than or equal to $500,000.00, in the absence of the occurrence and continuance of an Event of Default, shall be adjusted by and paid to the Lessee for application toward the reconstruction, repair or refurbishment of the applicable Property and (ii) greater than $500,000.00, shall be adjusted by and held by the Lessor for application in accordance with Article XIV. XIII.3. Insurance Coverage. (a) The Lessee shall furnish the Lessor and the Agent with certificates showing the insurance required under Sections 13.1 and 13.2 to be in effect and naming the Lessor as additional insured with respect to liability coverage (excluding worker's compensation insurance), naming the Lessor and the Lessee as their interests may appear with respect to property coverage and naming the Lessor as loss payee with respect to property coverage and showing the mortgagee endorsement required by Section 13.3(c) with respect to such coverage. All such insurance shall be at the cost and expense of the Lessee. Such certificates shall include a provision for no less than thirty (30) days' advance written notice by the insurer to the Lessor in the event of cancellation or reduction of such insurance. (b) The Lessee agrees that the insurance policy or policies required by Sections 13.2 shall include an appropriate clause pursuant to which such policy shall provide that it will not be invalidated should the Lessee waive, in writing, prior to a loss, any or all rights of recovery against any party for losses covered by such policy, and that the insurance in favor of the Lessor and its rights under and interests in said policies shall not be invalidated or reduced by any act or omission (including breach of warranty) or negligence of the Lessee or any other Person having any interest in any Property other than the Lessor. The Lessee hereby waives any and all such rights against the Lessor to the extent of payments made under such policies. (c) All such insurance shall be written by reputable insurance companies that are financially sound and solvent and otherwise reasonably appropriate considering the amount and type of insurance being provided by such companies. Any insurance company selected by the Lessee which is rated in Best's Insurance Guide or any successor thereto (or if there be none, an organization having a similar national reputation) shall have a general policyholder rating of "A" and a financial rating of at least "VIII" or be otherwise -17- 19 MASTER LEASE acceptable to the Lessor. All insurance policies required by Section 13.2 shall include a standard form mortgagee endorsement in favor of the Lessor. (d) The Lessor shall not carry separate insurance concurrent in kind or form or contributing in the event of loss with any insurance required under this Article XIII except that the Lessor may, at the Lessor's expense, carry separate liability insurance so long as (i) the Lessee's insurance is designated as primary and in no event excess or contributory to any insurance the Lessor may have in force which would apply to a loss covered under the Lessee's policy and (ii) each such insurance policy will not cause the Lessee's insurance required under this Article XIII to be subject to a coinsurance exception of any kind. (e) The Lessee shall pay as they become due all premiums for the insurance required by Section 13.1 and Section 13.2, and shall renew or replace each policy prior to the expiration date thereof. Throughout the Lease Term, at the time each of the Lessee's insurance policies is renewed (but in no event less frequently than once each year), the Lessee shall deliver to the Lessor and the Agent certificates of insurance evidencing that all insurance required by this Article XIII is being maintained by the Lessee and is in effect. ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS XIV.1. Casualty and Condemnation. (a) Subject to the provisions of this Article XIV, if all or a portion of any Property is damaged or destroyed in whole or in part by a Casualty or if the use, access, occupancy, easement rights or title to any Property or any part thereof, is the subject of a Condemnation, then (i) in the case of a Casualty, (x) any insurance proceeds less than $500,000 payable with respect to such Casualty shall be paid directly to the Lessee, or if received by the Lessor, shall be paid over to such Lessee for the reconstruction, refurbishment and repair of such Property, and (y) any insurance proceeds in excess of $500,000 payable with respect to such Casualty shall be paid to the Lessor to be applied by disbursement to the Lessee to the restoration of such Property, and -18- 20 MASTER LEASE (ii) in the case of a Condemnation (that is not a Significant Condemnation) of any part of any Land (not including the applicable Improvements), any award or compensation relating thereto shall be paid to the Lessee and in the case of a Significant Condemnation such award or compensation shall be paid to the Lessor to be applied in the Lessee's reasonable discretion to the restoration of such Property or toward the payment of the applicable Lease Balance; provided, however, that, in each case, if a Lease Event of Default shall have occurred and be continuing, such award, compensation or insurance proceeds shall be paid directly to the Lessor or, if received by the Lessee, shall be held in trust for the Lessor and the Lenders, and shall be paid over by the Lessee to the Lessor to be distributed in accordance with the Article VII of the Participation Agreement. All amounts held by the Lessor, or the Lenders when a Lease Event of Default exists hereunder on account of any award, compensation or insurance proceeds either paid directly to the Lessor or the Lenders or turned over to the Lessor or the Lenders shall at the option of the Lessor either be (i) paid to the Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with clause (d) of this Section 14.1, or (ii) applied to the purchase price of the related Property on the Termination Date with respect to such Property in accordance with Article XV, with any Excess Casualty/Condemnation Proceeds being payable to the Lessee. (b) The Lessee may appear in any proceeding or action to negotiate, prosecute, adjust or appeal any claim for any award, compensation or insurance payment on account of any such Casualty or Condemnation and shall pay all expenses thereof. At the Lessee's reasonable request, and at the Lessee's sole cost and expense, the Lessor and the Lenders shall participate in any such proceeding, action, negotiation, prosecution or adjustment. The Lessor and the Lessee agree that this Master Lease shall control the rights of the Lessor and the Lessee in and to any such award, compensation or insurance payment. (c) If the Lessor or the Lessee shall receive notice of a Casualty or of an actual, pending or threatened Condemnation of any Property or any interest therein, the Lessor or the Lessee, as the case may be, shall give notice thereof to the other and to the Lenders promptly after the receipt of such notice. -19- 21 MASTER LEASE (d) If pursuant to this Section 14.1 and Section 15.1 this Master Lease shall continue in full force and effect following a Casualty or Condemnation with respect to any Property, the Lessee shall, at its sole cost and expense (and, without limitation, if any award, compensation or insurance payment is not sufficient to restore such Property in accordance with this clause (d), or is not covered by insurance as in the case of Casualty caused by earthquake, the Lessee shall pay the shortfall), promptly and diligently repair any damage to such Property caused by such Casualty or Condemnation in conformity with the requirements of Sections 9.1 and 10.1 (as modified to give effect to any subsequent Modifications, any Condemnation affecting such Property and all applicable Property Legal Requirements) so as to restore such Property to at least the same condition, operation, function and value as existed immediately prior to such Casualty or Condemnation with such Modification as the Lessee may elect in accordance with Section 10.1. In such event, title to such Property shall remain with the Lessor subject to the terms of this Master Lease. Upon completion of such restoration, the Lessee shall furnish the Lessor an architect's certificate of substantial completion and a Responsible Employee's Certificate confirming that such restoration has been completed pursuant to this Master Lease. (e) In no event shall a Casualty or Condemnation affect the Lessee's obligations to pay Rent pursuant to Section 3.1 or to perform its obligations and pay any amounts due on the Expiration Date or pursuant to Articles XVIII and XXI. (f) Any Excess Casualty/Condemnation Proceeds received by the Lessor or the Lenders in respect of a Casualty or Condemnation shall be turned over to the Lessee. XIV.2. Environmental Matters. Promptly upon the Lessee's knowledge of the existence of an Environmental Violation with respect to any Property, the Lessee shall notify the Lessor in writing of such Environmental Violation. If the Lessor elects not to terminate this Master Lease with respect to such Property pursuant to Section 15.1, at the Lessee's sole cost and expense, the Lessee shall promptly and diligently commence any response, clean up, remedial or other action necessary to remove, clean up or remediate the Environmental Violation in accordance with the terms of Section 8.3 (including the last sentence thereof). The Lessee shall, upon completion of remedial action by the Lessee, cause to be prepared by an environmental consultant reasonably acceptable to the Lessor a report describing the Environmental -20- 22 MASTER LEASE Violation and the actions taken by the Lessee (or its agents) in response to such Environmental Violation, and a statement by the consultant that the Environmental Violation has been remedied in compliance in all material respects with applicable Hazardous Materials Laws. Each such Environmental Violation shall be remedied prior to the Expiration Date unless each Property with respect to which an Environmental Violation has occurred but has not been remedied has been purchased by the Lessee in accordance with Section 18.1 or 18.2. Nothing in this Article XIV shall reduce or limit the Lessee's obligations under Sections 13.1, 13.2 or 13.3 of the Participation Agreement. XIV.3. Notice of Environmental Matters. Promptly, but in any event within sixty (60) Business Days from the date the Lessee has actual knowledge thereof, the Lessee shall provide to the Lessor written notice of any pending or threatened claim, action or proceeding involving any Hazardous Materials Laws or any Release on or in connection with any Property. All such notices shall describe in reasonable detail the nature of the claim, action or proceeding and the Lessee's proposed response thereto. In addition, the Lessee shall provide to the Lessor, within sixty (60) Business Days of receipt, copies of all written communications with any Governmental Authority relating to any Environmental Violation in connection with any Property. The Lessee shall also promptly provide such detailed reports of any such material environmental claims as may reasonably be requested by the Lessor or the Lenders. In the event that the Lessor receives written notice of any pending or threatened claim, action or proceeding involving any Hazardous Materials Laws or any Release on or in connection with any Property, the Lessor shall promptly give notice thereof to the Lessee. ARTICLE XV TERMINATION OF LEASE XV.1. Partial Termination upon Certain Events. If any of the following occurs with respect to any Property: (i) a Significant Condemnation occurs; or (ii) an Environmental Violation occurs or is discovered the cost of remediation of which would exceed $5,000,000; and the Lessor shall have given written notice (a "Termination Notice") to the Lessee that, as a consequence of such event, (x) the Lease Supplement relating to such Property is to be terminated and (y) this Master Lease is to be terminated with -21- 23 MASTER LEASE respect to such Property, then the Lessee shall be obligated to purchase the Lessor's interest in such affected Property on or prior to the next occurring Basic Rent Payment Date by paying the Lessor an amount equal to the Property Balance for such affected Property. XV.2. Termination Procedures. On the date of the payment by the Lessee of the Property Balance, or the Lease Balance, as the case may be, with respect to any Property or all Properties, as the case may be, in accordance with Section 15.1 (such date, the "Termination Date"), the Lease Supplement relating to each such affected Property shall terminate and this Master Lease shall terminate with respect to each such Property and, concurrent with the Lessor's receipt of such payment, (a) the Lessor shall execute and deliver to the Lessee (or to the Lessee's designee) at the Lessee's cost and expense a special warranty deed with respect to each such Property, a bill of sale with respect to the Equipment located on each such Property and an assignment of the Lessor's entire interest in each such Property (which shall include an assignment of all of the Lessor's right, title and interest in and to any Net Proceeds with respect to each such Property not previously received by the Lessor), in each case in recordable form and otherwise in conformity with local custom and free and clear of the Lien of the Lessor Mortgage and any Lessor Liens attributable to the Lessor; (b) each such Property shall be conveyed to the Lessee (or to the Lessee's designee) "AS IS" and in its then present physical condition; and (c) in the case of a termination pursuant to clause (i) or (ii) of Section 15.1(a), the Lessor shall convey to the Lessee any Net Proceeds with respect to the Casualty or Condemnation giving rise to the termination of this Master Lease with respect to such Property theretofore received by the Lessor or at the request of the Lessee, such amounts shall be applied against sums due hereunder. -22- 24 MASTER LEASE ARTICLE XVI EVENTS OF DEFAULT XVI.1. Lease Events of Default. The occurrence of any one or more of the following events (whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall constitute a "Lease Event of Default": (a) the Lessee shall fail to make payment of (i) any Basic Rent within five (5) days after the same has become due and payable, or (ii) any Property Balance, Purchase Option Price, Loan Balance or Lease Balance, including, without limitation, amounts due pursuant to Sections 15.1, 15.2, 18.1, 18.2, or 20.1; (b) the Lessee shall fail to make payment of any Supplemental Rent due and payable within five (5) days after receipt of notice thereof; (c) the Lessee shall fail to maintain insurance as required by Article XIII of this Master Lease; (d) the Lessee shall fail to deposit with the Collateral Agent, within the time set forth in Section 6.1 of the Participation Agreement, the Deficiency Collateral; (e) the Lessee shall not be in compliance with Section 10.1(f)(i), (ii) or (iii) of the Participation Agreement; (f) the Lessee shall fail to observe or perform any term, covenant or condition of the Lessee under this Lease or the Operative Documents to which it is party other than those described in Section 20.1(a), (b), (c), (d) or (e) hereof, and such failure shall have continued for thirty (30) days after the earlier of (i) delivery to the Lessee of written notice thereof from the Lessor or (ii) a Responsible Employee of the Lessee shall have knowledge of such failure; provided further, that failure by the Lessee to fully comply with the requirements of Section 20.1 hereof shall not be subject to any cure period; provided, however, that no Event of Default shall be deemed to have occurred under this subsection until one hundred twenty (120) days has elapsed so long as throughout such time, the Lessee is diligently pursuing a cure for such breach (to the extent such breach may be cured); -23- 25 MASTER LEASE (g) any representation or warranty made by the Lessee in any of the Operative Documents to which it is a party shall prove to have been Materially inaccurate at the time made, and if such inaccuracy can be cured, it shall not have been cured within thirty (30) days after the earlier of (i) delivery to the Lessee of written notice thereof from the Lessor or (ii) a Responsible Employee of the Lessee shall have knowledge of such inaccuracy; provided, however, that no Event of Default shall be deemed to have occurred under this subsection until one hundred twenty (120) days has elapsed so long as throughout such time, the Lessee is diligently pursuing a cure for such breach (to the extent such breach may be cured); (h) the Lessee shall (i) admit in writing its inability to pay its debts generally as they become due, (ii) file a petition under the United States bankruptcy laws or any other applicable insolvency law or statute of the United States of America or any State or Commonwealth thereof, (iii) make a general assignment for the benefit of its creditors, (iv) consent to the appointment of a receiver of itself or the whole or any substantial part of its property, (v) fail to cause the discharge of any custodian, trustee or receiver appointed for the Lessee or the whole or a substantial part of its property within sixty (60) days after such appointment, or (vi) file a petition or answer seeking or consenting to reorganization under the United States bankruptcy laws or any other applicable insolvency law or statute of the United States of America or any State or Commonwealth thereof; (i) insolvency proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency law or statute of the United States of America or any State or Commonwealth thereof shall be filed against the Lessee and not dismissed within ninety (90) days from the date of its filing, or a court of competent jurisdiction shall enter an order or decree appointing, without the consent of the Lessee a receiver of the Lessee or the whole or a substantial part of any of its property and such order or decree shall not be vacated or set aside within ninety (90) days from the date of the entry thereof; (j) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $5,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any -24- 26 MASTER LEASE member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $5,000,000; (k) any judgments or orders for the payment of money, in any case not covered by insurance, individually or in the aggregate in excess of $5,000,000 shall be rendered against the Lessee, and such judgment or order shall continue unsatisfied and unstayed (pursuant to laws, rules or court orders) for a period of thirty (30) days; (l) an event of default, as defined in any agreement, mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness of the Lessee with respect to any Property, whether such indebtedness now exists or shall hereafter be created, shall happen and such indebtedness individually or in the aggregate shall exceed $5,000,000 and shall be due and payable prior to its stated maturity; (m) any Lien granted under any Operative Document shall, in whole or in part, terminate, cease to be effective against, or cease to be the legal, valid, binding and enforceable obligation of, the Lessee; (n) the Lessee shall directly or indirectly contest the validity of any Operative Document in any manner in any court of competent jurisdiction or any lien granted by any Operative Document; or (o) a Loan Agreement Event of Default, a Guaranty Event of Default or a Construction Agency Agreement Event of Default shall have occurred and be continuing. XVI.2. Remedies. Upon the occurrence of any Lease Event of Default and at any time thereafter, the Lessor may, so long as such Lease Event of Default is continuing, do one or more of the following as the Lessor in its sole discretion shall determine, -25- 27 MASTER LEASE without limiting any other right or remedy the Lessor may have on account of such Lease Event of Default (including, without limitation, the obligation of the Lessee to purchase the Properties as set forth in Section 18.2: (a) The Lessor may, by notice to the Lessee, rescind or terminate this Master Lease as to any Property or all of the Properties as of the date specified in such notice; however, (i) no reletting, reentry or taking of possession of any Property (or any portion thereof) by the Lessor will be construed as an election on the Lessor's part to terminate this Master Lease unless a written notice of such intention is given to the Lessee, (ii) notwithstanding any reletting, reentry or taking of possession, the Lessor may at any time thereafter elect to terminate this Master Lease for a continuing Lease Event of Default and (iii) no act or thing done by the Lessor or any of its agents, representatives or employees and no agreement accepting a surrender of the Properties shall be valid unless the same be made in writing and executed by the Lessor; (b) The Lessor may (i) demand that the Lessee, and the Lessee shall upon the written demand of the Lessor, return any Property promptly to the Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of, Articles VII and IX and Section 8.3 hereof as if such Property were being returned at the end of the Lease Term, and the Lessor shall not be liable for the reimbursement of the Lessee for any costs and expenses incurred by the Lessee in connection therewith and (ii) without prejudice to any other remedy which the Lessor may have for possession of any Property, and to the extent and in the manner permitted by Applicable Law, enter upon such Property and take immediate possession of (to the exclusion of the Lessee) such Property or any part thereof and expel or remove the Lessee and any other Person who may be occupying such Property, by summary proceedings or otherwise, all without liability to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise and, in addition to the Lessor's other damages, the Lessee shall be responsible for all costs and expenses incurred by the Lessor and/or the Lenders in connection with any reletting, including, without limitation, reasonable brokers' fees and all costs of any alterations or repairs made by the Lessor; (c) The Lessor may (i) sell all or any part of any Property at public sale free and clear of any rights of the -26- 28 MASTER LEASE Lessee and without any duty to account to the Lessee with respect to such action or inaction or any proceeds (except that Excess Proceeds are payable to and shall be paid to the Lessee) with respect thereto (except to the extent required by clause (ii) below if the Lessor shall elect to exercise its rights thereunder) in which event the Lessee's obligation to pay Basic Rent hereunder for periods commencing after the date of such sale shall be terminated or proportionately reduced, as the case may be; and (ii) if the Lessor shall so elect, demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (the parties agreeing that the Lessor's actual damages would be difficult to predict, but the aforementioned liquidated damages represent a reasonable approximation of such amount) or (in lieu of Basic Rent due for periods commencing on or after the Payment Date coinciding with such date of sale (or, if the sale date is not a Basic Rent Payment Date, the Basic Rent Payment Date next preceding the date of such sale)), an amount equal to (A) the excess, if any, of (1) the Lease Balance calculated as of such Basic Rent Payment Date (including all Rent due and unpaid to and including such Basic Rent Payment Date and), over (2) the net proceeds of such sale (that is, after deducting all costs and expenses incurred by the Lessor incident to such conveyance, including, without limitation, repossession costs, brokerage commissions, prorations, transfer taxes, fees and expenses for counsel, title insurance fees, survey costs, recording fees, and any repair costs); plus (B) interest at the Overdue Rate on the foregoing amount from such Basic Rent Payment Date until the date of payment; (d) The Lessor may, at its option, elect not to terminate this Master Lease with respect to any Property or all of the Properties and continue to collect all Basic Rent, Supplemental Rent, and all other amounts due the Lessor (together with all costs of collection) and enforce the Lessee's obligations under this Master Lease as and when the same become due, or are to be performed, and at the option of the Lessor, upon any abandonment of any Property by the Lessee or re-entry of same by the Lessor, the Lessor may, in its sole and absolute discretion, elect not to terminate this Master Lease and may make the necessary repairs in order to relet such Property, and relet such Property or any part thereof for such term or terms (which may be for a long term extending beyond the Lease Term of this Master Lease) and at such rental or rentals and upon such other terms and conditions as the Lessor in its -27- 29 MASTER LEASE reasonable discretion may deem advisable; and upon each such reletting all rentals actually received by the Lessor from such reletting shall be applied to the Lessee's obligations hereunder and the other Operative Documents in such order, proportion and priority as the Lessor may elect in the Lessor's sole and absolute discretion. If such rentals received from such reletting during any period are less than the Rent with respect to such Property to be paid during that period by the Lessee hereunder, the Lessee shall pay any deficiency, as calculated by the Lessor, to the Lessor on the next Basic Rent Payment Date; (e) Unless all of the Properties have been sold in their entirety, the Lessor may, whether or not the Lessor shall have exercised or shall thereafter at any time exercise any of its rights under clause (b), (c) or (d) of this Section 16.2 with respect to any Properties or any portions thereof, demand, by written notice to the Lessee specifying a date (a "Termination Date") not earlier than twenty (20) days after the date of such notice, that the Lessee purchase, on such Termination Date, all unsold Properties and all unsold portions of Properties in accordance with the provisions of Article XXI and Section 18.2; (f) The Lessor may exercise any other right or remedy that may be available to it under Applicable Law, or proceed by appropriate court action (legal or equitable) to enforce the terms hereof or to recover damages for the breach hereof. Separate suits may be brought to collect any such damages for any period(s), and such suits shall not in any manner prejudice the Lessor's right to collect any such damages for any subsequent period(s), or the Lessor may defer any such suit until after the expiration of the Lease Term, in which event such suit shall be deemed not to have accrued until the expiration of the Lease Term; (g) The Lessor may retain and apply against the Lease Balance all sums which the Lessor would, absent such Lease Event of Default, be required to pay to, or turn over to, the Lessee pursuant to the terms of this Master Lease; (h) If a Lease Event of Default shall have occurred and be continuing, the Lessor, to the extent permitted by Applicable Law, as a matter of right and with notice to the Lessee, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of any Property, and the Lessee hereby irrevocably consents to any such appointment. Any such receiver(s) shall have all of -28- 30 MASTER LEASE the usual powers and duties of receivers in like or similar cases and all of the powers and duties of the Lessor in case of entry, and shall continue as such and exercise such powers until the date of confirmation of the sale of such Property unless such receivership is sooner terminated; (i) To the maximum extent permitted by law, the Lessee hereby waives the benefit of any appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale of any Property or any interest therein; (j) The Lessor shall be entitled to enforce payment of the indebtedness and performance of the obligations secured hereby and to exercise all rights and powers under this instrument or under any of the other Operative Documents or other agreement or any laws now or hereafter in force, notwithstanding some or all of the obligations secured hereby may now or hereafter be otherwise secured, whether by mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this instrument nor its enforcement, shall prejudice or in any manner affect the Lessor's right to realize upon or enforce any other security now or hereafter held by the Lessor, it being agreed that the Lessor shall be entitled to enforce this instrument and any other security now or hereafter held by the Lessor in such order and manner as the Lessor may determine in its absolute discretion. No remedy herein conferred upon or reserved to the Lessor is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Operative Documents to the Lessor or to which it may otherwise be entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Lessor. In no event shall the Lessor, in the exercise of the remedies provided in this instrument (including, without limitation, in connection with the assignment of rents to Lessor, or the appointment of a receiver and the entry of such receiver onto all or any part of the Properties), be deemed a "mortgagee in possession," and the Lessor shall not in any way be made liable for any act, either of commission or omission, in connection with the exercise of such remedies. If, pursuant to the exercise by the Lessor of its remedies pursuant to this Section 16.2, the Lease Balance and all other amounts due and owing from the Lessee under this Master Lease and -29- 31 MASTER LEASE the other Operative Documents have been paid in full, then the Lessor shall remit to the Lessee any excess amounts received by the Lessor. (k) Foreclosure; Power of Sale. Lessee hereby grants to First American Title Guaranty Company, as trustee (together with all successor trustees, the "Trustee"), IN TRUST, WITH POWER OF SALE, all of Lessee's right, title and interest in and to the Properties and, upon the occurrence of a Lease Event of Default, Lessor shall have the power and authority, after proper notice and lapse of such time as may be required by law, to cause Trustee to sell any Property or the Properties by notifying Trustee of that election and depositing with Trustee this instrument and receipts and evidence of expenditures made and secured hereby as Trustee may reasonably require. Upon receipt of any such notice from Lessor, Trustee shall cause to be recorded, published and delivered to Lessee such Notice of Default and Election to Sell as is then required by applicable statutory authority and by this instrument, which notice shall set forth, among other things, the nature of the breach(es) or default(s), the action(s) required to effect a cure thereof and the time period within which that cure may be effected. If no cure is effected within the statutory time limits following recordation of the Notice of Default and Election to Sell and after Notice of Sale has been given as required by the above-referenced statutes, Trustee may without further notice or demand sell and convey any Property or the Properties in accordance with the above-referenced statutes. Each Property may be sold as a whole or in separate lots, parcels or items and in such order as Lessor may direct, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser(s) a good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty express or implied. The recitals in such deed of any matter or fact shall be conclusive proof of the truthfulness thereof. Any Person, including Lessee, Trustee or Lessor, may purchase at any sale. After deducting all costs, fees and expenses of Lessor and Trustee, including costs of evidence of title in connection with any sale, Lessor shall apply the proceeds of sale, in the following order of priority, to payment of the following (collectively, the "Obligations"): (i) first, all amounts expended by or for the account of Lessor under the terms hereof and not then repaid, with accrued interest at the Overdue Rate; and (ii) second, all other amounts then due and owing hereunder including, without limitation, all Basic Rent, Supplemental Rent, the full amount of the Lease -30- 32 MASTER LEASE Balance as of the date of sale as if this Lease had been terminated with respect to all of the Properties then subject to this Lease under Section 18.1, and all other amounts then payable by Lessee under this Lease and the other Operative Documents, with Lessor having the right to apply the proceeds of sale to the amounts described above in this clause (ii) in such order, proportion and priority as Lessor may elect in its sole and absolute discretion. To the extent permitted by applicable statutes, Trustee may postpone the sale of all or any portion of any Property or the Properties by public announcement at the time and place of sale, and from time to time thereafter may again postpone that sale by public announcement or subsequently noticed sale, and without further notice may make such sale at the time fixed at the last postponement or may, in its discretion, give a new notice of sale. A sale of less than all of any Property or the Properties or any defective or irregular sale made hereunder shall not exhaust the power of sale provided for herein, and subsequent sales may be made hereunder until all of the Obligations have been satisfied or all the Properties have been sold, without defect or irregularity. No action of Lessor or Trustee based upon the provisions contained herein or contained in the applicable statutes, including, without limitation, the giving of the Notice of Default and Election to Sell or the Notice of Sale, shall constitute an election of remedies which would preclude Lessor from pursuing judicial foreclosure before a completed sale pursuant to the power of sale contained herein. Lessor shall have the right, with the irrevocable consent of Lessee hereby given and evidenced by the execution of this instrument, to obtain appointment of a receiver by any court of competent jurisdiction without further notice to Lessee, which receiver shall be authorized and empowered to enter upon and take possession of any Property or the Properties, including all personal property used upon or in connection with the real property herein conveyed, to let any Property or the Properties, to receive all the rents, issues and profits, if any, which may be due or become due in respect to the leasing of any Property or the Properties to another party ("Property Rents"), and apply the Property Rents after payment of all necessary charges and expenses to reduction of the Obligations in such order, proportion and priority as Lessor may elect. At the option of Lessor, the receiver shall accomplish entry and taking possession of any Property or the Properties by actual entry and possession or by notice to Lessee. The receiver so appointed by a court of competent jurisdiction shall be empowered to issue receiver's certificates for funds advanced by Lessor for the purpose of protecting the -31- 33 MASTER LEASE value of any Property or the Properties as security for the Obligations. The amounts evidenced by receiver's certificates shall bear interest at the Overdue Rate and may be added to the Obligations if the Lessee or a junior lienholder purchases any Property or the Properties at the trustee's sale. Trustee or any successor acting hereunder may resign and thereupon be discharged of the trusts hereunder upon thirty (30) days' prior written notice to Lessor. Regardless of whether Trustee resigns, Lessor may, from time to time, substitute a successor or successors to any Trustee named herein or acting hereunder in accordance with any statutory procedure for such substitution; or if Lessor, in its sole and absolute discretion, so elects, and if permitted by law, Lessor may substitute such successors or successors by recording, in the office of the recorder of the county or counties where such Property is located, a document executed by Lessor and containing the name of the original Lessee and Lessor hereunder, the book and page where this instrument (or a memorandum hereof) is recorded (and/or instrument number, as applicable) and the name of the new Trustee, which instrument shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the predecessor Trustee, succeed to the rights, powers and duties hereunder. It is acknowledged that A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW LESSOR TO TAKE THE PROPERTIES AND SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY LESSEE UNDER THIS INSTRUMENT. Notwithstanding any of the foregoing, the Lessor acknowledges that upon the occurrence and continuance of a Lease Event of Default solely under clause (e) of Section 16.1, the Lessor's remedies for such default shall be limited to recovery of the Loan Balance by liquidation of the Additional Collateral or through other appropriate means. XVI.3. Waiver of Certain Rights. If this Master Lease shall be terminated pursuant to Section 16.2, the Lessee waives, to the fullest extent permitted by law, (a) any notice of re-entry or the institution of legal proceedings to obtain re-entry or possession; (b) any right of redemption, re-entry or repossession; (c) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt or limiting the Lessor with respect to the election of remedies; and (d) any other rights which might otherwise limit or modify any of the Lessor's rights or remedies under this Article XVI. -32- 34 MASTER LEASE ARTICLE XVII LESSOR'S RIGHT TO CURE XVII.1. The Lessor's Right to Cure the Lessee's Lease Defaults. The Lessor, without waiving or releasing any obligation or Lease Event of Default, may (but shall be under no obligation to) remedy any Lease Event of Default for the account and at the sole cost and expense of the Lessee, including the failure by the Lessee to maintain the insurance required by Article XIII, and may, to the fullest extent permitted by law, and notwithstanding any right of quiet enjoyment in favor of the Lessee, enter upon any Property for such purpose and take all such action thereon as may be necessary or appropriate therefor. No such entry shall be deemed an eviction of the Lessee. All reasonable out-of-pocket costs and expenses so incurred (including fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by the Lessor, shall be paid by the Lessee to the Lessor as Supplemental Rent. ARTICLE XVIII PURCHASE PROVISIONS XVIII.1. Purchase of All or Some of the Properties. Subject to the conditions contained herein, and without limitation of the Lessee's purchase obligation pursuant to Section 18.2, the Lessee shall have the irrevocable option on any Business Day to purchase all or some of the Properties subject to this Master Lease at a price equal to the Lease Balance for such Properties on the date of such purchase relating to such Property. The Lessee's exercise of its option pursuant to this Section 18.1 shall be subject to the following conditions: (i) the Lessee shall have delivered a Purchase Notice to the Lessor not less than thirty (30) days prior to such purchase, specifying the date of such purchase, which date shall be a Basic Rent Payment Date; (ii) the Lessee shall not have given notice of its intention to exercise the Remarketing Option. If the Lessee exercises its option pursuant to this Section 18.1 then, upon the Lessor's receipt of all amounts due in connection therewith, including Break Costs, if any, the Lessor shall transfer to the Lessee or its designee all of the Lessor's right, title and interest in and to the applicable Properties in accordance with the procedures set forth in Section 21.1(a), such transfer to be effective as of the date specified in the Purchase -33- 35 MASTER LEASE Notice. The Lessee may designate, in a notice given to the Lessor not less than ten (10) Business Days prior to the closing of such purchase (time being of the essence), the transferee or transferees to whom the conveyance shall be made (if other than to the Lessee), in which case such conveyance shall (subject to the terms and conditions set forth herein) be made to such designee; provided, however, that such designation of a transferee or transferees shall not cause the Lessee to be released, fully or partially, from any of its obligations under this Master Lease, including, without limitation, the obligation to pay the Lessor the Lease Balance on such Expiration Date. XVIII.2. Expiration Date Purchase Obligation. Unless (a) the Lessee shall have properly exercised its option pursuant to Section 18.1 and purchased the Properties pursuant thereto, or (b) the Lessee shall have properly exercised the Remarketing Option and shall have fulfilled all of the conditions of clauses (a) through (l) of Section 20.1 hereof and the Lessor shall have sold its interest in all of the Properties pursuant thereto, then, subject to the terms, conditions and provisions set forth in this Article, and in accordance with the terms of Section 21.1(a), the Lessee shall purchase from the Lessor, and the Lessor shall convey to the Lessee, on the Expiration Date all of the Lessor's interest in all of the Properties for an amount equal to the Lease Balance. The Lessee may designate, in a notice given to the Lessor not less than ten (10) Business Days prior to the closing of such purchase (time being of the essence), the transferee or transferees to whom the conveyance shall be made (if other than to the Lessee), in which case such conveyance shall (subject to the terms and conditions set forth herein) be made to such designee; provided, however, that such designation of a transferee or transferees shall not cause the Lessee to be released, fully or partially, from any of its obligations under this Master Lease, including, without limitation, the obligation to pay the Lessor the Lease Balance on such Expiration Date. ARTICLE XIX RENEWAL TERMS XIX.1. Renewal. Prior to the final Expiration Date, the parties hereto may agree to renew this Master Lease for one or more additional terms upon terms and conditions to be mutually agreed upon; provided, however, that nothing herein shall be construed as a commitment by either party to renew this Master Lease beyond the Expiration Date. -34- 36 MASTER LEASE ARTICLE XX REMARKETING OPTION XX.1. Option to Remarket. Subject to the fulfillment of each of the conditions set forth in this Section 20.1, the Lessee shall have the option (the "Remarketing Option") to market and complete the sale of all of the Properties for the Lessor. The Lessee's effective exercise and consummation of the Remarketing Option shall be subject to the due and timely fulfillment of each of the following provisions as to each of the Properties as of the dates set forth below. (a) Not later than one hundred and eighty (180) days prior to the Expiration Date, the Lessee shall give to the Lessor written notice of the Lessee's exercise of the Remarketing Option, which exercise shall be irrevocable. Failure by the Lessee to give timely notice shall be deemed to be an election by the Lessee, without further act thereby, of its Purchase Option for all of the Properties. (b) Not later than one hundred and twenty (120) days prior to the Expiration Date, the Lessee shall deliver to the Lessor an Environmental Audit for each of the Properties. Such Environmental Audit shall be prepared by an environmental consultant selected by the Lessor in the Lessor's reasonable discretion and shall contain conclusions reasonably satisfactory to the Lessor as to the environmental status of the Properties. If any such Environmental Audit indicates any exceptions, the Lessee shall have also delivered prior to the Expiration Date a Phase Two environmental assessment by such environmental consultant and a written statement by such environmental consultant indicating that all such exceptions have been remedied in compliance with Applicable Law. (c) The Lessee shall have completed all Modifications, restoration and rebuilding of the affected Properties pursuant to Sections 10.1 and 14.1 (as the case may be) and shall have fulfilled all of the conditions and requirements in connection therewith pursuant to said Sections, in each case prior to the date on which the Lessor receives the Lessee's notice of the Lessee's intention to exercise the Remarketing Option (time being of the essence), regardless of whether the same shall be within the Lessee's control. The Lessee shall have also paid the cost of all Modifications commenced prior to the Expiration Date. The Lessee shall not have been excused pursuant to Section 12.1 from complying with any Applicable Law that involved the -35- 37 MASTER LEASE extension of the ultimate imposition of such Applicable Law beyond the Expiration of the Term. Any Permitted Property Liens (other than Lessor Liens) on any Property that were contested by the Lessee shall have been removed. (d) During the Marketing Period, the Lessee shall, as nonexclusive agent for the Lessor, use its best efforts to sell the Lessor's interest in the Properties and will attempt to obtain the highest purchase price therefor and for not less than the Fair Market Sales Value. The Lessee will be responsible for hiring brokers and making the Properties available for inspection by prospective purchasers. The Lessee shall promptly upon request permit inspection of any Property and any maintenance records relating to any Property by the Lessor, any Participant and any potential purchasers, and shall otherwise do all things necessary to sell and deliver possession of the Properties to any purchaser. All such marketing of the Properties shall be at the Lessee's sole expense. The Lessee shall allow the Lessor and any potential qualified purchaser reasonable access to the Properties for the purpose of inspecting the same. (e) The Lessee shall procure bids from one or more bona fide prospective purchasers and shall deliver to the Lessor and the Participants not less than ninety (90) days prior to the Expiration Date a binding written unconditional (except as set forth below), irrevocable offer by such purchaser or purchasers offering the highest bid to purchase the Properties. No such purchaser shall be the Lessee or any Subsidiary or Affiliate of the Lessee. The written offer must specify the Expiration Date as the closing date unless the Lessor and the Participants shall otherwise agree in their sole discretion. (f) The Lessee shall submit all bids to the Lessor and the Participants, and the Lessor will have the right to submit any one or more bids. Any sale by the Lessee shall be for the highest cash bid submitted to the Lessor. The determination of the highest bid shall be made by the Lessor prior to the end of the Marketing Period, but in any event, the Lessor shall have no obligation to approve any bid for any Property unless each highest bid plus an amount that may be paid by the Lessee in its sole and absolute discretion (in addition to its obligations under Section 20.1(i)), together with such bid, equals or exceeds the Property Balance. All bids shall be on an all-cash basis unless the Lessor and the Participants shall otherwise agree in their sole discretion. -36- 38 MASTER LEASE (g) The Lessee shall have obtained, at its cost and expense, all required governmental and regulatory consents and approvals and shall have made all filings as required by Applicable Law in order to carry out and complete the transfer of each of the Properties. As to the Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by the Lessor other than the absence of Lessor Liens. Any agreement as to such sale shall be made subject to the Lessor's rights hereunder. (h) As between the Lessor and the Lessee the Lessee shall pay directly, and not from the sale proceeds, all prorations, credits, costs and expenses of the sale of the Properties, whether incurred by the Lessor or the Lessee, including without limitation, the cost of all title insurance, surveys, environmental reports, appraisals, transfer taxes, the Lessor's reasonable attorneys' fees, the Lessee's attorneys' fees, commissions, escrow fees,recording fees, and all applicable documentary and other transfer taxes. (i) The Lessee shall pay to the Lessor on or prior to the Expiration Date (or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to the Loan Balance plus all accrued and unpaid Rent (including Supplemental Rent, if any) and all other amounts hereunder which have accrued or will accrue prior to or as of the Expiration Date, in the type of funds specified in Section 3.4 hereof. (j) The Lessee shall pay to the Lessor on or prior to the Expiration Date the amounts, if any, required to be paid pursuant to Section 13.2 of the Participation Agreement. (k) The purchase of all of the Properties shall be consummated on the Expiration Date and the gross proceeds (the "Gross Remarketing Proceeds") of the sale of the Properties (less any marketing, closing or other costs, prorations or commissions) shall be paid directly to the Lessor; provided, however, that if the sum of (x) the Gross Remarketing Proceeds from such sale plus (y) the Loan Balance received by the Lessor exceeds the Lease Balance as of such date, then the excess shall be paid to the Lessee on the Expiration Date. If the Lessee effectively elects the Remarketing Option and no sale of any Property is consummated prior to the end of the Marketing Period, Lessee may exercise its purchase option -37- 39 pursuant to Section 18.2 or Lessee shall, in addition to making the payment required pursuant to Section 20.1(i) above, at its own cost and expense, do each of the following: (i) execute and deliver to Lessor and the Lessor's title insurance company an affidavit as to the absence of any Liens (other than Permitted Liens of the type described in clause (i), (viii) or (x)), and shall execute and deliver to the Lessor a statement of termination of this Master Lease to the extent relating to such Property; (ii) on the Expiration Date, transfer possession of such Property to the Lessor or any Person designated by the Lessor, by surrendering the same into the possession of the Lessor or such Person, as the case may be, in the condition required by this Section 20.1 and in compliance with Applicable Law; and (iii) for a period of up to one year after the Expiration Date, cooperate reasonably with the Lessor and/or any Person designated by the Lessor to receive such Property, which cooperation shall include reasonable efforts with respect to the following, all of which the Lessee shall do on or before the Expiration Date for such Property or as soon thereafter as is reasonably practicable: providing copies of all books and records regarding the maintenance and ownership of such Property and all know-how, data and technical information relating thereto, providing a current copy of the applicable Plans and Specifications, granting or assigning all assignable licenses necessary for the operation and maintenance of such Property and cooperating reasonably in seeking and obtaining all necessary Governmental Action. The obligations of the Lessee under this paragraph shall survive the expiration or termination of this Master Lease. Except as expressly set forth herein, the Lessee shall have no right, power or authority to bind the Lessor in connection with any proposed sale of any Property. If one or more of the foregoing provisions shall not be fulfilled as of the date set forth above with respect to any Property, then the Lessor shall declare by written notice to the Lessee the Remarketing Option to be null and void (whether or not it has been theretofore exercised by the Lessee) as to all of the Properties, in which event all of the Lessee's rights under this Section 20.1 shall immediately terminate and the Lessee shall be obligated to purchase all of the Properties pursuant to Section 18.2 on the Expiration Date. -38- 40 MASTER LEASE XX.2. Certain Obligations Continue. During the Marketing Period, the obligation of the Lessee to pay Rent with respect to each Property (including the installment of Rent due on the Expiration Date) shall continue undiminished until payment in full of the Loan Balance and all other amounts due to the Lessor with respect to the Properties under the Operative Documents to which the Lessee is a party. The Lessor shall have the right, but shall be under no duty, to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take action in connection with any such sale, other than as expressly provided in this Article XX. ARTICLE XXI PROCEDURES RELATING TO PURCHASE OR REMARKETING XXI.1. Provisions Relating to the Exercise of Purchase Option or Obligation and Conveyance Upon Remarketing and Conveyance Upon Certain Other Events. (a) In connection with any termination of this Master Lease with respect to any Property pursuant to the terms of Article XV, in connection with any purchase or in connection with the Lessee's purchase of any Property in accordance with Section 18.1 or in connection with the Lessee's Expiration Date Purchase Obligation or obligations under Section 16.2(e), then, upon the date on which this Master Lease is to terminate with respect to the applicable Property and upon the payment of all amounts due under Section 5.1 of the Construction Agency Agreement, as applicable, and upon tender by the Lessee of the amounts set forth in Article XV, Sections 16.2(e), 18.1 or 18.2, as applicable: (i) the Lessor shall execute and deliver to the Lessee (or to the Lessee's designee) at the Lessee's cost and expense a grant deed with respect to such Property or Properties containing representations and warranties of grantor to the Lessee regarding Lessor Liens, a bill of sale with respect to the Equipment located on such Property or Properties and an assignment of the Lessor's entire interest in such Property or Properties (which shall include an assignment of all of the Lessor's right, title and interest in and to any Net Proceeds with respect to such Property or Properties not previously received by the Lessor and an assignment of leases of the Properties), in each case in recordable form and -39- 41 otherwise in conformity with local custom and free and clear of the Lien of the Lessor Deed of Trust and any Lessor Liens; (ii) such Property or Properties shall be conveyed to the Lessee "AS IS" and in its then present physical condition; and (iii) the Lessor shall execute and deliver to Lessee and the Lessee's title insurance company an affidavit as to the Lessor's title and Lessor Liens and shall execute and deliver to Lessee a statement of termination of this Master Lease. (b) If the Lessee properly exercises the Remarketing Option, then the Lessee shall, on the Expiration Date, and at its own cost, transfer possession of all of the Properties to the independent purchaser(s) thereof, in each case by surrendering the same into the possession of the Lessor or such purchaser(s), as the case may be, free and clear of all Liens other than Lessor Liens and the lien of the Lessor Mortgage, in good condition (as modified by Modifications permitted by this Master Lease), ordinary wear and tear excepted, and in compliance with Applicable Law. The Lessee shall, on and within a reasonable time before and up to one year after the Expiration Date, cooperate reasonably with the Lessor and the independent purchaser(s) of the Properties in order to facilitate the purchase by such purchaser(s) of the Properties, which cooperation shall include the following, all of which the Lessee shall do on or before the Expiration Date or as soon thereafter as is reasonably practicable: providing copies of all books and records regarding the maintenance and ownership of the Properties and all know-how, data and technical information relating thereto, providing a current copy of the Plans and Specifications for each Property, granting or assigning all licenses necessary for the operation and maintenance of each Property and cooperating reasonably in seeking and obtaining all necessary Governmental Action. The obligations of the Lessee under this paragraph shall survive the expiration or termination of this Master Lease. -40- 42 MASTER LEASE ARTICLE XXII ESTOPPEL CERTIFICATES XXII.1. Estoppel Certificates. At any time and from time to time upon not less than ten (10) Business Days' prior request by the Lessor or the Lessee (the "Requesting Party"), the other party (whichever party shall have received such request, the "Certifying Party") shall furnish to the Requesting Party a certificate signed by an individual having the office of vice president or higher in the Certifying Party certifying that this Master Lease is in full force and effect (or that this Master Lease is in full force and effect as modified and setting forth the modifications); the dates to which the Basic Rent and Supplemental Rent have been paid; to the best knowledge of the signer of such certificate, whether or not the Requesting Party is in default under any of its obligations hereunder (and, if so, the nature of such alleged default); and such other matters under this Master Lease as the Requesting Party may reasonably request. Any such certificate furnished pursuant to this Article XXII may be relied upon by the Requesting Party, and any existing or prospective mortgagee, purchaser or lender, and any accountant or auditor, of, from or to the Requesting Party (or any Affiliate thereof). ARTICLE XXIII ACCEPTANCE OF SURRENDER XXIII.1. Acceptance of Surrender. No surrender to the Lessor of this Master Lease or of all or any of the Properties or of any part of any thereof or of any interest therein shall be valid or effective unless agreed to and accepted in writing by the Lessor and, prior to the payment or performance of all obligations under the Loan Agreement and termination of the Commitments, the Lenders, and no act by the Lessor or the Lenders or any representative or agent of the Lessor or the Lenders, other than a written acceptance, shall constitute an acceptance of any such surrender. -41- 43 MASTER LEASE ARTICLE XXIV NO MERGER OF TITLE XXIV.1. No Merger of Title. There shall be no merger of this Master Lease or of the leasehold estate created hereby by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, in whole or in part, (a) this Master Lease or the leasehold estate created hereby or any interest in this Master Lease or such leasehold estate, (b) the fee or groundleasehold estate in any Property, except as may expressly be stated in a written instrument duly executed and delivered by the appropriate Person or (c) a beneficial interest in the Lessor. ARTICLE XXV INTENT OF THE PARTIES XXV.1. Ownership of the Properties. (a) The parties hereto intend that (i) for financial accounting purposes with respect to the Lessee, the Lessor will be treated as the owner and the lessor of the Properties and the Lessee will be treated as the lessee of the Properties and (ii) for all other purposes, including federal and all state and local income tax purposes, state real estate and commercial law and bankruptcy purposes, (A) this Lease will be treated as a financing arrangement, (B) the Lessor and the Lenders will be deemed lenders making loans to the Lessee in an amount equal to the sum of the Lessor Amount and the outstanding principal amount of the Loans and (C) the Lessee will be treated as the owner of the Properties and will be entitled to all tax benefits ordinarily available to an owner of properties like the Properties for such tax purposes. Nevertheless, the Lessee acknowledges and agrees that neither the Lessor nor any of the Lenders has made any representations or warranties to the Lessee concerning the tax, accounting or legal characteristics of the Operative Documents and that the Lessee has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents as it deems appropriate. (b) It is the intent of the parties hereto that this Lease grants a security interest and mortgage, as the case may be, on the Properties to the Lessor to secure Lessee's performance under and payment of all amounts under this Lease and the other Operative Documents. -42- 44 MASTER LEASE ARTICLE XXVI MISCELLANEOUS XXVI.1. Survival; Severability; Etc. Anything contained in this Master Lease to the contrary notwithstanding, all claims against and liabilities of the Lessee or the Lessor arising from events commencing prior to the expiration or earlier termination of this Master Lease shall survive such expiration or earlier termination for a period of one year except as to indemnification which shall continue to survive; provided that any such right shall be exercised within 54 years from the date hereof. If any term or provision of this Master Lease or any application thereof shall be declared invalid or unenforceable, the remainder of this Master Lease and any other application of such term or provision shall not be affected thereby. If any right or option of the Lessee provided in this Master Lease, including any right or option described in Article XIV, XV, XVIII or XX, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule of law relating to the vesting of an interest in or the suspension of the power of alienation of property, then such right or option shall be exercisable only during the period which shall end twenty-one (21) years after the date of death of the last survivor of the descendants of Franklin D. Roosevelt, the former President of the United States, Henry Ford, the deceased automobile manufacturer, and John D. Rockefeller, the founder of the Standard Oil Company, known to be alive on the date of the execution, acknowledgement and delivery of this Master Lease. XXVI.2. Amendments and Modifications. Subject to the requirements, restrictions and conditions set forth in the Participation Agreement, neither this Master Lease nor any provision hereof may be amended, waived, discharged or terminated except by an instrument in writing in recordable form signed by the Lessor and the Lessee. XXVI.3. No Waiver. No failure by the Lessor or the Lessee to insist upon the strict performance of any term hereof or to exercise any right, power or remedy upon a default hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such default, shall constitute a waiver of any such default or of any such term. To the fullest extent permitted by law, no waiver of any default shall affect or alter this Master Lease, and this Master Lease shall continue in full force and effect with respect to any other then existing or subsequent default. -43- 45 MASTER LEASE XXVI.4. Notices. All notices, demands, requests, consents, approvals and other communications hereunder shall be in writing and directed to the address described in, and deemed received in accordance with the provisions of, Section 14.3 of the Participation Agreement. XXVI.5. Successors and Assigns. All the terms and provisions of this Master Lease shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. XXVI.6. Headings and Table of Contents. The headings and table of contents in this Master Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. XXVI.7. Counterparts. This Master Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one and the same instrument. XXVI.8. GOVERNING LAW. THIS MASTER LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF. XXVI.9. Limitations on Recourse. The parties hereto agree that except as specifically set forth in this Lease or in any other Operative Document, Lessor shall have no personal liability whatsoever to the Lessee or its respective successors and assigns for any claim based on or in respect of this Master Lease or any of the other Operative Documents or arising in any way from the transactions contemplated hereby or thereby and the recourse shall be solely had against the Lessor's interest in the Property; provided, however, that Lessor shall be liable in its individual capacity (a) for its own willful misconduct or gross negligence (or negligence in the handling of funds), (b) breach of any of its representations, warranties or covenants under the Operative Documents, or (c) for any Tax based on or measured by any fees, commission or compensation received by it for acting as the Lessor as contemplated by the Operative Documents. It is understood and agreed that, except as provided in the preceding sentence: (i) Lessor shall have no personal liability under any of the Operative Documents as a result of acting pursuant to and consistent with any of the Operative Documents; (ii) all obligations of Lessor to the Lessee are solely nonrecourse obligations except to the extent that it has received payment from others; and (iii) all such personal liability of Lessor is expressly waived and released as a condition of, and as -44- 46 MASTER LEASE consideration for, the execution and delivery of the Operative Documents by Lessor. XXVI.10. Original Lease. The single executed original of this Master Lease marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt thereof of The Sumitomo Bank, Limited, San Francisco Branch, as Agent for the Lenders therefor on or following the signature page thereof shall be the Original Executed Counterpart of this Master Lease (the "Original Executed Counterpart"). To the extent that this Master Lease constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Master Lease may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. -45- 47 MASTER LEASE IN WITNESS WHEREOF, the parties have caused this Master Lease be duly executed and delivered as of the date first above written. SYMANTEC CORPORATION, as Lessee By _____________________________________ Name: Title: S-1 48 MASTER LEASE SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor By _____________________________________ Name: Title: S-2 49 MASTER LEASE THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART. Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as of the date hereof. THE SUMITOMO BANK, LIMITED, SAN FRANCISCO, as Agent for the Lenders By_________________________________ Name: Title: S-3 50 MASTER LEASE TABLE OF CONTENTS
Section Page - ------- ---- ARTICLE I DEFINITIONS 1.1. Definitions; Interpretation...................................... 1 ARTICLE II MASTER LEASE 2.1. Acceptance and Lease of Property................................. 2 2.2. Acceptance Procedure............................................. 2 2.3. Lease Term....................................................... 2 2.4. Title............................................................ 2 ARTICLE III PAYMENT OF RENT 3.1. Rent............................................................. 3 3.2. Payment of Rent.................................................. 3 3.3. Supplemental Rent................................................ 3 3.4. Method of Payment................................................ 4 ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT 4.1. Quiet Enjoyment.................................................. 4 4.2. Right to Inspect................................................. 4 ARTICLE V NET LEASE, ETC. 5.1. Net Lease........................................................ 5 5.2. No Termination or Abatement...................................... 6 ARTICLE VI SUBLEASES 6.1. Subletting....................................................... 6 ARTICLE VII LESSEE ACKNOWLEDGMENTS 7.1. Condition of the Properties...................................... 7 7.2. Risk of Loss..................................................... 7
i 51 TABLE OF CONTENTS (continued)
Section Page - ------- ---- ARTICLE VIII POSSESSION AND USE OF THE PROPERTIES, ETC. 8.1. Utility Charges.................................................. 7 8.2. Possession and Use of the Property............................... 8 8.3. Compliance with Requirements of Law, Property Legal Requirements and Insurance Requirements....................... 8 8.4. Assignment by Lessee............................................. 8 ARTICLE IX MAINTENANCE AND REPAIR; RETURN 9.1. Maintenance and Repair; Return................................... 8 ARTICLE X MODIFICATIONS, ETC. 10.1. Modifications, Substitutions and Replacements.................... 9 10.2. Notice to the Lessor............................................. 11 ARTICLE XI WARRANT OF TITLE; EASEMENTS 11.1. Warrant of Title................................................. 11 11.2. Grants and Releases of Easements; Lessor's Waivers............... 11 ARTICLE XII PERMITTED CONTESTS 12.1. Permitted Contests in Respect of Applicable Law.................. 13 ARTICLE XIII INSURANCE 13.1. Public Liability and Workers' Compensation Insurance............. 13 13.2. Hazard and Other Insurance....................................... 14 13.3. Insurance Coverage............................................... 14 ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS 14.1. Casualty and Condemnation........................................ 16 14.2. Environmental Matters............................................ 18 14.3. Notice of Environmental Matters.................................. 18
ii 52 TABLE OF CONTENTS (continued)
Section Page - ------- ---- ARTICLE XV TERMINATION OF LEASE 15.1. Partial Termination upon Certain Events.......................... 19 15.2. Termination Procedures........................................... 19 ARTICLE XVI EVENTS OF DEFAULT 16.1. Lease Events of Default.......................................... 20 16.2. Remedies......................................................... 23 16.3. Waiver of Certain Rights......................................... 30 17.1. The Lessor's Right to Cure the Lessee's Lease Defaults........... 30 ARTICLE XVIII PURCHASE PROVISIONS 18.1. Purchase of All or Some of the Properties........................ 31 18.2. Expiration Date Purchase Obligation.............................. 31 ARTICLE XIX RENEWAL TERMS 19.1. Renewal.......................................................... 32 ARTICLE XX REMARKETING OPTION 20.1. Option to Remarket............................................... 32 20.2. Certain Obligations Continue..................................... 36 ARTICLE XXI PROCEDURES RELATING TO PURCHASE OR REMARKETING 21.1. Provisions Relating to the Exercise of Purchase Option or Obligation and Conveyance Upon Remarketing and Conveyance Upon Certain Other Events...................... 37 ARTICLE XXII ESTOPPEL CERTIFICATES 22.1. Estoppel Certificates.............................................. 38 ARTICLE XXIII ACCEPTANCE OF SURRENDER
iii 53 TABLE OF CONTENTS (continued)
Section Page - ------- ---- 23.1. Acceptance of Surrender........................................... 39 ARTICLE XXIV NO MERGER OF TITLE 24.1. No Merger of Title................................................ 39 ARTICLE XXV INTENT OF THE PARTIES 25.1. Ownership of the Properties....................................... 39 ARTICLE XXVI MISCELLANEOUS 26.1. Survival; Severability; Etc....................................... 40 26.2. Amendments and Modifications...................................... 41 26.3. No Waiver......................................................... 41 26.4. Notices........................................................... 41 26.5. Successors and Assigns............................................ 41 26.6. Headings and Table of Contents.................................... 41 26.7. Counterparts...................................................... 41 26.8. GOVERNING LAW..................................................... 41 26.9. Limitations on Recourse........................................... 42 26.10. Original Lease.................................................... 42
EXHIBIT A Form of Lease Supplement iv 54 EXECUTION COPY This instrument prepared by, recording requested by, and when recorded return to: MAYER, BROWN & PLATT 1675 Broadway New York, New York 10019 Attention: Michael Sloyer, Esq. LEASE SUPPLEMENT NO. 1 AND MEMORANDUM OF LEASE AND DEED OF TRUST dated as of October 18, 1996 among SYMANTEC CORPORATION, as the Lessee, SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor, and FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee Location of Premises: County of Santa Clara State of California 55 THIS LEASE SUPPLEMENT NO. 1 AND MEMORANDUM OF LEASE AND DEED OF TRUST (this "Memorandum") dated as of October 18, 1996, among SYMANTEC CORPORATION, a Delaware corporation, having a principal office at 10101 Torre Avenue, Cupertino, California 95014, as the Lessee and as Mortgagor (the "Lessee"), SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor (the "Lessor"), having an address at 277 Park Avenue, New York, New York 10172, and FIRST AMERICAN TITLE INSURANCE COMPANY (the "Trustee"). W I T N E S S E T H: WHEREAS, the Lessor is the owner in fee simple of the land described on Exhibit A-1 attached hereto and all Improvements thereon described in Exhibit A-2 attached hereto (together, the "Property"); WHEREAS, the Lessor wishes to lease the Property to the Lessee and the Lessee wishes to lease the Property from the Lessor; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to enter into this Memorandum, as follows: I. Certain Terms. Capitalized terms used but not otherwise defined in this Memorandum have the meanings specified in Appendix A to the Master Lease and Security Agreement dated as of October 18, 1996 (as amended, restated, supplemented or otherwise modified from time to time, the "Lease"), between the Lessee and the Lessor; and the rules of interpretation specified in Appendix A to the Lease shall apply to this Memorandum. 2. Property. Attached hereto as Exhibit A is the description of the Property. Effective upon the execution and delivery of this Memorandum by the Lessor and the Lessee, the Property shall be subject to the terms and provisions of the Lease. Subject to the terms and conditions of the Lease, the Lessor hereby leases the Property to the Lessee for the Term (as defined below) of this Memorandum, and the Lessee hereby agrees, expressly for the direct benefit of the Lessor, to lease the Property from the Lessor for the Term. For the purposes of this Lease Supplement No. 1, the lease of the Exhibit A-1 Land and Exhibit A-2 Improvements shall be considered separate Leases but one Property for the purposes of the Master Lease. 3. Lease Term. The term of this Memorandum (the "Term") shall begin on the date hereof and shall end on October 18, 2003 unless the Term with respect to the Property is renewed or earlier terminated in accordance with the provisions of the Lease or the other Operative Documents. For and in consideration of 56 good and valuable consideration paid by the Lessee to the Lessor as described in the Lease, the Lessor hereby grants to the Lessee the right to purchase the Property or to market and sell the Property during the Term of this Memorandum on the terms set forth in the Lease. 4. Ownership of the Property. (a) The parties hereto intend that (i) for financial accounting purposes with respect to the Lessee, the Lessor will be treated as the owner and the lessor of the Properties and the Lessee will be treated as the lessee of the Properties and (ii) for all other purposes, including federal and all state and local income tax purposes, state real estate and commercial law and bankruptcy purposes, (A) the Lease will be treated as a financing arrangement, (B) the Lessor and the Lenders will be deemed lenders making loans to the Lessee in an amount equal to the sum of the Lessor Amount and the outstanding principal amount of the Loans, which loans are secured by the Properties and (C) the Lessee will be treated as the owner of the Properties and will be entitled to all tax benefits ordinarily available to an owner of properties like the Properties for such tax purposes. Nevertheless, the Lessee acknowledges and agrees that neither the Lessor nor any of the Lenders has made any representations or warranties to the Lessee concerning the tax, accounting or legal characteristics of the Operative Documents and that the Lessee has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents as it deems appropriate. (b) It is the intent of the parties hereto that the Lease grants a security interest and deed of trust or lien, as the case may be, on the Property for the benefit of the Lessor to secure the Lessee's performance under and payment of all amounts advanced by the Lessor for the acquisition of the Property (corresponding to the value of the Property as indicated on the Appraisal) under the Lease and the other Operative Documents, together with interest thereon, and all other amounts payable under the Operative Documents in connection therewith. (c) Specifically, without limiting the generality of subsection (b), the Lessor and the Lessee intend and agree that with respect to the nature of the transactions evidenced by the Lease in the context of the exercise of remedies under the Operative Documents, including, without limitation, in the case of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting the Lessee and the Lessor, or any enforcement or collection actions, the transactions evidenced by the Lease are loans made by the Lessor as unrelated third party lender to the Lessee secured by the Property (it being understood that the Lessee hereby mortgages, -2- 57 grants, bargains, sells, releases, confirms, conveys, assigns, transfers and sets over to the Trustee for the benefit of the Lessor, and grants a security interest in, the Property (consisting of a fee deed of trust with respect to all right, title and interest of the Lessee in and to the fee title to, and reversionary interest in, the Land and Improvements, if any, and a leasehold deed of trust on the Lessee's leasehold estate under the Lease), all to secure such loans, effective on the date hereof, to have and to hold such interests in the Property unto the Trustee for the benefit of the Lessor and its successors and assigns, forever, provided always that these presents are upon the express condition that, if all amounts due under the Lease shall have been paid and satisfied in full, then this instrument and the estate hereby granted shall cease and become void. As additional security for the Rent, the Lease Balance and all other sums owed to the Lessor by the Lessee under the Lease, the Lessee does hereby grant, bargain, sell, transfer and convey unto the Trustee, its successors in trust and assigns, IN TRUST, WITH POWER OF SALE, for the benefit of the Lessor, all of the Lessee's right, title and interest in and to the Property, including, without limitation, all buildings, structures and other improvements, and all fixtures and other property now or hereafter attached to or affixed to any such buildings, structures or other improvements, and any additions and alterations thereto or replacements thereof, now or hereafter built, constructed or located upon the Property, all rents, additional rents, issues, income, revenues, distributions, royalties and profits now or in the future payable in respect of the Property, together with all of the right, power and authority of the Lessee to alter, modify or change the terms, conditions and provisions of the Lease and any other lease pertaining to the Property, to consent to any request made by a tenant or landlord pursuant thereto, or to surrender, cancel or terminate the same or to accept any surrender, cancellation or termination of the same, together with all of the options, rights, powers and privileges of the Lessee under any lease pertaining to the Property, whether heretofore or hereafter existing, including, without limitation, the rights and options to purchase the Property contained in Articles XVIII and XX of the Lease, and all present and future right, title and interest of the Lessee in and to (i) all refunds, tax abatement agreements, rebates, reserves, deferred payments, deposits, cost savings, awards and payments of any kind due from or payable by (a) any Governmental Authority, or (b) any insurance or utility company, in each case under clause (a) or (b) above in respect of the Property, and (ii) all refunds, rebates and payments of any kind due from or payable by any Governmental Authority for any taxes, assessments, or governmental or quasi-governmental charges or levies imposed upon the Lessee in respect of the Property, and all plans and specifications, designs, drawings and other information, -3- 58 materials and matters heretofore or hereafter prepared relating to the Property or any construction on the Property, all proceeds (including claims and demands therefor) of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including without limitation the proceeds of insurance and condemnation awards in respect of the Property or any portion thereof, all additional estates, rights and interests hereafter acquired by the Lessee in the Property, or any portion thereof, together with all proceeds of the conversion, whether voluntary or involuntary, of any of the Property into cash or other liquid claims, including without limitation, all awards, payments or proceeds, including interest thereon, and the right to receive the same, which may be made as a result of any casualty, any exercise of the right of eminent domain or deed in lieu thereof, any injury to the Property and any defect in title in the Property or other matter insured under any policy of title insurance, together with attorney's fees, costs and disbursements incurred by the Lessor in connection with the collection of such awards, payments and proceeds, and the Lessee further grants to the Lessor, pursuant to the California Uniform Commercial Code (the "UCC"), a security interest in all present and future right, title and interest of the Lessee in and to any portion of the foregoing property for which a security interest may be created under the UCC. To have and to hold the same whether now owned or held or hereafter acquired unto the Trustee, its successors-in-trust forever, IN TRUST, WITH POWER OF SALE, to secure to the Lessor the payment of the Rent, the Lease Balance and all other sums owing to the Lessor under the Lease and the performance and observance of the terms, covenants, warranties, conditions, agreements and obligations under the Lease. If the Lessee shall pay all sums due under the Lease when due according to the terms thereof and shall otherwise fully and properly perform and comply with all of the obligations, agreements, terms and conditions of the Lease, then this conveyance shall become null and void. In the event of the occurrence of an Event of Default, then the entire unpaid balance of all sums due under the Lease and the interest accrued thereon shall, at the option of the owner thereof and without notice, immediately become due and payable for all purposes, whether or not due according to the maturity date or dates thereof; and all other indebtedness, the payment of which is secured hereby, shall likewise become due and payable. The Trustee and the Lessor and each of them are authorized prior or subsequent to the institution of any foreclosure proceedings to enter upon the Property or any part thereof and to take possession of the Property and exercise without interference from the Lessee, any and all rights which the Lessee has with respect to the management, possession, operation, protection or preservation of the Property. -4- 59 Upon the occurrence of an Event of Default, Lessor shall have the power and authority, after proper notice and lapse of such time as may be required by law, to cause Trustee to sell the Property by notifying Trustee of that election and depositing with Trustee this instrument and receipts and evidence of expenditures made and secured hereby as Trustee may reasonably require. Upon receipt of any such notice from Lessor, Trustee shall cause to be recorded, published and delivered to Lessee such Notice of Default and Election to Sell as is then required by applicable statutory authority and by this instrument, which notice shall set forth, among other things, the nature of the breach(es) or default(s), the action(s) required to effect a cure thereof and the time period within which that cure may be effected. If no cure is effected within the statutory time limits following recordation of the Notice of Default and Election to Sell and after Notice of Sale has been given as required by the above-referenced statutes, Trustee may without further notice or demand sell and convey the Property in accordance with the above-referenced statutes. The Property may be sold as a whole or in separate lots, parcels or items and in such order as Lessor may direct, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser(s) a good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty express or implied. The recitals in such deed of any matter or fact shall be conclusive proof of the truthfulness thereof. Any Person, including Lessee, Trustee or Lessor, may purchase at any sale. After deducting all costs, fees and expenses of Lessor and Trustee, including costs of evidence of title in connection with any sale, Lessor shall apply the proceeds of sale, in the following order of priority, to payment of the following (collectively, the "Obligations"): (i) first, all amounts expended by or for the account of Lessor under the terms hereof and not then repaid, with accrued interest at the Overdue Rate; and (ii) second, all other amounts then due and owing hereunder including, without limitation, all Basic Rent, Supplemental Rent, the full amount of the Lease Balance as of the date of sale as if the Lease had been terminated with respect to all of the Properties then subject to the Lease under Section 18.1, and all other amounts then payable by Lessee under the Lease and the other Operative Documents, with Lessor having the right to apply the proceeds of sale to the amounts described above in this clause (ii) in such order, proportion and priority as Lessor may elect in its sole and absolute discretion. To the extent permitted by applicable statutes, Trustee may postpone the sale of all or any portion of the Property by public announcement at the time and place of sale, and from time to time thereafter may again postpone that sale by public announcement or subsequently noticed sale, and without further notice may make such sale at the time fixed at the last postponement or may, in -5- 60 its discretion, give a new notice of sale. A sale of less than all of the Property or any defective or irregular sale made hereunder shall not exhaust the power of sale provided for herein, and subsequent sales may be made hereunder until all of the Obligations have been satisfied or the entire Property has been sold, without defect or irregularity. No action of Lessor or Trustee based upon the provisions contained herein or contained in the applicable statutes, including, without limitation, the giving of the Notice of Default and Election to Sell or the Notice of Sale, shall constitute an election of remedies which would preclude Lessor from pursuing judicial foreclosure before a completed sale pursuant to the power of sale contained herein. Lessor shall have the right, with the irrevocable consent of Lessee hereby given and evidenced by the execution of this instrument, to obtain appointment of a receiver by any court of competent jurisdiction without further notice to Lessee, which receiver shall be authorized and empowered to enter upon and take possession of the Property, including all personal property used upon or in connection with the real property herein conveyed, to let the Property, to receive all the rents, issues and profits, if any, which may be due or become due in respect to the leasing of the Property to another party ("Property Rents"), and apply the Property Rents after payment of all necessary charges and expenses to reduction of the Obligations in such order, proportion and priority as Lessor may elect. At the option of Lessor, the receiver shall accomplish entry and taking possession of the Property by actual entry and possession or by notice to Lessee. The receiver so appointed by a court of competent jurisdiction shall be empowered to issue receiver's certificates for funds advanced by Lessor for the purpose of protecting the value of the Property as security for the Obligations. The amounts evidenced by receiver's certificates shall bear interest at the Overdue Rate and may be added to the Obligations if the Lessee or a junior lienholder purchases the Property at the trustee's sale. Trustee or any successor acting hereunder may resign and thereupon be discharged of the trusts hereunder upon thirty (30) days' prior written notice to Lessor. Regardless of whether Trustee resigns, Lessor may, from time to time, substitute a successor or successors to any Trustee named herein or acting hereunder in accordance with any statutory procedure for such substitution; or if Lessor, in its sole and absolute discretion, so elects, and if permitted by law, Lessor may substitute such successors or successors by recording, in the office of the recorder of the county or counties where the Property is located, a document executed by Lessor and containing the name of the original Lessee and Lessor hereunder, the book and page where this instrument (or a memorandum hereof) is recorded (and/or instrument number, as applicable) and the name of the new Trustee, which instrument shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the predecessor Trustee, succeed -6- 61 to the rights, powers and duties hereunder. It is acknowledged that A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW LESSOR TO TAKE THE PROPERTY AND SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY LESSEE UNDER THIS INSTRUMENT. If (a) the Property shall consist of one or more parcels, whether or not contiguous and whether or not located in the same county, or (b) in addition to this Memorandum, the Lessor shall now or hereafter hold one or more additional mortgages, liens, deeds of trust or other security (directly or indirectly) for the Obligations upon other property in the State in which the Property is located (whether or not such property is owned by Lessor or by others) or (c) both the circumstances described in clauses (a) and (b) shall be true, then to the fullest extent permitted by law, the Lessor may, in its sole discretion, commence or consolidate in a single foreclosure action all foreclosure proceedings against all such collateral securing the Obligations (including the Property), which action may be brought or consolidated in the courts of any county in which any of such collateral is located. The Lessee acknowledges that the right to maintain a consolidated foreclosure action is a specific inducement to the Lessor to extend the Advances, and the Lessor expressly and irrevocably waives any objections to the commencement or consolidation of the foreclosure proceedings in a single action and any objections to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have. The Lessee further agrees that if the Lessor shall be prosecuting one or more foreclosure or other proceedings against a portion of the Property or against any collateral other than the Property, which collateral directly or indirectly secures the Obligations, or if the Lessor shall have obtained a judgment of foreclosure and sale or similar judgment against such collateral, then, whether or not such proceedings are being maintained or judgments were obtained in or outside the State in which the Property is located, the Lessor may commence or continue foreclosure proceedings and exercise its other remedies granted in this Memorandum against all or any part of the Property and the Lessor waives any objections to the commencement or continuation of a foreclosure of this Memorandum or exercise of any other remedies hereunder based on such other proceedings or judgments, and waives any right to seek to dismiss, stay, remove, transfer or consolidate either any action under this Memorandum or such other proceedings on such basis. Neither the commencement nor continuation of proceedings to foreclose this Memorandum nor the exercise of any other rights hereunder nor the recovery of any judgment by the Lessor in any such proceedings shall prejudice, limit or preclude the Lessor's right to commence or continue one or more foreclosure or other proceedings or obtain a judgment against any other collateral (either in or outside the State in which the Property is located) which -7- 62 directly or indirectly secures the Obligations, and the Lessor expressly waives any objections to the commencement of, continuation of, or entry of a judgment in such other proceedings or exercise of any remedies in such proceedings based upon any action or judgment connected to this Memorandum, and the Lessor also waives any right to seek to dismiss, stay, remove, transfer or consolidate either such other proceedings or any action under this Memorandum on such basis. If the Lessor so elects, the Trustee may sell any personal property covered by this instrument at one or more separate sales in any manner permitted by the UCC. One or more exercises of the powers herein granted shall not extinguish nor exhaust such powers until the entire Property is sold or until the entire amounts evidenced and/or secured by the Lease and the Operative Documents is paid in full. (d) Specifically, but without limiting the generality of subsection (b), the Lessor and the Lessee further intend and agree that, with respect to that portion of the Property constituting personal property, for the purpose of securing the Lessee's obligations for the repayment of the above-described obligations from the Lessor to the Lessee, (i) the Lease shall also be deemed to be a security agreement and financing statement within the meaning of Article 9 of the UCC; (ii) the conveyance provided for hereby shall be deemed to be a grant by the Lessee to the Lessor of a lien and security interest in all of the Lessee's present and future right, title and interest in and to such portion of the Property, including but not limited to the Lessee's leasehold estate therein and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, investments, securities or other property, whether in the form of cash, investments, securities or other property to secure such obligations, effective on the date hereof, to have and to hold such interests in the Property unto the Lessor and its successors and assigns, forever, provided always that these presents are upon the express condition that, if all amounts due under the Lease shall have been paid and satisfied in full, then this instrument and the estate hereby granted shall cease and become void; (iii) the possession by the Lessor of notes and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be "possession by the secured party" for purposes of perfecting the security interest pursuant to Section 9-305 of the UCC; and (iv) notifications to Persons holding such property, and acknowledgements, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of the Lessee shall be deemed to have been given for the purpose of perfecting such security interest under Applicable Law. The Lessor and the Lessee shall, to the extent consistent with this Memorandum, take such actions and execute, deliver, file and record such other -8- 63 documents, financing statements, mortgages and deeds of trust as may be necessary to ensure that, if the Lease were deemed to create a security interest in the Property in accordance with this Section, such security interest would be deemed to be a perfected security interest with priority over all Liens other than Permitted Liens, under Applicable Law and will be maintained as such throughout the Term. SECTION 5. Ratification. The terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. In the event of any conflict between the terms of the Lease and the terms of this Memorandum, the terms of the Lease shall control. SECTION 6. Supplemental Lease Term. (a) The Lenders' Percentage for the Lease Supplement is 84.8469%. (b) The Lessor Margin for this Lease Supplement is 0.695% (c) The Loan Margin for the Lease Supplement is 0.20%. SECTION 7. Counterpart Execution. This Memorandum may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. SECTION 8. Future Advances; Revolving Credit. In the event a court of competent jurisdiction rules that this instrument constitutes a mortgage, deed of trust or other secured financing as is the intent of the parties pursuant to Section 4 hereof, then this instrument will be deemed given to secure not only existing financing, but also future advances made pursuant to or as provided in the Lease, whether such advances are obligatory or to be made at the option of the Lessor, or otherwise, to the same extent as if such future advances were made on the date of execution of this instrument, although there may be no advance made at the time of execution hereof, and although there may be no financing outstanding at the time any advance is made. To the fullest extent permitted by law, the lien of this instrument shall be valid as to all such amounts, including all future advances, from the time this instrument is recorded. Notwithstanding anything in this instrument to the contrary, although the amount of the financing secured by this instrument may increase or decrease from time to time, the maximum principal amount of the financing secured by this instrument at any one time shall not exceed Fifty Three Million Dollars ($53,000,000), which amount shall be payable as set forth in the Lease, and in any event the final payment shall be payable no later than -9- 64 October 18, 2003, plus all costs of enforcement and collection of this instrument, the Lease and the other Operative Documents, plus the total amount of any advances made pursuant thereto to protect the collateral and the security interest and lien created hereby, together with interest on all of the foregoing as provided in the Operative Documents. SECTION 9. GOVERNING LAW. THE LEASE AND THIS MEMORANDUM SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF. -10- 65 IN WITNESS WHEREOF, each of the parties hereto has caused this Memorandum of Lease and Deed of Trust to be duly executed by an officer thereunto duly authorized as of the date and year first above written. SYMANTEC CORPORATION, as the Lessee By:__________________________ Name: Title: SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor By:_______________________ Name: Title: 66 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ______________________________ ______________________________ [ ] CORPORATE OFFICER(S) ______________________________ ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ _______________________ _______________________ - -------------------------------------------------------------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ 67 DESCRIBED AT RIGHT: 68 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ______________________________ ______________________________ [ ] CORPORATE OFFICER(S) ______________________________ ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ _______________________ _______________________ - -------------------------------------------------------------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ 69 DESCRIBED AT RIGHT: 70 EXHIBIT A-1 TO MEMORANDUM OF LEASE LEGAL DESCRIPTION OF LAND 71 EXECUTION COPY This instrument prepared by, recording requested by, and when recorded return to: MAYER, BROWN & PLATT 1675 Broadway New York, New York 10019 Attention: Michael Sloyer, Esq. AMENDMENT NO. 1 dated as of March 3, 1997, AMENDING LEASE SUPPLEMENT NO. 1 AND MEMORANDUM OF LEASE AND DEED OF TRUST dated as of October 18, 1996 among SYMANTEC CORPORATION, as the Lessee, SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor, and FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee. Location of Premises: County of Santa Clara State of California - -------------------------------------------------------------------------------- This Amendment No. 1 is an amendment to that certain Lease Supplement No. 1 and Memorandum of Lease and Deed of Trust recorded on October 21, 1996 in the Official Records of Santa Clara County, California (the "Official Records") as Instrument No. 13489802, with respect to the land described on Exhibit A to this Amendment No. 1, which Lease Supplement No. 1 is a supplement to that certain Lease (as hereinafter defined), as supplemented by that certain Lease Supplement No. 2 and Memorandum of Lease and Deed of Trust recorded on October 23, 1996 in the Official Records, as Instrument No. 1349244, and that certain Lease Supplement No. 3 and Memorandum of Lease and Deed of Trust recorded on February 5, 1997 in the Official Records, as Instrument No. 13602289. 72 THIS AMENDMENT NO. 1 TO LEASE SUPPLEMENT NO. 1 AND MEMORANDUM OF LEASE AND DEED OF TRUST, dated as of March 3, 1997 (this "Amendment"), amending that certain Lease Supplement No. 1 and Memorandum of Lease and Deed of Trust (the "Memorandum") dated as of October 18, 1996 and recorded on October 21, 1996 in the Official Records of Santa Clara County, California as Instrument No. 13489802, is among SYMANTEC CORPORATION, a Delaware corporation, having a principal office at 10101 Torre Avenue, Cupertino, California 95014, as the Lessee and as Mortgagor (the "Lessee"), SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor (the "Lessor"), having an address at 277 Park Avenue, New York, New York 10172, and FIRST AMERICAN TITLE INSURANCE COMPANY (the "Trustee"). W I T N E S S E T H: WHEREAS, the Lessee, the Lessor and the Trustee have heretofore entered into the Memorandum; and WHEREAS, the Lessee, the Lessor and the Trustee now desire to amend the Memorandum in certain respects to reflect the fact that the principal amount of the obligations secured by the Memorandum has increased from Fifty Three Million Dollars ($53,000,000) to Eighty One Million Five Hundred Thousand Dollars ($81,500,000), as hereinafter provided; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION I. Certain Terms. Capitalized terms used but not otherwise defined in this Amendment have the meanings specified in Appendix A to the Master Lease and Security Agreement dated as of October 18, 1996 (as amended by that certain Master Amendment Agreement dated as of the date hereof, and amended, restated, supplemented or otherwise modified from time to time, the "Lease"), between the Lessee and the Lessor; and the rules of interpretation specified in Appendix A to the Lease shall apply to this Amendment. SECTION 2. Amendment to Section 8 of Memorandum. Section 8 of the Memorandum is hereby amended by deleting the words "Fifty Three Million Dollars ($53,000,000)" appearing in the twentieth line of such Section, and replacing such words with the words "Eighty One Million Five Hundred Thousand Dollars ($81,500,000)". SECTION 3. Ratification of and References to Memorandum. This Amendment shall be deemed to be an amendment to the Memorandum, and the Memorandum, as amended hereby, is hereby 73 ratified, approved and confirmed in every respect. All references to the Memorandum in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Memorandum as amended hereby. SECTION 4. Ratification of Lease. The terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. In the event of any conflict between the terms of the Lease and the terms of this Amendment, the terms of the Lease shall control. SECTION 7. Counterpart Execution. This Amendment may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. SECTION 9. GOVERNING LAW. THIS AMENDMENT, THE LEASE AND THE MEMORANDUM SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF. -2- 74 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed by an officer thereunto duly authorized as of the date and year first above written. SYMANTEC CORPORATION, as the Lessee By:__________________________ Name: Title: SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor By:_______________________ Name: Title: -3- 75 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ______________________________ ______________________________ [ ] CORPORATE OFFICER(S) ______________________________ ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ ______________________________ ______________________________ - -------------------------------------------------------------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ DESCRIBED AT RIGHT: 76 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ______________________________ ______________________________ [ ] CORPORATE OFFICER(S) ______________________________ ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ ______________________________ ______________________________ - -------------------------------------------------------------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ DESCRIBED AT RIGHT: 77 EXHIBIT A TO AMENDMENT NO. 1 TO LEASE SUPPLEMENT NO. 1 AND MEMORANDUM OF LEASE AND DEED OF TRUST LEGAL DESCRIPTION OF LAND 78 EXECUTION COPY This instrument prepared by, recording requested by, and when recorded return to: MAYER, BROWN & PLATT 1675 Broadway New York, New York 10019 Attention: Michael Sloyer, Esq. LEASE SUPPLEMENT NO. 2 AND MEMORANDUM OF LEASE AND DEED OF TRUST dated as of October 22, 1996 among SYMANTEC CORPORATION, as the Lessee, SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor, and FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee Location of Premises: County of Santa Clara State of California This Lease Supplement is a supplement to that certain Lease (as hereinafter defined) recorded on October 21, 1996, in the Official Records of Santa Clara County, California, as Instrument No. ______________ 79 THIS LEASE SUPPLEMENT NO. 2 AND MEMORANDUM OF LEASE AND DEED OF TRUST (this "Memorandum") dated as of October 22, 1996, among SYMANTEC CORPORATION, a Delaware corporation, having a principal office at 10101 Torre Avenue, Cupertino, California 95014, as the Lessee and as Mortgagor (the "Lessee"), SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor (the "Lessor"), having an address at 277 Park Avenue, New York, New York 10172, and FIRST AMERICAN TITLE INSURANCE COMPANY (the "Trustee"). W I T N E S S E T H: WHEREAS, the Lessor is the owner in fee simple of the land described on Exhibit A attached hereto and all Improvements thereon (together, the "Property"); WHEREAS, the Lessor wishes to lease the Property to the Lessee and the Lessee wishes to lease the Property from the Lessor; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to enter into this Memorandum, as follows: 1. Certain Terms. Capitalized terms used but not otherwise defined in this Memorandum have the meanings specified in Appendix A to the Master Lease and Security Agreement dated as of October 18, 1996 (as amended, restated, supplemented or otherwise modified from time to time, the "Lease"), between the Lessee and the Lessor; and the rules of interpretation specified in Appendix A to the Lease shall apply to this Memorandum. 2. Property. Attached hereto as Exhibit A is the description of the Property. Effective upon the execution and delivery of this Memorandum by the Lessor and the Lessee, the Property shall be subject to the terms and provisions of the Lease. Subject to the terms and conditions of the Lease, the Lessor hereby leases the Property to the Lessee for the Term (as defined below) of this Memorandum, and the Lessee hereby agrees, expressly for the direct benefit of the Lessor, to lease the Property from the Lessor for the Term. 3. Lease Term. The term of this Memorandum (the "Term") shall begin on the date hereof and shall end on October 18, 2003 unless the Term with respect to the Property is renewed or earlier terminated in accordance with the provisions of the Lease or the other Operative Documents. For and in consideration of good and valuable consideration paid by the Lessee to the Lessor as described in the Lease, the Lessor hereby grants to the Lessee the right to purchase the Property or to market and sell the Property during the Term of this Memorandum on the terms set 80 forth in the Lease. 4. Ownership of the Property. (a) The parties hereto intend that (i) for financial accounting purposes with respect to the Lessee, the Lessor will be treated as the owner and the lessor of the Properties and the Lessee will be treated as the lessee of the Properties and (ii) for all other purposes, including federal and all state and local income tax purposes, state real estate and commercial law and bankruptcy purposes, (A) the Lease will be treated as a financing arrangement, (B) the Lessor and the Lenders will be deemed lenders making loans to the Lessee in an amount equal to the sum of the Lessor Amount and the outstanding principal amount of the Loans, which loans are secured by the Properties and (C) the Lessee will be treated as the owner of the Properties and will be entitled to all tax benefits ordinarily available to an owner of properties like the Properties for such tax purposes. Nevertheless, the Lessee acknowledges and agrees that neither the Lessor nor any of the Lenders has made any representations or warranties to the Lessee concerning the tax, accounting or legal characteristics of the Operative Documents and that the Lessee has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents as it deems appropriate. (b) It is the intent of the parties hereto that the Lease grants a security interest and deed of trust or lien, as the case may be, on the Property for the benefit of the Lessor to secure the Lessee's performance under and payment of all amounts advanced by the Lessor for the acquisition of the Property (corresponding to the value of the Property as indicated on the Appraisal) under the Lease and the other Operative Documents, together with interest thereon, and all other amounts payable under the Operative Documents in connection therewith. (c) Specifically, without limiting the generality of subsection (b), the Lessor and the Lessee intend and agree that with respect to the nature of the transactions evidenced by the Lease in the context of the exercise of remedies under the Operative Documents, including, without limitation, in the case of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting the Lessee and the Lessor, or any enforcement or collection actions, the transactions evidenced by the Lease are loans made by the Lessor as unrelated third party lender to the Lessee secured by the Property (it being understood that the Lessee hereby mortgages, grants, bargains, sells, releases, confirms, conveys, assigns, transfers and sets over to the Trustee for the benefit of the Lessor, and grants a security interest in, the Property (consisting of a fee deed of trust with respect to all right, -2- 81 title and interest of the Lessee in and to the fee title to, and reversionary interest in, the Land and Improvements, if any, and a leasehold deed of trust on the Lessee's leasehold estate under the Lease), all to secure such loans, effective on the date hereof, to have and to hold such interests in the Property unto the Trustee for the benefit of the Lessor and its successors and assigns, forever, provided always that these presents are upon the express condition that, if all amounts due under the Lease shall have been paid and satisfied in full, then this instrument and the estate hereby granted shall cease and become void. As additional security for the Rent, the Lease Balance and all other sums owed to the Lessor by the Lessee under the Lease, the Lessee does hereby grant, bargain, sell, transfer and convey unto the Trustee, its successors in trust and assigns, IN TRUST, WITH POWER OF SALE, for the benefit of the Lessor, all of the Lessee's right, title and interest in and to the Property, including, without limitation, all buildings, structures and other improvements, and all fixtures and other property now or hereafter attached to or affixed to any such buildings, structures or other improvements, and any additions and alterations thereto or replacements thereof, now or hereafter built, constructed or located upon the Property, all rents, additional rents, issues, income, revenues, distributions, royalties and profits now or in the future payable in respect of the Property, together with all of the right, power and authority of the Lessee to alter, modify or change the terms, conditions and provisions of the Lease and any other lease pertaining to the Property, to consent to any request made by a tenant or landlord pursuant thereto, or to surrender, cancel or terminate the same or to accept any surrender, cancellation or termination of the same, together with all of the options, rights, powers and privileges of the Lessee under any lease pertaining to the Property, whether heretofore or hereafter existing, including, without limitation, the rights and options to purchase the Property contained in Articles XVIII and XX of the Lease, and all present and future right, title and interest of the Lessee in and to (i) all refunds, tax abatement agreements, rebates, reserves, deferred payments, deposits, cost savings, awards and payments of any kind due from or payable by (a) any Governmental Authority, or (b) any insurance or utility company, in each case under clause (a) or (b) above in respect of the Property, and (ii) all refunds, rebates and payments of any kind due from or payable by any Governmental Authority for any taxes, assessments, or governmental or quasi-governmental charges or levies imposed upon the Lessee in respect of the Property, and all plans and specifications, designs, drawings and other information, materials and matters heretofore or hereafter prepared relating to the Property or any construction on the Property, all proceeds (including claims and demands therefor) of the conversion, voluntary or involuntary, of any of the foregoing into cash or -3- 82 liquidated claims, including without limitation the proceeds of insurance and condemnation awards in respect of the Property or any portion thereof, all additional estates, rights and interests hereafter acquired by the Lessee in the Property, or any portion thereof, together with all proceeds of the conversion, whether voluntary or involuntary, of any of the Property into cash or other liquid claims, including without limitation, all awards, payments or proceeds, including interest thereon, and the right to receive the same, which may be made as a result of any casualty, any exercise of the right of eminent domain or deed in lieu thereof, any injury to the Property and any defect in title in the Property or other matter insured under any policy of title insurance, together with attorney's fees, costs and disbursements incurred by the Lessor in connection with the collection of such awards, payments and proceeds, and the Lessee further grants to the Lessor, pursuant to the California Uniform Commercial Code (the "UCC"), a security interest in all present and future right, title and interest of the Lessee in and to any portion of the foregoing property for which a security interest may be created under the UCC. To have and to hold the same whether now owned or held or hereafter acquired unto the Trustee, its successors-in-trust forever, IN TRUST, WITH POWER OF SALE, to secure to the Lessor the payment of the Rent, the Lease Balance and all other sums owing to the Lessor under the Lease and the performance and observance of the terms, covenants, warranties, conditions, agreements and obligations under the Lease. If the Lessee shall pay all sums due under the Lease when due according to the terms thereof and shall otherwise fully and properly perform and comply with all of the obligations, agreements, terms and conditions of the Lease, then this conveyance shall become null and void. In the event of the occurrence of an Event of Default, then the entire unpaid balance of all sums due under the Lease and the interest accrued thereon shall, at the option of the owner thereof and without notice, immediately become due and payable for all purposes, whether or not due according to the maturity date or dates thereof; and all other indebtedness, the payment of which is secured hereby, shall likewise become due and payable. The Trustee and the Lessor and each of them are authorized prior or subsequent to the institution of any foreclosure proceedings to enter upon the Property or any part thereof and to take possession of the Property and exercise without interference from the Lessee, any and all rights which the Lessee has with respect to the management, possession, operation, protection or preservation of the Property. Upon the occurrence of an Event of Default, Lessor shall have the power and authority, after proper notice and lapse of such time as may be required by law, to cause Trustee to sell the Property -4- 83 by notifying Trustee of that election and depositing with Trustee this instrument and receipts and evidence of expenditures made and secured hereby as Trustee may reasonably require. Upon receipt of any such notice from Lessor, Trustee shall cause to be recorded, published and delivered to Lessee such Notice of Default and Election to Sell as is then required by applicable statutory authority and by this instrument, which notice shall set forth, among other things, the nature of the breach(es) or default(s), the action(s) required to effect a cure thereof and the time period within which that cure may be effected. If no cure is effected within the statutory time limits following recordation of the Notice of Default and Election to Sell and after Notice of Sale has been given as required by the above-referenced statutes, Trustee may without further notice or demand sell and convey the Property in accordance with the above-referenced statutes. The Property may be sold as a whole or in separate lots, parcels or items and in such order as Lessor may direct, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser(s) a good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty express or implied. The recitals in such deed of any matter or fact shall be conclusive proof of the truthfulness thereof. Any Person, including Lessee, Trustee or Lessor, may purchase at any sale. After deducting all costs, fees and expenses of Lessor and Trustee, including costs of evidence of title in connection with any sale, Lessor shall apply the proceeds of sale, in the following order of priority, to payment of the following (collectively, the "Obligations"): (i) first, all amounts expended by or for the account of Lessor under the terms hereof and not then repaid, with accrued interest at the Overdue Rate; and (ii) second, all other amounts then due and owing hereunder including, without limitation, all Basic Rent, Supplemental Rent, the full amount of the Lease Balance as of the date of sale as if the Lease had been terminated with respect to all of the Properties then subject to the Lease under Section 18.1, and all other amounts then payable by Lessee under the Lease and the other Operative Documents, with Lessor having the right to apply the proceeds of sale to the amounts described above in this clause (ii) in such order, proportion and priority as Lessor may elect in its sole and absolute discretion. To the extent permitted by applicable statutes, Trustee may postpone the sale of all or any portion of the Property by public announcement at the time and place of sale, and from time to time thereafter may again postpone that sale by public announcement or subsequently noticed sale, and without further notice may make such sale at the time fixed at the last postponement or may, in its discretion, give a new notice of sale. A sale of less than all of the Property or any defective or irregular sale made hereunder shall not exhaust the power of sale provided for herein, and subsequent sales may be made hereunder until all of -5- 84 the Obligations have been satisfied or the entire Property has been sold, without defect or irregularity. No action of Lessor or Trustee based upon the provisions contained herein or contained in the applicable statutes, including, without limitation, the giving of the Notice of Default and Election to Sell or the Notice of Sale, shall constitute an election of remedies which would preclude Lessor from pursuing judicial foreclosure before a completed sale pursuant to the power of sale contained herein. Lessor shall have the right, with the irrevocable consent of Lessee hereby given and evidenced by the execution of this instrument, to obtain appointment of a receiver by any court of competent jurisdiction without further notice to Lessee, which receiver shall be authorized and empowered to enter upon and take possession of the Property, including all personal property used upon or in connection with the real property herein conveyed, to let the Property, to receive all the rents, issues and profits, if any, which may be due or become due in respect to the leasing of the Property to another party ("Property Rents"), and apply the Property Rents after payment of all necessary charges and expenses to reduction of the Obligations in such order, proportion and priority as Lessor may elect. At the option of Lessor, the receiver shall accomplish entry and taking possession of the Property by actual entry and possession or by notice to Lessee. The receiver so appointed by a court of competent jurisdiction shall be empowered to issue receiver's certificates for funds advanced by Lessor for the purpose of protecting the value of the Property as security for the Obligations. The amounts evidenced by receiver's certificates shall bear interest at the Overdue Rate and may be added to the Obligations if the Lessee or a junior lienholder purchases the Property at the trustee's sale. Trustee or any successor acting hereunder may resign and thereupon be discharged of the trusts hereunder upon thirty (30) days' prior written notice to Lessor. Regardless of whether Trustee resigns, Lessor may, from time to time, substitute a successor or successors to any Trustee named herein or acting hereunder in accordance with any statutory procedure for such substitution; or if Lessor, in its sole and absolute discretion, so elects, and if permitted by law, Lessor may substitute such successors or successors by recording, in the office of the recorder of the county or counties where the Property is located, a document executed by Lessor and containing the name of the original Lessee and Lessor hereunder, the book and page where this instrument (or a memorandum hereof) is recorded (and/or instrument number, as applicable) and the name of the new Trustee, which instrument shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the predecessor Trustee, succeed to the rights, powers and duties hereunder. It is acknowledged that A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW LESSOR TO TAKE THE PROPERTY AND SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY -6- 85 LESSEE UNDER THIS INSTRUMENT. If (a) the Property shall consist of one or more parcels, whether or not contiguous and whether or not located in the same county, or (b) in addition to this Memorandum, the Lessor shall now or hereafter hold one or more additional mortgages, liens, deeds of trust or other security (directly or indirectly) for the Obligations upon other property in the State in which the Property is located (whether or not such property is owned by Lessor or by others) or (c) both the circumstances described in clauses (a) and (b) shall be true, then to the fullest extent permitted by law, the Lessor may, in its sole discretion, commence or consolidate in a single foreclosure action all foreclosure proceedings against all such collateral securing the Obligations (including the Property), which action may be brought or consolidated in the courts of any county in which any of such collateral is located. The Lessee acknowledges that the right to maintain a consolidated foreclosure action is a specific inducement to the Lessor to extend the Advances, and the Lessor expressly and irrevocably waives any objections to the commencement or consolidation of the foreclosure proceedings in a single action and any objections to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have. The Lessee further agrees that if the Lessor shall be prosecuting one or more foreclosure or other proceedings against a portion of the Property or against any collateral other than the Property, which collateral directly or indirectly secures the Obligations, or if the Lessor shall have obtained a judgment of foreclosure and sale or similar judgment against such collateral, then, whether or not such proceedings are being maintained or judgments were obtained in or outside the State in which the Property is located, the Lessor may commence or continue foreclosure proceedings and exercise its other remedies granted in this Memorandum against all or any part of the Property and the Lessor waives any objections to the commencement or continuation of a foreclosure of this Memorandum or exercise of any other remedies hereunder based on such other proceedings or judgments, and waives any right to seek to dismiss, stay, remove, transfer or consolidate either any action under this Memorandum or such other proceedings on such basis. Neither the commencement nor continuation of proceedings to foreclose this Memorandum nor the exercise of any other rights hereunder nor the recovery of any judgment by the Lessor in any such proceedings shall prejudice, limit or preclude the Lessor's right to commence or continue one or more foreclosure or other proceedings or obtain a judgment against any other collateral (either in or outside the State in which the Property is located) which directly or indirectly secures the Obligations, and the Lessor expressly waives any objections to the commencement of, continuation of, or entry of a judgment in such other proceedings or exercise of any remedies in such proceedings based upon any -7- 86 action or judgment connected to this Memorandum, and the Lessor also waives any right to seek to dismiss, stay, remove, transfer or consolidate either such other proceedings or any action under this Memorandum on such basis. If the Lessor so elects, the Trustee may sell any personal property covered by this instrument at one or more separate sales in any manner permitted by the UCC. One or more exercises of the powers herein granted shall not extinguish nor exhaust such powers until the entire Property is sold or until the entire amounts evidenced and/or secured by the Lease and the Operative Documents is paid in full. (d) Specifically, but without limiting the generality of subsection (b), the Lessor and the Lessee further intend and agree that, with respect to that portion of the Property constituting personal property, for the purpose of securing the Lessee's obligations for the repayment of the above-described obligations from the Lessor to the Lessee, (i) the Lease shall also be deemed to be a security agreement and financing statement within the meaning of Article 9 of the UCC; (ii) the conveyance provided for hereby shall be deemed to be a grant by the Lessee to the Lessor of a lien and security interest in all of the Lessee's present and future right, title and interest in and to such portion of the Property, including but not limited to the Lessee's leasehold estate therein and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, investments, securities or other property, whether in the form of cash, investments, securities or other property to secure such obligations, effective on the date hereof, to have and to hold such interests in the Property unto the Lessor and its successors and assigns, forever, provided always that these presents are upon the express condition that, if all amounts due under the Lease shall have been paid and satisfied in full, then this instrument and the estate hereby granted shall cease and become void; (iii) the possession by the Lessor of notes and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be "possession by the secured party" for purposes of perfecting the security interest pursuant to Section 9-305 of the UCC; and (iv) notifications to Persons holding such property, and acknowledgements, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of the Lessee shall be deemed to have been given for the purpose of perfecting such security interest under Applicable Law. The Lessor and the Lessee shall, to the extent consistent with this Memorandum, take such actions and execute, deliver, file and record such other documents, financing statements, mortgages and deeds of trust as may be necessary to ensure that, if the Lease were deemed to create a security interest in the Property in accordance with this Section, such security interest would be deemed to be a -8- 87 perfected security interest with priority over all Liens other than Permitted Liens, under Applicable Law and will be maintained as such throughout the Term. SECTION 5. Ratification. The terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. In the event of any conflict between the terms of the Lease and the terms of this Memorandum, the terms of the Lease shall control. SECTION 6. Supplemental Lease Term. (a) The Lenders' Percentage for the Lease Supplement is 84.8469%. (b) The Lessor Margin for this Lease Supplement is 0.695% (c) The Loan Margin for the Lease Supplement is 0.20%. SECTION 7. Counterpart Execution. This Memorandum may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. SECTION 8. Future Advances; Revolving Credit. In the event a court of competent jurisdiction rules that this instrument constitutes a mortgage, deed of trust or other secured financing as is the intent of the parties pursuant to Section 4 hereof, then this instrument will be deemed given to secure not only existing financing, but also future advances made pursuant to or as provided in the Lease, whether such advances are obligatory or to be made at the option of the Lessor, or otherwise, to the same extent as if such future advances were made on the date of execution of this instrument, although there may be no advance made at the time of execution hereof, and although there may be no financing outstanding at the time any advance is made. To the fullest extent permitted by law, the lien of this instrument shall be valid as to all such amounts, including all future advances, from the time this instrument is recorded. Notwithstanding anything in this instrument to the contrary, although the amount of the financing secured by this instrument may increase or decrease from time to time, the maximum principal amount of the financing secured by this instrument at any one time shall not exceed Fifty Three Million Dollars ($53,000,000), which amount shall be payable as set forth in the Lease, and in any event the final payment shall be payable no later than October 18, 2003, plus all costs of enforcement and collection of this instrument, the Lease and the other Operative Documents, plus the total amount of any advances made pursuant thereto to protect the collateral and the security interest and lien created -9- 88 hereby, together with interest on all of the foregoing as provided in the Operative Documents. SECTION 9. GOVERNING LAW. THE LEASE AND THIS MEMORANDUM SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF. -10- 89 IN WITNESS WHEREOF, each of the parties hereto has caused this Memorandum of Lease and Deed of Trust to be duly executed by an officer thereunto duly authorized as of the date and year first above written. SYMANTEC CORPORATION, as the Lessee By:________________________________________ Name: Title: SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor By:________________________________________ Name: Title: 90 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ________________________________ Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ____________________________________ [ ] CORPORATE OFFICER(S) ____________________________________ ______________________________ ____________________________________ TITLE ______________________________ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ ================================================================================ ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ DESCRIBED AT RIGHT: 91 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ________________________________ Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ____________________________________ [ ] CORPORATE OFFICER(S) ____________________________________ ______________________________ ____________________________________ TITLE ______________________________ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ ================================================================================ ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ DESCRIBED AT RIGHT: 92 EXHIBIT A-1 TO MEMORANDUM OF LEASE LEGAL DESCRIPTION OF LAND 93 EXECUTION COPY This instrument prepared by, recording requested by, and when recorded return to: MAYER, BROWN & PLATT 1675 Broadway New York, New York 10019 Attention: Michael Sloyer, Esq. LEASE SUPPLEMENT NO. 3 AND MEMORANDUM OF LEASE AND DEED OF TRUST dated as of February 5, 1997 among SYMANTEC CORPORATION, as the Lessee, SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor, and FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee Location of Premises: County of Santa Clara State of California This Lease Supplement is a supplement to that certain Lease (as hereinafter defined), as supplemented by that certain Lease Supplement No. 1 and Memorandum of Lease and Deed of Trust recorded on October 21, 1996 in the Official Records of Santa Clara County, California (the "Official Records"), as Instrument No. 13489802, and that certain Lease Supplement No. 2 and Memorandum of Lease and Deed of Trust recorded on October 23, 1996 in the Official Records, as Instrument No. 13492444 94 THIS LEASE SUPPLEMENT NO. 3 AND MEMORANDUM OF LEASE AND DEED OF TRUST (this "Memorandum") dated as of February 5, 1997, among SYMANTEC CORPORATION, a Delaware corporation, having a principal office at 10101 Torre Avenue, Cupertino, California 95014, as the Lessee and as Mortgagor (the "Lessee"), SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor (the "Lessor"), having an address at 277 Park Avenue, New York, New York 10172, and FIRST AMERICAN TITLE INSURANCE COMPANY (the "Trustee"). W I T N E S S E T H: WHEREAS, the Lessor is the owner in fee simple of the land described on Exhibit A attached hereto and all Improvements thereon (together, the "Property"); WHEREAS, the Lessor wishes to lease the Property to the Lessee and the Lessee wishes to lease the Property from the Lessor; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to enter into this Memorandum, as follows: I. Certain Terms. Capitalized terms used but not otherwise defined in this Memorandum have the meanings specified in Appendix A to the Master Lease and Security Agreement dated as of October 18, 1996 (as amended, restated, supplemented or otherwise modified from time to time, the "Lease"), between the Lessee and the Lessor; and the rules of interpretation specified in Appendix A to the Lease shall apply to this Memorandum. 2. Property. Attached hereto as Exhibit A is the description of the Property. Effective upon the execution and delivery of this Memorandum by the Lessor and the Lessee, the Property shall be subject to the terms and provisions of the Lease. Subject to the terms and conditions of the Lease, the Lessor hereby leases the Property to the Lessee for the Term (as defined below) of this Memorandum, and the Lessee hereby agrees, expressly for the direct benefit of the Lessor, to lease the Property from the Lessor for the Term. 3. Lease Term. The term of this Memorandum (the "Term") shall begin on the date hereof and shall end on October 18, 2003 unless the Term with respect to the Property is renewed or earlier terminated in accordance with the provisions of the Lease or the other Operative Documents. For and in consideration of good and valuable consideration paid by the Lessee to the Lessor as described in the Lease, the Lessor hereby grants to the Lessee the right to purchase the Property or to market and sell the 95 Property during the Term of this Memorandum on the terms set forth in the Lease. 4. Ownership of the Property. (a) The parties hereto intend that (i) for financial accounting purposes with respect to the Lessee, the Lessor will be treated as the owner and the lessor of the Properties and the Lessee will be treated as the lessee of the Properties and (ii) for all other purposes, including federal and all state and local income tax purposes, state real estate and commercial law and bankruptcy purposes, (A) the Lease will be treated as a financing arrangement, (B) the Lessor and the Lenders will be deemed lenders making loans to the Lessee in an amount equal to the sum of the Lessor Amount and the outstanding principal amount of the Loans, which loans are secured by the Properties and (C) the Lessee will be treated as the owner of the Properties and will be entitled to all tax benefits ordinarily available to an owner of properties like the Properties for such tax purposes. Nevertheless, the Lessee acknowledges and agrees that neither the Lessor nor any of the Lenders has made any representations or warranties to the Lessee concerning the tax, accounting or legal characteristics of the Operative Documents and that the Lessee has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents as it deems appropriate. (b) It is the intent of the parties hereto that the Lease grants a security interest and deed of trust or lien, as the case may be, on the Property for the benefit of the Lessor to secure the Lessee's performance under and payment of all amounts advanced by the Lessor for the acquisition of the Property (corresponding to the value of the Property as indicated on the Appraisal) under the Lease and the other Operative Documents, together with interest thereon, and all other amounts payable under the Operative Documents in connection therewith. (c) Specifically, without limiting the generality of subsection (b), the Lessor and the Lessee intend and agree that with respect to the nature of the transactions evidenced by the Lease in the context of the exercise of remedies under the Operative Documents, including, without limitation, in the case of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting the Lessee and the Lessor, or any enforcement or collection actions, the transactions evidenced by the Lease are loans made by the Lessor as unrelated third party lender to the Lessee secured by the Property (it being understood that the Lessee hereby mortgages, grants, bargains, sells, releases, confirms, conveys, assigns, transfers and sets over to the Trustee for the benefit of the Lessor, and grants a security interest in, the Property -2- 96 (consisting of a fee deed of trust with respect to all right, title and interest of the Lessee in and to the fee title to, and reversionary interest in, the Land and Improvements, if any, and a leasehold deed of trust on the Lessee's leasehold estate under the Lease), all to secure such loans, effective on the date hereof, to have and to hold such interests in the Property unto the Trustee for the benefit of the Lessor and its successors and assigns, forever, provided always that these presents are upon the express condition that, if all amounts due under the Lease shall have been paid and satisfied in full, then this instrument and the estate hereby granted shall cease and become void. As additional security for the Rent, the Lease Balance and all other sums owed to the Lessor by the Lessee under the Lease, the Lessee does hereby grant, bargain, sell, transfer and convey unto the Trustee, its successors in trust and assigns, IN TRUST, WITH POWER OF SALE, for the benefit of the Lessor, all of the Lessee's right, title and interest in and to the Property, including, without limitation, all buildings, structures and other improvements, and all fixtures and other property now or hereafter attached to or affixed to any such buildings, structures or other improvements, and any additions and alterations thereto or replacements thereof, now or hereafter built, constructed or located upon the Property, all rents, additional rents, issues, income, revenues, distributions, royalties and profits now or in the future payable in respect of the Property, together with all of the right, power and authority of the Lessee to alter, modify or change the terms, conditions and provisions of the Lease and any other lease pertaining to the Property, to consent to any request made by a tenant or landlord pursuant thereto, or to surrender, cancel or terminate the same or to accept any surrender, cancellation or termination of the same, together with all of the options, rights, powers and privileges of the Lessee under any lease pertaining to the Property, whether heretofore or hereafter existing, including, without limitation, the rights and options to purchase the Property contained in Articles XVIII and XX of the Lease, and all present and future right, title and interest of the Lessee in and to (i) all refunds, tax abatement agreements, rebates, reserves, deferred payments, deposits, cost savings, awards and payments of any kind due from or payable by (a) any Governmental Authority, or (b) any insurance or utility company, in each case under clause (a) or (b) above in respect of the Property, and (ii) all refunds, rebates and payments of any kind due from or payable by any Governmental Authority for any taxes, assessments, or governmental or quasi-governmental charges or levies imposed upon the Lessee in respect of the Property, and all plans and specifications, designs, drawings and other information, materials and matters heretofore or hereafter prepared relating to the Property or any construction on the Property, all proceeds (including claims and demands therefor) of the conversion, -3- 97 voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including without limitation the proceeds of insurance and condemnation awards in respect of the Property or any portion thereof, all additional estates, rights and interests hereafter acquired by the Lessee in the Property, or any portion thereof, together with all proceeds of the conversion, whether voluntary or involuntary, of any of the Property into cash or other liquid claims, including without limitation, all awards, payments or proceeds, including interest thereon, and the right to receive the same, which may be made as a result of any casualty, any exercise of the right of eminent domain or deed in lieu thereof, any injury to the Property and any defect in title in the Property or other matter insured under any policy of title insurance, together with attorney's fees, costs and disbursements incurred by the Lessor in connection with the collection of such awards, payments and proceeds, and the Lessee further grants to the Lessor, pursuant to the California Uniform Commercial Code (the "UCC"), a security interest in all present and future right, title and interest of the Lessee in and to any portion of the foregoing property for which a security interest may be created under the UCC. To have and to hold the same whether now owned or held or hereafter acquired unto the Trustee, its successors-in-trust forever, IN TRUST, WITH POWER OF SALE, to secure to the Lessor the payment of the Rent, the Lease Balance and all other sums owing to the Lessor under the Lease and the performance and observance of the terms, covenants, warranties, conditions, agreements and obligations under the Lease. If the Lessee shall pay all sums due under the Lease when due according to the terms thereof and shall otherwise fully and properly perform and comply with all of the obligations, agreements, terms and conditions of the Lease, then this conveyance shall become null and void. In the event of the occurrence of an Event of Default, then the entire unpaid balance of all sums due under the Lease and the interest accrued thereon shall, at the option of the owner thereof and without notice, immediately become due and payable for all purposes, whether or not due according to the maturity date or dates thereof; and all other indebtedness, the payment of which is secured hereby, shall likewise become due and payable. The Trustee and the Lessor and each of them are authorized prior or subsequent to the institution of any foreclosure proceedings to enter upon the Property or any part thereof and to take possession of the Property and exercise without interference from the Lessee, any and all rights which the Lessee has with respect to the management, possession, operation, protection or preservation of the Property. Upon the occurrence of an Event of Default, Lessor shall have the power and authority, after proper notice and lapse of such time -4- 98 as may be required by law, to cause Trustee to sell the Property by notifying Trustee of that election and depositing with Trustee this instrument and receipts and evidence of expenditures made and secured hereby as Trustee may reasonably require. Upon receipt of any such notice from Lessor, Trustee shall cause to be recorded, published and delivered to Lessee such Notice of Default and Election to Sell as is then required by applicable statutory authority and by this instrument, which notice shall set forth, among other things, the nature of the breach(es) or default(s), the action(s) required to effect a cure thereof and the time period within which that cure may be effected. If no cure is effected within the statutory time limits following recordation of the Notice of Default and Election to Sell and after Notice of Sale has been given as required by the above-referenced statutes, Trustee may without further notice or demand sell and convey the Property in accordance with the above-referenced statutes. The Property may be sold as a whole or in separate lots, parcels or items and in such order as Lessor may direct, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser(s) a good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty express or implied. The recitals in such deed of any matter or fact shall be conclusive proof of the truthfulness thereof. Any Person, including Lessee, Trustee or Lessor, may purchase at any sale. After deducting all costs, fees and expenses of Lessor and Trustee, including costs of evidence of title in connection with any sale, Lessor shall apply the proceeds of sale, in the following order of priority, to payment of the following (collectively, the "Obligations"): (i) first, all amounts expended by or for the account of Lessor under the terms hereof and not then repaid, with accrued interest at the Overdue Rate; and (ii) second, all other amounts then due and owing hereunder including, without limitation, all Basic Rent, Supplemental Rent, the full amount of the Lease Balance as of the date of sale as if the Lease had been terminated with respect to all of the Properties then subject to the Lease under Section 18.1, and all other amounts then payable by Lessee under the Lease and the other Operative Documents, with Lessor having the right to apply the proceeds of sale to the amounts described above in this clause (ii) in such order, proportion and priority as Lessor may elect in its sole and absolute discretion. To the extent permitted by applicable statutes, Trustee may postpone the sale of all or any portion of the Property by public announcement at the time and place of sale, and from time to time thereafter may again postpone that sale by public announcement or subsequently noticed sale, and without further notice may make such sale at the time fixed at the last postponement or may, in its discretion, give a new notice of sale. A sale of less than all of the Property or any defective or irregular sale made hereunder shall not exhaust the power of sale provided for -5- 99 herein, and subsequent sales may be made hereunder until all of the Obligations have been satisfied or the entire Property has been sold, without defect or irregularity. No action of Lessor or Trustee based upon the provisions contained herein or contained in the applicable statutes, including, without limitation, the giving of the Notice of Default and Election to Sell or the Notice of Sale, shall constitute an election of remedies which would preclude Lessor from pursuing judicial foreclosure before a completed sale pursuant to the power of sale contained herein. Lessor shall have the right, with the irrevocable consent of Lessee hereby given and evidenced by the execution of this instrument, to obtain appointment of a receiver by any court of competent jurisdiction without further notice to Lessee, which receiver shall be authorized and empowered to enter upon and take possession of the Property, including all personal property used upon or in connection with the real property herein conveyed, to let the Property, to receive all the rents, issues and profits, if any, which may be due or become due in respect to the leasing of the Property to another party ("Property Rents"), and apply the Property Rents after payment of all necessary charges and expenses to reduction of the Obligations in such order, proportion and priority as Lessor may elect. At the option of Lessor, the receiver shall accomplish entry and taking possession of the Property by actual entry and possession or by notice to Lessee. The receiver so appointed by a court of competent jurisdiction shall be empowered to issue receiver's certificates for funds advanced by Lessor for the purpose of protecting the value of the Property as security for the Obligations. The amounts evidenced by receiver's certificates shall bear interest at the Overdue Rate and may be added to the Obligations if the Lessee or a junior lienholder purchases the Property at the trustee's sale. Trustee or any successor acting hereunder may resign and thereupon be discharged of the trusts hereunder upon thirty (30) days' prior written notice to Lessor. Regardless of whether Trustee resigns, Lessor may, from time to time, substitute a successor or successors to any Trustee named herein or acting hereunder in accordance with any statutory procedure for such substitution; or if Lessor, in its sole and absolute discretion, so elects, and if permitted by law, Lessor may substitute such successors or successors by recording, in the office of the recorder of the county or counties where the Property is located, a document executed by Lessor and containing the name of the original Lessee and Lessor hereunder, the book and page where this instrument (or a memorandum hereof) is recorded (and/or instrument number, as applicable) and the name of the new Trustee, which instrument shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the predecessor Trustee, succeed to the rights, powers and duties hereunder. It is acknowledged that A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW LESSOR TO TAKE THE PROPERTY AND SELL THEM -6- 100 WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY LESSEE UNDER THIS INSTRUMENT. If (a) the Property shall consist of one or more parcels, whether or not contiguous and whether or not located in the same county, or (b) in addition to this Memorandum, the Lessor shall now or hereafter hold one or more additional mortgages, liens, deeds of trust or other security (directly or indirectly) for the Obligations upon other property in the State in which the Property is located (whether or not such property is owned by Lessor or by others) or (c) both the circumstances described in clauses (a) and (b) shall be true, then to the fullest extent permitted by law, the Lessor may, in its sole discretion, commence or consolidate in a single foreclosure action all foreclosure proceedings against all such collateral securing the Obligations (including the Property), which action may be brought or consolidated in the courts of any county in which any of such collateral is located. The Lessee acknowledges that the right to maintain a consolidated foreclosure action is a specific inducement to the Lessor to extend the Advances, and the Lessor expressly and irrevocably waives any objections to the commencement or consolidation of the foreclosure proceedings in a single action and any objections to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have. The Lessee further agrees that if the Lessor shall be prosecuting one or more foreclosure or other proceedings against a portion of the Property or against any collateral other than the Property, which collateral directly or indirectly secures the Obligations, or if the Lessor shall have obtained a judgment of foreclosure and sale or similar judgment against such collateral, then, whether or not such proceedings are being maintained or judgments were obtained in or outside the State in which the Property is located, the Lessor may commence or continue foreclosure proceedings and exercise its other remedies granted in this Memorandum against all or any part of the Property and the Lessor waives any objections to the commencement or continuation of a foreclosure of this Memorandum or exercise of any other remedies hereunder based on such other proceedings or judgments, and waives any right to seek to dismiss, stay, remove, transfer or consolidate either any action under this Memorandum or such other proceedings on such basis. Neither the commencement nor continuation of proceedings to foreclose this Memorandum nor the exercise of any other rights hereunder nor the recovery of any judgment by the Lessor in any such proceedings shall prejudice, limit or preclude the Lessor's right to commence or continue one or more foreclosure or other proceedings or obtain a judgment against any other collateral (either in or outside the State in which the Property is located) which directly or indirectly secures the Obligations, and the Lessor expressly waives any objections to the commencement of, continuation of, or entry of a judgment in such other proceedings -7- 101 or exercise of any remedies in such proceedings based upon any action or judgment connected to this Memorandum, and the Lessor also waives any right to seek to dismiss, stay, remove, transfer or consolidate either such other proceedings or any action under this Memorandum on such basis. If the Lessor so elects, the Trustee may sell any personal property covered by this instrument at one or more separate sales in any manner permitted by the UCC. One or more exercises of the powers herein granted shall not extinguish nor exhaust such powers until the entire Property is sold or until the entire amounts evidenced and/or secured by the Lease and the Operative Documents is paid in full. (d) Specifically, but without limiting the generality of subsection (b), the Lessor and the Lessee further intend and agree that, with respect to that portion of the Property constituting personal property, for the purpose of securing the Lessee's obligations for the repayment of the above-described obligations from the Lessor to the Lessee, (i) the Lease shall also be deemed to be a security agreement and financing statement within the meaning of Article 9 of the UCC; (ii) the conveyance provided for hereby shall be deemed to be a grant by the Lessee to the Lessor of a lien and security interest in all of the Lessee's present and future right, title and interest in and to such portion of the Property, including but not limited to the Lessee's leasehold estate therein and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, investments, securities or other property, whether in the form of cash, investments, securities or other property to secure such obligations, effective on the date hereof, to have and to hold such interests in the Property unto the Lessor and its successors and assigns, forever, provided always that these presents are upon the express condition that, if all amounts due under the Lease shall have been paid and satisfied in full, then this instrument and the estate hereby granted shall cease and become void; (iii) the possession by the Lessor of notes and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be "possession by the secured party" for purposes of perfecting the security interest pursuant to Section 9-305 of the UCC; and (iv) notifications to Persons holding such property, and acknowledgements, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of the Lessee shall be deemed to have been given for the purpose of perfecting such security interest under Applicable Law. The Lessor and the Lessee shall, to the extent consistent with this Memorandum, take such actions and execute, deliver, file and record such other documents, financing statements, mortgages and deeds of trust as may be necessary to ensure that, if the Lease were deemed to create a security interest in the Property in accordance with -8- 102 this Section, such security interest would be deemed to be a perfected security interest with priority over all Liens other than Permitted Liens, under Applicable Law and will be maintained as such throughout the Term. SECTION 5. Ratification. The terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. In the event of any conflict between the terms of the Lease and the terms of this Memorandum, the terms of the Lease shall control. SECTION 6. Supplemental Lease Term. (a) The Lenders' Percentage for the Lease Supplement is 97.0%. (b) The Lessor Margin for this Lease Supplement is 2.70% (c) The Loan Margin for the Lease Supplement is 0.20%. SECTION 7. Counterpart Execution. This Memorandum may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. SECTION 8. Future Advances; Revolving Credit. In the event a court of competent jurisdiction rules that this instrument constitutes a mortgage, deed of trust or other secured financing as is the intent of the parties pursuant to Section 4 hereof, then this instrument will be deemed given to secure not only existing financing, but also future advances made pursuant to or as provided in the Lease, whether such advances are obligatory or to be made at the option of the Lessor, or otherwise, to the same extent as if such future advances were made on the date of execution of this instrument, although there may be no advance made at the time of execution hereof, and although there may be no financing outstanding at the time any advance is made. To the fullest extent permitted by law, the lien of this instrument shall be valid as to all such amounts, including all future advances, from the time this instrument is recorded. Notwithstanding anything in this instrument to the contrary, although the amount of the financing secured by this instrument may increase or decrease from time to time, the maximum principal amount of the financing secured by this instrument at any one time shall not exceed Fifty Three Million Dollars ($53,000,000), which amount shall be payable as set forth in the Lease, and in any event the final payment shall be payable no later than October 18, 2003, plus all costs of enforcement and collection of this instrument, the Lease and the other Operative Documents, plus the total amount of any advances made pursuant thereto to -9- 103 protect the collateral and the security interest and lien created hereby, together with interest on all of the foregoing as provided in the Operative Documents. SECTION 9. GOVERNING LAW. THE LEASE AND THIS MEMORANDUM SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF. -10- 104 IN WITNESS WHEREOF, each of the parties hereto has caused this Memorandum of Lease and Deed of Trust to be duly executed by an officer thereunto duly authorized as of the date and year first above written. SYMANTEC CORPORATION, as the Lessee By:__________________________ Name: Title: SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor By:_______________________ Name: Title: -11- 105 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ______________________________ ______________________________ [ ] CORPORATE OFFICER(S) ______________________________ ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ _______________________ _______________________ - -------------------------------------------------------------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ 106 DESCRIBED AT RIGHT: 107 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ______________________________ ______________________________ [ ] CORPORATE OFFICER(S) ______________________________ ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ _______________________ _______________________ - -------------------------------------------------------------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_______________________________ MUST BE ATTACHED Number of Pages _____ Date of Document__________________ TO THE DOCUMENT Signer(s) Other Than Named Above _______________________ 108 DESCRIBED AT RIGHT: 109 EXHIBIT A TO MEMORANDUM OF LEASE LEGAL DESCRIPTION OF LAND Real Property in the City of Cupertino, County of Santa Clara, State of California, described as follows: PARCEL ONE: Lot 5, as shown on that certain Map entitled Tract No. 7953 Cupertino City Center Phase III, which Map was filed for record in the office of the Recorder of the County of Santa Clara, State of California on February 27, 1987, in Book 571 of Maps, pages 36 and 37. PARCEL TWO: Easements as described in the Section entitled "Easements and Rights Reserved for Owners" of the Article entitled "Easements and Rights of Entry" of the Declaration of Covenants, Conditions, and Restrictions and Grant of Easement for Cupertino City Center recorded October 9, 1985, in Book J482, page 1907, as amended by that certain First Amendment to Declaration of Covenants, Conditions, and Restrictions and Grant of Easements recorded September 2, 1987, in Book K281, page 2071, each in the Official Records of Santa Clara County, California. PARCEL THREE: Easements for parking, landscaping, support, settlement and encroachment as granted to Cupertino City Center Buildings, a California Limited Partnership, in the Grant of Easement (Cupertino City Center 5) recorded February 5, 1997 under Series No. 13602286. 110 EXECUTION COPY This instrument prepared by, recording requested by, and when recorded return to: MAYER, BROWN & PLATT 1675 Broadway New York, New York 10019 Attention: Michael Sloyer, Esq. AMENDMENT NO. 1 dated as of March 3, 1997, AMENDING LEASE SUPPLEMENT NO. 3 AND MEMORANDUM OF LEASE AND DEED OF TRUST dated as of February 5, 1997 among SYMANTEC CORPORATION, as the Lessee, SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor, and FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee. Location of Premises: County of Santa Clara State of California ___________________ This Amendment No. 1 is an amendment to that certain Lease Supplement No. 3 and Memorandum of Lease and Deed of Trust recorded on February 5, 1997 in the Official Records of Santa Clara County, California (the "Official Records") as Instrument No. 13602289, with respect to the land described on Exhibit A to this Amendment No. 1, which Lease Supplement No. 3 is a supplement to that certain Lease (as hereinafter defined), as supplemented by that certain Lease Supplement No. 1 and Memorandum of Lease and Deed of Trust recorded on October 21, 1996 in the Official Records, as Instrument No. 13489802, and that certain Lease Supplement No. 2 and Memorandum of Lease and Deed of Trust recorded on October 23, 1996 in the Official Records, as Instrument No. 13492444. 111 THIS AMENDMENT NO. 1 TO LEASE SUPPLEMENT NO. 3 AND MEMORANDUM OF LEASE AND DEED OF TRUST, dated as of March 3, 1997 (this "Amendment"), amending that certain Lease Supplement No. 3 and Memorandum of Lease and Deed of Trust (the "Memorandum") dated as of February 5, 1997 and recorded on February 5, 1997 in the Official Records of Santa Clara County, California as Instrument No. 13602289, is among SYMANTEC CORPORATION, a Delaware corporation, having a principal office at 10101 Torre Avenue, Cupertino, California 95014, as the Lessee and as Mortgagor (the "Lessee"), SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor (the "Lessor"), having an address at 277 Park Avenue, New York, New York 10172, and FIRST AMERICAN TITLE INSURANCE COMPANY (the "Trustee"). W I T N E S S E T H: WHEREAS, the Lessee, the Lessor and the Trustee have heretofore entered into the Memorandum; and WHEREAS, the Lessee, the Lessor and the Trustee now desire to amend the Memorandum in certain respects to reflect the fact that the principal amount of the obligations secured by the Memorandum has increased from Fifty Three Million Dollars ($53,000,000) to Eighty One Million Five Hundred Thousand Dollars ($81,500,000), as hereinafter provided; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION I. Certain Terms. Capitalized terms used but not otherwise defined in this Amendment have the meanings specified in Appendix A to the Master Lease and Security Agreement dated as of October 18, 1996 (as amended by that certain Master Amendment Agreement dated as of the date hereof, and as further amended, restated, supplemented or otherwise modified from time to time, the "Lease"), between the Lessee and the Lessor; and the rules of interpretation specified in Appendix A to the Lease shall apply to this Amendment. SECTION 2. Amendment to Section 8 of Memorandum. Section 8 of the Memorandum is hereby amended by deleting the words "Fifty Three Million Dollars ($53,000,000)" appearing in the twentieth line of such Section, and replacing such words with the words "Eighty One Million Five Hundred Thousand Dollars ($81,500,000)". SECTION 3. Ratification of and References to Memorandum. This Amendment shall be deemed to be an amendment to the Memorandum, and the Memorandum, as amended hereby, is hereby 112 ratified, approved and confirmed in every respect. All references to the Memorandum in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Memorandum as amended hereby. SECTION 4. Ratification of Lease. The terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. In the event of any conflict between the terms of the Lease and the terms of this Amendment, the terms of the Lease shall control. SECTION 7. Counterpart Execution. This Amendment may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. SECTION 9. GOVERNING LAW. THIS AMENDMENT, THE LEASE AND THE MEMORANDUM SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF. -2- 113 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed by an officer thereunto duly authorized as of the date and year first above written. SYMANTEC CORPORATION, as the Lessee By:__________________________ Name: Title: SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor By:_______________________ Name: Title: -3- 114 Consent of Lessee to Assignment of Lease and Rent CONSENT AND ACKNOWLEDGMENT BY SYMANTEC CORPORATION -------------------------------------------------- The undersigned hereby acknowledges receipt of a counterpart original of, and consents to, the foregoing Assignment of Lease and Rent. The foregoing is furnished for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by the undersigned, and the undersigned understands and intends that the Lenders will rely on the foregoing and that the undersigned will be legally bound by the foregoing. This Consent and Acknowledgment shall inure to the benefit of the Lenders and their respective successors and assigns. IN WITNESS WHEREOF, the undersigned has executed and delivered this Consent and Acknowledgment as of October __, 1996, pursuant to proper authority duly granted. SYMANTEC CORPORATION By: -------------------------- Name: Title: 115 EXHIBIT A TO ASSIGNMENT OF LEASE AND RENT SUPPLEMENT NO. _____ TO ASSIGNMENT OF LEASE AND RENT THIS SUPPLEMENT NO. _____ (this "Supplement"), dated as of _________, to the ASSIGNMENT OF LEASE AND RENT, dated as of October ___, 1996 (the "Assignment"), made by SUMITOMO BANK LEASING AND FINANCE, INC., (the "Lessor"), in favor of THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as Agent (in such Capacity, the "Agent") for the Lenders. Capitalized terms used herein but not otherwise defined have the meanings specified in the Assignment. The parties hereto agree as follows: 1. The Property. In accordance with the Assignment, the Lessor has executed this Supplement to subject the Master Lease, as supplemented by the Lease Supplement attached as Schedule 1 hereto, to the Assignment. The description of the Property is attached hereto as Schedule 2. 2. Integrated Assignment. Following the execution and delivery of this Supplement, this Supplement, and all supplements previously delivered under the Assignment, shall constitute a part of the Assignment. 3. Confirmation. Except as expressly supplemented hereby, the provisions of the Assignment are and shall remain in full force and effect. Further, the Lessor hereby reaffirms its obligations under the Assignment. IN WITNESS WHEREOF, the Lessor has caused this supplement to be duly executed as of the day and year first above written. SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor By: ------------------------------- Name: Title: 116 Schedule 1 [Lease Supplement] 117 Schedule 2 [Description of Property] 118 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ______________________________ ______________________________ [ ] CORPORATE OFFICER(S) ______________________________ ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ _______________________ _______________________ - -------------------------------------------------------------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ DESCRIBED AT RIGHT: 119 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ______________________________ ______________________________ [ ] CORPORATE OFFICER(S) ______________________________ ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ _______________________ _______________________ - -------------------------------------------------------------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ DESCRIBED AT RIGHT: 120 EXHIBIT A TO AMENDMENT NO. 1 TO LEASE SUPPLEMENT NO. 3 AND MEMORANDUM OF LEASE AND DEED OF TRUST LEGAL DESCRIPTION OF LAND Real Property in the City of Cupertino, County of Santa Clara, State of California, described as follows: PARCEL ONE: Lot 5, as shown on that certain Map entitled Tract No. 7953 Cupertino City Center Phase III, which Map was filed for record in the office of the Recorder of the County of Santa Clara, State of California on February 27, 1987, in Book 571 of Maps, pages 36 and 37. PARCEL TWO: Easements as described in the Section entitled "Easements and Rights Reserved for Owners" of the Article entitled "Easements and Rights of Entry" of the Declaration of Covenants, Conditions, and Restrictions and Grant of Easement for Cupertino City Center recorded October 9, 1985, in Book J482, page 1907, as amended by that certain First Amendment to Declaration of Covenants, Conditions, and Restrictions and Grant of Easements recorded September 2, 1987, in Book K281, page 2071, each in the Official Records of Santa Clara County, California. PARCEL THREE: Easements for parking, landscaping, support, settlement and encroachment as granted to Cupertino City Center Buildings, a California Limited Partnership, in the Grant of Easement (Cupertino City Center 5) recorded February 5, 1997 under Series No. 13602286. EX-10.17 4 ASSIGNMENT OF LEASE AND RENT 1 EXHIBIT 10.17 EXECUTION COPY This instrument prepared by, recording requested by, and when recorded return to: MAYER, BROWN & PLATT 1675 Broadway New York, New York 10019 Attention: Michael Sloyer, Esq. ================================================================================ ASSIGNMENT OF LEASE AND RENT dated as of October 18, 1996 from SUMITOMO BANK LEASING AND FINANCE, INC., as ASSIGNOR to THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as Agent, as ASSIGNEE ================================================================================ 2 ASSIGNMENT OF LEASE AND RENT THIS ASSIGNMENT OF LEASE AND RENT, dated as of October 18, 1996 (this "Assignment"), made by SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation (the "Lessor"), to THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as agent (the "Agent") for the Lenders under the Loan Agreement referred to below (together with their respective successors and assigns, the "Lenders"), W I T N E S S E T H: WHEREAS, pursuant to the Loan Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"), among the Lessor, the Lenders and the Agent, the Lenders have severally agreed to make Loans to the Lessor in an aggregate amount not to exceed the aggregate Commitments of the Lenders, as set forth on Schedule I to the Participation Agreement (as defined in Appendix A to the Loan Agreement), upon the terms and subject to the conditions set forth in the Loan Agreement and the Participation Agreement, to be evidenced by the notes (such notes, as the same may hereafter be amended, modified, renewed, extended or otherwise changed from time to time, together with any note or notes or other obligations executed and delivered in renewal, extension or replacement thereof or in substitution or exchange therefor, are hereinafter collectively referred to as the "Notes") issued by the Lessor under the Loan Agreement; WHEREAS, it is a condition, among others, to the obligation of the Lenders to make their respective Loans to the Lessor under the Loan Agreement that the Lessor shall have executed and delivered, and the Lessee shall have consented to, this Assignment to the Agent for the benefit of the Lenders; and WHEREAS, in order further to secure payment of all the amounts owing to the Lenders under the Loan Agreement, the Notes and the other Operative Documents, the Lessor has agreed to enter into, execute, and deliver this Assignment; NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as follows: 1. Defined Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the respective meanings specified in Appendix A to the Loan Agreement; and the rules of interpretation set forth in such Appendix A shall apply to this Assignment. 3 2. Assignment. To secure its obligations under the Loan Agreement, the Lessor hereby assigns, transfers, sets over and conveys to the Agent for the ratable benefit of the Lenders, all the following described property relating to or arising in connection with the Properties (including, without limitation, each Property described in a Supplement to this Assignment, as delivered from time to time in the form attached hereto as Exhibit A), whether now owned or held or hereafter acquired: (a) Except as hereinafter provided, all of the estate, right, title, interest, benefits, powers and privileges of the Lessor, as lessor, under the Master Lease (including all Lease Supplements) (hereinafter referred to collectively as the "Assigned Leases") including (i) the immediate and continuing right, on a non-exclusive basis, to make claim for, receive, collect and receipt for all rents, income, revenues, issues, profits, insurance proceeds, condemnation awards, sales proceeds and other sums payable to or receivable by the Lessor under the Assigned Leases, or pursuant to any provisions thereof, whether as rent or as the purchase price or termination payment for any interest in any Property or otherwise (including, without limitation, the Loan Balance, the Purchase Option Price and any sales proceeds payable to the Lessor pursuant to the Assigned Leases) (collectively, the "Lease Rents"), including all cash, securities or letters of credit delivered or deposited pursuant thereto to secure performance by the Lessee of its obligations thereunder, (ii) the right and power (which right and power are coupled with an interest) upon the purchase by the Lessee of the interest of the Lessor in any Property in accordance with any Assigned Lease to execute and deliver as irrevocable agent and attorney-in-fact of the Lessor an appropriate instrument necessary to convey the interest of the Lessor therein, or to pay over or assign to the Lessee those sums to which it is entitled if the Lessee becomes obligated to purchase the interest of the Lessor in any Property and to perform all other necessary or appropriate acts as said agent and attorney-in-fact with respect to any such purchase and conveyance, (iii) the right, on a non-exclusive basis, to perform all other necessary or appropriate acts as said agent and attorney-in-fact with respect to any purchase or conveyance referred to in clause (ii) above, (iv) the right (subject to the consent of Required Participants), on a non-exclusive basis, to declare the Master Lease or any Lease Supplement to be in default, (v) subject to the terms of the Operative Documents (and subject to the consent of Required Participants), the -2- 4 Assignment of Lease and Rent right to exercise remedies under or with respect to the Assigned Leases, (vi) the right (subject to the consent of Required Lenders) to make all waivers and agreements on behalf of the Lessor under the Assigned Leases provided for or permitted under the Assigned Leases; provided, however, that none of the foregoing will be made or given with respect to Article VII, IX, X, XIII, XIV, XVIII, XX or XXI of the Master Lease without the written consent of the Required Participants, (vii) the right to give all notices, consents, releases and other instruments provided under the Assigned Leases; provided, however, that none of the foregoing will be made or given with respect to Article VII, IX, X, XIII, XIV, XVIII, XX or XXI of the Master Lease without the written consent of the Required Participants, (viii) the right (subject to the consent of Required Participants), on a non-exclusive basis, to give all notices of default and to take all action upon the happening of a Default or an Event of Default under any Assigned Lease, including the commencement, conduct and consummation of proceedings as shall be permitted under any provision of any Assigned Lease, or by law or in equity, (ix) the right, on a non-exclusive basis, to receive all notices sent to the Lessor under any Assigned Lease, (x) the Lessor's interest under any Assigned Lease in the Lessee's tangible and intangible property used or arising in connection with any Property, including, but not limited to, permits, licenses, contract rights and prepaid expenses, and (xi) the right (subject to the consent of Required Participants), on a non-exclusive basis, to do any and all other things whatsoever which the Lessor is or any lessor is, or may be entitled to do under any Assigned Lease. The Lessor hereby agrees that any action taken by the Lenders (or their designee) pursuant to this Assignment shall be exclusive, and no party relying on such action of the Lenders (or such designee) pursuant hereto shall be required to obtain the concurrence or consent of the Lessor to such action or to a request for such action. (b) All of the estate, right, title, interest, benefits, powers and privileges of the Lessor, to and under all agreements or contracts for the sale or other disposition of all or any part of any Property, now or hereafter entered into by the Lessor (collectively, the "Contracts"), together with all estate, right, title, interest, benefits, powers and privileges of the Lessor under the Contracts including, without limitation, the immediate and continuing right, on a non-exclusive basis, to make claim for, receive, collect and receipt for all -3- 5 Assignment of Lease and Rent charges, fees, income, issues, profits, receipts, rents, revenues or royalties payable under any of the Contracts (collectively, the "Contract Rents" and, together with the Lease Rents, the "Rents") and all right, title and interest of the Lessor thereunder, including all cash, securities or letters of credit deposited thereunder to secure performance by the obligors of their obligations thereunder. (c) On a non-exclusive basis, all of the right, title and interest of the Lessor in and to all claims and rights to the payment of money at any time arising in connection with any repudiation, rejection or breach of any Assigned Lease by the Lessee or a trustee or receiver of the Lessee under any insolvency statute, law or regulation, including, without limitation, all rights to recover damages arising out of such breach or rejection, all rights to charges payable by the Lessee or such trustee or receiver in respect of any Property or any portions thereof following rejection, repudiation or disaffirmance of the Lease or following the entry of an order for relief under any insolvency statute, law or regulation in respect of the Lessee and all rentals and other charges outstanding under the Lease as of the date of entry of such order for relief. Notwithstanding the foregoing provisions of this Section 2, the assignment contained herein shall in no event include any amounts received by Agent or Lessor or otherwise paid or payable to Lessor with respect to Yield, Lessor Amount, indemnity payments to or for the benefit of the Lessor, insurance proceeds under policies maintained by the Lessor and fees or Transaction Expenses paid or payable to or for the benefit of the Lessor. 3. Receipt of Rents. The Lenders hereby acknowledge and agree that the Agent will hold the Rents for the benefit of each of the Lenders and the Lessor, and the Agent will distribute the Rents to the Lenders and the Lessor in accordance with Article VII of the Participation Agreement. 4. Irrevocability; Supplemental Instruments. The Lessor agrees that this Assignment and the designation and direction to the Lessee set forth in Sections 2 and 3 of this Assignment are irrevocable and that it will not take any action as lessor under the Leases or otherwise which is inconsistent with this Assignment and that any action, assignment, designation or direction inconsistent herewith shall be void. The Lessor will from time to time execute and deliver all instruments of further assurance and do such further acts as may be necessary or proper to carry out more effectively the purpose of this Assignment. -4- 6 Assignment of Lease and Rent 5. Validity. The Lessor represents and warrants (on a continuing basis) and covenants to the Lenders that (a) the Lessor has not assigned or executed any assignment of, and will not assign or execute any assignment of, the Lessor's interest in any of the Assigned Leases, in any Contract, in any Rents or in any other subject matter of this Assignment to anyone other than the Lenders and any assignment, designation or direction by the Lessor inconsistent herewith shall be void, and (b) the Lessor has not done any act or executed any document that impairs the rights of the Lenders to the Leases or the Rents under this Assignment. 6. The Lessor Remains Liable. While the assignment made hereby is present, direct and continuing, it has been made for the purpose of providing the Lenders with security for the performance of the Lessor's obligations under the Loan Agreement and the Notes and the execution and delivery hereof shall not impair or diminish in any way the obligations of the Lessor under the Assigned Leases, or impose any of such obligations on the Lenders. This Assignment shall not operate to cause the Lenders (or their designee) to be regarded as a mortgagee in possession. Neither the Lenders nor their designee shall be responsible or liable for performing any of the obligations of the Lessor under any of the Assigned Leases or any Contract, for any waste by the Lessee or others, for any dangerous or defective conditions of any Property, for negligence in the management, upkeep, repair or control of any Property or any other act or omission by any other Person. Nothing contained herein shall operate or be construed to (a) obligate the Lenders (or their designee) to assume the obligations of the Lessor under any of the Assigned Leases or any Contract, to perform any of the terms and conditions contained in any of the Assigned Leases or any Contract or otherwise to impose any obligation upon the Lenders with respect to any of the Assigned Leases or any Contract or (b) place upon the Lenders (or their designee) any responsibility for the operation, control, care, management or repair of any Property or any part thereof. Subject at all times to the terms and conditions of this Assignment, the Lessor will at all times promptly and faithfully perform in all respects, or cause to be performed in all respects, all of its covenants, conditions and agreements contained in the Assigned Leases or any Contract now or hereafter existing on the part of the Lessor to be kept and performed. 7. Amendments; Lessee's Consent. The Lessor will not enter into any agreement subordinating, amending, extending or terminating any of the Assigned Leases except as provided in Section 14.5 of the Participation Agreement, and any such -5- 7 Assignment of Lease and Rent attempted subordination, amendment, modification, extension or termination without compliance with such Section 14.5 shall be void. If any of the Assigned Leases or any Contract shall be amended, it shall continue to be subject to the provisions hereof without the necessity of any further act by any of the parties hereto. The Lessor and the Lenders hereby consent to the provisions of Lessee's Consent attached to this Assignment and agree to be bound thereby. 8. Termination of this Assignment. This Assignment shall continue in full force and effect until all obligations, liabilities and indebtedness of any kind now or hereafter due to the Lenders from the Lessor or the Lessee under or with respect to the Loan Agreement or any of the other Operative Documents, or which are otherwise secured hereby, whether now existing or hereafter arising or incurred, have been fully paid, performed and satisfied, at which time this Assignment will terminate. 9. Ongoing Right to Collect Rents; Receivers. If notwithstanding the terms of this Assignment, a petition or order for sequestration of rents, or the appointment of a receiver or some similar judicial action or order is deemed required under applicable state law to allow the Lenders to continue to collect the moneys described in paragraphs 2(a), (b) and (c) of this Assignment, then it is agreed by the Lessor that any proof of claim or similar document filed by the Lenders in connection with the breach or rejection of any Lease by the lessee thereunder or the trustee of any lessee under any federal or state insolvency statute shall for the purpose of perfecting the Lenders' rights conferred in said paragraphs be deemed to constitute action required under such state law. Upon the occurrence and during the continuance of a Loan Agreement Event of Default (not existing solely by virtue of a Lease Event of Default), the Lessor hereby consents to the appointment of a receiver for any or all of the Properties as a matter of right and without any requirement for notice to the Lessor and without regard to the solvency of the Lessor or to the collateral that may be available for the satisfaction of the Notes and all other obligations under the Loan Agreement and the other Operative Documents. 10. Amendment. This Assignment may not be amended or otherwise modified except by a writing signed by the Lessor, the Agent and, if required by Section 14.5 of the Participation Agreement, the Lessee, in accordance with the terms of the Participation Agreement. 11. Notices. All notices, demands, requests, consents, approvals and other instruments under this Assignment shall be -6- 8 Assignment of Lease and Rent made in accordance with the notice provisions of the Participation Agreement. 12. Successors and Assigns. All covenants, agreements, representations and warranties in this Assignment by the Lessor and the Lenders shall bind, and shall inure to the benefit of and be enforceable by, their respective successors and assigns, whether or not so expressed. 13. Severability. If any provision or provisions, or if any portion of any provision or provisions, in this Assignment is found by a court of law of competent jurisdiction to be in violation of any local, state or Federal ordinance, statute, law, administrative or judicial decision, or public policy, and if such court should declare such portion, provision or provisions to be illegal, invalid, unlawful, void or unenforceable as written, then it is the intent of the parties hereto that such portion, provision or provisions shall be given force to the fullest possible extent that they are legal, valid and enforceable, that the remainder of this Assignment shall be construed as if such illegal, invalid, unlawful, void or unenforceable portion, provision or provisions were not contained therein, and that the rights, obligations and interests of the Lessor, the Lenders and the Lessee under the remainder of this Assignment shall continue in full force and effect. 14. Governing Law. THIS ASSIGNMENT AND THE RIGHTS AND OBLIGATIONS OF THE LESSOR UNDER THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. 15. Counterparts. This Assignment may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 16. Conflicts. In the event of any conflicts between the terms and provisions hereof and the terms and provisions of the other Operative Documents, the terms and provisions of the other Operative Documents shall be controlling. 17. Non-Disturbance. So long as no Lease Event of Default has occurred and is continuing, the Lenders will take no action to disturb the Lessee's rights to quiet enjoyment of each Property as set forth in Section 4.1 of the Master Lease. -7- 9 Assignment of Lease and Rent IN WITNESS WHEREOF, the Lessor has caused this Assignment to be duly executed as of the day and year first above written. SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor By_______________________________ Name: Title: -8- 10 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ______________________________ ______________________________ [ ] CORPORATE OFFICER(S) ______________________________ ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ ______________________________ ______________________________ - -------------------------------------------------------------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ -9- 11 MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ DESCRIBED AT RIGHT: -10- 12 Consent of Lessee to Assignment of Lease and Rent CONSENT AND ACKNOWLEDGMENT BY SYMANTEC CORPORATION The undersigned hereby acknowledges receipt of a counterpart original of, and consents to, the foregoing Assignment of Lease and Rent. The foregoing is furnished for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by the undersigned, and the undersigned understands and intends that the Lenders will rely on the foregoing and that the undersigned will be legally bound by the foregoing. This Consent and Acknowledgment shall inure to the benefit of the Lenders and their respective successors and assigns. IN WITNESS WHEREOF, the undersigned has executed and delivered this Consent and Acknowledgment as of October __, 1996, pursuant to proper authority duly granted. SYMANTEC CORPORATION By_____________________________________ Name: Title: 13 EXHIBIT A TO ASSIGNMENT OF LEASE AND RENT SUPPLEMENT NO. __ TO ASSIGNMENT OF LEASE AND RENT THIS SUPPLEMENT NO. __ (this "Supplement"), dated as of ____________, to the ASSIGNMENT OF LEASE AND RENT, dated as of October ___, 1996 (the "Assignment"), made by SUMITOMO BANK LEASING AND FINANCE, INC., (the "Lessor"), in favor of THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as Agent (in such capacity, the "Agent") for the Lenders. Capitalized terms used herein but not otherwise defined have the meanings specified in the Assignment. The parties hereto agree as follows: 1. The Property. In accordance with the Assignment, the Lessor has executed this Supplement to subject the Master Lease, as supplemented by the Lease Supplement attached as Schedule 1 hereto, to the Assignment. The description of the Property is attached hereto as Schedule 2. 2. Integrated Assignment. Following the execution and delivery of this Supplement, this Supplement, and all supplements previously delivered under the Assignment, shall constitute a part of the Assignment. 3. Confirmation. Except as expressly supplemented hereby, the provisions of the Assignment are and shall remain in full force and effect. Further, the Lessor hereby reaffirms its obligations under the Assignment. IN WITNESS WHEREOF, the Lessor has caused this Supplement to be duly executed as of the day and year first above written. SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor By_______________________________ Name: Title: 14 Schedule 1 [Lease Supplement] 15 Schedule 2 [Description of Property] 16 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ______________________________ ______________________________ [ ] CORPORATE OFFICER(S) ______________________________ ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER _______________________ ______________________________ ______________________________ - -------------------------------------------------------------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ 17 MUST BE ATTACHED Number of Pages _____ Date of Document________________ TO THE DOCUMENT Signer(s) Other Than Named Above _____________________ DESCRIBED AT RIGHT: 18 Consent of Lessee to Supplement to Assignment of Lease and Rent CONSENT AND ACKNOWLEDGMENT BY SYMANTEC CORPORATION The undersigned hereby acknowledges receipt of a counterpart original of, and consents to, the foregoing Supplement No. __ to the Assignment of Lease and Rent. The foregoing is furnished for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by the undersigned, and the undersigned understands and intends that the Agent and the Lenders will rely on the foregoing and that the undersigned will be legally bound by the foregoing. This Consent and Acknowledgment shall inure to the benefit of the Agent, the Lenders and their respective successors and assigns. IN WITNESS WHEREOF, the undersigned has executed and delivered this Consent and Acknowledgment as of October ___, 1996, pursuant to proper authority duly granted. SYMANTEC CORPORATION By______________________________________ Name: Title: 19 EXECUTION COPY SUPPLEMENT NO. 1 TO ASSIGNMENT OF LEASE AND RENT THIS SUPPLEMENT NO. 1 (this "Supplement"), dated as of October 18, to the ASSIGNMENT OF LEASE AND RENT, dated as of October 18, 1996 (the "Assignment"), made by SUMITOMO BANK LEASING AND FINANCE, INC., (the "Lessor"), in favor of THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as Agent (in such capacity, the "Agent") for the Lenders. Capitalized terms used herein but not otherwise defined have the meanings specified in the Assignment. The parties hereto agree as follows: 1. The Property. In accordance with the Assignment, the Lessor has executed this Supplement to subject the Master Lease, as supplemented by the Lease Supplement attached as Schedule 1 hereto, to the Assignment. The description of the Property is attached hereto as Schedule 2. 2. Integrated Assignment. Following the execution and delivery of this Supplement, this Supplement, and all supplements previously delivered under the Assignment, shall constitute a part of the Assignment. 3. Confirmation. Except as expressly supplemented hereby, the provisions of the Assignment are and shall remain in full force and effect. Further, the Lessor hereby reaffirms its obligations under the Assignment. IN WITNESS WHEREOF, the Lessor has caused this Supplement to be duly executed as of the day and year first above written. SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor By_______________________________ Name: Title: 20 Schedule 1 [Lease Supplement] 21 Schedule 2 [Description of Property] 22 Consent of Lessee to Supplement to Assignment of Lease and Rent CONSENT AND ACKNOWLEDGMENT BY SYMANTEC CORPORATION The undersigned hereby acknowledges receipt of a counterpart original of, and consents to, the foregoing Supplement No. 1 to the Assignment of Lease and Rent. The foregoing is furnished for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by the undersigned, and the undersigned understands and intends that the Agent and the Lenders will rely on the foregoing and that the undersigned will be legally bound by the foregoing. This Consent and Acknowledgment shall inure to the benefit of the Agent, the Lenders and their respective successors and assigns. IN WITNESS WHEREOF, the undersigned has executed and delivered this Consent and Acknowledgment as of October ___, 1996, pursuant to proper authority duly granted. SYMANTEC CORPORATION By_______________________________ Name: Title: 23 EXECUTION COPY This instrument prepared by, recording requested by, and when recorded return to: MAYER, BROWN & PLATT 1675 Broadway New York, New York 10019 Attention: Michael Sloyer, Esq. SUPPLEMENT NO. 3 TO ASSIGNMENT OF LEASE AND RENT dated as of _______________ ___, 1997 made by SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor, in favor of SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as the Agent Location of Premises: County of Santa Clara State of California This Supplement is a supplement to that certain Assignment (as hereinafter defined), recorded on October 21, 1996, in the Official Records of Santa Clara County, California (the "Official Records"), as Instrument No. 13489803, as supplemented by that certain Supplement No. 1 to Assignment of Lease and Rent, recorded on October 21, 1996, in the Official Records as Instrument No. 13489804, and that certain Supplement No. 2 to Assignment of Lease and Rent, recorded on October 23, 1996, in the Official Records, as Instrument No. 13492445 24 SUPPLEMENT NO. 3 TO ASSIGNMENT OF LEASE AND RENT THIS SUPPLEMENT NO. 3 (this "Supplement"), dated as of _______________ ___, 1997, to the ASSIGNMENT OF LEASE AND RENT, dated as of October 18, 1996 (the "Assignment"), made by SUMITOMO BANK LEASING AND FINANCE, INC., (the "Lessor"), in favor of THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as Agent (in such capacity, the "Agent") for the Lenders. Capitalized terms used herein but not otherwise defined have the meanings specified in the Assignment. The parties hereto agree as follows: 1. The Property. In accordance with the Assignment, the Lessor has executed this Supplement to subject the Master Lease, as supplemented by the Lease Supplement attached as Schedule 1 hereto, to the Assignment. The description of the Property is attached hereto as Schedule 2. 2. Integrated Assignment. Following the execution and delivery of this Supplement, this Supplement, and all supplements previously delivered under the Assignment, shall constitute a part of the Assignment. 3. Confirmation. Except as expressly supplemented hereby, the provisions of the Assignment are and shall remain in full force and effect. Further, the Lessor hereby reaffirms its obligations under the Assignment. IN WITNESS WHEREOF, the Lessor has caused this Supplement to be duly executed as of the day and year first above written. SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor By__________________________________________ Name: Title: 25 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public" personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) ------------------------------ ------------------------------ ------------------------------ [ ] CORPORATE OFFICER(S) ---------------------------- TITLE ---------------------------- TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER ---------------------- ---------------------------- ---------------------------- ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ 26 MUST BE Number of Pages _____ Date of Document________________ ATTACHED Signer(s) Other Than Named Above _____________________ TO THE DOCUMENT DESCRIBED AT RIGHT: 27 Consent of Lessee to Supplement to Assignment of Lease and Rent CONSENT AND ACKNOWLEDGMENT BY SYMANTEC CORPORATION The undersigned hereby acknowledges receipt of a counterpart original of, and consents to, the foregoing Supplement No. 3 to the Assignment of Lease and Rent. The foregoing is furnished for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by the undersigned, and the undersigned understands and intends that the Agent and the Lenders will rely on the foregoing and that the undersigned will be legally bound by the foregoing. This Consent and Acknowledgment shall inure to the benefit of the Agent, the Lenders and their respective successors and assigns. IN WITNESS WHEREOF, the undersigned has executed and delivered this Consent and Acknowledgment as of _______________ ___, 1997, pursuant to proper authority duly granted. SYMANTEC CORPORATION By__________________________________________ Name: Title: 28 ALL-PURPOSE ACKNOWLEDGEMENT State of ___________________ ) ) County of __________________ ) On _______________________ before me, _______________________________________, Date Name, Title of Officer, e.g., "Jane Doe, Notary Public" personally appeared _________________________________________________________, [ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ----------------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) [ ] INDIVIDUAL(S) --------------------------------- --------------------------------- --------------------------------- [ ] CORPORATE OFFICER(S) ------------------------------ TITLE ------------------------------ TITLE [ ] PARTNER(S) [ ] ATTORNEY-IN-FACT [ ] TRUSTEE(S) [ ] SUBSCRIBING WITNESS [ ] GUARDIAN/CONSERVATOR [ ] OTHER ---------------------- ------------------------------ ------------------------------ ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED DOCUMENT. THIS CERTIFICATE Title or Type of Document_____________________________ 29 MUST BE Number of Pages _____ Date of Document________________ ATTACHED Signer(s) Other Than Named Above _____________________ TO THE DOCUMENT DESCRIBED AT RIGHT: 30 Schedule 1 [Copy of Lease Supplement No. 3] 31 Schedule 2 Real Property in the City of Cupertino, County of Santa Clara, State of California, described as follows: PARCEL ONE: Lot 5, as shown on that certain Map entitled Tract No. 7953 Cupertino City Center Phase III, which Map was filed for record in the office of the Recorder of the County of Santa Clara, State of California on February 27, 1987, in Book 571 of Maps, pages 36 and 37. PARCEL TWO: Easements as described in the Section entitled "Easements and Rights Reserved for Owners" of the Article entitled "Easements and Rights of Entry" of the Declaration of Covenants, Conditions, and Restrictions and Grant of Easement for Cupertino City Center recorded October 9, 1985, in Book J482, page 1907, as amended by that certain First Amendment to Declaration of Covenants, Conditions, and Restrictions and Grant of Easements recorded September 2, 1987, in Book K281, page 2071, each in the Official Records of Santa Clara County, California. PARCEL THREE: Easements for parking, landscaping, support, settlement and encroachment as granted to Cupertino City Center Buildings, a California Limited Partnership, in the Grant of Easement (Cupertino City Center 5) recorded _______________ ___, 1997 under Series No. ______________. 32 [EXECUTION COPY] This instrument prepared by, recording requested by, and when recorded return to: MAYER, BROWN & PLATT 1675 Broadway New York, New York 10019 Attention: Michael Sloyer, Esq. ================================================================================ MASTER AMENDMENT NO. 1 dated as of March 3, 1997 among SYMANTEC CORPORATION, as Lessee, Pledgor, Guarantor and Construction Agent, SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor, THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, and the other VARIOUS FINANCIAL INSTITUTIONS IDENTIFIED HEREIN, as Lenders, and THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as Agent. ----------------------- Lease Financing of Three Properties Located in Cupertino, California and Construction of Certain Improvements for Symantec Corporation ================================================================================ This Master Amendment No. 1 is an amendment to, among other things, that certain Assignment of Lease and Rent recorded on October 21, 1996 in the Official Records of Santa Clara County, California (the "Official Records") as Instrument No. 13489803, as supplemented by that certain Supplement No. 1 to Assignment of Lease and Rent, with respect to the land described on Annex 1 hereto, recorded on October 21, 1996, in the Official Records, as Instrument No. 13489804, that certain Supplement No. 2 to Assignment of Lease and Rent, with respect to the land described on Annex 2 hereto, recorded on October 23, 1996, in the Official Records, as Instrument No. 13492445, and that certain Supplement No. 3 to Assignment of Lease and Rent, with respect to the land described on Annex 3 hereto, recorded on February 5, 1997, in the Official Records, as Instrument No. 13602290. 33 MASTER AMENDMENT NO. 1 THIS MASTER AGREEMENT NO. 1 (this "Amendment"), dated as of March 3, 1997, to (a) that certain Participation Agreement dated as of October 18, 1996 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Participation Agreement") by and among SYMANTEC CORPORATION, a Delaware corporation, as the Lessee, Pledgor and Guarantor; SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation, as Lessor; THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, a Japanese banking organization acting through its San Francisco Branch, and the other Lenders; and THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as Agent; (b) that certain Master Lease and Deed of Trust dated as of October 18, 1996 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Master Lease"), between the Lessee and the Lessor; (c) that certain Loan Agreement dated as of October 18, 1996 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Loan Agreement"), among the Lessor, the Lenders and the Agent; and (d) that certain Assignment of Lease and Rent dated as of October 18, 1996 and recorded on October 21, 1996 in the Official Records of Santa Clara County, California (the "Official Records"), as Instrument No. 13489803 (as supplemented by Supplement No. 1 to Assignment of Lease and Rent dated as of October 18, 1996 and recorded on October 21, 1996 in the Official Records as Instrument No. 13489804, Supplement No. 2 to Assignment of Lease and Rent dated as of October 22, 1996 and recorded on October 23, 1996 in the Official Records as Instrument No. 13492445, and Supplement No. 3 to Assignment of Lease and Rent dated as of February 5, 1997 and recorded on February 5, 1997 in the Official Records as Instrument No. 13602290, and as amended, supplemented, amended and restated or otherwise modified from time to time, the "Assignment of Lease and Rent"), made by Sumitomo Bank Leasing and Finance, Inc., to The Sumitomo Bank, Limited, San Francisco Branch, as Agent. W I T N E S S E T H: WHEREAS, the Lessee, the Lessor, the Lenders and the Agent have heretofore entered into the Participation Agreement; WHEREAS, the Lessee and the Lessor have heretofore entered into the Master Lease and certain Lease Supplements; WHEREAS, the Lenders and the Lessor wish to finance the construction of certain Improvements located on the Land subject to Lease Supplement No. 3; 34 WHEREAS, the Lessee, as Construction Agent, will construct the Improvements on the Land subject to Lease Supplement No. 3 and such Improvements, as constructed, will be the property of the Lessor; WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee desires to lease from the Lessor, such Improvements; WHEREAS, the Improvements on the Land subject to Lease Supplement No. 3 will be made subject to the Master Lease pursuant to a Lease Supplement to be dated as of the date hereof, and will become part of the Property subject to the terms of the Master Lease; WHEREAS, the Lessee, the Lessor, the Lenders and the Agent now desire to amend (a) the Participation Agreement (including Schedule I thereto), (b) Appendix A to the Participation Agreement, (c) the Master Lease, (d) each Lease Supplement, (e) the Loan Agreement and (f) the Assignment of Lease and Rent, as hereinafter provided; NOW, THEREFORE, in consideration of the mutual agreements contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS; INTERPRETATION Unless the context shall otherwise require, capitalized terms used and not defined herein (including the recitals hereto) shall have the meanings assigned thereto in Appendix A to the Participation Agreement (as amended hereby, "Appendix A") for all purposes hereof; and the rules of interpretation set forth in Appendix A shall apply to this Amendment. ARTICLE II CERTAIN AMENDMENTS SECTION II.1. Amendments to the Participation Agreement. Solely with respect to the Subject Property and not with respect to Property No. 1 and the Improvements constructed thereon, the Master Lease is hereby amended as follows: (a) Amendment to Article II. Article II of the Participation Agreement is hereby amended as follows: -2- 35 (i) the caption is amended by adding a semicolon at the end thereof and inserting the following immediately after such semicolon: "CONDITIONS PRECEDENT TO EACH CONSTRUCTION ADVANCE; CONDITIONS TO SUBSTANTIAL COMPLETION". (ii) the following provisions shall be inserted at the end of such Article: SECTION 2.3. Conditions Precedent to each Construction Advance. The obligations of the Lessor to make a Construction Advance on a Construction Payment Date is subject to satisfaction or waiver of the following conditions precedent: (a) Funding Request. Each of the Lenders, the Lessor and the Agent shall have received a fully executed counterpart of the applicable Funding Request in accordance with Section 3.4 (except that the Funding Request shall be substantially in the form of Exhibit E to Master Amendment No. 1) executed by the Lessee, as Construction Agent. Each of the delivery of a Funding Request and the acceptance of the proceeds of the applicable Construction Advance shall constitute a representation and warranty by the Lessee that on such Construction Payment Date (both immediately before and after giving effect to the making of such Construction Advance and the application of the proceeds thereof), the statements made in Section 8.1 are true and correct. (b) Fees. The Agent and the Lessor shall have received all fees then due and payable pursuant to Section 4.3. (c) Accuracy of Representations and Warranties. On the applicable Construction Payment Date the representations and warranties of the Lessee contained herein and in each of the other Operative Documents shall be true and correct in all Material respects as though made on and as of such date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all Material respects on and as of such earlier date. -3- 36 (d) Litigation. On the applicable Construction Payment Date there shall not be any actions, suits or proceedings pending or, to the knowledge of the Lessee, threatened by or against the Lessee (i) that are reasonably likely to have a Material adverse effect on City Center V or (ii) that question the validity of the Operative Documents or the rights or remedies of the Lessor with respect to the Lessee or City Center V under the Operative Documents. (e) No Default. There shall not have occurred and be continuing any Default or Event of Default under the Master Lease, and no Default or Event of Default under the Master Lease will have occurred after giving effect to the making of the Construction Advance requested by such Funding Request. (f) Commitment Amount. After giving effect to the applicable Construction Advance, (x) the condition set forth in Section 3.1(c) shall not be violated and (y) the Property Improvement Costs for City Center V shall not exceed the Construction Commitment. (g) Cost of Completion. After giving effect to the applicable Construction Advance, the estimated as yet unpaid cost to the Construction Agent of completing the Construction pursuant to the Construction Documents shall not exceed the Available Construction Commitment. (h) Building Permits. All building permits required by any Governmental Authority in connection with the Construction for which the applicable Construction Advance is being made shall have been obtained. (i) Prime Construction Contract. With respect to all Construction Advances, the Prime Construction Contract shall have been duly executed and delivered by the parties thereto and shall be in form and substance satisfactory to the Lessor. (j) Title Policy Endorsement. The Lessor shall have received on the date of such Construction Advance an endorsement to the title policy delivered pursuant to the Lease (i) indicating that since the date of the preceding Construction Advance there has been no change in the state of title, and (ii) updating the title policy to the date of such Construction Advance. -4- 37 SECTION 2.4. Conditions to Substantial Completion of the Property. Substantial Completion shall be deemed to have occurred for purposes of the Operative Documents at such time as the Construction shall have been substantially completed in accordance with the Plans and Specifications and all Applicable Law, as evidenced by certificates of the Architect, the Prime Contractor and the Construction Agent, all in form and substance reasonably satisfactory to the Lessor. (b) Amendment to Section 3.1. Section 3.1 of the Participation Agreement is hereby amended and restated to read in its entirety as follows: SECTION 3.1. Advances. (a) Subject to the conditions and terms hereof, the Lessor and the Agent shall take the following actions at the written request of the Lessee on the Acquisition Date for each Property: (i) the Lessor and the Agent shall make an Advance (out of the funds provided by the Lessor and the Lenders) to the Lessee, for the purpose of financing the acquisition of Land and Improvements existing thereon, if any, and the Fees and the Transaction Expenses incurred in connection therewith, and the proceeds of such Advances shall be made directly to the Lessee or to such payees designated in writing by the Lessee; (ii) the Lessor shall acquire the Land and Improvements, if any (using the funds provided by the Lessor and the Lenders); and (iii) the Lessor shall lease the Land and Improvements to the Lessee under the Master Lease and the respective Lease Supplements. (b) Subject to the conditions and terms hereof, (including, without limitation, receipt of a Funding Request in accordance with Section 3.4), the Lessor and the Agent shall make a Construction Advance on a Construction Payment Date (out of funds provided by the Lessor and the Lenders) to the Lessee, for the purpose of financing the Construction of Improvements for City Center V, and the proceeds of such Construction Advances shall be paid directly to the Construction Agent or its designee(s) for the purpose of paying or reimbursing itself for Property Improvement Costs, and -5- 38 paying Capitalized Interest, the Arrangement Fee, the Commitment Fees, Transaction Expenses paid or payable by the Lessee in connection therewith, and all fees paid or payable by the Lessee to the Lessor in connection with the Operative Documents. (c) Notwithstanding any other provision hereof, the Participants shall not be obligated to make any Advance if, after giving effect thereto, the aggregate outstanding amounts of each of the Loans and the Lessor Amounts would exceed the Maximum Commitment Amount. (c) Amendment to Section 3.2. Section 3.2 of the Participation Agreement is hereby amended as follows: (x) by deleting the words "the Acquisition Date for each Property" appearing in the third line thereof and replacing them with the words "each Funding Date", and (y) by deleting the word "Acquisition" appearing in the sixth line thereof and replacing it with the word "Funding". (d) Amendment to Section 3.3. Section 3.3 of the Participation Agreement is hereby amended as follows: (x) by deleting the words "the Acquisition Date for each Property" appearing in the third and fourth lines thereof and replacing them with the words "each Funding Date" and (y) by deleting the word "Acquisition" appearing in the seventh line thereof and replacing it with the word "Funding". (e) Amendments to Section 3.4. (i) Clause (a) of Section 3.4 of the Participation Agreement is hereby amended as follows: (x) by deleting the word "Acquisition" appearing in the sixth line thereof immediately after the words "prior to the proposed" and replacing it with the word "Funding", (y) by deleting the word "Acquisition" appearing in subclause (i) of such clause (a) and replacing it with the word "Funding" and (z) by deleting the word "and" appearing between subclauses (ii) and (iii) of such clause (a), and inserting the words "and (iv) in the case of a Construction Advance, requesting that the proceeds of such Construction Advance be wire transferred to the accounts and Persons specified therein" immediately before the period at the end of such sentence. (ii) Clause (b) of Section 3.4 of the Participation Agreement is hereby amended by inserting the words "and Property Improvement Costs" immediately before the period at the end of such sentence. (f) Amendment to Section 4.3. Section 4.3 of the Participation Agreement is hereby amended and restated in -6- 39 its entirety to read as follows: SECTION 4.3. Fees. The Lessee hereby agrees to pay the fees set forth in this Section 4.3. All such fees shall be non-refundable. (a) Fee Letter. The Lessee shall pay the Fees to the Lessor and the Agent. (b) Commitment Fee. The Lessee shall pay to the Lessor, for the period (including any portion thereof when the Lessor's obligations pursuant to Section 3.2 are suspended by reason of the Lessee's inability to satisfy any condition of Article II) commencing on (and including) the Improvements Closing Date for City Center V and continuing through (but excluding) the last day of the Construction Commitment Period, a Commitment Fee (the "Commitment Fee") at a rate of 0.275% per annum on the average daily unused portion of the Construction Commitment Amount. The Commitment Fee shall be payable by the Lessee in arrears on each Construction Payment Date and on the last day of the Construction Commitment Period. (b) Arrangement Fee. The Lessee shall pay to the Lessor an Arrangement Fee (the "Arrangement Fee") in the amount of $85,500.00, which amount shall be payable on the Improvements Closing Date for City Center V and will be capitalized and included in the Property Improvement Costs of City Center V. (g) Amendment to Section 8.2. Section 8.2 of the Participation Agreement is hereby amended by deleting the word "Acquisition" appearing in the fifth line thereof and replacing it with the words "Funding". (h) Amendment to Section 9.1. Clause (a) of Section 9.1 of the Participation Agreement is hereby amended by deleting the word "Acquisition" appearing in the fourth line of such clause and replacing it with the word "Funding". (i) Amendment to Section 13.2. Clause (a) of Section 13.2 of the Participation Agreement is hereby amended by inserting the following words immediately prior to the period at the end of such clause: "(or, in the case of the Improvements constructed on City Center V pursuant to the Construction Agency Agreement, the Appraisal delivered on the Improvements Closing Date)". -7- 40 (j) Amendment to Schedule I. Schedule I to the Participation Agreement is hereby amended and restated in its entirety to read as set forth in Schedule I attached hereto. SECTION II.2. Amendments to Appendix A. Appendix A to the Participation Agreement is hereby amended as follows: (a) The following definitions shall be added to Appendix A in their appropriate alphabetical order: "Architect" means Hellmuth, Obata + Kassabaum, or such other Person who shall, with the prior consent of the Lessor, have been designated by the Construction Agent to act as the architect for purposes of the Construction. "Available Construction Commitment" means at any time, an amount equal to the excess, if any, of (a) the amount of the Construction Commitment Amount over (b) the aggregate original principal amount of all Construction Advances (including all Construction Advances made for the purpose of financing Capitalized Interest, Commitment Fees and the Arrangement Fee). "Capitalized Interest" means, for each Construction Payment Date during the Construction Commitment Period, an amount equal to (a) the aggregate outstanding Property Improvement Costs on such date multiplied by (b) the LIBO Rate (Reserve Adjusted) plus a margin of 0.275% multiplied by (c) the number of days elapsed since the immediately preceding Construction Payment Date (or, in the case of the first Construction Payment Date, the number of days elapsed since the first Construction Advance), divided by (d) 360. "City Center V" means the Property consisting of (a) the Land and Improvements covered by Lease Supplement No. 3 dated as of February 5, 1997, together with (b) all Improvements thereon constructed pursuant to the Construction Agency Agreement. "Construction" means the construction and installation of all Improvements contemplated by the Plans and Specifications. "Construction Advance" means each Advance made by the Lessor and the Agent to the Construction Agent for the purpose of paying Property Improvement Costs with respect to City Center V. -8- 41 "Construction Agency Agreement" means the Construction Agency Agreement dated as of March 3, 1997 between the Lessor and the Construction Agent, with respect to City Center V. "Construction Agency Agreement Event of Default" means a "Construction Agency Agreement Event of Default" as defined in Section 5.1 of the Construction Agency Agreement. "Construction Agent" means Symantec Corporation, as construction agent under the Construction Agency Agreement. "Construction Commitment Amount" means $28,500,000. "Construction Commitment Period" means the period commencing on (and including) the Improvements Closing Date for City Center V and ending on (but excluding) the date occurring on the earliest of (x) the first Business Day of the second full month following Substantial Completion, (y) the first Business Day following the calendar month in which the Construction Commitment Amount has been fully funded and (z) the first Business Day of the twenty-fifth (25th) month following the Improvements Closing Date. "Construction Documents" is defined in Section 2.4 of the Construction Agency Agreement. "Construction Payment Date" means (a) the last Business Day of each calendar month, commencing with the last Business Day of March, 1997, and (b) the last day of the Interim Lease Term (provided, that if such day is not a Business Day, such Construction Payment Date shall be extended to the next succeeding Business Day). "Force Majeure Event" means any event (the existence of which was not known and could not have been discovered through the exercise of due diligence by the Lessee or the Construction Agent prior to the Improvements Closing Date) beyond the control of the Lessee and the Construction Agent, including, but not limited to, strikes, lockouts, adverse soil conditions, acts of God, adverse weather conditions, inability to obtain labor or materials, government activities, civil commotion and enemy action; but excluding any event, cause or condition that results from the Construction Agent's financial condition or failure to pay or any -9- 42 event, cause or condition which could have been avoided or which could be remedied through the exercise of commercially reasonable efforts or the commercially reasonable expenditure of funds. "Funding Date" means (a) each Acquisition Date and (b) each date on which a Construction Advance is made. "Improvements Closing Date" is defined in Section 3.1 of Master Amendment No. 1. "Interim Lease Term" is defined in Section 2.3 of the Master Lease. "Master Amendment No. 1" means the Master Amendment No. 1 dated as of March 3, 1997, among the Lessee, the Lessor, the Lenders and the Agent, amending the Participation Agreement, Appendix A to the Participation Agreement, the Master Lease, the Loan Agreement and the Assignment of Lease and Rent. "Outside Completion Date" means the date occurring twenty-four (24) months after the Improvements Closing Date. "Plans and Specifications" means the plans and specifications for the construction and installation of Improvements for City Center V, as more particularly described in Schedule 2 to the Construction Agency Agreement. "Prime Construction Contract" means the contract between the Construction Agent and the Prime Contractor, as amended from time to time in accordance with the Construction Agency Agreement. "Prime Contractor" means the contractor designated as such in the Prime Construction Contract or such other Person who shall, with the prior consent of the Lessor, have been designated by the Construction Agent to act as the general contractor for purposes of the Construction. "Property Improvement Costs" means out-of-pocket costs of the Construction Agent incurred and properly payable under the Construction Documents in accordance with the Operative Documents. "Substantial Completion" means such time as the conditions set forth in Section 2.4 of the Participation Agreement shall have been satisfied with -10- 43 respect to City Center V. (b) The definition of "Appraisal" is hereby amended by inserting the words "(or, in the case of the Appraisal delivered with respect to the Improvements on City Center V, as of the Improvements Closing Date)" immediately after the words "Fair Market Sales Value of such Property as of the Acquisition Date" appearing therein. (c) The definition of "Lease Supplement" is hereby amended by inserting the words "or Improvements Closing Date, as applicable," immediately after the words "dated as of the Acquisition Date" appearing therein. (d) The definition of "Maximum Commitment Amount" in Appendix A is hereby amended by deleting the amount "$53,000,000.00" and replacing it with the amount "$81,500,000.00". (e) the definition of "Operative Documents" in Appendix A is hereby amended by deleting the word "and" at the end of clause (k) thereof, by deleting the period at the end of clause (l) thereof and replacing it with a semicolon, and by inserting the following immediately after such semicolon: (m) the Construction Agency Agreement; and (n) Master Amendment No. 1. SECTION II.3. Amendments to Master Lease. The Master Lease is hereby amended as follows: (a) Amendment to Section 2.3. Section 2.3 of the Master Lease is hereby amended by inserting the words "(other than the Improvements comprising part of City Center V)" immediately after the words "with respect to any Property", and inserting the following at the end of such Section: "The Lease Term of this Master Lease with respect to the Improvements comprising part of City Center V and constructed pursuant to the Construction Agency Agreement shall consist of an Interim Lease Term (the "Interim Lease Term") and a Base Lease Term. The Interim Lease Term for such Improvements shall begin on (and include) the Improvements Closing Date and end on (but exclude) the first day of the Base Lease Term for such Improvements. The Base Lease Term for the Improvements comprising part of City Center V and constructed pursuant to the Construction Agency Agreement shall (i) begin on (and include) the earliest of (x) the first Business Day of the second full month following Substantial Completion, (y) the first Business Day following the calendar month in which the Construction -11- 44 Commitment Amount has been fully funded and (z) the first Business Day of the twenty-fifth (25th) month following the Improvements Closing Date (provided, that no Construction Agency Agreement Event of Default shall have occurred and be continuing on such date) and (ii) end on (but exclude) the seventh (7th) anniversary of the Documentation Date, unless earlier terminated in accordance with the provisions of this Master Lease and the other Operative Documents. (b) Amendment to Section 3.1. Clause (a) of Section 3.1 of the Master Lease is hereby amended by deleting the phrase "During the Lease Term" at the beginning of such clause and replacing it with the phrase "During the Base Lease Term for each Property". SECTION II.4. Amendments to Loan Agreement. The Master Lease is hereby amended as follows: (a) Amendment to Second Recital. The Second Recital of the Loan Agreement is hereby amended by deleting the amount "$45,800,000.00" appearing therein and replacing it with the amount "$70,450,000.00". (b) Amendment to Section 2.1. Section 2.1 of the Loan Agreement is hereby amended by inserting the words "and Property Improvement Costs" immediately after the words "and to pay Property Acquisition Costs" appearing in the fifth line thereof. (c) Amendment to Section 8.11. Section 8.11 of the Loan Agreement is hereby amended as follows: (i) by inserting a comma after the word "Lessee" appearing in the fourth line thereof, inserting the words "Agent, any Lender" immediately after such comma, and deleting the word "its" appearing before the words "respective successors" and replacing it with the word "their", (ii) by inserting the words "for any liability or obligation hereunder or under any other Operative Document (including without limitation, the payment of the principal of, or interest on, the Loans) or" immediately after the words "respective successors and assigns" appearing in the fourth and fifth lines of such Section, (iii) by deleting the words "Master Lease" immediately following the words "in respect of this" appearing in the fifth line of such Section and replacing them with the words "Loan Agreement" and (iv) by inserting the words "or the Lenders" immediately after the words "obligations of Lessor to the Lessee" appearing in clause (ii) of such Section. -12- 45 SECTION II.5. Amendment to Assignment of Lease and Rent. The Assignment of Lease and Rent is hereby amended as follows: (a) Schedule 1 to each of (i) Supplement No. 1 to Assignment of Lease and Rent, dated as of October 18, 1996 and recorded on October 21, 1996 in the Official Records as Instrument No. 13489804, (ii) Supplement No. 2 to Assignment of Lease and Rent, dated as of October 22, 1996 and recorded on October 23, 1996 in the Official Records as Instrument No. 13492445 and (iii) Supplement No. 3 to Assignment of Lease and Rent, dated as of February 5, 1997 and recorded on February 5, 1997 in the Official Records as Instrument No. 13602290, is hereby amended in each case to reflect the amendment made as of the date hereof to the Lease Supplement referred to in such Schedule; (b) the first recital of the Assignment of Lease and Rent is hereby amended by inserting the words "as amended by Master Amendment No. 1 dated as of March 3, 1997, and" immediately after the open parenthesis on the second line thereof and immediately before the words "as amended, restated, supplemented or otherwise modified form time to time, the "Loan Agreement")"; and (c) Section 2 of the Assignment of Lease and Rent is hereby amended by inserting the words "the Notes and the other Operative Documents," immediately after the words "obligations under the Loan Agreement," appearing in the first and second line of such Section. SECTION II.6. Effect of Amendments. Except as otherwise specifically amended hereby, each of the Master Lease, the Participation Agreement and Appendix A to the Participation Agreement shall remain in full force and effect and all references therein to each such document, and all references in each of other Operative Documents and the other documents, instruments or agreements executed and delivered in connection herewith and therewith shall refer to the Master Lease, the Participation Agreement and Appendix A to the Participation Agreement as amended hereby. ARTICLE III CONDITIONS PRECEDENT SECTION 3.1. Improvements Closing Date. This Amendment shall be effective on the date (the "Improvements Closing Date") on which all the following conditions precedent thereto shall have been satisfied or waived by the applicable parties as set forth herein: (a) Master Amendment No. 1. This Amendment shall have -13- 46 been duly authorized, executed and delivered by the parties hereto. (b) Construction Agency Agreement. A Construction Agency Agreement in the form of Exhibit A hereto shall have been duly authorized, executed and delivered by the Lessee and the Lessor. (c) New Notes. The Agent shall have received, for the account of each Lender, a note substantially in the form of Exhibit A to the Loan Agreement (each, a "New Note"), duly executed and delivered by the Lessor, payable to the order of such Lender and in a principal amount equal to the initial Commitment of such Lender after giving effect to the increase in Commitments provided by this Amendment (it being understood that each Lender shall, promptly after receipt of its New Note, surrender its old Note for cancellation to the Lessee). (d) Amendments to Lease Supplements. Amendment No. 1 to Lease Supplement No. 1, Amendment No. 1 to Lease Supplement No. 2, and Amendment No. 1 to Lease Supplement No. 3, in the forms of Exhibits B, C and D, respectively, shall have been duly authorized, executed and delivered by the Lessee and the Lessor, and the original counterpart of each Amendment to a Lease Supplement shall have been delivered to the Agent and the Lenders. (e) Lessor Financing Statements. The Lessee shall have delivered to the Lessor all Lessor Financing Statements relating to the Improvements to be constructed on City Center V as the Lessor or any other Participant may reasonably request in order to protect the Lessor's interest under the Master Lease and the Lease Supplement relating to such Property to the extent the Master Lease and such Lease Supplement constitute security agreements. (f) Recordation. Each of the Participants shall have received evidence reasonably satisfactory to it that each of (i) the amendments described in clause (d) above, (ii) the Lessor Financing Statements described in clause (e) above and (iii) this Amendment, has been, or are being, recorded in a manner sufficient to properly secure each of their interest therein. (g) Appraisal. The Lessor and the Lenders shall have received an Appraisal with respect to City Center V, in form and substance satisfactory to the Agent and the Lessor, which Appraisal shall show that, as of the Improvements Closing Date, the Fair Market Sales Value of the Land and the Improvements to be constructed thereon in accordance -14- 47 with the Plans and Specifications shall not be less than the sum of (i) the Property Acquisition Cost for City Center V and (ii) ninety percent (90%) of the Construction Commitment Amount. (h) Title Insurance. With respect to each Property, First American Title Insurance Company shall have reissued, in favor of the Lessor, the ALTA extended coverage owners title insurance policies previously committed to be issued pursuant to Section 2.2(i) of the Participation Agreement in connection with the acquisition of such Property, each dated as of the Improvements Closing Date, with the same endorsements, and otherwise in the same form as agreed to by First American Title Insurance Company in connection with the acquisition of such Property, and with no other title exceptions other than (a) current taxes (not yet delinquent) and (b) the Master Lease, as supplemented and modified by the applicable Lease Supplement, this Amendment and the applicable Amendment No. 1 to Lease Supplement. Each such reissued title insurance policy shall include a tie-in endorsement confirming the aggregate liability amount for the title policies to be $81,500,000. (i) Lessee's Resolutions. The Lessee shall have delivered to the Agent, the Lessor and each Lender a certificate of its Secretary or an Assistant Secretary attaching and certifying as to the resolutions of the Board of Directors duly authorizing the execution, delivery and performance by it of this Amendment, the Construction Agency Agreement and each other Operative Document to be executed by it in connection herewith or therewith. (j) Legal Opinion. The Agent and the Lessor shall have received, with a copy for each Lender, an opinion of counsel for the Lessee, dated the Improvements Closing Date and addressed to the Agent, the Lessor and the Lenders, in form and substance reasonably satisfactory to the Agent, the Lessor and the Lenders. (k) Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of Lessee shall be satisfactory in form and substance to Lessor and its counsel; and Lessor and its counsel shall have received all information, approvals, opinions, documents or instruments as Lessor or its counsel may have reasonably requested. -15- 48 ARTICLE IV REPRESENTATIONS OF LESSEE SECTION IV.1. Representations of Lessee. The Lessee represents and warrants to each of the other parties as follows: (a) Representations in Operative Documents. The representations and warranties of the Lessee set forth in the Operative Documents (including, without limitation, the representations and warranties set forth in Section 8.2 of the Participation Agreement) are true and correct in all material respects on and as of the Improvements Closing Date except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct on and as of such earlier date. No Event of Default has occurred and is continuing and no Default of which the Lessee has knowledge and that has not been previously disclosed to the Agent and the Participants has occurred and is continuing under the Master Lease, the Construction Agency Agreement or, to the knowledge of the Lessee, any other Operative Document. No Default or Event of Default under the Master Lease, the Construction Agency Agreement or, to the knowledge of the Lessee, any other Operative Document, will occur as a result of, or after giving effect to, the transactions contemplated hereby. (b) Due Authorization, Non-Contravention, etc. The execution, delivery and performance by the Lessee of this Amendment and each other Operative Document executed or to be executed by it in connection with this Amendment are within the Lessee's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene the Lessee's Organic Documents; (ii) contravene any material contractual restriction the contravention of which is reasonably likely to have a material adverse effect on the financial condition of the Lessee (including any covenant relating to the incurrence of indebtedness, which restrictions the Lessee hereby acknowledges are material), law or governmental regulation or court decree or order binding on or affecting the Lessee; or (iii) result in, or require the creation or imposition of, any Lien on any of the Lessee's properties (including the Properties) other than as are contemplated by the Operative Documents. -16- 49 (c) Governmental Approval, Regulation, etc. No authorization or approval or other action by, and not notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Lessee of this Amendment or any other Operative Document to be executed by it in connection with this Amendment. (d) Validity, etc. This Amendment constitutes, and each other Operative Document executed by the Lessee in connection with this Amendment will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Lessee enforceable in accordance with their respective terms, subject, in each case, as to enforceability, to bankruptcy, insolvency, reorganization and other similar laws affecting enforcement of creditor rights generally (insofar as any such law relates to the bankruptcy, insolvency, reorganization or similar event of the Lessee) and, as to the availability of specific performance or other injunctive relief, subject to the discretionary power of a court to deny such relief and to general equitable principles. ARTICLE V MISCELLANEOUS SECTION V.1. Ratification of and References to the Operative Documents. Upon the Improvements Closing Date, this Amendment shall be known (and may be referred to) as Amendment No. 1, dated as of March 3, 1997, to each of the Operative Documents amended hereby. This Amendment is an Operative Document executed pursuant to the Participation Agreement, including for purposes of construction as provided in Appendix A thereto. All references to the Participation Agreement, the Master Lease, any Lease Supplement, the Loan Agreement or the Assignment of Lease and Rent shall hereafter be deemed to refer to such Operative Document as amended hereby. SECTION V.2. Counterparts. This Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION V.3. Headings, etc. The Table of Contents and headings of the various Articles and Sections of this Amendment are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. -17- 50 SECTION V.4. GOVERNING LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF CALIFORNIA (EXCLUDING ANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. SECTION V.5. Severability. Any provision of this Amendment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION V.6. Liability Limited. The parties hereto agree that except as specifically set forth herein or in any other Operative Document, Lessor shall have no personal liability whatsoever to the Lessee or any Participant or their respective successors and assigns for any claim based on or in respect hereof or any of the other Operative Documents or arising in any way from the transactions contemplated hereby or thereby and the recourse shall be solely had against the Lessor's interest in any Property; provided, however, that Lessor shall be liable in its individual capacity (a) for its own willful misconduct or gross negligence (or negligence in the handling of funds), (b) breach of any of its representations, warranties or covenants under the Operative Documents, or (c) for any Tax based on or measured by any fees, commission or compensation received by it for acting as the Lessor as contemplated by the Operative Documents. It is understood and agreed that, except as provided in the preceding sentence: (i) Lessor shall have no personal liability under any of the Operative Documents as a result of acting pursuant to and consistent with any of the Operative Documents; (ii) all obligations of Lessor to the Lessee are solely nonrecourse obligations except to the extent that it has received payment from others; and (iii) all such personal liability of Lessor is expressly waived and released as a condition of, and as consideration for, the execution and delivery of the Operative Documents by Lessor. -18- 51 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. SYMANTEC CORPORATION, as Lessee, Pledgor, Guarantor and Construction Agent By____________________________________ Name: Title: S-1 Master Amendment No. 1 52 SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor By____________________________________ Name: Title: S-2 Master Amendment No. 1 53 THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as Lender and as Agent By____________________________________ Name: Title: S-3 Master Amendment No. 1 54 SCHEDULE I AMENDED AND RESTATED SCHEDULE I TO PARTICIPATION AGREEMENT COMMITMENTS
PARTICIPANT COMMITMENT Lender ------ The Sumitomo Bank, Limited, San $70,450,000.00 Francisco Branch Lessor ------ Sumitomo Bank Leasing and Finance, $11,050,000.00 Inc. ============== TOTAL: $81,500,000.00
55 EXHIBIT B [Form of Amendment No. 1 to Lease Supplement No. 1] 56 EXHIBIT C [Form of Amendment No. 1 to Lease Supplement No. 2] 57 EXHIBIT D [Form of Amendment No. 1 to Lease Supplement No. 3] 58
TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS; INTERPRETATION ARTICLE II CERTAIN AMENDMENTS SECTION 2.1. Amendments to the Participation Agreement.................. 2 (a) Amendment to Article II............................. 2 (b) Amendment to Section 3.1............................ 5 (c) Amendment to Section 3.2............................ 6 (d) Amendment to Section 3.3............................ 6 (e) Amendments to Section 3.4........................... 6 (f) Amendment to Section 4.3............................ 6 (g) Amendment to Section 8.2............................ 7 (h) Amendment to Section 9.1............................ 7 (i) Amendment to Section 13.2........................... 7 (j) Amendment to Schedule I............................. 7 SECTION 2.2. Amendments to Appendix A................................... 8 SECTION 2.3. Amendments to Master Lease................................. 11 (a) Amendment to Section 2.3............................ 11 (b) Amendment to Section 3.1............................ 12 SECTION 2.4. Amendments to Loan Agreement............................... 12 (a) Amendment to Second Recital......................... 12 (b) Amendment to Section 2.1............................ 12 (c) Amendment to Section 8.11........................... 12 SECTION 2.5. Amendment to Assignment of Lease and Rent.................. 13 SECTION 2.6. Effect of Amendments....................................... 13 ARTICLE III CONDITIONS PRECEDENT SECTION 3.1. Improvements Closing Date. ................................ 13 (a) Master Amendment No. 1.............................. 14 (b) Construction Agency Agreement....................... 14 (c) New Notes........................................... 14 (d) Amendments to Lease Supplements..................... 14 (e) Lessor Financing Statements......................... 14 (f) Recordation......................................... 14 (g) Appraisal........................................... 14 (h) Title Insurance..................................... 15 (i) Lessee's Resolutions................................ 15 (j) Legal Opinion....................................... 15 (k) Satisfactory Legal Form............................. 15
59
TABLE OF CONTENTS Page ---- ARTICLE IV REPRESENTATIONS OF LESSEE SECTION 4.1. Representations of Lessee.................................. 16 ARTICLE V MISCELLANEOUS SECTION 5.1. Ratification of and References to the Operative Documents.. 17 SECTION 5.2. Counterparts............................................... 17 SECTION 5.3. Headings, etc.............................................. 17 SECTION 5.4. GOVERNING LAW.............................................. 18 SECTION 5.5. Severability............................................... 18 SECTION 5.6. Liability Limited.......................................... 18 Schedule - -------- Schedule I Amended and Restated Schedule I to Participation Agreement Exhibits - -------- Exhibit A Form of Construction Agency Agreement Exhibit B Form of Amendment No. 1 to Lease Supplement No. 1 Exhibit C Form of Amendment No. 1 to Lease Supplement No. 2 Exhibit D Form of Amendment No. 1 to Lease Supplement No. 3 Exhibit E Form of Funding Request for Construction Advances Annexes - ------- Annex 1 Legal Description of Land Covered by Supplement No. 1 to Assignment of Lease and Rent Annex 2 Legal Description of Land Covered by Supplement No. 2 to Assignment of Lease and Rent Annex 3 Legal Description of Land Covered by Supplement No. 3 to Assignment of Lease and Rent
-ii- 60 ANNEX 1 TO MASTER AMENDMENT NO. 1 LEGAL DESCRIPTION OF LAND COVERED BY SUPPLEMENT NO. 1 TO ASSIGNMENT OF LEASE AND RENT 61 ANNEX 2 TO MASTER AMENDMENT NO. 1 LEGAL DESCRIPTION OF LAND COVERED BY SUPPLEMENT NO. 2 TO ASSIGNMENT OF LEASE AND RENT 62 ANNEX 3 TO MASTER AMENDMENT NO. 1 LEGAL DESCRIPTION OF LAND COVERED BY SUPPLEMENT NO. 3 TO ASSIGNMENT OF LEASE AND RENT Real Property in the City of Cupertino, County of Santa Clara, State of California, described as follows: PARCEL ONE: Lot 5, as shown on that certain Map entitled Tract No. 7953 Cupertino City Center Phase III, which Map was filed for record in the office of the Recorder of the County of Santa Clara, State of California on February 27, 1987, in Book 571 of Maps, pages 36 and 37. PARCEL TWO: Easements as described in the Section entitled "Easements and Rights Reserved for Owners" of the Article entitled "Easements and Rights of Entry" of the Declaration of Covenants, Conditions, and Restrictions and Grant of Easement for Cupertino City Center recorded October 9, 1985, in Book J482, page 1907, as amended by that certain First Amendment to Declaration of Covenants, Conditions, and Restrictions and Grant of Easements recorded September 2, 1987, in Book K281, page 2071, each in the Official Records of Santa Clara County, California. PARCEL THREE: Easements for parking, landscaping, support, settlement and encroachment as granted to Cupertino City Center Buildings, a California Limited Partnership, in the Grant of Easement (Cupertino City Center 5) recorded February 5, 1997 under Series No. 13602286. EX-10.18 5 AGREEMENT OF PURCHASE & SALE OF CUPERTINO CITY CTR 1 EXHIBIT 10.18 AGREEMENT OF PURCHASE AND SALE BETWEEN CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY, SELLER AND SYMANTEC CORPORATION, PURCHASER CUPERTINO CITY CENTER ONE 2 TABLE OF CONTENTS -----------------
Page ---- Article 1 Property 1 Article 2 Purchase Price and Deposits 1 Article 3 Failure to Close 3 3.1 Purchaser's Default 3 3.2 Seller's Default 3 Article 4 Closing and Transfer of Title 4 4.1 Closing 4 4.2 Closing Procedure 4 4.3 Purchaser's Performance 6 4.4 Evidence of Authority; Miscellaneous 6 Article 5 Prorations of Rents, Taxes, Etc. 6 Article 6 Purchaser Inspections and Contingencies 8 6.1 Document Inspection 8 6.2 Physical Inspection 9 6.3 Feasibility Period 10 6.4 Survey 10 6.5 Title Contingency 10 Article 7 Loss due to Casualty or Condemnation 11 7.1 Loss due to Condemnation 11 7.2 Loss due to Casualty 12 Article 8 Maintenance of the Property 13 Article 9 Broker 14 Article 10 Representations and Warranties 15 10.1 Limitations on Representations and Warranties 15 10.2 Representations and Warranties 16 10.3 Seller's Knowledge 17 10.4 Survival 18 Article 11 Liability of Parties 18 Article 12 Assignment 19 Article 13 Notices 19 Article 14 Expenses 20
3 TABLE OF CONTENTS (Continued) -----------------------------
Page ---- Article 15 Miscellaneous 21 15.1 Successors and Assigns 21 15.2 Gender 21 15.3 Captions 21 15.4 Construction 21 15.5 Entire Agreement 21 15.6 Recording 22 15.7 No Continuance 22 15.8 Time of Essence 22 15.9 Original Document 22 15.10 Governing Law 22 15.11 Acceptance of Offer 22 15.12 Confidentiality 22 15.13 Surviving Covenants 22 15.14 Attorneys' Fees 23 15.15 Exclusivity Period 23 Exhibit A - Description of Land Exhibit B - Rent Roll Exhibit C - Special Warranty Deed Exhibit D - Bill of Sale Exhibit E - Assignment of Leases Exhibit F - Form of Seller's Affidavit of Non-Foreign Status Exhibit G - Pending Litigation
4 AGREEMENT OF PURCHASE AND SALE THIS AGREEMENT OF PURCHASE AND SALE is made by and between CIGNA Property and Casualty Insurance Company, a Connecticut corporation ("Seller"), and Symantec Corporation, a Delaware corporation ("Purchaser"), as of the "Effective Date" (as defined below). Article I. Property Seller hereby agrees to sell, and Purchaser hereby agrees to buy, all of the following property: (a) a parcel of real property (the "Land"), located in the County of Santa Clara, State of California, more particularly described on Exhibit A attached to this Agreement, together with easements, easement rights, rights of way, rights in and to common areas and any other rights appurtenant to the Land; (b) the buildings and other improvements located on the Land, being a four story office building located at 20300 Stevens Creek Boulevard, Cupertino, California, generally known as Cupertino City Center One (the "Improvements"); (c) all tenant leases relating to the Improvements, being the leases referred to on the Rent Roll attached hereto as Exhibit B (the Land, Improvements, and tenant leases are referred to herein, collectively, as the "Real Property"); and (d) all fixtures, equipment, and other personal property (both tangible and intangible, including, without limitation, any service and maintenance agreements applicable thereto, other than the property management agreement, which shall be terminated) owned by Seller and contained in or related to the Improvements (the "Personal Property") (collectively, the Real Property and the Personal Property are sometimes referred to herein as the "Property"). 5 Article II. Purchase Price and Deposits The purchase price which the Purchaser agrees to pay and the Seller agrees to accept for the Property shall be the sum of Thirty-One Million, Five Hundred Thousand and No/100 Dollars ($31,500,000) (hereinafter referred to as the "Purchase Price"), subject to adjustment as provided in Article V hereof, payable as follows: (a) An earnest money deposit ("Earnest Deposit") of Three Hundred Thousand and No/100 Dollars ($300,000), in cash, to be deposited with First American Title Insurance Company (the "Title Company") within three (3) business days after execution hereof by both parties, such amount to be held in escrow and deposited in an interest-bearing account; (b) An additional earnest money deposit (the "Additional Deposit") of Three Hundred Thousand and No/100 Dollars ($300,000), in cash, to be deposited by Purchaser with the Title Company, within three (3) business days after expiration of the Feasibility Period (hereinafter defined), such amount to be held in escrow and deposited in an interest-bearing account (the Earnest Deposit and the Additional Deposit, with interest thereon, will be referred to hereinafter, collectively, as the "Deposit"); and (c) The balance of the Purchase Price shall be paid at time of Closing by Federal wire transfer, with the transfer of funds to Seller to be completed on the day of the Closing. The Deposit shall be paid to Seller at the Closing as a credit against the Purchase Price. Purchaser shall provide the Title Company with its tax Page 2 6 identification number, and all interest shall be for Purchaser's account for tax purposes. In addition to the Deposit, Purchaser shall deposit five fully executed copies of this Agreement with the Title Company immediately after both parties have executed it. The date of such deposit shall be acknowledged by the Title Company on all copies, and such date shall be the "Effective Date" of this Agreement. The Title Company shall retain one copy of this Agreement and deliver two copies hereof to each of Purchaser and Seller. Article III. Failure to Close 3.1 Purchaser's Default. IF SELLER HAS COMPLIED WITH ALL OF THE COVENANTS AND CONDITIONS CONTAINED HEREIN AND IS READY, WILLING AND ABLE TO CONVEY THE PROPERTY IN ACCORDANCE WITH THIS AGREEMENT AND PURCHASER FAILS TO CONSUMMATE THIS AGREEMENT AND TAKE TITLE, THEN THE PARTIES HERETO RECOGNIZE AND AGREE THAT THE DAMAGES THAT SELLER WILL SUSTAIN AS A RESULT THEREOF WILL BE SUBSTANTIAL, BUT DIFFICULT IF NOT IMPOSSIBLE TO ASCERTAIN. THEREFORE, THE PARTIES AGREE THAT, IN THE EVENT OF PURCHASER'S DEFAULT, SELLER SHALL, AS ITS SOLE REMEDY, BE ENTITLED TO RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES, AND NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS WITH RESPECT TO THE OTHER UNDER THIS AGREEMENT, EXCEPT FOR THE SURVIVING COVENANTS (HEREINAFTER DEFINED). SELLER'S INITIALS: PURCHASER'S INITIALS: ------- ------- 3.2 Seller's Default. In the event that Purchaser has complied with all of the covenants and conditions contained herein and is ready, willing and able to take title to the Property in accordance with this Agreement, and Seller fails to consummate this Agreement and convey title as set forth Page 3 7 herein, then Purchaser shall have, as its sole and exclusive remedy the right to either (i) terminate this contract and recover the Deposit and all of Purchaser's reasonable out-of-pocket expenses incurred by it in connection with its due diligence investigation of the Property pursuant to this Agreement (including, but not limited to, costs of obtaining environmental reports, appraisals and engineering reports), or (ii) pursue the remedy of specific performance of Seller's obligations under this Agreement, provided however that (a) Purchaser must furnish ten (10) days prior written notice to Seller of its intent and election to seek specific enforcement of this Agreement, and (b) Purchaser must not be in default under this Agreement. In the event that either of the conditions set forth in (a) or (b) above is not satisfied, the remedy of specific performance shall be deemed waived by Purchaser. Notwithstanding any of the foregoing to the contrary contained herein, if Purchaser seeks specific performance under this Agreement, Purchaser agrees to accept the Property in its "WHERE IS, AS IS" condition. Purchaser further hereby agrees that prior to its exercise of any right or remedies as a result of any defaults by Seller, Purchaser will first deliver written notice of said default to Seller and give Seller ten (10) days thereafter in which to cure said default, if Seller so elects. Except as specifically provided herein, Purchaser shall have no right to seek money damages of any kind as a result of any default by Seller under any of the terms of this Agreement. Purchaser's claim and any recovery of damages shall be limited to direct damages from Seller's breach of this Agreement, and in no event shall Seller be liable to Purchaser for any punitive, speculative, incidental, consequential or any other type of damages. If for any reason the remedy of specific performance is denied Purchaser following all available court proceedings, or Purchaser discontinues the action for specific performance, then the Deposit, if applicable, shall be returned to Purchaser and Seller shall then be released from any further liability to Purchaser in reference to this Agreement. Page 4 8 Article IV. Closing and Transfer of Title 4.1 Closing. The parties hereto agree to conduct a closing of this sale (the "Closing") on or before 10:00 a.m. E.S.T. on October 22, 1996 ("Closing Date") in the principal office of Morrison & Foerster, or at such other place as may be agreed upon by the parties hereto. This Agreement shall terminate if transfer of title is not completed by the Closing Date (unless such failure to close is due to Seller's default, the date for Closing is extended pursuant to any provision hereof, including, without limitation, the matters described in Sections 6.3, 6.5 and Article VII hereof, or the date for Closing is extended by agreement of the parties, which agreement shall be confirmed in writing). 4.2 Closing Procedure. Seller shall execute and deliver or cause to be delivered (a) a Grant Deed, in the form attached hereto as Exhibit C, proper for recording, conveying Seller's interest in the Real Property to Purchaser, subject, however, to (i) exceptions as reported in the Title Report (defined in Section 6.5) and either approved by Purchaser or as to which objection has been waived by Purchaser, or as shown on the Survey (as defined in Section 6.4), (ii) taxes not yet delinquent, (iii) the rights of lessees and licensees of space in the Improvements at the time of Closing (to the extent such lessees and licensees are listed on the Rent Roll), and (iv) any encumbrances created or permitted by the terms of this Agreement; (b) a Bill of Sale in the form attached hereto as Exhibit D, dated as of the date of Closing conveying to Purchaser any and all Personal Property; (c) an Assignment of Leases in the form attached hereto as Exhibit E, dated the date of Closing, assigning all of the landlord's right, title and interest in and to any tenant and other leases covering all or any portion of the Real Property; (d) an Owner's Title Insurance Policy (the "Owner's Title Policy") dated no earlier than the date of the recording of the Deed, in the full amount of the Purchase Price, insuring that good and indefeasible fee simple Page 5 9 title to the Property is vested in Purchaser, containing no exceptions to such title other than the standard printed exceptions (provided, however, that (i) the printed survey exception must be deleted, except for matters shown on the Survey, (ii) the exception as to ad valorem taxes shall be limited to taxes for the current and subsequent years, and (iii) the exception for tenants and parties in possession shall be limited to those tenants, licensees, and occupants shown on the Rent Roll delivered at Closing), those items listed on Schedule "B" of the Title Report that either were approved by Purchaser or as to which objection has been waived by Purchaser or cured by Seller (but only as to the portion of such encumbrance remaining after such cure), and encumbrances created or permitted by the terms of this Agreement; (e) Tenant Notification Agreements (the "Tenant Notices"), dated the date of the Closing, executed by Seller, and complying with applicable statutes in order to relieve Seller of liability for tenant security deposits (provided the security deposits are paid to Purchaser), notifying the tenants of the Real Property that the Property has been sold to Purchaser and directing the tenants to pay rentals to Purchaser (or Purchaser's designated agent); (f) the originals of all leases and, to the extent in Seller's possession or under Seller's control, as-built plans and specifications and maintenance and service contracts that are to be assumed; (g) a tenant estoppel certificate executed by Canon, in form and substance satisfactory to Purchaser, which certificate shall identify the lease documents and state the date of commencement and termination of the lease term, the rent currently being paid, the amount of any rental payments made in advance, if any, the amount of any security deposit, if any, that no party is in default under the lease, and the date to which rent has been paid and shall list any renewal options that exist, (except that Seller agrees to use reasonable efforts to obtain such estoppel certificates from all other tenants of space in the Improvements other than Purchaser, and Seller shall represent and warrant to the best of Seller's knowledge as to the same matters for all leases shown on the Rent Roll (except the lease to Purchaser) for which no tenant estoppel certificate was obtained); (h) an updated Rent Roll, in the form of the Rent Roll attached Page 6 10 hereto as Exhibit B, dated within 15 days of the date of the Closing; (i) an affidavit that Seller is not a "foreign person" in the form attached as Exhibit G and the corresponding California Form 590 RE Form; (j) a master key or duplicate key for all locks in the Improvements; and (k) to the extent in the possession of Seller or Seller's property management company, all maintenance records. Purchaser acknowledges and agrees that Seller is under no obligation to clear from the title any easements, rights of way, encumbrances, liens, covenants, restrictions, or any other matters of record, or to cure any survey objections of Purchaser, or to create any encumbrances on, or for the benefit of, the Property, except any monetary liens or encumbrances against the Property created by Seller on or after the Effective Date and any existing mortgages or deeds of trust encumbering the Property (which shall be satisfied in full by Seller on or before the Closing Date). Except as set forth above, if Seller does not deliver title at Closing in form consistent with the Title Report as approved or deemed approved in accordance with the terms hereof, such failure shall not constitute a default or breach by Seller hereunder, and notwithstanding any other provision of this Agreement, Purchaser's sole and exclusive remedy shall be to terminate this Agreement and receive a return of the Deposit or to accept conveyance of title as delivered by Seller without reduction of the Purchase Price. 4.3 Purchaser's Performance. At the Closing, Purchaser will cause the Purchase Price to be delivered to the Title Company, will execute and deliver the Tenant Notices, the Assignment of Leases, and the Bill of Sale. 4.4 Evidence of Authority; Miscellaneous. Both parties will deliver to the Title Company and each other such evidence or documents as may reasonably be required by the Title Company or either party hereto evidencing Page 7 11 the power and authority of Seller and Purchaser and the due authority of, and execution and delivery by, any person or persons who are executing any of the documents required hereunder in connection with the sale of the Property. Both parties will execute and deliver such other documents as are reasonably required to effect the intent of this Agreement. Article V. Prorations of Rents, Taxes, Etc. Real estate taxes for the year of closing shall be prorated as of the date of Closing either using actual tax figures or, if actual figures are not available, then using as a basis for said proration the most recent assessed value of the Real Estate multiplied by the current tax rate, with a subsequent cash adjustment to be made between Purchaser and Seller when actual tax figures are available. Personal property taxes, annual permit or inspection fees, sewer charges and other expenses normal to the operation and maintenance of the Property shall also be prorated as of the date of Closing. Rents that have been collected for the month of the Closing will be prorated at the Closing, effect as of the date of the Closing. With regard to rents that are delinquent as of the date of the Closing, (i) no proration will be made at the Closing, (ii) Purchaser will make a good faith effort after the Closing to collect the rents in the usual course of Purchaser's operation of the Property, and (iii) Purchaser will apply all rents collected first to the current rents and the excess amount, if any, shall be applied to the delinquent rent owed to Seller. It is agreed, however, that Purchaser will not be obligated to institute any lawsuit or other collection procedures to collect delinquent rents. Rents collected by Purchaser after the Closing Date, to which Seller is entitled, shall be promptly paid to Seller. As of the Closing Date, Purchaser shall be entitled to a credit for any tenant deposits under the leases. Page 8 12 Final readings on all gas, water and electric meters shall be made as of the date of closing, if possible. If final readings are not possible, gas, water and electricity charges will be prorated based on the most recent period for which costs are available. Any deposits made by Seller with utility companies shall be returned to Seller. Purchaser shall be responsible for making all arrangements for the continuation of utility services. After the Closing, Purchaser will assume full responsibility for all security deposits and advance rental deposits of current tenants of the Real Property currently held by Seller, which items will be itemized by Seller and transferred and paid over to Purchaser at the Closing. All items (including taxes) that are not subject to an exact determination shall be estimated by the parties. When any item so estimated is, after the Closing capable of exact determination, the party in possession of the facts necessary to make the determination shall send the other party a detailed report on the exact determination so made and the parties shall adjust the prior estimate within thirty (30) days after both parties have received said reports. ARTICLE VI. Purchaser Inspections and Contingencies 6.1 Document Inspection. Seller has made or will make available within ten (10) days from the Effective Date of this Agreement the following items relating to the Real Property for review by Purchaser, to the extent in Seller's or its property manager's possession: 1. Copies of all leases and other occupancy agreements applicable to the Property; 2. Copies of all licenses and permits regarding the Property; 3. Seller's existing survey of the Property; 4. Copies of any warranties or guarantees currently in effect (if any); Page 9 13 5. As-built plans and specifications for the improvements on the Property and any soil reports, environmental reports, engineering and architectural studies, grading plans, topographical maps, and similar data relating to the Property; 6. A copy of Seller's policy of lender's title insurance; 7. Copies of all service and maintenance agreements; 8. A Rent Roll prepared as of the first day of the month in which this Agreement is executed; and 9. Books and records of the Property. Purchaser acknowledges that Seller took title to the Property through deed in lieu of foreclosure on March 1, 1995, and that Seller has limited records and knowledge pertaining to prior periods of time. Seller shall also provide to Purchaser on or before two (2) business days before the expiration of the Feasibility Period an updated Rent Roll for the Property for review by Purchaser. Purchaser agrees that if for any reason the Closing is not consummated, Purchaser will immediately return to Seller all materials furnished to Purchaser pursuant to this Section 6.1. 6.2 Physical Inspection. In addition to the items set forth in Section 6.1, Seller will make the Property available for inspection by Purchaser and Purchaser shall, at Purchaser's option and risk, conduct an engineering and/or market and economic feasibility study of the Property and undertake such physical inspection of the Property as Purchaser deems appropriate as soon as possible after the Effective Date of this Agreement. Such inspection shall be conducted at reasonable times upon reasonable oral or written notice to Seller's property manager. Seller shall have the right to designate a representative to accompany Purchaser's employees, agents, and independent contractors on any such inspections. Page 10 14 Purchaser hereby agrees to pay, protect, defend, indemnify and save Seller harmless against all liabilities, obligations, claims (including mechanic's lien claims), damages, penalties, causes of action, judgments, costs and expenses (including, without limitation, attorneys' fees and expenses) imposed upon, incurred by or asserted against Seller in connection with or arising out of the entry upon the Real Property by Purchaser's employees, agents or independent contractors and the actions of such persons on the Real Property. In the event any part of the Property is damaged or excavated by Purchaser, its employees, agents or independent contractors, Purchaser agrees in the event its purchase hereunder is not consummated, to make such additional payments to Seller as may be reasonably required to return the Property to its condition immediately prior to such damage or excavation or, at Seller's option, to cause such work to be done. Notwithstanding any provision to the contrary herein, Purchaser's obligations under this subparagraph shall survive the expiration or termination of this Agreement, and shall survive Closing. 6.3 Feasibility Period. Purchaser shall have a period ending 5:00 p.m. E.D.T. September 19, 1996 to conduct its inspection of the documents delivered in accordance with Section 6.1 and to conduct a physical inspection of the Property as set forth in Section 6.2 (the "Feasibility Period"). On or before the last day of the Feasibility Period, Purchaser may, in its sole discretion without obligation to specify which aspect of its inspection was unsatisfactory, terminate this Agreement by providing a written notice to Seller so providing. Upon receipt of such notice, this Agreement shall terminate and Seller shall instruct the Title Company to return the Deposit to Purchaser, and neither party shall have any obligation to the other, except for the Surviving Covenants. If Purchaser fails to provide such notice of termination on or before the last day of the Feasibility Period, Purchaser shall be deemed to have approved such inspections and this contract shall remain in full force and effect. Page 11 15 6.4 Survey. Purchaser shall obtain, within ten (10) business days of the Effective Date of this Agreement, a survey of the Real Property by a registered surveyor (the "Survey"). The Survey shall show the location of all improvements, structures, driveways, parking areas, easements, rights of way, and any encroachments and shall specify whether the Property is within the 100 year flood plain or flood way. The Survey shall further set forth a legal description of the boundaries of the Real Property in accordance with local practices. Purchaser's obligations hereunder do not constitute a contingency for closing under this Agreement. 6.5 Title Contingency. Purchaser's obligation to purchase the Property is subject to its receipt of a preliminary title report (the "Title Report"), issued by the Title Company, together with legible copies of all items and documents referred to in the Title Report. Purchaser acknowledges that the Title Report and accompanying documents have been delivered to Purchaser by Seller. Purchaser shall have until the last day of the Feasibility Period to state any objections in writing. This contingency shall be deemed satisfied or waived if such written notice of objection is not received by Seller before such date. Such written notice of objection shall state all of Purchaser's objections with specificity. Upon receipt of such notice, Seller may, but shall not be obligated to, cure such objection, except for monetary encumbrances in an amount in the aggregate below $100,000. If Seller cures such objections within 15 days, or, if such objections are such that they cannot be cured within 15 days and Seller has commenced curing such objections and thereafter diligently proceeds to perfect such cure, then this Agreement shall continue in full force and effect and the Closing Date shall be adjusted accordingly. If Seller is unable or chooses not to cure such objections within the time permitted, then this Agreement shall terminate, and Seller shall instruct the Title Company to return the Deposit to Purchaser, and neither party shall have any further obligations hereunder except for the Surviving Covenants. Notwithstanding the foregoing, however, Purchaser may waive such objections that Seller is unable or chooses not to cure within 10 Page 12 16 days after receipt of a notice that Seller is unable or chooses not to cure such objections, and upon receipt by Seller of such waiver in full from Purchaser, this Agreement shall remain in full force and effect with no reduction in the Purchase Price. If required by Seller, Purchaser will confirm in writing whether this title contingency has been satisfied and, if so, the date on which it was satisfied. Article VII. Loss due to Casualty or Condemnation 7.1 Loss due to Condemnation. In the event of a condemnation of all or a Substantial Portion of the Real Property which condemnation shall or would render a Substantial Portion of the Real Property untenantable, or if any portion of the building or parking area is taken, either party may, upon written notice to the other party given within 10 days of receipt of notice of such event, cancel this Agreement, in which event Seller shall instruct the Title Company to return the Deposit to Purchaser, this Agreement shall terminate and neither party shall have any rights or obligations hereunder except for the Surviving Covenants. In the event that neither party elects to terminate, or if the condemnation affects less than a Substantial Portion or does not affect the building or parking area, then this Agreement shall remain in full force and effect, and Seller shall be entitled to all monies received or collected by reason of such condemnation prior to closing. In such event, the transaction hereby contemplated shall close in accordance with the terms and conditions of this Agreement except that there will be an abatement of the Purchase Price equal to the amount of the net proceeds, less costs and attorney's fees, which are received by Seller by reason of such condemnation prior to closing. If the condemnation proceeding shall not have been concluded prior to the closing, then there shall be no abatement of the Purchase Price and Seller shall assign any interest it has in the pending Page 13 17 award to Purchaser. For purposes of this Section 7.1, a Substantial Portion shall mean a condemnation of in excess of $5,000,000 in value of the Real Property. 7.2 Loss due to Casualty. In the event of Substantial Loss or Damage to the Real Property by fire or other casualty, either party may, upon written notice to the other party given within 10 days of receipt of notice of such event, cancel this Agreement in which event Seller shall instruct the Title Company to return the Deposit to Purchaser and this Agreement shall terminate and neither party shall have any rights or obligations hereunder except for the Surviving Covenants. In the event that neither party elects to terminate, then this Agreement shall remain in full force and effect, the transaction hereby contemplated shall close in accordance with the terms and conditions of this Agreement except that Seller shall assign to Purchaser its rights to all insurance proceeds by reason of such damage or loss, and there will be an abatement of the Purchase Price equal to the amount of any loss not covered by insurance, including without limitation the amount of any deductible, provided that such abatement will be reduced by the amount expended by Seller in accordance with Article VIII hereof for restoration or preservation of the Property following the casualty. In the event that the casualty results in less than Substantial Loss or Damage and the repair or replacement will take no more than sixty (60) days to complete, Seller shall repair or replace the damaged Property, and there shall be no abatement of the Purchase Price in such case. In the event that the casualty results in less than Substantial Loss or Damage and the repair or replacement will take more than sixty (60) days to complete, the transaction hereby contemplated shall close in accordance with the terms and conditions of this Agreement except that Seller shall assign to Purchaser its rights to all insurance proceeds by reason of such damage or loss, and there will be an abatement of the Purchase Price equal to the amount of any loss not covered by insurance, including without limitation the amount of any deductible, provided that such abatement will be reduced by the amount expended by Seller in accordance with Article VIII hereof for restoration or preservation of the Property following the casualty. In no event shall the date of Closing be extended beyond sixty (60) days pursuant to this Section 7.2. For purposes of this Section 7.2, "Substantial Loss or Damage" shall mean loss or damage, the cost for repair of which exceeds $500,000. Page 14 18 Article VIII. Maintenance of the Property Between the time of execution of this Agreement and the Closing, Seller shall maintain the Property in good repair, reasonable wear and tear excepted, shall perform all work required to be done under the terms of any lease or agreement relating to the Property, and shall timely make all repairs, maintenance and replacements of equipment or improvements, the same as though Seller were retaining the Property; except that in the event of a fire or other casualty, damage or loss, Seller shall have no duty to repair said damage. However, Seller may repair any such damage with Purchaser's prior, written approval and may, without Purchaser's approval, repair damage where such repair is necessary in Seller's reasonable opinion to preserve and protect the health and safety of tenants of the Property or to preserve the Property from imminent risk of further damage or if required to do so by Seller's insurance carrier. Any such emergency repairs shall be reported to Purchaser within 48 hours of their completion. During the period prior to the Closing and after the latest to occur of (i) the last day of the Feasibility Period, or (ii) the date on which the title contingency in Section 6.5 is satisfied, Seller shall not lease any portion of the Real Property unless such lease has been approved in writing by Purchaser. Any such proposed lease shall be on Seller's standard form of lease and shall be reviewed and approved or rejected within five (5) business days after receipt thereof by Purchaser. Failure to approve or reject such proposed lease within such period shall be deemed approval. If the proposed lease is rejected, then Seller shall not enter into such lease. With respect to any leases entered into between the Effective Date hereof and the Closing Date, Purchaser shall pay the unamortized cost (based on the number of months in the entire term of the lease for which rent is paid and the number of such months that shall have occurred as of the date of the Closing) of all tenant improvements and leasing commissions with respect thereto. Page 15 19 Article IX. Broker Purchaser and Seller represent to each other that they have dealt with no agent or broker who in any way has participated as a procuring cause of the sale of the Property, except Cornish & Carey Commercial ("Cornish"), Cooper/Brady ("Cooper/Brady"), and McCandless Management Company ("McCandless"). At Closing, Seller shall be responsible for any real estate brokerage commissions due to Cornish and McCandless in connection with this transaction, each pursuant to a separate written agreement. In addition, Seller shall be responsible for a real estate brokerage commission of three-quarters of one percent (.75%) to Cooper/Brady at the Closing. Purchaser and Seller each agree to defend, indemnify and hold harmless the other for any and all judgments, costs of suit, attorneys' fees, and other reasonable expenses which the other may incur by reason of any action or claim against the other by any broker, agent, or finder with whom the indemnifying party has dealt arising out of this Agreement or any subsequent sale of the Property to Purchaser, except for the above-described commissions, which shall be paid by Seller. The provisions of this Article IX shall survive the Closing and any termination of this Agreement. Article X. Representations and Warranties 10.1 Limitations on Representations and Warranties. Purchaser hereby agrees and acknowledges that, except as set forth in Section 10.2 below, neither Seller nor any agent, attorney, employee or representative of Seller has made any representation whatsoever regarding the subject matter of this sale, or any part thereof, including (without limiting the generality of the foregoing) representations as to the physical nature or condition of the Property or the capabilities thereof, and that Purchaser, in executing, delivering and/or performing this Agreement, does not rely upon any statement Page 16 20 and/or information to whomever made or given, directly or indirectly, orally or in writing, by any individual, firm or corporation. Purchaser agrees to take the Real Property and the Personal Property "as is," as of the date hereof, reasonable wear and tear, and minor damage caused by the removal of any personal property or fixtures not included in this sale, excepted. SELLER MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE PHYSICAL CONDITION OF THE PROPERTY OR THE SUITABILITY THEREOF FOR ANY PURPOSE FOR WHICH PURCHASER MAY DESIRE TO USE IT. SELLER HEREBY EXPRESSLY DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER WARRANTIES OR REPRESENTATIONS AS TO THE PHYSICAL CONDITION OF THE PROPERTY. PURCHASER, BY ACCEPTANCE OF THE DEED, AGREES THAT IT HAS INSPECTED THE PROPERTY AND ACCEPTS SAME "AS IS" AND "WITH ALL FAULTS". Purchaser understands that any financial statement and data, including, without limitation, gross rental income, operating expenses and cash flow statements, to be made available by Seller to Purchaser, will be unaudited financial statements and data not prepared or reviewed by independent public accountants, and that Seller makes no representation as to the accuracy or completeness thereof. 10.2 Representations and Warranties. Seller makes the following representations and warranties and agrees that Purchaser's obligations under this Agreement are conditioned upon the truth and accuracy of such representations and warranties, both as of this date and as of the date of the Closing: (a) Seller has the corporate power and authority to enter into this Agreement and convey the Property to Purchaser. (b) To the best of Seller's knowledge, Seller has received no notice of any existing, pending or threatened litigation, administrative proceeding Page 17 21 or condemnation or sale in lieu thereof, with respect to any portion of the Real Property, except as noted on Exhibit H attached hereto. (c) Except for those tenants and licensees in possession of the Real Property under written leases or license Agreements for space in the Real Property, as shown in the Rent Roll, to the best of Seller's knowledge there are no parties in possession of, or claiming any possession to, any portion of the Real Property as leases, tenants at sufferance, licensees, trespassers or otherwise. (d) The updated Rent Roll for the Real Property, which shall be delivered at the Closing, will be true, correct and complete as of the date set forth thereon; no tenant will be entitled to any rebates, rent concessions, or free rent (other than as reflected in said Rent Roll) and no rents due under any of the tenant or other leases will have been assigned, hypothecated, or encumbered, to any party except pursuant to documents to be released at Closing. (e) There are no attachments or executions affecting the Property, general assignments for the benefit of creditors, or voluntary or involuntary proceedings in bankruptcy, pending or, to the best of Seller's knowledge, threatened against Seller. (f) During the period of Seller's ownership of the Property (i.e. from March 1, 1995 to the Date of Closing) Seller has not itself, and to the best of Seller's knowledge no prior owner or current or prior tenant or other occupant of all or any part of the Property at any time has, used Hazardous Materials (hereinafter defined) on, from, or affecting the Property in any manner that violates federal, state, or local laws, ordinances, rules, or regulations governing the use, storage, treatment, transportation, generation, or disposal of Hazardous Materials (collectively, the "Environmental Laws"), and to the best of Seller's knowledge no Hazardous Materials are present Page 18 22 underground beneath the Property or have been disposed of on the Property. "Hazardous Materials" shall mean any flammable substances, explosives, radioactive materials, hazardous wastes, toxic substances, pollutants, pollution, or related materials regulated under any of the Environmental Laws. 10.3 Seller's Knowledge. Whenever the term "to the best of Seller's knowledge" is used in this Agreement or in any representations and warranties given to Purchaser at Closing, such knowledge shall be the actual knowledge of Thomas W. Johnson and Leon Pouncy (the "Key Personnel"), the asset manager assigned to the Real Property by CIGNA Investments, Inc., authorized agent for Seller, after review of the files of CIGNA Investments, Inc. and inquiry of Seller's property manager. Seller shall have no duty to conduct any further inquiry in making any such representations and warranties, and no knowledge of any other person shall be imputed to the Key Personnel. Purchaser acknowledges that Seller took title to the Property through deed in lieu of foreclosure on March 1, 1995, and that Seller has limited records and knowledge pertaining to prior periods of time. 10.4 Survival. All representations and warranties contained in Section 10.2 will survive the Closing of this transaction (but only as to the status of facts as they exist as of the Closing, it being understood that Seller makes no representations or warranties which would apply to changes or other matters occurring after the Closing), but shall expire on the date one year from the date of Closing, and no action on such representations and warranties may be commenced after such expiration. ARTICLE XI. LIABILITY OF PARTIES Except as specifically set forth herein, (i) Seller on behalf of itself and its successors and assigns does hereby agree to indemnify and hold Purchaser, its successors and assigns, harmless from and against all costs, Page 19 23 charges and expenses related to the ownership, management and operation of the Property prior to the date of Closing but not thereafter; and (ii) Purchaser on behalf of itself, its successors and assigns does hereby agree to indemnify and hold Seller, it successors and assigns, harmless from an against all costs, charges and expenses relating to the ownership, management and operation of the Property from and after the date of Closing. The foregoing indemnities shall not imply any warranties or indemnities with respect to compliance with environmental and land use laws or disposal of hazardous materials. ARTICLE XII. ASSIGNMENT Except as provided herein, this Agreement may not be assigned or transferred by Purchaser without the prior written consent of Seller. Purchaser shall have the right to assign its interests under this Agreement to (i) Sumitomo Bank Leasing and Finance, Inc., a Delaware corporation; or (ii) an assignee (the "Assignee") with the prior written approval of Assignee by Seller on or before the date five (5) days before Closing, which approval shall not be unreasonably withheld. No assignment shall relieve Purchaser of any of its obligations under this Agreement. ARTICLE XIII. NOTICES All notices hereunder or required by law shall be sent via telecopy, United States Mail, postage prepaid, certified mail, return receipt requested, or via any nationally recognized commercial overnight carrier with provisions for receipt, addressed to the parties hereto at their respective addresses set forth below or as they have theretofore specified by written notice delivered in accordance herewith: Page 20 24 PURCHASER: Symantec Corporation 10201 Torre Avenue Cupertino, CA 95014 Attn: Dakin Ferris Telecopier: (406) 252-5101 with a copy to: John Wells Gibson Dunn & Crutcher 4 Park Plaza Irvine, CA 92714 Telecopier (714) 451-4220 SELLER: CIGNA Property and Casualty Insurance Company c/o CIGNA Investments, Inc. 900 Cottage Grove Road Hartford, CT 06152-2311 Attn: Real Estate Investment Department Asset Management, S-311 Telecopier: (860) 726-7381 with a copy to: CIGNA Corporation Investment Law Department Mortgage and Real Estate Group, S-215A 900 Cottage Grove Road Hartford, CT 06152-2215 Telecopier: (860) 726-8446 Delivery will be deemed complete upon actual receipt or refusal to accept delivery. All telecopied notices shall be followed up by notice via another mode of delivery approved hereunder. Page 21 25 Article XIV. Expenses Seller shall pay (i) its own attorney's fees, (ii) the real estate transfer stamp, documentary or conveyance taxes, (iii) the cost of an Owner's title insurance policy without extended coverage or special endorsements issued in connection with this transaction, and (iv) one-half of the Title Company's escrow fee. Notwithstanding any local practice to the contrary, Purchaser shall pay for all other costs and expenses related to the transaction or this Agreement including but not limited to (a) all of Purchaser's attorneys' fees and expenses, (b) costs of Purchaser's inspecting architect and engineer, if any, (c) recording charges, (d) one-half of the Title Company's escrow fee, (e) the cost of any title insurance in excess of the cost of an Owner's policy without extended coverage or special endorsements, including any additional premium charges for endorsements and/or deletions of exception items and any cancellation charges imposed by any title company in the event a title insurance policy is not issued, unless caused by willful default of Seller hereunder, and (f) the cost of the Survey. Article XV. Miscellaneous 15.1 Successors and Assigns. All the terms and conditions of this Agreement are hereby made binding upon the executors, heirs, administrators, successors and permitted assigns of both parties hereto. 15.2 Gender. Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise. Page 22 26 15.3 Captions. The captions in this Agreement are inserted only for the purpose of convenient reference and in no way define, limit or prescribe the scope or intent of this Agreement or any part hereof. 15.4 Construction. No provision of this Agreement shall be construed by any Court or other judicial authority against any party hereto by reason of such party's being deemed to have drafted or structured such provisions. 15.5 Entire Agreement. This Agreement constitutes the entire contract between the parties hereto and there are no other oral or written promises, conditions, representations, understandings or terms of any kind as conditions or inducements to the execution hereof and none have been relied upon by either party. 15.6 Recording. The parties agree that this Agreement shall not be recorded. If Purchaser causes this Agreement or any notice or memorandum thereof to be recorded, this Agreement shall be null and void at the option of the Seller. 15.7 No Continuance. Purchaser acknowledges that there shall be no assignment, transfer or continuance of any of Seller's insurance coverage or of the property management contract. 15.8 Time of Essence. Time is of the essence in this transaction. 15.9 Original Document. This Agreement may be executed by both parties in counterparts in which event each shall be deemed an original. 15.10 Governing Law. This Agreement shall be construed, and the rights and obligations of Seller and Purchaser hereunder, shall be determined in accordance with the laws of the State of California. Page 23 27 15.11 Acceptance of Offer. This Agreement constitutes Seller's offer to sell to Purchaser on the terms set forth herein and must be accepted by Purchaser by signing five copies hereof and depositing such with the Title Company in accordance with Article II hereof no later than September 4, 1996. If Purchaser has not accepted this Agreement by such date, then this Agreement and the offer represented hereby shall automatically be revoked and shall be of no further force or effect. 15.12 Confidentiality. Purchaser and Seller agree that all documents and information concerning the Property delivered to Purchaser, the subject matter of this Agreement, and all negotiations will remain confidential. Purchaser and Seller will disclose such information only to those parties required to know it, including, without limitation, employees of either of the parties, consultants and attorneys engaged by either of the parties, and prospective or existing investors and lenders. 15.13 Surviving Covenants. Notwithstanding any provisions hereof to the contrary, the provisions of the second paragraph of Section 6.2 hereof and the provisions of Article IX hereof (collectively, the "Surviving Covenants") shall survive the closing and any termination of this Agreement. 15.14 Attorneys' Fees. If either party hereto fails to perform any of its obligations under this Agreement or if any dispute arises between the parties hereto concerning the meaning or interpretation of any provision of this Agreement, then the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party on account of such default and/or in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorney's fees and disbursements. Any such attorneys' fees and other expenses incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys' Page 24 28 fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment. 15.14 Exclusivity Period. In consideration of Purchaser's commitment to expend significant time, effort and expense to evaluate the possible acquisition of the Property, Seller agrees that during the Feasibility Period (unless sooner notified by Purchaser of its intent not to purchase the Property) Seller shall not offer the Property (or any interest therein) for sale or lease, except for leases of office space in the ordinary course of business, to any other party, or negotiate, solicit or entertain any offers to purchase or lease the Property (or any interest therein), except for leases of office space in the ordinary course of business. EXECUTED BY PURCHASER this ____ day of _____________, 1996. PURCHASER: SYMANTEC CORPORATION By: /s/ [SIG] ------------------------------------ Name: Title: EXECUTED BY SELLER this ____ day of _____________, 1996. SELLER: CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY By: CIGNA Investments, Inc. By: /s/ Thomas W. Johnson ------------------------------------ Name: Thomas W. Johnson Title: Vice President Receipt of original copies of this Agreement executed by Seller and Purchaser is acknowledged this ____ day of _____________, 1996. Page 25 29 TITLE COMPANY: FIRST AMERICAN TITLE INSURANCE COMPANY By: ------------------------------------ Name: Title: Page 26 30 EXHIBIT A TO AGREEMENT OF PURCHASE AND SALE Description of Land 31 Order No. 511608 Page No. 12 LEGAL DESCRIPTION REAL PROPERTY in the City of Cupertino, County of Santa Clara, State of California, described as follows: PARCEL ONE: Lot 1 as shown on that certain Map of Tract No. 7734 filed October 9, 1985 in Book 550 of Maps, pages 24, ?? and 26, Records of Santa Clara County. Excepting therefrom the underground water rights conveyed to California Water Service Company, a California Corporation by Deeds recorded July 11, 1984 in Book 1708, page 320 of Official Records and September 7, 1984 in Book 1859, page 185 of Official Records. PARCEL TWO: All easements, rights, benefits and privileges described in that certain Declaration of Covenants, Conditions and Restrictions and Grants of Easements for Cupertino City Center, recorded October 9, 1985 in Book J482, page 1807, Official Records, as amended by First Amendment to Declaration of Covenants, Conditions and Restrictions and Grant of Easements for Cupertino City Center, recorded September 2, 1987, in Book K281, page 2071, Official Records, appurtenant to Parcel One above. PARCEL THREE: A non-exclusive easement for parking 580 automobiles and for vehicular and pedestrian ingress to and egress from such parking area upon Parcel A of Tract No. 7870 recorded April 29, 1987 in Book 573 of Maps, pages ?? and 22 of the Official Records of Santa Clara County, as granted in that certain Agreement and Grant of Easement recorded June 26, 1987 in Book K202, page 1782 of Official Records, appurtenant to Parcel One above. ?N: 368-01-019 32 EXHIBIT B TO AGREEMENT OF PURCHASE AND SALE Rent Roll (The Rent Roll follows this page.) 33 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX ONE-FOUR STORY BLDG,. SPRINKLERED OFFICE/FULL SERVICE CONSTRUCTION COMPLETED - 1965
Total Basic (1) Monthly Monthly Monthly Tenant Suite Rent Rent Prorata SUN LIFE ASSURANCE (2) 300.320 14,253.18 2.99 7,787.50 1.50 4.475.68 0.59 CITY NET (3) 398 0.00 0.00 0.00 0.00 0.00 0.00 SILICON MAGIC (4) 400 17,710.22 8.94 11,428.75 1.25 6.281.47 0.00 SYMANTEC (5) 200.332 109,941.00 8.83 108,841.00 0.00 Date 1995 CANON (6) 100 90,258.02 8.88 20,258.02 0.00 Date 1995 ALPINE(7) 495 6,382.10 8.85 6,382.10 0.00 Date 1995 COMPUWARE 350,445 30,558.30 8.85 30,558.30 0.00 Date 1995 DSP 465 17,964.45 1.88 17,964.45 0.00 Date 1995 EDV 385 8,586,45 2.69 6,392.95 2.00 2,103.53 0.00 MORN VENTURES (W.R.GRACE) 330 6,303.96 2.04 4,176.00 1.35 2,127.08 0.00 MANAGEMENT OFFICE 125 0.00 0.00 0.00 0.00 0.00 0.00 MXXXXXXXXXXX 398 2,074.00 2.04 1,919.70 1.35 874.90 0.00 TOKYO ELECTRON AMERICA 380 12,311.15 1.84 7,046.25 1.25 4,304.00 0.00 XXX TOTAL 317,084.78 1.88 796,800.72 1.85 870.417.34 0.13
Orig Rev Base Soft XXXXX Comm Comm Exp. Rental Leased Pro Date Date Date Adjust. XXX SUN LIFE ASSURANCE (2) 6,525 0.00 4.04 09/01/93 08/31/99 - NONE CITY NET (3) 611 0.00 9.38 10/01/95 08/30/97 - NONE SILICON MAGIC (4) 9,143 0.00 5.87 12/01/94 11/30/97 - NONE SYMANTEC (5) 58,810 0.00 36.20 04/24/95 06/31/01 5/22/97 YES CANON (6) 43,237 0.00 25.79 03/16/95 08/30/00 03/18/99 YES ALPINE(7) 3,270 0.00 2.03 09/18/95 00/18/00 03/18/97 NO COMPUWARE 18,518 0.00 10.25 XXXXXXXX 09/31/98 - NONE DSP 9,505 0.00 5.89 03/5/91 02/28/90 - NONE EDV 3,182 0.00 1.XX 03/5/91 XXXXXXXX - NONE MORN VENTURES (W.R.GRACE) 3,094 0.00 1.82 11/01/94 04/30/97 - NONE MANAGEMENT OFFICE 1,038 0.00 0.04 XXXXXXXX - NONE MXXXXXXXXXXX 1,422 0.00 0.00 02/01/94 01/31/87 - NONE TOKYO ELECTRON AMERICA 8,357 0.00 3.94 08/01/94 08/08/94 06/31/98 - NONE 160,728 TOTAL
Option Renewal to SEC DEP Tenant Option Term or LLC SUN LIFE ASSURANCE (2) 3yr THBY 2/28/99 No S/D - WAIVED CITY NET (3) NONE No S/D - WAIVED SILICON MAGIC (4) 1yr THBY 7/31/97 No S/D - $11.428.75 SYMANTEC (5) 3yr THBY 8/31/00 No S/D - WAIVED CANON (6) 5yr THBY 12/31/99 Yes S/D - WAIVED ALPINE(7) 5yr THBY 12/19/99 No S/D - WAIVED COMPUWARE NONE No S/D - $30,550.00 DSP 3yr THBY 8/28/97 No S/D - $17,984.45 EDV NONE No S/D - $3,700.00 MORN VENTURES (W.R.GRACE) 5yr THBY 4/30/99 No S/D - WAIVED MANAGEMENT OFFICE NONE N/A MXXXXXXXXXXX NONE No S/D - $1,918,70 TOKYO ELECTRON AMERICA 3yr THBY 11/00/07 No S/D - XX,232,30 TOTAL 160,728
1) Expenses XXXXX were currently projected based on 1990 numbers. 2) Sun XXXX brother Communication ($13,332.25) to be paid XXX since they didn't XXXX XXXX option. Sun Life has free XXXX XXXX - 9/1/95 - 10/15/08 3) City XXX has rest and expense abatement through XXXX. 4) SXXXXX has right to XXXXX if they are unable to expand. (refl XXXXX 2.(b)). Must give five (5) months XXXX notice and information could be that 13th month. Penalty of (2) XXXX bears a unamortized cover 5) SdXXXXX trust be $R109,841.80 on 5/22/98. Effective 6/1/2000 - Restriction of space to 14.873 6) RPR any spacr over 5,000 XXXXXXXX effective 9/15/00XXXXXXX 7) Option to intend XXXXXXXXXXXXXXXXXXXXXXXXx 34 EXHIBIT C TO AGREEMENT OF PURCHASE AND SALE Grant Deed (Seller's Local Counsel to draft form of Grant Deed.) 35 EXHIBIT D TO AGREEMENT OF PURCHASE AND SALE Bill of Sale (The form of Bill of Sale follows this page.) 36 BILL OF SALE AND GENERAL ASSIGNMENT Concurrently with the execution and delivery hereof, ____________, a __________________________________ ("Assignor"), is conveying to _____________________________, a ___________________________ ("Assignee"), by Grant Deed, that certain tract of land together with the improvements thereon (the "Property") lying and being situated in _______________________________, California and being more particularly described in Exhibit A, attached hereto and made a part hereof. It is the desire of Assignor to hereby assign, transfer, set over and deliver to Assignee all furnishings, fixtures, fittings, appliances, apparatus, equipment, machinery and other items of personal property, if any, affixed or attached to, or placed or situated upon, the Property, except those not owned by Assignor and any and all other incidental rights and appurtenances relating thereto, all as more fully described below (such properties being collectively called the "Assigned Properties"). NOW, THEREFORE, in consideration of the receipt of Ten Dollars ($10.00) and other good and valuable consideration in hand paid by Assignee to Assignor, the receipt and sufficiency of which are hereby acknowledged and confessed by Assignor, Assignor does hereby ASSIGN, TRANSFER, SET OVER and DELIVER to Assignee, its successors and assigns, all of the Assigned Properties, without warranty (whether statutory, express or implied), including, without limitation the following: 1. All furnishings, fittings, equipment, appliances, apparatus, machinery fixtures and all other personal property of every kind and character (both tangible and intangible), if any, owned by Assignor and located in or on the Property; 2. All of Assignor's interest in and to all use, occupancy, building and operating permits, licenses and approvals, if any, issued from time to time with respect to the Property of the Assigned Properties; 3. All of Assignor's interest in and to all maintenance, service and supply contracts, if any, relating to the Property or the Assigned Properties (to the full extent same are assignable); 4. All of Assignor's interest in and to all existing and assignable guaranties and warranties (express or implied), if any, issued in connection with the making by Seller of a loan on the Property, to the extent assignable, or in connection with the construction, alteration and repair of the Property and/or the purchase, installation and the repair of the Assigned Properties; 5. All rights which Assignor may have to use any names commonly used in connection with the Property, if any; and 6. All rights, which Assignor may have, if any, in and to any tenant data, telephone numbers and listings, all master keys and keys to common areas, all good will, if any, and any and all other rights, privileges and appurtenances owned by Assignor and related to or used in connection with the existing business operation of the Property. ASSIGNOR MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE PHYSICAL CONDITION OF THE PROPERTY OR THE ASSIGNED PROPERTIES OR THE SUITABILITY THEREOF FOR ANY PURPOSE THAT ASSIGNEE MAY DESIRE TO USE IT. ASSIGNOR HEREBY EXPRESSLY DISCLAIMS ANY WARRANTIES AS TO MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER WARRANTIES OR REPRESENTATIONS AS TO THE 37 BILL OF SALE AND GENERAL ASSIGNMENT (Continued) PHYSICAL CONDITION OF THE ASSIGNED PROPERTIES. ASSIGNEE ACKNOWLEDGES AND AGREES THAT IT HAS INSPECTED THE ASSIGNED PROPERTIES AND ACCEPTS SAME IN THEIR PRESENT CONDITION, "AS IS" AND "WITH ALL FAULTS." Assignor on behalf of itself and its successors and assigns does hereby agree to indemnify and hold Assignee, its successors and assigns, harmless from all obligations accruing under the maintenance, service and supply contract assigned hereby and any liabilities arising thereunder, prior to the date hereof but not thereafter. Assignee on behalf of itself, its successors and assigns, hereby agrees to assume and perform all obligations accruing under the maintenance, service and supply contracts from and after the date hereof, and Assignee on behalf of itself, its successors and assigns does hereby agree to indemnify and hold Assignor, its successors and assigns, harmless from all such obligations and any liabilities arising thereunder from and after the date hereof. If either party hereto fails to perform any of its obligations under this Agreement or if any dispute arises between the parties hereto concerning the meaning or interpretation of any provision of this Agreement, then the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party on account of such default and/or in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys' fees and disbursements. Any such attorneys' fees and other expenses incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys' fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment. This document may be executed in any number of counterparts, each of which may be executed by any one or more of the parties hereto, but all of which shall constitute one instrument, and shall be binding and effective when all parties hereto have executed at least one counterpart. IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment to be executed as of the ______ day of ____________, 19__. ASSIGNOR: ASSIGNEE: 38 EXHIBIT E TO AGREEMENT OF PURCHASE AND SALE ASSIGNMENT OF LEASES [The form of Assignment of Leases follows this page.] 39 ASSIGNMENT AND ASSUMPTION OF LEASES AND SECURITY DEPOSITS This agreement is executed as of the _____ day of _____________, 19__, by ______________________________, a _________________________________________ ("Seller"), and _________________________, a _____________________("Purchaser"). Purchaser is this day purchasing from Seller and Seller is conveying to Purchaser the real property described on Exhibit A attached hereto and made a part hereof together with all improvements thereon and appurtenances thereto (herein called the "Property"). The Property is occupied by various tenants (herein called the "Tenants") claiming under written space leases listed and described on Exhibit B attached hereto and made a part hereof (the "Leases"). Seller has required certain of the Tenants to pay and has collected from such Tenants a security or other deposit, a list of which deposits and the Tenants form from whom the deposits were collected being set forth on Exhibit B attached hereto and made a part hereof (herein the total of all such deposits are referred to as the "Security Deposits"). Seller desires to transfer and assign all of Seller's right, title and interest in and to (i) the Leases and (ii) the Security Deposits not heretofore forfeited, credited or returned to the Tenants. NOW, THEREFORE in consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller hereby transfers and assigns to Purchaser all right, title and interest of Seller in and to (i) the Leases and (ii) the Security Deposits paid to and held by Seller which have not been heretofore forfeited, credited or returned to the Tenants, which Security Deposits hereby assigned are in the amounts as set forth on Exhibit B attached hereto. Seller on behalf of itself, its successors and assigns does hereby agree to indemnify and hold Purchaser, its successors and assigns, harmless from and against all liabilities arising under the Leases prior to the date hereof but not thereafter, provided, however, that the foregoing indemnity shall not imply any warranty or indemnity with respect to compliance with environmental and land use laws or the use, generation or disposal of hazardous materials. Purchaser on behalf of itself, its successors and assigns does hereby agree to indemnify and hold Seller, its successors and assigns harmless from all liabilities arising under the Lease from and after the date hereof; provided, however, Purchaser shall not be liable under this indemnity for or with respect to any inaccuracies set forth in Exhibit B. Purchaser hereby assumes all obligations (i) of the landlord under the Leases arising from and after the date hereof and (ii) under the Leases to pay or account for the Security Deposits hereby transferred to Purchaser. It is specifically agreed that Seller does not hereby transfer or assign to Purchaser and Purchaser does not hereby assume liability for, any deposits other than as set forth on Exhibit B. If either party hereto fails to perform any of its obligations under this Agreement or if any dispute arises between the parties hereto concerning the meaning or interpretation of any provision of this Agreement, then the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party on account of such default and/or in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys' fees and disbursements. Any such attorneys' fees and other expenses incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from and in addition to any 40 ASSIGNMENT AND ASSUMPTION OF LEASES AND SECURITY DEPOSITS (Continued) other amount included in such judgment, and such attorneys' fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment. This document may be executed in any number of counterparts, each of which may be executed by any one or more of the parties hereto, but all of which shall constitute one instrument, and shall be binding and effective when all parties hereto have executed at least one counterpart. The terms and provisions of this agreement shall be binding upon and inure to the benefit of the respective parties hereto and their respective successors and assigns. EXECUTED as of the day and year first written above. SELLER: PURCHASER: 41 EXHIBIT F TO AGREEMENT OF PURCHASE AND SALE Form of Seller's Affidavit of Non-Foreign Status STATE OF ___________________) ) (insert date) COUNTY OF __________________) I, (proper name of Seller's officer), as (office held) of (Seller), being duly authorized to make this affidavit on behalf of (Seller) and being duly sworn, do depose and say, that: 1. (Seller's) taxpayer identification number is _________________. 2. (Seller) is not a "foreign person" within the meaning of Section 1445(f)(3), of the Internal Revenue Code of 1954 (the "Code"), as amended; and (Buyer) is not required, pursuant to Section 1445 of the Code, to withhold ten percent (10%) of the amount realized by Seller on the disposition of the Property to (Buyer). 3. I understand that I am making this Affidavit under penalty or perjury pursuant to the requirements of Section 1445 of the Code. (Seller) By: ____________________________________ SWORN TO and subscribed before me this _____ day of _____________, 199_. ---------------------------------------- Notary Public My Commission Expires: 42 EXHIBIT G TO AGREEMENT OF PURCHASE AND SALE Pending Litigation 1. NONE EX-10.19 6 AGREEMENT OF PURCHASE/SALE/ESCROW INSTRUCT 1 EXHIBIT 10.19 AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS ARTICLE 1. AGREEMENT TERMS 1.1. DEFINITIONS. For purposes of this Agreement, terms set forth in quotes in Section 1.2. below and Schedule "1" attached, shall have the meanings indicated therein. 1.2. SPECIFIC TERMS. 1.2.1. "AGREEMENT DATE". July ___, 1996 1.2.2. "BROKER-BUYER". The real estate broker representing Buyer which is Cooper/Brady Corporate Real Estate Services. 1.2.3. "BROKER-SELLER". The real estate broker representing Seller which is Lincoln Property Management Services, Inc. 1.2.4. "BUYER". The party from time to time having the rights to purchase the Property pursuant to this Agreement and the obligations of Buyer set forth in this Agreement. Buyer shall initially be Symantec Corporation, a Delaware corporation (or its Nominee); provided, however, the rights and obligations of Buyer may be assigned or otherwise transferred in connection with Buyer's financing of the acquisition of the Property to any other party at any time without the consent of Seller so long as such assignee assumes the obligations of Buyer hereunder. 1.2.5. "BUYER'S DESIGNATED REPRESENTATIVES". Shall refer the following persons: Gordon Ciochon Vice President, Worldwide Operations. 1.2.6. "CITY". City of Cupertino, California. 1.2.7. "COUNTY". Santa Clara County, California. 1.2.8. "DEPOSIT". The Deposit shall consist of the following: 1.2.8.1. "INITIAL DEPOSIT". An initial amount of Fifty Thousand Dollars ($50,000.00) to be paid to Escrow Holder within three (3) business days after the full execution of this Agreement; 1.2.8.2. "FEASIBILITY PERIOD EXTENSION DEPOSIT". If Buyer extends the Feasibility Period pursuant to Section 1.2.10. , the Deposit shall be increased by an additional Fifty Thousand Dollars ($50,000.00); 2 1.2.8.3. "ELECTION TO PROCEED DEPOSIT". Upon Buyer's election to proceed pursuant to Section 3.3.1. , the Deposit shall be increased to Two Hundred Thousand Dollars ($200,000.00); 1.2.8.4. "CLOSING EXTENSION DEPOSIT". If Buyer elects to extend the Closing pursuant to Section 1.2.14., the Deposit shall be increased by an additional Fifty Thousand Dollars ($50,000.00). 1.2.9. "ESCROW HOLDER". First American Title Guaranty Company, 1737 N. First Street, San Jose, CA 95112. 1.2.10. "FEASIBILITY PERIOD". The period beginning on the Agreement Date and terminating at 5:00 p.m. Pacific Time thirty (30) days after the Agreement Date; provided, however, if Buyer determines in good faith that Buyer needs additional time to evaluate facts concerning the conditions for the benefit of Buyer set forth in Section 3.2., the Feasibility Period shall be extended for up to an additional thirty (30) days upon the payment of the Feasibility Period Extension Deposit. 1.2.11. "PROPERTY". Shall collectively refer to: (i) an approximate 86,630 square foot three story building identified as 10201 Torre Avenue, Cupertino, California, currently occupied under lease by Buyer, and the parcel of land on which such building is located, as described in Exhibit A and to be more particularly described through Escrow, (ii) easements, rights, rights of way, rights in and to common areas, and other rights appurtenant to item (i), (iii) all fixtures, improvements, and personal property currently located on the Property, and (iv) subject to the rights of others and the terms thereof, all of Seller's right, title and interest in any and all of the following pertaining to item (i): discretionary permits, if any, from the City and County; subdivision maps completed, in tentative or final form, or in process; grading, improvement and landscape plans submitted to the City or County or in the process of preparation for item (i), if any; and any and all of Seller's non-exclusive rights to architectural and engineering drawings, including site utilities, sanitary sewer and drainage facilities relating to the Property. 1.2.12. "PROPERTY DOCUMENTS". All architectural drawings and plans, documents, records, reports (including, without limitation, environmental), surveys, governmental approvals, Owners Association CC&Rs, Articles, Bylaws and other Association documents, and other documentary information in Seller's possession or control which relates to the use, occupancy or condition of the Property. 1.2.13. "PURCHASE PRICE". Twelve Million Eight Hundred Thousand Dollars ($12,800,000.00). 2 3 1.2.14. "SCHEDULED CLOSING DATE". Shall occur thirty (30) days after the date of Buyer's election to proceed pursuant to Section 3.3.1; provided, however, the Scheduled Closing Date shall be extended for up to thirty (30) days, if such time is needed to complete the financing of the purchase upon the payment of the Closing Extension Deposit. 1.2.15. "SELLER". Lincoln Cupertino Associates Limited, a California limited partnership. 1.2.16. "SELLER'S DESIGNATED REPRESENTATIVES". Shall refer to the following persons: Barry DiRaimondo. 1.2.17. "TITLE INSURER". First American Title Guaranty Company. 1.2.18. "TITLE INSURANCE AMOUNT". The Title Policy shall be issued in the amount of the Purchase Price. 1.3. NOTICES. All notices requests, demands and other communication given or required to be given hereunder shall be in writing, duly addressed to the parties and pursuant to Section 4.03 as follows: 1.3.1. BUYER. If to Buyer at: Symantec Corporation 452 Kifer Road Sunnyvale, CA 94086 Attention: Gordon Ciochon Telephone: ________________________ Facsimile: ________________________ 1.3.2. COPY TO: With a copy to: Dakin Ferris Symantec Corporation 10201 Torre Avenue Cupertino, CA 95014 Telephone: (408) 725-2738 Facsimile: (408) 252-5101 3 4 1.3.3. SELLER. If to Seller at: Lincoln Cupertino Associates Limited c/o the Lincoln Property Company 101 Lincoln Center Drive Foster City, CA 94404 Attention: Edgar M. Thrift, Jr. Telephone: (415) 571-2272 Facsimile: 415-573-8624 1.4. ADDITIONAL TERMS. 1.4.1. PURCHASE AND SALE. See Article II 1.4.2. CONTINGENCIES. See Article III 1.4.3. REPRESENTATIONS AND WARRANTIES. See Article IV 1.4.4. COVENANTS. See Article V 1.4.5. ESCROW. See Article VI 1.4.6. MISCELLANEOUS PROVISIONS. See Article VII 1.5. SCHEDULES. 1.5.1. SCHEDULE 1. Definitions 1.5.2. SCHEDULE 2. Representations and Warranties 1.5.3. SCHEDULE 3. Specific Escrow Instructions 1.5.4. SCHEDULE 4. Miscellaneous Provisions 1.6. EXHIBITS. 1.6.1. EXHIBIT "A." Legal Description of Property 1.6.2. EXHIBIT "B." Grant Deed 1.6.3. EXHIBIT "C." Buyer's Election to Continue Escrow 1.6.4. EXHIBIT "D." Non-Foreign Status Affidavit 4 5 ARTICLE 2. PURCHASE AND SALE 2.1. PURCHASE AND SALE. Subject to the terms and conditions contained in this Agreement, Seller agrees to sell the Property to Buyer and Buyer agrees to purchase the Property from Seller. 2.2. PAYMENT BY BUYER. The Purchase Price shall be paid as follows: 2.2.1. DEPOSIT. Buyer shall pay to Escrow Holder in cash or other immediately available funds the amount of the Initial Deposit. The Deposit shall be placed by Escrow Holder in an interest bearing account as instructed by Buyer. The Deposit shall be increased by the amount of the Feasibility Period Extension Deposit, if applicable. Upon Buyer's election to proceed pursuant to Section 3.3.1., Buyer will increase the Deposit to Two Hundred Thousand Dollars ($200,000.00). The Deposit shall be further increased by the amount of the Closing Extension Deposit, if applicable. The total Deposit and interest earned thereon shall apply against the Purchase Price at Closing, if such occurs. 2.2.2. CASH REMAINDER. The remainder of the Purchase Price shall be paid in cash or through other immediately available funds through escrow at Closing. 2.3. CONDITION OF TITLE. Seller shall convey to Buyer title in fee simple to the Property free and clear of all mortgages, liens or rights to liens, charges, encumbrances, encroachments, easements conditions and rights of reentry or forfeiture and other defects of title, except for the Permitted Exceptions. ARTICLE 3. CONTINGENCIES 3.1. EFFECT OF CONDITIONS GENERALLY. The close of escrow, Buyer's obligation to purchase the Property and Seller's obligation to sell the Property shall be contingent upon the satisfaction (or deemed satisfaction as specifically set forth in each Section herein) or waiver by Buyer or Seller of all of the conditions that are expressly stated to be in favor of each as set forth in this Article and the Conditions to Close of Escrow as set forth in Schedule "3" hereof, within the time 5 6 limits specified in each Section of this Article and such Schedule. In the event that any such condition is neither satisfied within the time limits specified in each such Section nor waived in writing by the party specifically stated to be benefited by such Section, such condition shall be deemed to have failed and the party specifically stated to be benefited by such failed condition, may elect to terminate this Agreement. In the event of any termination pursuant to this Article, Buyer and Seller shall be released from their respective obligations to purchase or sell under this Agreement and shall have no further rights or remedies regarding purchase or sale against the other as a result of such termination, except for the return of Buyer's Deposit and the payment of escrow cancellation fees. In such event, Buyer and Seller shall comply with any requirements reasonably imposed by Escrow Holder to evidence such termination. 3.2. CONDITIONS FOR THE BENEFIT OF BUYER. In addition to any other conditions to Buyer's obligations contained in this Agreement, the following shall constitute conditions to Buyer's obligation to purchase the Property from Seller and are for the benefit of Buyer, the failure of any of which shall allow Buyer to terminate this Agreement: 3.2.1. FEASIBILITY STUDIES. This Agreement is contingent on Buyer's approval of any and all investigations, studies or analyses for the Property deemed appropriate by Buyer to aid Buyer in determining whether to consummate the transaction ("Feasibility Studies"). Buyer may elect in Buyer's sole discretion, at any time prior to the end of the Feasibility Period to terminate this Agreement. Upon such election to terminate, the Deposit together with interest earned thereon shall be returned to Buyer. Without limiting the generality of the foregoing, Buyer shall have the right to approve the following during the Feasibility Period: 3.2.1.1. SITE APPRAISAL. An appraisal of the Property at Buyer's expense; 3.2.1.2. SURVEY. An ALTA survey performed at Seller's expense; 3.2.1.3. SITE IMPROVEMENTS. An inspection of existing site improvements (including, without limitation, location and availability of utilities), roof. Foundation, structural integrity of the building and all operating systems including, without limitation, HVAC, plumbing and electrical; and 3.2.1.4. SOIL AND GROUND WATER CONDITIONS. Soil and groundwater conditions concerning, without limitation, (i) the stability and load bearing capacity of the soil, and (ii) the presence of Hazardous Material on or under the Property or the potential for migration of Hazardous Material onto or under the Property from other property; provided, however, Buyer agrees not to perform any drilling without giving Seller notice at least two (2) business days in advance. 3.2.1.5. FINANCING. Buyer shall have obtained a binding commitment of an institutional lender to provide financing for Buyer's acquisition of the 6 7 Property on terms satisfactory to Buyer. In connection therewith, Seller agrees to cooperate, at no expense to Seller, in the assignment of this Agreement to a third party selected by Buyer. 3.2.1.6. BOARD APPROVAL. Buyer's obligations under this Agreement are conditioned upon the approval of this Agreement and the purchase contemplated hereby by Buyer's Board of Directors prior to the end of the Feasibility Period. 3.2.2. APPROVAL OF CONDITION OF TITLE. Seller shall obtain and deliver to Buyer within five (5) days of the Agreement Date a Title Report together with full and complete copies of all documents referenced as exceptions therein and a plotting of all easements referred to as exceptions therein. This Agreement is contingent on Buyer's approval of the condition of title of the Property as shown in such Title Report. If Seller and Escrow holder are not notified in writing of Buyer's disapproval thereof by the later of (i) the end of the Feasibility Period or (ii) ten (10) days after Buyer receives such Title Report, Buyer shall be deemed to have approved the condition of title as reflected in such Title Report. In case of Buyer's timely objection, Seller shall have ten (10) days from receipt of Buyer's notice of objection to inform Buyer and Escrow Holder in writing whether Seller shall use its best efforts to remove such disapproved exceptions prior to the Closing. In the event Seller agrees that Seller shall use its best efforts to remove such disapproved exceptions, such removal shall be a condition to the Closing and the condition of title as shown on the Title Report shall otherwise be deemed approved. In the event that Seller is unwilling or unable to remove such disapproved exceptions or fails to notify Buyer and Escrow Holder whether it shall use its best efforts to remove such exceptions, Buyer shall have ten (10) days from the first to occur of (a) the date of receipt of Seller's notice, or (b) the expiration of Seller's ten (10) day notice period, to inform Seller and Escrow Holder whether Buyer is waiving its disapproval of such exceptions. In the event Buyer fails to waive such disapproval, the condition of title shall be deemed disapproved and this condition shall be deemed to have failed. All matters shown on the Title Report, which are not disapproved by Buyer or for which Buyer waives its disapproval, shall be deemed to be Permitted Exceptions. 3.2.3. ASSIGNMENT OF PLANS. At Closing, Seller shall assign, at no cost to Buyer, in form acceptable to Buyer, all of Seller's assignable rights in the Property Documents. 3.2.4. REMOVAL OF ENCUMBRANCES. On or before the Scheduled Closing Date, Seller shall have, at Seller's sole cost and expense and to Buyer's satisfaction, removed the effect on title to the Property, or any portion thereof, of any 7 8 assessments for public improvements, deeds of trust, mechanics liens, and any other monetary or similar encumbrances. 3.2.5. EXISTING LEASE. Symantec Corporation is currently the sole occupant and tenant of the Property pursuant to a lease with Seller as Landlord (the "Existing Lease"). The following conditions shall be satisfied by Seller or waived by Buyer as of the Closing Date: 3.2.5.1. LEASE TERMINATION. The Existing Lease shall be deemed terminated without the necessity of any further documentation between Seller and Symantec Corporation; provided, however, if requested by Symantec Corporation, Seller agrees to execute documentation confirming the termination of the Existing Lease. 3.2.5.2. PRORATIONS. As of the Closing Date, the following shall be prorated between Buyer and Seller: 3.2.5.2.1. RENT. All rent and other charges to tenant treated as rent or additional rent under the Existing Lease. 3.2.5.2.2. OTHER TENANT CHARGES. All charges due from tenant under the Existing Lease that are not treated as rent or additional rent; 3.2.5.2.3. LANDLORD ALLOWANCES. All allowances, if any, provided under the Existing Lease to the tenant for improvements, repairs, maintenance or other purposes which have accrued, but not been utilized by or paid to the tenant. 3.2.5.3. SECURITY DEPOSIT. At the closing, any security deposit held by Seller pursuant to the Existing Lease shall be paid to Escrow for distribution to Buyer or credited against the Purchase Price at the Closing. 3.2.5.4. LANDLORD PERFORMANCES. To the extent that the Existing Lease requires that Seller as Landlord have commenced or completed any non-monetary obligations with respect to the Property and such non-monetary obligations have not been commenced or completed, Buyer shall be entitled to a credit against the Purchase Price for the reasonable value of such non-monetary obligations. 3.3. CONDITIONS FOR THE BENEFIT OF SELLER. In addition to any other conditions to Seller's obligations contained in this Agreement, the following shall constitute conditions to 8 9 Seller's obligation to sell the Property to Buyer and are for the benefit of Seller, the failure of any of which shall allow Seller to terminate this Agreement: 3.3.1. BUYER'S ELECTION TO PROCEED. This Agreement is contingent upon Buyer's delivery to Seller, by the end of the Feasibility Period, of Buyer's written election to proceed with the purchase of the Property. If Buyer elects to proceed in Buyer's sole discretion with the purchase after the Feasibility Period, Buyer shall deliver to Seller and Escrow Holder a notice of Buyer's election to proceed substantially in the form of Exhibit C. 3.4. CONDITIONS OF DEPOSIT REFUND TO BUYER. The Deposit is being made by Buyer in consideration for Seller agreeing to refrain from actively marketing the Property during the Feasibility Period. Therefore, the Deposit shall not be refundable to Buyer unless this Agreement is terminated by Buyer on account of the failure of conditions intended to benefit Buyer as set forth in this Article 3. or Schedule "3" attached hereto or terminated by Seller on account of the failure of conditions set forth for the benefit of Seller in this Article 3 or Schedule 3. Buyer agrees to proceed diligently with the Feasibility Studies. If Buyer elects to proceed in its sole discretion with the purchase after the Feasibility Period, the total Deposit will become non-refundable except in the event of a default by Seller or a failure of a condition which is for the benefit of the Buyer. ARTICLE 4. REPRESENTATIONS AND WARRANTIES 4.1. BUYER AND SELLER REPRESENTATIONS AND WARRANTIES. Buyer and Seller hereby make those representations and warranties as set forth in Schedule "2" attached hereto. 4.2. BUYER'S ADDITIONAL REPRESENTATIONS AND WARRANTIES. In addition to those representations and warranties set forth in Schedule "2" attached hereto, Buyer hereby represents as follows: 4.2.1. BROKER. Buyer represents and warrants to Seller that it has employed no broker, agent and/or finder with respect to this transaction other than Broker-Buyer (Cooper/Brady Corporate Real Estate Services) whose commission is to be paid by Seller. 4.3. SELLERS ADDITIONAL REPRESENTATIONS AND WARRANTIES. In addition to those representations and warranties set forth in Schedule "2" attached hereto, Seller hereby represents as follows: 9 10 4.3.1. BROKER. Seller represents and warrants to Buyer that it has employed no broker, agent and/or finder with respect to this transaction other than Broker-Seller (Lincoln Property Management Services, Inc.) whose commission is to be paid by Seller. 4.4. SURVIVABILITY. Buyer's and Seller's representations and warranties shall survive the Closing and the delivery of the Grant Deed for a period of one (l) year. ARTICLE 5. COVENANTS 5.1. SELLER'S COVENANTS. 5.1.1. PROPERTY INSPECTION AND DOCUMENTS. Seller hereby covenants and agrees to reasonably cooperate with Buyer in the inspection of the Property. Within five (5) days after the Agreement Date, Seller shall make available to Buyer all Property Documents in Seller's possession and control. Seller makes no representation or warranty that such information is truthful, accurate or complete. 5.1.2. OFF-BALANCE SHEET FINANCING STRUCTURE. Seller hereby covenants and agrees to use reasonable and good faith efforts, at no expense to Seller, to accommodate Buyer's use of an off-balance sheet financing structure. 5.1.3. CONDITION OF PROPERTY AND TITLE. Seller hereby covenants and agrees that until the Closing, Seller shall (subject to the terms and conditions of the Existing Lease) maintain all portions of the Property, including, without limitation, all building systems, substantially in its present condition, ordinary wear and tear excepted, and shall not permit acts of waste or acts that would tend to diminish the value of the Property for any reason. Seller further covenants and agrees that until the Closing, Seller shall not permit any liens, encumbrances, or easements to be placed on the Property, other than the Permitted Exceptions, nor shall Seller enter into any agreement regarding the sale, rental, management, repair, improvement or any other matter affecting the Property that would be binding on Buyer or the Property after the Closing without the prior written consent of Buyer. 5.1.4. REMOVAL OF ENCUMBRANCES. In addition to any obligations undertaken by Seller pursuant to Section 3.2, on or before the Scheduled Closing Date, Seller shall have, at Seller's sole cost and expense and to Buyer's satisfaction, removed the effect on title to the Property, or any portion thereof, of any assessments for 10 11 public improvements, deeds of trust, mechanics liens, and any other monetary or similar encumbrances. 5.1.5. CONFIDENTIALITY. Seller shall maintain the confidentiality of Buyer's name and shall not disclose Buyer's name or the terms of this Agreement or of such sale and purchase to any third parties whatsoever other than the Escrow Holder, the Title Insurer and such other persons whose assistance is required in carrying out the terms of this Agreement. 5.2. BUYER'S INSPECTION RIGHTS. Buyer and its agents and contractors shall have the right to enter on the Property to inspect it and conduct tests and will indemnify Seller from any loss resulting from such entry or inspection; provided, however, Buyer agrees not to perform any drilling without giving Seller notice as provided in Section 3.2.1.4. Buyer shall also have the right to contact any federal, state or local governmental authority or agency to investigate any matters relating to the Property. 5.3. AS-IS PURCHASE. The sale of the Property as provided for herein is made on an "AS-IS" basis, and except as otherwise expressly specified in this Agreement, buyer expressly acknowledges that in consideration of the agreements of Seller herein, except as set forth in this Agreement 5.3 or in the Existing Lease, Seller hereby specifically disclaims any warranty, guaranty or representation, oral or written, past, present or future, express or implied, or arising by operation of law, including, but not limited to (i) any warranty of condition; (ii) habitability; (iii) merchantability; (iv) size; (v) useable area; (vi) occupation or management of the Property; (vii) the available uses of the Property; (viii) the boundary lines of or any encroachments or easements affecting the Property; (ix) the nature and condition of the Property, including, but not limited to, the water, soil, geology, environmental conditions (including the presence or absence of any environmental contamination, or toxic pollution as a result of the presence, use, discharge or release of hazardous substances or materials on, bout or in the Property), and the suitability thereof for any and all activities and uses which buyer may elect to conduct thereon; (x) the presence or availability of water or sewage disposal on or to the Property; (xi) the amount or nature of any taxes, special assessments, governmental bonds or similar charges or liabilities affecting the Property, (xii) the Property's compliance with applicable statues (including, without limitation, the Americans With Disabilities Act of 1990), (xiii) laws, codes, ordinances, regulations or requirements relating to leasing, zoning, subdivision, planning, building, fire, safety, health, hazardous material or environmental matters; (xiv) the nature an extent of any right-of-way, lease, possessory interest, lien, encumbrance, license, reservation, condition or otherwise or (xv) the Property's compliance with covenants, conditions or restrictions (whether or not of record) or other local municipal, regional, state or federal requirements or other statues, laws, codes, ordinances, regulations or requirements. 11 12 5.3.1. BUYER INVESTIGATION. Except for the specific promises and representations set forth in this Agreement or the Existing Lease, Buyer further acknowledges that it has entered into this Agreement in reliance solely upon Buyer's ability to conduct it's own investigation of the physical, environmental, economic and legal conditions of the Property, and it s independent review and examination of the Feasibility Studies and that Buyer is not relying upon any representation or warranty of Seller, or any of its respective officers, trustees, managers, directors, employees, brokers, agents, attorneys or other representatives ("Interested Parties"), concerning the Property. Buyer further acknowledges that Buyer has not received from Seller or any of its Interested Parties, any accounting, tax, legal, property management or other advice with respect to the Property or the transaction contemplated by this Agreement and that Buyer is relying solely upon the advice of its own advisors, if any, in entering into this Agreement. Accordingly, buyer's failure to terminate this Agreement in accordance with its rights under this Agreement shall constitute an acknowledgment that buyer has considered, inspected and reviewed to Buyer's satisfaction, all physical, environmental, economic and legal aspects and conditions of the Property and that Buyer is acquiring the Property on the basis of its evaluation, without the benefit of any representation or warranty from Seller or its Interested Parties except for the specific promises and representations set forth in this Agreement or in the Existing Lease. 5.3.2. LIMITED REPRESENTATIONS. Buyer acknowledges that notwithstanding any prior or contemporaneous oral or written representations, statements, documents or understandings, this Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and supersedes the entire understanding of the parties with respect to the subject matter hereof and supersedes all such prior or contemporaneous oral or written representations, statements, documents or understandings and will remain unaffected by any representation, statement or understanding subsequent to the date hereof not constituting a duly executed amendment to this Agreement. Buyer further acknowledges that except for the specific promises and representations set forth in this Agreement or in the Existing Lease, Seller nor any Interested Party has previously or does so under this Agreement make any representation or warranty of any kind whatsoever, either express or implied, with respect to the Property or any related matter (and hereby disclaims any of the same that may exist) and that the Property shall be sold to Buyer hereunder in an "AS IS" condition. 5.3.3. BUYER'S WAIVER. Except for the specific promises and representations set forth in this Agreement or in the Existing Lease, in light of the "AS IS" nature of the transaction contemplated under this Agreement and in consideration of the resultant benefits to Buyer in connection with other terms of this Agreement, including without limitation, the Purchase Price, Buyer hereby waives to the fullest 12 13 extent permitted by law the benefit of, and releases and absolves to the fullest extent permitted by law, Seller and each Interested Party from any liability under, all laws, rules, cases and other doctrines requiring disclosure by Seller or any Interested Party of any matter concerning or related to the Property, including without limitation, any applicable statutes relating to the disclosure of known or suspected releases of hazardous substances and all theories of recover based on concealment, whether intention, passive, negligent or unintentional. 5.3.4. BUYER'S RELEASE OF SELLER. With the exception of a default or breach of any representation or warranty of Seller specifically set forth in this Agreement, Buyer, or itself and its agents, affiliates, successors and assigns, hereby releases and forever discharges Seller, its agents, affiliates, successors and assigns from, and waives any right to proceed against Seller for, any and all cost, expense, claim, liabilities and demands (including reasonable attorneys' fees) at law or in equity, whether known or unknown, arising out of the physical, environmental, economic, legal or other condition of the Property, including, without limitation, any claims for contribution pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other similar environmental statute, rule or decision (collectively referred to hereinafter as "Claims") which Buyer has or may have in the future. Buyer hereby specifically acknowledges that buyer has carefully reviewed this subsection, and discussed its import with legal counsel, is fully aware of its consequences, and that the provisions of this subsection are a material part of this Agreement ARTICLE 6. ESCROW 6.1. AGREEMENT TO CONSTITUTE ESCROW INSTRUCTIONS. This Agreement shall constitute escrow instructions and a copy hereof shall be deposited with Escrow Holder for this purpose. The Deposit shall be immediately placed by the Escrow Holder into an insured interest bearing account or an insured certificate of deposit, as designated by the Buyer. Interest accruing thereon shall be held in accordance with this Agreement. 6.2. OPENING OF ESCROW. Escrow shall open on the date Escrow Holder receives a fully executed original or originally executed counterparts of this Agreement and the Deposit. Escrow Holder shall notify both Buyer and Seller of the date escrow is opened. 13 14 6.3. CLOSE OF ESCROW. Provided that all of the contingencies contained in Article III herein and all of the conditions to the close of escrow contained in Schedule "3" attached hereto have been satisfied (or deemed satisfied as the case may be) or waived, the close of escrow shall occur on or before 5:00 p.m., Pacific Time, on the Scheduled Closing Date. 6.4. SPECIFIC ESCROW INSTRUCTIONS. Specific escrow instructions are attached hereto as Schedule "3." 6.4.1. ASSIGNMENT OF PLANS. As an additional obligation of Seller at the Closing, unless as to any item, Buyer elects not to accept the assignment thereof, Seller shall assign (to the extent assignable), at no cost to Buyer, all of Seller's right, title and interest in and to all architectural and engineering drawings and plans as well as any and all warranties, contracts, reports, or other rights relating to the Property. 6.5. LIQUIDATED DAMAGES. IF BUYER FAILS TO COMPLETE THE PURCHASE PROVIDED FOR IN THIS AGREEMENT BY REASON OF ANY DEFAULT OF BUYER, SELLER SHALL BE RELEASED FROM SELLER'S OBLIGATION TO SELL THE PROPERTY TO BUYER. BUYER AND SELLER AGREE IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO FIX ACTUAL DAMAGES IN THE CASE OF BUYER'S DEFAULT AND THAT THE AMOUNT OF THE TOTAL "DEPOSIT" INCLUDING ALL INTEREST ACCRUED THEREON AT THE TIME OF DEFAULT, IS A REASONABLE ESTIMATE OF SELLER'S DAMAGES IN SUCH EVENT, AND THAT IN THE EVENT OF ANY DEFAULT BY BUYER HEREUNDER AS AFORESAID, SELLER MAY RETAIN THE DEPOSIT. THE DEPOSIT SHALL CONSTITUTE LIQUIDATED DAMAGES AND SELLER'S SOLE REMEDY ON ACCOUNT OF BUYER'S DEFAULT FOR FAILURE TO CLOSE. ---------------- ----------------- Buyer's initials Seller's initials 6.6. SPECIFIC PERFORMANCE. If Seller breaches this Agreement in any respect, Buyer shall be entitled to specific performance of Seller's obligations. ARTICLE 7. MISCELLANEOUS PROVISIONS 14 15 7.1. MISCELLANEOUS PROVISIONS. Buyer and Seller hereby agree to those miscellaneous provisions as set forth in Schedule "4" attached hereto. 7.2. ASSIGNMENT. Buyer may assign this Agreement or designate a party other than Buyer to take title to the Property at the Closing without the consent of Seller as provided in Section 1.2.4 and upon any such assignment, the party which is then assignor under such assignment shall be relieved of any obligation under this Agreement. 7.3. INCORPORATION OF EXHIBITS. All schedules and exhibits attached hereto and referred to herein are incorporated in this Agreement as though fully set forth herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date above first written. SELLER: Lincoln Cupertino Associates Limited, a California limited partnership, By: Lincoln Property Company No. 309, Ltd., a California limited partnership Its General Partner By: _____________________________________ Edgar M. Thrift, Jr., Its Managing General Partner BUYER: Symantec Corporation, a Delaware corporation By: _____________________________________ Robert Dykes, Its Executive Vice President 15 16 CONSENT OF ESCROW HOLDER The undersigned Escrow Holder hereby agrees to (i) accept the foregoing Agreement, (ii) be escrow agent under said Agreement, and (iii) be bound by said Agreement in the performance of its duties as escrow agent. First American Title Guaranty Company By:_________________________________ Its: Authorized Agent 16 17 LIST OF SCHEDULES Schedule "1 "Definitions Schedule "2 "Representations and Warranties Schedule "3 "Specific Escrow Instructions Schedule "4 "Miscellaneous Provisions 17 18 SCHEDULE "1" DEFINITIONS 1.01 Definitions. For the purposes of this Agreement, the terms set forth below in quotes shall have the meanings indicated in this Schedule "1." 1.02 "Agreement" means this Agreement for Purchase and Sale and Escrow Instructions. 1.03 "Closing" means the delivery and recordation of the Grant Deed and the payment by Buyer to Seller of the Purchase Price for the Property pursuant to the terms of the Agreement. 1.04 "Closing Date" means the date on which the Closing occurs. 1.05 "Contract Period" means the period commencing upon the Agreement Date and ending upon the first to occur of the Closing or the termination of this Agreement. 1.06 "Grant Deed" means a deed in favor of Buyer in a form substantially similar to that attached hereto as Exhibit "B." 1.07 "Hazardous Material" means any substance, the presence of which requires investigation or remediation under any federal, state or local statute, regulation or law; or which is as of the date of this Agreement defined as a "hazardous waste" pollutant or contaminant under any federal, state or local statute, regulation or law. 1.08 "Permitted Exceptions" means those certain matters constituting exceptions to and/or encumbrances against the Property not disapproved by Buyer, and all other exceptions to title voluntarily imposed or consented to by Buyer prior to Closing. 1.09 "Title Report" means a preliminary title report issued by the Title Insurer providing for the issuance at the Closing to Buyer of a Title Policy. 1.10 "Title Policy" shall mean an ALTA Policy of Title Insurance from Title Insurer in form satisfactory to Buyer ("ALTA Policy") insuring Buyer (or Buyer's approved assignee) as fee owner of the Property, with liability in the amount of the Title Insurance Amount, subject only to the Permitted Exceptions. Buyer shall pay the premium difference between the ALTA and CLTA policy. 18 19 SCHEDULE "2" REPRESENTATIONS AND WARRANTIES 2.01 Seller's Representations and Warranties. Seller hereby makes the following representations and warranties to Buyer. (a) Actions. To the actual knowledge of the Seller's Representatives, there are no actions, suits, material claims, legal proceedings or any other proceedings pending or threatened before any court or governmental agency which may involve or affect the Property or any portion thereof. (b) Compliance with Laws. To the actual knowledge of the Seller's Representatives, Seller has not received written notice that any operation, use or ownership of the Property is a material violation of any fire, building, zoning, health or other ordinance, code, law, regulation or order of any governmental or any agency or body or subdivision thereof, or that any investigation has been commenced or is contemplated regarding such possible violation. (c) Other Agreements. Except as previously disclosed in writing by Seller to Buyer, there is no agreement affecting the Property to which Seller is a party. Neither this Agreement, nor anything provided to be done hereunder, violates or shall violate any contract, agreement or instrument to which Seller is a party, or which affects the Property or any portion thereof. (d) Default. To the actual knowledge of the Seller's Representatives, Seller is not in default with respect to any of its obligations or liabilities pertaining to the Property. (e) Hazardous Materials. To the actual knowledge of the Seller's Representatives, the Property is not contaminated by any Hazardous Material, including, but not limited to, any substance or material: (i) which could impair the value or beneficial use of the Property or constitute or cause a health, safety or environmental hazard on or off the Property or to any person who may enter on the Property or (ii) which may require remediation at the behest of any governmental agency; and, to the actual knowledge of Seller's Representatives, the Property is not in violation of and previously has not been in violation of, and there are no actions or proceedings pending or contemplated pursuant to any federal, state or local law, ordinance, regulation or order relating to the environmental condition of the Property. (f) Bankruptcy. Seller has not (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of 19 20 an involuntary petition by the Seller's creditors; (iii) suffered the appointment of a receiver to take possession of all or substantially all of the Seller's assets; (iv) suffered the attachment or other judicial seizure of all, or substantially all, of the Seller's assets; or (v) admitted in writing its inability to pay its debts as they come due. (g) Authority. Seller is duly organized and existing and in good standing under the laws of the State of California. Seller has the full right and authority to enter into this Agreement and to consummate the transaction contemplated herein. All requisite action, has been taken by Seller in connection with entering into this Agreement. Each of the persons signing this Agreement on behalf of Seller is authorized to do so. (h) Execution. The execution and delivery of the Agreement will not constitute a breach of or a default under any agreement or other instrument to which the Seller is a party. (i) No Other Representations or Warranties. Seller makes no representations and warranties other than those contained in this Schedule "2." 2.02 Buyer's Representations and Warranties. Buyer hereby makes the following representations and warranties to Seller: (a) Authority. Buyer is duly organized and in good standing under the laws of the State of its formation. Buyer has the full right and authority to enter into and fully perform its obligations under this Agreement and to consummate the transactions contemplated herein. All requisite action has been taken by Buyer in connection with entering this Agreement. Each of the persons signing this Agreement on behalf of Buyer is authorized to do so. (b) Execution. The execution and delivery of the Agreement will not constitute a breach of or a default under any agreement or other instrument to which the Buyer is a party. (c) Actions. To the actual knowledge of the Buyer's Representatives, there are no actions, suits, material claims, legal proceedings or any other proceedings pending or threatened before any court or governmental agency which may involve or affect the Property or any portion thereof. (d) Compliance with Laws. To the actual knowledge of the Buyer's Representatives, Buyer has not received written notice that any operation, use or ownership of the Property is a material violation of any fire, building, zoning, health or other ordinance, code, law, regulation or order of any governmental or 20 21 any agency or body or subdivision thereof, or that any investigation has been commenced or is contemplated regarding such possible violation. (e) Hazardous Materials. To the actual knowledge of the Buyer's Representatives, the Property is not contaminated by any Hazardous Material, including, but not limited to, any substance or material: (i) which could impair the value or beneficial use of the Property or constitute or cause a health, safety or environmental hazard on or off the Property or to any person who may enter on the Property or (ii) which may require remediation at the behest of any governmental agency; and, to the actual knowledge of Buyer's Representatives, the Property is not in violation of and previously has not been in violation of, and there are no actions or proceedings pending or contemplated pursuant to any federal, state or local law, ordinance, regulation or order relating to the environmental condition of the Property. 21 22 "SCHEDULE "3" SPECIFIC ESCROW INSTRUCTIONS 3.01 Conditions to Close of Escrow. (a) Conditions for the Benefit of Buyer. In addition to any other obligations contained in this Agreement, the following shall constitute conditions to Buyer's obligation to purchase the Property from Seller and are for the benefit of Buyer, the failure of any of which shall allow Buyer to terminate this Agreement. (i) Grant Deed. Seller shall have delivered to Escrow Holder prior to the time set for Closing a duly executed and acknowledged Grant Deed in the form attached hereto as Exhibit "B." (ii) Non-Foreign Status Affidavit. Seller shall have delivered to Escrow Holder prior to the time set for Closing a Non-Foreign Status Affidavit executed by Seller in the form attached hereto as Exhibit "E" as well as any similar Affidavit required by the State where the Property is located. (iii)Other Documents and Sums. Seller shall deliver to Escrow Holder all other documents and sums reasonably required of Seller to carry out the Closing, including, without limitation, the Existing Lease Security Deposit and the Lease Termination Documentation pursuant to Section 3.2.5. (iv) Seller's Representations and Warranties are True and Correct. Seller shall have delivered to Escrow Holder on or before the time set for Closing a certificate of Seller that all representations and warranties made by Seller in this Agreement are true and correct as of the Closing and that Seller has complied with all covenants of Seller contained therein. (v) Title Policy. The Title Company shall be committed to issue an ALTA Policy from Title Insurer subject only to the Permitted Exceptions. (vi) Bill of Sale. Seller shall have delivered to Escrow Holder prior to the time set for Closing a duly executed "Bill of Sale" in a form reasonably acceptable to Buyer transferring to Buyer all of Seller's right, title and interest in and to all fixtures, improvements, and personal property located on the Property. (b) Conditions for the Benefit of Seller. In addition to any other obligations contained in this Agreement, the following shall constitute conditions to Seller's obligation to sell the Property to Buyer and shall be for the benefit of Seller, the failure of any of which shall allow Seller to terminate this Agreement: 22 23 (i) Delivery of Purchase Price. Buyer shall deliver the balance of the Purchase Price to Escrow Holder prior to the time set for Closing. (ii) Other Documents and Sums. Buyer shall deliver to Escrow Holder all other documents and sums reasonably required of Buyer to carry out the Closing. (iii)Buyer's Representations and Warranties are True and Correct. Buyer shall have delivered to Escrow Holder on or before the time set for Closing a certificate of Buyer that all representations and warranties are true and correct as of the Closing Date and that Buyer has complied with all covenants of Buyer contained therein. 3.02 Recordation of Grant Deed and Delivery of Funds. Upon receipt of the funds and instruments described in this Schedule "3," and upon the satisfaction (or deemed satisfaction as the case may be) or waiver of the conditions specified in this Schedule "3," Escrow Holder shall cause the Grant Deed to be recorded in the official records of the County Recorder of Santa Clara County, California, (with documentary transfer tax information to be affixed by separate affidavit) and shall deliver the proceeds of this escrow to Seller. All sums to be disbursed to Seller by Escrow Holder shall be in cash, by wire transfer, or in other immediately available funds. 3.03 Prorations. All prorations are to be apportioned as of 11:59 p.m. on the day preceding the Closing Date. (a) Real property taxes and assessments shall be prorated between Buyer and Seller based on the latest available tax information. In the event any supplemental tax bill is issued following the Closing, Seller shall pay to Buyer all additional amounts for which Sellers would otherwise be responsible applicable to the time prior to the Closing upon written request of Buyer. (b) Rent and other amounts relating to the Existing lease pursuant to Section 3.2.1.2. (c) Said prorations shall be based on a 30-day month and a 360-day year. 3.04 Costs of Escrow. (a) Seller shall pay; (i) All costs not specifically referenced herein customarily allocated to Seller Santa Clara County, California; (ii) A real estate brokerage commission in an amount equal to two percent (2%) of the Purchase Price to Broker-Buyer and in an amount equal to one percent (1%) of the Purchase Price to Broker-Seller; 23 24 (iii) The premium for the Title Policy up to the cost for a CLTA policy; (iv) The cost of any of Seller's other obligations hereunder. (b) Buyer shall pay: (i) All costs not specifically referenced herein customarily allocated to Buyer in Santa Clara County, California. (ii) The premium for the Title Policy for such portion of the Title Insurance Amount that is in excess of the cost for a CLTA policy and for the following numbered CLTA endorsements to the Title Policy: 100 (broad coverage CC&R's, easements and encroachments), 116 (improvements designated and described), 116.1 (improvements described in survey), 103.1 (blanket easements), 103.1 (locatable easements), and 123.2 (zoning). (iv) The cost of any of Buyer's other obligations hereunder. 3.05 Escrow Cancellation Charges. In the event that any Closing shall fail to occur by reason of the default of either party, the defaulting party shall be liable for all escrow cancellation charges. In the event that any Closing shall fail to occur for any other reason, Buyer and Seller shall each be liable for one-half of any escrow cancellation charges. 3.06 Default. TIME IS OF THE ESSENCE in this Agreement and if Buyer or Seller (the "Defaulting Party") fails to deposit any of the amounts due pursuant to this Agreement, or to perform any other act when due, then the other party (the "Non-Defaulting Party") may terminate this Agreement by notice in writing to the Defaulting Party and Escrow Holder at which time Escrow Holder shall cancel this escrow and the Non-Defaulting Party shall thereupon be released from its obligations under this Agreement. In the event that escrow shall fail to close by reason of the default of Seller, in addition to any other remedies to which Buyer is entitled under this Agreement, including, without limitation, the right to specific performance, if Buyer elects to terminate this Agreement, Buyer shall be entitled to the return of the Deposit and all accrued interest. 3.07 Additional Escrow Instructions. If required by Escrow Holder, Buyer and Seller shall execute Escrow Holder's usual form of supplemental escrow instructions for transactions of this type, provided, however, that (a) in the event that any portion of such additional escrow instructions shall be inconsistent with the provisions of this Agreement, the provisions of this Agreement shall prevail to the extent of any such 24 25 inconsistency; and (b) no provision thereof shall have the effect of modifying this Agreement unless it is expressly so stated and such express statement is initialed by Buyer and Seller. 25 26 SCHEDULE "4" MISCELLANEOUS PROVISIONS 4.01 Brokers. The parties hereto hereby acknowledges that any brokerage, broker's, agent's and/or finder's fee that shall have been earned or claimed in connection with this Agreement is and shall be the sole and exclusive responsibility of the party employing or allegedly employing a broker, agent and/or finder, and the other party shall have no liability or responsibility therefor. Each party shall indemnify the other against and hold the other party free and harmless from any and all loss, damage, liability or expense (including costs and reasonable attorneys' fees) that such other party may incur or sustain by reason of, or in connection with, any claim or liability on account of a broker, agent and/or finder employed by or allegedly employed by the other party.. 4.02 Attorneys' Fees. In any legal proceeding between Buyer and Seller seeking enforcement of or attempting to construe any of the terms and provisions of this Agreement, or in connection with the Property, including, without limitation, insolvency, bankruptcy, arbitration, declaratory relief or other litigation, the prevailing party in such action shall be awarded, in addition to damages, injunctive or other relief, its reasonable costs and expenses, not limited to service of process, filing fees, court and court reporter costs, investigation costs, expert witness fees and the cost of any bonds, and reasonable attorneys' fee (hereinafter "Legal Fees"). In addition, any Legal Fees incurred in enforcing any judgment, injunctive or other relief, shall be paid by the party against whom the judgment is being enforced. 4.03 Notices. Any notice sent by registered or certified mail, return receipt requested, shall be deemed delivered and effective upon the earlier of (i) if personally delivered, the date of the receipt of delivery by an individual at the address of the party to receive such notice; (ii) if delivered by overnight commercial carrier, on the date of delivery to the address of the party to receive such notice, as shown on the delivery receipt from such carrier; (iii) if mailed, on the date of delivery as shown by the sender's registry or certification receipt; or (iv) if given by facsimile, upon telephonic confirmation of receipt of such facsimile transmission and provided further that the facsimile shall be later confirmed by any of the above-noted three methods. Any communication sent by facsimile must be confirmed immediately by telephone and also by the end of the next succeeding business day by written evidence mailed or delivered in accordance with this Section. Notice sent by any other manner shall be effective only upon actual receipt thereof. Any party may change its address for purposes of this Section by giving notice to the other party hereto and to Escrow Holder as herein provided. 4.04 Assignment. This Agreement shall be binding upon the parties hereto and their respective heirs, successors or representatives. 26 27 4.05 Relationship of Parties. Except for the provisions of the Existing Lease which shall remain in full force and effect until earlier terminated in accordance with the provisions thereof or upon the Closing pursuant to this Agreement (whichever first occurs), the relationship of the parties to this Agreement shall be solely that of Buyer and Seller, and nothing herein contained shall be construed otherwise. 4.06 Governing Law. This Agreement shall be construed in accordance with the laws of the State of California. 4.07 Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the parties may require. 4.08 Headings. All headings of this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement. 4.09 Severability. If any paragraph, section, sentence, clause or phrase contained in this Agreement shall become illegal, null or void against public policy, or otherwise unenforceable, for any reason, or shall be held by any court of competent jurisdiction to be illegal, null or void, against public policy, or otherwise unenforceable, the remaining paragraphs, sections, sentences, clauses or phrases contained in this Agreement shall not be affected thereby. 4.10 Waiver. The waiver of any breach of any provision hereunder by Buyer or Seller shall not be deemed to be a waiver of any preceding or subsequent breach hereunder. No failure or delay of any party in the exercise of any right given hereunder shall constitute a waiver thereof nor shall any partial exercise of any right preclude further exercise thereof. 4.11 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which shall constitute one and the same instrument. 4.12 Time of Essence. TIME IS OF THE ESSENCE in this Agreement as to all dates and time periods set forth herein. 27 28 LIST OF EXHIBITS Exhibit "A" Legal Description of Property Exhibit "B" Grant Deed Exhibit "C" Buyer's Election to Continue Escrow Exhibit "D" Non-Foreign Status Affidavit 28 29 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY PARCEL ONE: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being a Subdivision of Lot 9 of Tract 3743 (186-MAPS-36 & 37)" which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California on December 12, 1978 in Book 432, of Maps, at page 3. PARCEL TWO and PARCEL THREE: Appurtenant easements 29 30 EXHIBIT "B" RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: __________________________ __________________________ __________________________ Attention: _______________ MAIL TAX STATEMENTS TO: __________________________ __________________________ __________________________ Attention ________________: _____________________________________________________________________________ (SPACE ABOVE THIS LINE FOR RECORDER'S USE) GRANT DEED ---------- Documentary Transfer tax is $ ( ) Computed on full value of property conveyed, or ( ) Computed on full value less value of liens and encumbrances remaining at time of sale. ( ) Unincorporated area: ( ) City of _________________, FOR A VALUABLE CONSIDERATION, receipt of this is hereby acknowledged, Lincoln Cupertino Associates Limited, a California limited partnership hereby grants to ______________, a ________________, the following described real property in the County of Santa Clara, State of California: See Exhibit "A" which is attached hereto and incorporated by this reference Subject to: 1. Current taxes and assessments. 2. [Permitted Exceptions] IN WITNESS WHEREOF, the parties hereto have executed this Grant Deed as of this day of , 19 . Lincoln Cupertino Associates Limited, a California limited partnership, By:_________________________________________ Its: _______________________________________ 30 31 EXHIBIT "A" to Grant Deed PROPERTY DESCRIPTION -------------------- PARCEL ONE: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being a Subdivision of Lot 9 of Tract 3743 (186-MAPS-36 & 37)" which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California on December 12, 1978 in Book 432, of Maps, at page 3. PARCEL TWO and PARCEL THREE: Appurtenant easements 31 32 EXHIBIT "C" BUYER'S ELECTION TO CONTINUE ESCROW To: _______________ [Escrow Holder] Re: Buyer's Election to Continue Escrow for Escrow No. Ladies and Gentlemen: Under that certain Agreement for Purchase and Sale and Escrow Instructions (the "Agreement") dated July __, 1996 between Lincoln Cupertino Associates Limited, a California limited partnership ("Seller") and the Buyer therein, initially Symantec Corporation, a Delaware corporation ("Buyer"), hereby elects to proceed with the purchase and tenders herewith the additional sum of Thousand Dollars ($________) as an increase in the Deposit making the total Deposit Two Hundred Thousand Dollars ($200,000). Very truly yours, BUYER ____________________ a ___________________ By: ______________________________________ 32 33 EXHIBIT "D" NON-FOREIGN STATUS AFFIDAVIT To inform __________________________________, a ___________________________ (the "Transferee") that withholding of tax under Section 1445 of the Internal Revenue Code of 1986, as amended ("Code") and under Section 18805(a)(2) of the California Revenue and Taxation Code will not be required upon the transfer of certain real property to the Transferee by Lincoln Cupertino Associates Limited, a California limited partnership (the "Transferor"), the undersigned hereby certifies the following on behalf of the Transferor: 1. The Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder); 2. The Transferor's U.S. employer identification number is ______________; and 3. The Transferor's office address is ____________________________________ The Transferor understands that this Certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalty of perjury I declare that I have examined this Certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Transferor. Date ________________, 1996. Lincoln Cupertino Associates, Limited, a California limited partnership, By: Lincoln Property Company No. 309, Ltd., a California limited partnership Its General Partner By: _____________________________________ Edgar M. Thrift, Jr., Its Managing General Partner BUYER: Symantec Corporation , a Delaware corporation By: _____________________________________ Robert Dykes, Its Executive Vice President 33 EX-10.20 7 AGREEMENT OF PURCHASE/SALE/ESCROW INSTRUCT,AMENDED 1 EXHIBIT 10.20 AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS ARTICLE 1. AGREEMENT TERMS 1.1. DEFINITIONS. For purposes of this Agreement, terms set forth in quotes in Section 1.2. below and Schedule "1" attached, shall have the meanings indicated therein. 1.2. SPECIFIC TERMS. 1.2.1. "AGREEMENT DATE". May ___, 1996 1.2.2. "BUYER". The party from time to time having the rights to purchase the Property pursuant to this Agreement and the obligations of Buyer set forth in this Agreement. Buyer shall initially be Symantec Corporation, a Delaware corporation (or its Nominee); provided, however, the rights and obligations of Buyer may be assigned or otherwise transferred to any other party at any time without the consent of Seller. 1.2.3. "BUYER'S DESIGNATED REPRESENTATIVES". Shall refer to the following persons: Gordon Ciochon. 1.2.4. "CITY". City of Cupertino, California. 1.2.5. "COUNTY". Santa Clara County, California. 1.2.6. "DEPOSIT". The Deposit shall consist of an initial amount of Fifty Thousand Dollars ($50,000.00) (the "Initial Deposit") to be paid to Escrow Holder within two (2) business days after the full execution of this Agreement, and upon Buyer's election to proceed pursuant to Section 3.3.1., the deposit shall be increased to Two Hundred Thousand Dollars ($200,000.00)(the "Second Deposit"). 1.2.7. "ESCROW HOLDER". First American Title Guaranty Company, 1850 Mt. Diablo Boulevard, Suite 300, Walnut Creek, CA 94596. 1.2.8. "FEASIBILITY PERIOD". The period beginning on the Agreement Date and terminating at 5:00 p.m. Pacific Time sixty (60) days after the Agreement Date. 1.2.9. "LIENHOLDER." Teachers Insurance and Annuity Association of America. 1.2.10. "PARKING AGREEMENT". That agreement to be negotiated and executed during the Feasibility Period as contemplated by Section 5.1. 2 1.2.11. "PARKING APPROVALS". The approvals to be obtained by Seller as required pursuant to Section 5.3.1.1. . 1.2.12. "PROJECT". Shall refer to the construction of a four story building of approximately 140,000 square feet and underground parking for approximately 630 parking stalls. 1.2.13. "PROPERTY". Shall collectively refer to: (i) approximately 1.291 net acres of land identified as Lot 5 of Tract 7953, "Cupertino City Center," Cupertino, California, more particularly described in Exhibit "A" attached hereto (the "Land"), (ii) easements, rights, rights of way, rights in and to common areas, and other rights appurtenant to the Land and (iii) subject to the rights of others and the terms thereof, all of Seller's right, title and interest in any and all of the following pertaining to the Land: discretionary permits, if any, from the City and County; subdivision maps completed, in tentative or final form, or in process; grading, improvement and landscape plans submitted to the City or County or in the process of preparation for the Land, if any; and any and all of Seller's non-exclusive rights to architectural and engineering drawings, including site utilities, sanitary sewer and drainage facilities relating to the Property. 1.2.14. "PROPERTY DOCUMENTS". Any architectural drawings and plans, documents, records, reports (including, without limitation, environmental), surveys, governmental approvals, Owners Association CC&Rs, Articles, Bylaws and other Association documents, and other documentary information in Seller's possession and control which relates to the use, occupancy or condition of the Property. 1.2.15. "PURCHASE PRICE". Six Million Five Hundred Thousand Dollars ($6,500,000.00), subject to reduction pursuant to Section 2.3. . 1.2.16. "SCHEDULED CLOSING DATE". Shall occur seven (7) days after Buyer's receipt of a Use Permit from the City for the Project, but in no event later than December 30, 1996. 1.2.17. "SELLER". Cupertino City Center Buildings, a California limited partnership. 1.2.18. "SELLER'S DESIGNATED REPRESENTATIVES". Shall refer to the following persons: Mark Kroll and Sanford N. Diller. 1.2.19. "TITLE INSURER". First American Title Guaranty Company. 2 3 1.2.20. "TITLE INSURANCE AMOUNT". The liability amount of title insurance for which the Title Policy shall be issued. 1.2.21. "USE PERMIT". Shall refer to any use permit (other than a building permit) required by the City to allow Buyer to construct the Project. 1.3. NOTICES. All notices requests, demands and other communication given or required to be given hereunder shall be in writing, duly addressed to the parties as follows: 1.3.1. BUYER. If to Buyer at: Symantec Corporation1452 Kifer Road Sunnyvale, CA 94086 Attention: Gordon Ciochon 1.3.2. COPY TO: With a copy to: Dakin Ferris Symantec Corporation 10201 Torre Avenue Cupertino, CA 95014 1.3.3. SELLER. If to Seller at: Sanford N. Diller Maxim Property Management 350 Bridge Parkway Redwood City, CA 94065 1.3.4. COPY TO: With a copy to: Mark Kroll SARES_REGIS Group of Northern California 393 Vintage Park Dr. Suite 100 Foster City, CA 94404-1134 1.4. ADDITIONAL TERMS. 1.4.1. PURCHASE AND SALE. See Article II 1.4.2. CONTINGENCIES. See Article III 1.4.3. REPRESENTATIONS AND WARRANTIES. See Article IV 3 4 1.4.4. COVENANTS. See Article V 1.4.5. ESCROW. See Article VI 1.4.6. MISCELLANEOUS PROVISIONS. See Article VII 1.5. SCHEDULES. 1.5.1. SCHEDULE 1. Definitions 1.5.2. SCHEDULE 2. Representations and Warranties 1.5.3. SCHEDULE 3. Specific Escrow Instructions 1.5.4. SCHEDULE 4. Miscellaneous Provisions 1.6. EXHIBITS. 1.6.1. EXHIBIT "A." Legal Description of Property 1.6.2. EXHIBIT "B." Grant Deed 1.6.3. EXHIBIT "C." Buyer's Election to Continue Escrow 1.6.4. EXHIBIT "D." Non-Foreign Status Affidavit ARTICLE 2. PURCHASE AND SALE 2.1. PURCHASE AND SALE. Subject to the terms and conditions contained in this Agreement, Seller agrees to sell the Property to Buyer and Buyer agrees to purchase the Property from Seller. 2.2. PAYMENT BY BUYER. The Purchase Price shall be paid as follows: 2.2.1. DEPOSIT. Buyer shall pay to Escrow Holder in cash or other immediately available funds the amount of the Initial Deposit within two (2) business days of execution of this Agreement. The Deposit shall be placed by Escrow Holder in an interest bearing Federally insured account as instructed by Buyer. Upon Buyer's election to proceed pursuant to Section 3.3.1. , Buyer will increase the Deposit to 4 5 Two Hundred Thousand Dollars ($200,000.00). The Total Deposit and interest earned thereon shall apply against the Purchase Price at Closing, if such occurs. 2.2.2. CASH REMAINDER. The remainder of the Purchase Price shall be paid in cash or through other immediately available funds through escrow at Closing. 2.3. REDUCTION IN PURCHASE PRICE. The Purchase Price shall be subject to reduction in the following events: 2.3.1. USE PERMIT. In the event that Buyer's Use Permit for the Project is approved for less than 140,000 square feet of building area, the Purchase Price shall be reduced by $46.42 per square foot times the number of square feet of building area less than 140,000 square feet, provided, however, in no event shall the Purchase Price be less than Five Million Five Hundred Seventy Thousand Four Hundred Dollars ($5,570,400.00). Buyer will apply for 140,000 square feet of building area. 2.4. CONVEYANCE. Seller shall convey to Buyer title in fee simple to the Property by Grant Deed, subject to the Permitted Exceptions. ARTICLE 3. CONTINGENCIES 3.1. EFFECT OF CONDITIONS GENERALLY. The close of escrow, Buyer's obligation to purchase the Property and Seller's obligation to sell the Property shall be contingent upon the satisfaction (or deemed satisfaction as specifically set forth in each Section herein) or waiver by Buyer or Seller of all of the conditions that are expressly stated to be in favor of each as set forth in this Article and the Conditions to Close of Escrow as set forth in Schedule "3" hereof, within the time limits specified in each Section of this Article and such Schedule. In the event that any such condition is neither satisfied within the time limits specified in each such Section nor waived in writing by the party specifically stated to be benefited by such Section, such condition shall be deemed to have failed and this Agreement shall terminate. In the event of any termination pursuant to this Article, Buyer and Seller shall be released from their respective obligations to purchase or sell under this Agreement and shall have no further rights or remedies regarding purchase or sale against the other as a result of such termination, except for the return of Buyer's Deposit and the payment of escrow cancellation fees and the survival of the indemnity made by Buyer 5 6 pursuant to Section 5.4.. In such event, Buyer and Seller shall comply with any requirements reasonably imposed by Escrow Holder to evidence such termination. 3.2. CONDITIONS FOR THE BENEFIT OF BUYER. In addition to any other conditions to Buyer's obligations contained in Schedule 3, the following shall constitute conditions to Buyer's obligation to purchase the Property from Seller and are for the benefit of Buyer, the failure of any of which shall allow Buyer to terminate this Agreement: 3.2.1. FEASIBILITY STUDIES. This Agreement is contingent on Buyer's approval of any and all investigations, studies or analyses, including, but not limited to engineering reports, soils reports, surveys, and environmental studies for the Property deemed appropriate by Buyer to aid Buyer in determining whether to consummate the transaction ("Feasibility Studies"). Buyer may elect in Buyer's sole discretion, at any time prior to the end of the Feasibility Period to terminate this Agreement. Upon such election to terminate, the Deposit together with interest earned thereon shall be returned to Buyer, and Buyer shall furnish to Seller a copy of all Feasibility Studies produced by or for Buyer which Buyer has the right to so furnish. Any such Feasibility Studies so furnished to Seller shall be accepted by Seller "as is" and Buyer shall not warrant or represent in any way the accuracy or completeness of any such Feasibility Studies. 3.2.2. APPROVAL OF CONDITION OF TITLE. Buyer shall obtain a Title Report together with full and complete copies of all documents referenced as exceptions therein and a plotting of all easements referred to as exceptions therein. This Agreement is contingent on Buyer's approval of the condition of title of the Property as shown in such Title Report. If Seller and Escrow holder are not notified in writing of Buyer's disapproval thereof by within thirty-five (35) days after the Agreement Date, Buyer shall be deemed to have approved the condition of title as reflected in such Title Report. In case of Buyer's timely objection, Seller shall have ten (10) days from receipt of Buyer's notice of objection to inform Buyer and Escrow Holder in writing whether Seller shall use its diligent efforts to remove such disapproved exceptions prior to the Closing. In the event Seller agrees that Seller shall use its diligent efforts to remove such disapproved exceptions, such removal shall be a condition to the Closing and the condition of title as shown on the Title Report shall otherwise be deemed approved. In the event that Seller is unwilling or unable to remove such disapproved exceptions or fails to notify Buyer and Escrow Holder whether it shall use its best efforts to remove such exceptions, Buyer shall have ten (10) days from the first to occur of (a) the date of receipt of Seller's notice, or (b) the expiration of Seller's ten (10) day notice period, to inform Seller and Escrow Holder whether Buyer is waiving 6 7 its disapproval of such exceptions. In the event Buyer fails to waive such disapproval, the condition of title shall be deemed disapproved. All matters shown on the Title Report, which are not disapproved by Buyer and/or as to which Buyer waives its disapproval, shall be deemed to be Permitted Exceptions. Unless Seller has actual knowledge that a matter of record which is material is not disclosed in the Title Report, any matter of record not disclosed in the Title Report shall be the responsibility of the Title Insurer and not Seller and shall be deemed a Permitted Exception. 3.2.3. APPROVAL TO ENTER AGREEMENT. Buyer's obligations under this Agreement shall be subject to Seller obtaining within thirty (30) days of the Agreement Date the written approval of Lienholder and any other necessary parties for Seller to enter into this Agreement. 3.2.4. ASSIGNMENT OF PLANS. At Closing, Seller shall assign, at no cost to Buyer, in form acceptable to Buyer, all of Seller's assignable rights in the Property Documents. 3.2.5. PARKING AGREEMENT. Prior to the expiration of the Feasibility Period, Buyer and Seller shall have agreed to the terms, provisions, and form of the Parking Agreement, shall have executed the Parking Agreement to become effective at the Closing described in Section 5.1.1. and the Parking Approvals defined in Section 5.3.1.1. shall have been obtained. 3.2.6. ACCESS. Seller shall have arranged prior to the end of the Feasibility Period for the grant from the Cupertino City Center Owners Association ("Association") to Buyer for the benefit of the Property, a non-exclusive easement over Lot 7 of Tract 7953 to the East of the Property, to the West of the Property, and, if required by the City, to the South of Lot 4 of Tract 7953 for vehicular and pedestrian ingress and egress to the parking garage and service area, which grant shall be by deed recordable at the closing and in a form reasonably acceptable to Buyer. 3.2.7. CONSTRUCTION STAGING AREA. Seller shall have arranged prior to the end of the Feasibility Period for a temporary easement ("Construction Staging Easement") in favor of Buyer effective as of the Closing to permit Buyer to use Parcels 1 and 6 of Tract 7953 in the City for construction staging purposes in connection with Buyer's contemplated construction of the Project. The Construction Staging easement shall be coordinated with and subject to any temporary parking requirements that need to be provided on such parcels pursuant to Section 5.3.1.2. and shall be of a duration limited to Buyer's contemplated construction period. 7 8 3.3. CONDITIONS FOR THE BENEFIT OF SELLER. In addition to any other conditions to Seller's obligations contained in Schedule 3, the following shall constitute conditions to Seller's obligation to sell the Property to Buyer and are for the benefit of Seller, the failure of any of which shall allow Seller to terminate this Agreement: 3.3.1. BUYER'S ELECTION TO PROCEED. This Agreement is contingent upon Buyer's delivery to Seller, by the end of the Feasibility Period, of Buyer's written election to proceed with the purchase of the Property. If Buyer elects to proceed, in Buyer's sole discretion, with the purchase, Buyer shall deliver to Seller and Escrow Holder a notice of Buyer's election to proceed substantially in the form of Exhibit C. 3.3.2. APPROVAL TO ENTER AGREEMENT. Seller's obligations under this Agreement shall be subject to Seller obtaining within thirty (30) days of the Agreement Date the written approval of Lienholder for Seller to enter into this Agreement. 3.3.3. PARKING AGREEMENT. Prior to the expiration of the Feasibility Period, Buyer and Seller shall have agreed to the terms, provisions and form of the Parking Agreement and shall have executed the Parking Agreement to become effective at the Closing described in Section 5.1.1. and the Parking Approvals defined in Section 5.3.1.1. shall have been obtained. 3.3.4. ACCESS. Seller shall have arranged prior to the end of the Feasibility Period for the grant from the Cupertino City Center Owners Association ("Association") to Buyer for the benefit of the Property, a non-exclusive easement over Lot 7 of Tract 7953 to the East of the Property, to the West of the Property, and, if required by the City, to the South of Lot 4 of Tract 7953 for vehicular and pedestrian ingress and egress to the parking garage and service area, which grant shall be by deed recordable at the closing and in a form reasonably acceptable to Buyer. 3.4. CONDITIONS OF DEPOSIT REFUND TO BUYER. The Deposit is being made by Buyer in consideration for Seller keeping the Property off the market during the Feasibility Period. Therefore, the Deposit shall not be refundable to Buyer unless this Agreement is terminated by Buyer pursuant to conditions intended to benefit Buyer as set forth in this Article 3. or Schedule "3" attached hereto or terminated by Seller pursuant to the conditions set forth for the benefit of Seller in this Article 3. or Schedule 3. If Buyer elects to proceed in its sole discretion with the purchase 8 9 after the Feasibility Period, the total Deposit will become non-refundable except in the event of a material breach by Seller. ARTICLE 4. REPRESENTATIONS AND WARRANTIES 4.1. BUYER AND SELLER REPRESENTATIONS AND WARRANTIES. Buyer and Seller hereby make those representations and warranties as set forth in Schedule "2" attached hereto. 4.2. BUYER'S ADDITIONAL REPRESENTATIONS AND WARRANTIES. In addition to those representations and warranties set forth in Schedule "2" attached hereto, Buyer hereby represents as follows: 4.2.1. BROKER. Buyer represents and warrants to Seller that it has employed no broker, agent and/or finder with respect to this transaction other than Cooper/Brady. 4.3. LIMITATION OF ACTIONS[SURVIVABILITY]. Any claims resulting or arising out of or related to this Agreement and/or the Property, including, but not limited to, the representations and warranties set forth in Schedule 2, shall be asserted and legal action commenced, if at all, within twelve (12) months from the Closing and the delivery of the Grant Deed, except for claims based on the fraudulent misrepresentations and/or fraudulent non-disclosures of either party, which shall survive for the period of the applicable statute of limitations.[Buyer's and Seller's representations and warranties shall survive for twelve (12) months from the Closing and the delivery of the Grant Deed, except for claims based on the fraudulent misrepresentations and/or fraudulent non-disclosures of Seller which shall survive for the period of the applicable statute of limitations.] ARTICLE 5. COVENANTS 5.1. PARKING. 5.1.1. PARKING AGREEMENT. The Property is currently used to provide surface parking for the benefit of other lots (the "Benefitted Lots"). It is the intention of Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 9 10 Buyer and Seller that during Buyer's construction of the Project, the parking facilities currently existing on the Property will be removed and, if required, inter alia, by the City, temporary parking facilities will be provided by Buyer, at Buyer's cost and expense. Upon the completion of the Project, Buyer will provide replacement parking on the Property for the Benefitted Lots to the extent required by those entitled thereto. To facilitate the accommodation of parking, Buyer and Seller agree to cooperate during the Feasibility Period to understand the requirements for such temporary and permanent parking, if any, and to reach agreement with any necessary third parties about the exact time, place and manner of accommodating such parking. The parties contemplate that the terms, conditions and requirements with respect to such parking shall be contained in an agreement to be negotiated during the Feasibility Period and executed during the Feasibility Period to become effective as of the Closing by Buyer and Seller and any other parties that Buyer and Seller deem necessary (the "Parking Agreement"). Buyer and Seller agree to cooperate in negotiating the Parking Agreement. 5.1.2. MINIMIZE TEMPORARY PARKING. Buyer and Seller agree to work together in order to persuade the City and other necessary parties that the parking needs currently filled by the surface parking on the Property can be filled temporarily without the need for Buyer to construct new temporary parking facilities while the Project is being completed. 5.2. BUYER'S COVENANTS. 5.2.1. BUYER'S PARKING OBLIGATIONS. Buyer hereby covenants and agrees as follows with respect to parking, which covenants shall survive the Closing, and shall bind the Property and the assigns and successors of Buyer: 5.2.1.1. REPLACEMENT PARKING To provide, at Buyer's sole cost and expense, in a portion of the parking structure contemplated as part of the Project, sufficient parking to accommodate the parking requirements of the Benefitted Lots, including handicap parking to the extent required. 5.2.1.2. TEMPORARY PARKING. If required, to provide, at Buyer's sole cost and expense, for the construction of temporary surface parking facilities including vehicular and pedestrian access on property made available by Seller. Once constructed, Buyer shall have no liability for such temporary parking facilities or the use or removal thereof. Buyer agrees to cooperate with Seller in an effort to persuade the City and any other necessary parties that such temporary parking facilities should not be required. If such temporary parking is required, Seller shall be responsible for obtaining, on 10 11 or before the expiration of the Feasibility Period required consents, including, without limitation, consents from Lienholder and Apple Computer. The consent of the City will be part of Buyer's Use Permit process. 5.2.2. FUTURE DEVELOPMENT IN CITY CENTER PLANNING AREA. Buyer hereby covenants and agrees for itself, its successors and assigns, that it shall not object either publicly or privately to future development within the City Center Master Project unless such future development will have a substantial and material adverse effect on the Project. 5.3. SELLER'S COVENANTS. 5.3.1. SELLER'S PARKING OBLIGATIONS. Seller hereby covenants and agrees as follows with respect to parking: 5.3.1.1. PARKING APPROVALS. To exert diligent efforts to obtain, at Seller's sole cost and expense (i) on or before the end of the Feasibility Period, any and approvals (other than from the City) that may be required in connection with the abandonment of the existing parking facilities on the Property, the provision for temporary parking facilities, and the provision for replacement parking within the Project when completed, including, without limitation, the approvals and consent of the Lienholder and Apple Computer, Inc. (the "Parking Approvals"). 5.3.1.2. TEMPORARY PARKING. To the extent temporary parking facilities are required, to make available at Buyer's request land on Parcel 3 and 6 of Tract 7953 in the City to be used for temporary parking facilities during the construction of the Project, to arrange for the administration and maintenance of such temporary parking facilities. When such temporary parking facilities are no longer required, Seller in its discretion (unless such removal is required by the City in which event Seller shall) and at Seller's sole cost and expense, may remove such temporary parking facilities and restore such land to its condition prior to the construction of such temporary parking facilities.. Seller agrees to cooperate with Buyer in an effort to persuade the City and any other necessary parties that such temporary parking facilities should not be required. 5.3.2. GOVERNMENTAL APPROVALS FOR THE PROJECT. Seller hereby covenants and agrees to cooperate with Buyer and to use reasonable and good faith efforts to aid and assist Buyer in obtaining a Use Permit and other approvals necessary for construction, development of the Project. 11 12 5.3.3. PROPERTY INSPECTION AND DOCUMENTS. Seller hereby covenants and agrees to cooperate with Buyer in the inspection of the Property. Within five (5) days after the Agreement Date, Seller shall make available to Buyer all Property Documents in Seller's possession and control. Seller makes no representation or warranty that such information is accurate or complete. 5.3.4. OFF-BALANCE SHEET FINANCING STRUCTURE. Seller hereby covenants and agrees to use reasonable and good faith efforts to accommodate Buyer's use of an off-balance sheet financing structure. 5.3.5. CONDITION OF PROPERTY AND TITLE. Seller hereby covenants and agrees that until the Closing, Seller shall maintain all portions of the Property substantially in its present condition, ordinary wear and tear and acts or occurrences beyond the reasonable control of Seller excepted, and shall not permit acts of waste. Seller further covenants and agrees that until the Closing, Seller shall not permit any liens, encumbrances, or easements that will survive the closing to be placed on the Property, other than the Permitted Exceptions, nor shall Seller enter into any agreement regarding the sale, rental, management, repair, improvement or any other matter affecting the Property that would be binding on Buyer or the Property after the Closing without the prior written consent of Buyer, which consent Buyer will not unreasonably withhold. 5.3.6. APPROVAL TO ENTER AGREEMENT. Seller covenants and agrees that on or before thirty (30) days from the Agreement Date, it shall exert diligent efforts to obtain the approval of Lienholder and any other necessary parties for Seller to enter into this Agreement. 5.3.7. CONFIDENTIALITY. Seller shall maintain the confidentiality of Buyer's name and shall not disclose Buyer's name or the terms of this Agreement or of such sale and purchase to any third parties whatsoever other than the Escrow Holder, the Title Insurer and such other persons whose assistance is required in carrying out the terms of this Agreement. 5.3.8. NO FURTHER MARKETING. Seller agrees that unless and until this Agreement is terminated, Seller will not offer the Property for sale or lease, negotiate with anyone for the sale or lease of the Property, or otherwise market the Property in any respect. 5.4. BUYER'S INSPECTION RIGHTS. Buyer and its agents and contractors shall have the right to enter on the Property to inspect it and conduct tests. Buyer will indemnify, defend (with counsel reasonably approved by Seller) and hold Seller, its partners and Designated Representatives harmless from any loss, cost, liability, claim or damage (including reasonable attorneys' fees and the cost of expert witnesses) resulting or arising from any 12 13 such entry, inspection or test and will, if Buyer fails to close, take reasonable steps to restore the Property to its condition prior to such inspection, entry, or test. Buyer shall also have the right to contact any federal, state or local governmental authority or agency to investigate any matters relating to the Property. ARTICLE 6. ESCROW 6.1. AGREEMENT TO CONSTITUTE ESCROW INSTRUCTIONS. This Agreement shall constitute escrow instructions and a copy hereof shall be deposited with Escrow Holder for this purpose. The Deposit shall be immediately placed by the Escrow Holder into a federally insured interest bearing account or a federally insured certificate of deposit, as designated by the Buyer. Interest accruing thereon shall be held for the benefit of the Buyer. 6.2. OPENING OF ESCROW. Escrow shall open on the date Escrow Holder receives a fully executed original or originally executed counterparts of this Agreement and the Deposit. Escrow Holder shall notify both Buyer and Seller of the date escrow is opened. 6.3. CLOSE OF ESCROW. Provided that all of the contingencies contained in Article III herein and all of the conditions to the close of escrow contained in Schedule "3" attached hereto have been satisfied (or deemed satisfied as the case may be) or waived, the close of escrow shall occur on or before 5:00 p.m., Pacific Time, on the Scheduled Closing Date. 6.4. SPECIFIC ESCROW INSTRUCTIONS. Specific escrow instructions are attached hereto as Schedule "3." 6.5. LIQUIDATED DAMAGES. IF BUYER FAILS TO COMPLETE THE PURCHASE PROVIDED FOR IN THIS AGREEMENT BY REASON OF ANY DEFAULT OF BUYER, SELLER SHALL BE RELEASED FROM SELLER'S OBLIGATION TO SELL THE PROPERTY TO BUYER. BUYER AND SELLER AGREE IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO FIX ACTUAL DAMAGES IN THE CASE OF BUYER'S DEFAULT AND THAT THE DEPOSIT OF FIFTY THOUSAND DOLLARS ($50,000.00) PRIOR TO THE END OF THE FEASIBILITY PERIOD, OR TWO HUNDRED THOUSAND DOLLARS ($200,000.00) AFTER THE EXPIRATION OF THE FEASIBILITY PERIOD, IS A REASONABLE ESTIMATE OF SELLER'S DAMAGES IN SUCH EVENT, AND THAT IN THE EVENT OF ANY DEFAULT BY BUYER HEREUNDER AS 13 14 AFORESAID, SELLER MAY RETAIN THE DEPOSIT. THE DEPOSIT SHALL CONSTITUTE LIQUIDATED DAMAGES AND SELLER'S SOLE REMEDY ON ACCOUNT OF BUYER'S DEFAULT FOR FAILURE TO CLOSE, BUT SHALL NOT LIMIT BUYER'S LIABILITY UNDER SECTION 5.4 ABOVE. ---------------- ----------------- Buyer's initials Seller's initials Nothing in this Section shall prevent any recovery of attorneys' fees or other costs pursuant to the Section hereof entitled "Attorneys' Fees." ARTICLE 7. MISCELLANEOUS PROVISIONS 7.1. MISCELLANEOUS PROVISIONS. Buyer and Seller hereby agree to those miscellaneous provisions as set forth in Schedule "4" attached hereto. 7.2. ASSIGNMENT. Buyer may assign this Agreement or designate a party other than Buyer to take title to the Property at the Closing without the consent of Seller and upon any such assignment, the party which is then assignor under such assignment shall, subject to the conditions hereinafter described, be released from any obligation under this Agreement. As a condition precedent to the release of Buyer from liability under Section 5.4. of this Agreement, Buyer or Buyer's assignee shall obtain and maintain for a period commencing with the effective date of the assignment and ending two (2) years after the earlier of the Closing or the termination of this Agreement, a policy of commercial general liability insurance naming Seller as an additional insured in an amount of not less than $1,000,000 per occurrence and $2,000,000 aggregate insuring against bodily injury and property damage[protecting Seller] on account of any activities undertaken by or on behalf of Buyer under Section 5.4. of this Agreement, which insurance policy shall name Seller as insured and shall be in form and substance reasonably approved by Seller. 7.3. INCORPORATION OF EXHIBITS. All schedules and exhibits attached hereto and referred to herein are incorporated in this Agreement as though fully set forth herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date above first written. SELLER: Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 14 15 Cupertino City Center Buildings Partnership, a California limited partnership, By: _____________________________________ Its _________________________________ BUYER: Symantec Corporation, a Delaware corporation By:_____________________________________ Robert Dykes, Its Executive Vice President 15 16 CONSENT OF ESCROW HOLDER The undersigned Escrow Holder hereby agrees to (i) accept the foregoing Agreement, (ii) be escrow agent under said Agreement, and (iii) be bound by said Agreement in the performance of its duties as escrow agent. First American Title Guaranty Company By:_________________________________ Its: Authorized Agent 16 17 LIST OF SCHEDULES Schedule "1" Definitions Schedule "2" Representations and Warranties Schedule "3" Specific Escrow Instructions Schedule "4" Miscellaneous Provisions 17 18 SCHEDULE "1" DEFINITIONS 1.01 Definitions. For the purposes of this Agreement, the terms set forth below in quotes shall have the meanings indicated in this Schedule "1." 1.02 "Agreement" means this Agreement for Purchase and Sale and Escrow Instructions. 1.03 "Closing" means the delivery and recordation of the Grant Deed and the payment by Buyer to Seller of the Purchase Price for the Property pursuant to the terms of the Agreement. 1.04 "Closing Date" means the date on which the Closing occurs. 1.05 "Contract Period" means the period commencing upon the Agreement Date and ending upon the first to occur of the Closing or the termination of this Agreement. 1.06 "Grant Deed" means a deed in favor of Buyer in a form substantially similar to that attached hereto as Exhibit "B." 1.07 "Hazardous Material" means any substance, the presence of which requires investigation or remediation under any federal, state or local statute, regulation or law; or which is or becomes defined as a "hazardous waste" pollutant or contaminant under any federal, state or local statute, regulation or law. 1.08 "Permitted Exceptions" means those certain matters constituting exceptions to and/or encumbrances against the Property approved or deemed approved by Buyer pursuant to Section 3.2.2., all matters which would be disclosed by an ALTA survey of the Property, or an inspection of the Property unless such ALTA survey is completed within thirty-five (35) days of the Agreement Date and items shown on such survey are not so approved or deemed approved by Buyer and all other exceptions to title voluntarily imposed or consented to by Buyer prior to Closing. 1.09 "Title Report" means a preliminary title report issued by the Title Insurer providing for the issuance at the Closing to Buyer of a Title Policy. 1.10 "Title Policy" shall mean an Owners CLTA Policy of Title Insurance from Title Insurer in form satisfactory to Buyer . insuring Buyer (or Buyer's assignee) as fee owner of the Property, with liability in the amount of the Title Insurance Amount, subject only to the Permitted Exceptions. Buyer shall be responsible for any costs or delays 18 19 occasioned by Buyer's desire to obtain an ALTA Policy of Title Insurance or the need to obtain an ALTA Survey. 19 20 SCHEDULE "2" REPRESENTATIONS AND WARRANTIES 2.01 Seller's Representations and Warranties. Seller hereby makes the following representations and warranties to Buyer. (a) Actions. To the best of Seller's knowledge, there are no actions, suits, material claims, legal proceedings or any other proceedings pending or threatened before any court or governmental agency which may involve or affect the Property or any portion thereof. (b) Compliance with Laws. To the best of Seller's knowledge, Seller is not aware that any governmental authority considers the operation, use or ownership of the Property to violate or have violated any fire, building, zoning, health or other ordinance, code, law, regulation or order of any governmental or any agency or body or subdivision thereof, or that any investigation has been commenced or is contemplated regarding such possible violation, or that there is any material, adverse fact or condition relating to the Property or any portion thereof affecting the legality of developing the Property. (c) Other Agreements. To the best knowledge of Seller, neither this Agreement, nor anything provided to be done hereunder, violates or shall violate any contract, agreement or instrument to which Seller is a party, or which affects the Property or any portion thereof. (d) Default. To the best of Seller's knowledge, Seller is not in default with respect to any of its obligations or liabilities pertaining to the Property. (e) Hazardous Materials. To the best of Seller's actual knowledge, there has been no release of Hazardous Materials on, from or under the Property. (f) Bankruptcy. Seller has not (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by the Seller's creditors; (iii) suffered the appointment of a receiver to take possession of all or substantially all of the Seller's assets; or (iv) suffered the attachment or other judicial seizure of all, or substantially all, of the Seller's assets. (g) Authority. Seller is duly organized and existing and in good standing under the laws of the State of California. Seller has the full right and authority to enter into this Agreement and subject to the approvals described in this Agreement to consummate the transaction contemplated herein. All requisite action, has been 20 21 taken by Seller in connection with entering into this Agreement. Any person signing this Agreement on behalf of Seller is authorized to do so. (h) Execution. The execution and delivery of the Agreement will not constitute a breach of or a default under any agreement or other instrument to which the Seller is a party. (i) No Other Representations or Warranties. Seller makes no representations and warranties other than those contained in this Schedule "2." (j) Limited to Actual Knowledge. Any and all representations and warranties by Seller to its best knowledge are hereby expressly limited to matters within the actual knowledge of Seller's Designated Representatives without investigation or inquiry. 2.02 Buyer's Independent Investigation. (a) Buyer acknowledges and agrees that it has been given or will be given before the end of the Feasibility Period, a full opportunity to inspect and investigate each and every aspect of the Property, either independently or through agents of Buyer's choosing, including, without limitation: (l) All matters relating to title, together with all governmental and other legal requirements such as taxes, assessments, zoning, use permit requirements and building codes. (2) The physical condition and aspects of the Property, including, without limitation, the utilities, and all other physical and functional aspects of the Property. Such examination of the physical condition of the Property shall include an examination for the presence or absence of Hazardous Materials, which shall be performed or arranged by Buyer at Buyer's sole expense. (3) Any easements and/or access rights affecting the Property. (4) The service contracts and any other documents or agreements of significance affecting the Property. (5) All other matters of material significance affecting the Property. (b) BUYER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT SELLER IS SELLING AND BUYER IS PURCHASING 21 22 THE PROPERTY ON AN "AS IS WITH ALL FAULTS" BASIS AND THAT BUYER IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM SELLER, ITS AGENTS, OR BROKERS AS TO ANY MATTERS CONCERNING THE PROPERTY EXCEPT AS EXPRESSLY SET FORTH IN SCHEDULE 2, INCLUDING, WITHOUT LIMITATION: (i) the quality, nature, adequacy and physical condition and aspects of the Property, including, but not limited to appurtenances, access, landscaping, and parking facilities, (ii) the quality, nature, adequacy, and physical condition of soils, geology and any groundwater, (iii) the existence, quality, nature, adequacy and physical condition of utilities serving the Property, (iv) the development potential of the Property, and the Property's use, habitability, merchantability, or fitness, suitability, value or adequacy of the Property for any particular purpose, (v) the zoning or other legal status of the Property or any other public or private restrictions on use of the Property, (vi) the compliance of the Property or its operation with any applicable codes, laws, regulations, statutes, ordinances, covenants, conditions and restrictions of any governmental or quasi-governmental entity or of any other person or entity, (vii) the presence of Hazardous Materials on, under or about the Property or the adjoining or neighboring property, (viii) the quality of any labor and materials used in any improvements on the Real Property, (ix) the condition of title to the Property, (x) the leases, service contracts, or other agreements affecting the Property and (xi) the economics of the operations of the Property. (c) Without limiting the above, and subject to the representations and warranties of Seller contained in Schedule 2, Buyer on behalf of itself and its successors and assigns waives its right to recover from, and forever releases and discharges, Seller, Seller's affiliates, Seller's investment manager, the partners, trustees, shareholders, directors, officers, employees and agents of each of them and their respective heirs, successors, personal representatives and assigns (collectively, the "Seller Related Parties"), from any and all demands, claims, legal or administrative proceedings, losses, liabilities, damages, penalties, fines, liens, judgments, costs or expenses whatsoever, including, 22 23 without limitation, attorneys' fees and costs), whether direct or indirect, known or unknown, foreseen or unforeseen, that may arise on account of or in any way be connected with the physical condition of the Property or any law or regulation applicable thereto, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 6901), et seq.), the Resources Conservation and Recovery Act of 1975 (42 U.S.C. Section 6901, et seq.), the Clean Water Act (33 U.S.C. Section 1251, et seq.), the Safe Drinking Water Act (14 U.S.C. Section 1401, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et. seq.), and the Toxic Substance Control Act (15 U.S.C. Section 2601, et seq.). (d) As to all matters being released by Buyer pursuant to the ptovisions hereof, Buyer hereby waives any and all rights which it may have under the provisions of California Civil Code Section 1542 or any comparable federal or state statute or rule of law. California Civil Code Section 1542 provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." 2.03 Buyer's Representations and Warranties. Buyer hereby makes the following representations and warranties to Seller: (a) Authority. Buyer is duly organized and in good standing under the laws of the State of its formation. Following the approval of Buyer's Board of Directors, Buyer will have the full right and authority to enter into and fully perform its obligations under this Agreement and to consummate the transactions contemplated herein. All requisite action has been taken by Buyer in connection with entering this Agreement. Each of the persons signing this Agreement on behalf of Buyer is authorized to do so. (b) Execution. The execution and delivery of the Agreement will not constitute a breach of or a default under any agreement or other instrument to which the Buyer is a party. (c) No Other Representations or Warranties. Buyer acknowledges that Seller has made no other representations or warranties other than those contained in this Schedule 2. 23 24 "SCHEDULE "3" SPECIFIC ESCROW INSTRUCTIONS 3.01 Conditions to Close of Escrow. (a) Conditions for the Benefit of Buyer. In addition to any other obligations contained in this Agreement, the following shall constitute conditions to Buyer's obligation to purchase the Property from Seller and are for the benefit of Buyer, the failure of any of which shall allow Buyer to terminate this Agreement. (i) Grant Deed. Seller shall have delivered to Escrow Holder prior to the time set for Closing a duly executed and acknowledged Grant Deed in the form attached hereto as Exhibit "B." (ii) Non-Foreign Status Affidavit. Seller shall have delivered to Escrow Holder prior to the time set for Closing a Non-Foreign Status Affidavit executed by Seller in the form attached hereto as Exhibit "E" as well as any similar Affidavit required by the State where the Property is located. (iii) Other Documents and Sums. Seller shall deliver to Escrow Holder all other documents and sums reasonably required of Seller to carry out the Closing. (iv) Seller's Representations and Warranties are True and Correct. Seller shall not have delivered to Escrow Holder on or before the time set for Closing a certificate of Seller that any of the representations and warranties made by Seller in this Agreement are no longer true and correct as of the Closing and/or that Seller has not complied with any of the covenants of Seller contained therein. (iv) Title Policy. The Title Company shall be prepared to issue the Title Policy from Title Insurer subject only to the Permitted Exceptions. (b) Conditions for the Benefit of Seller. In addition to any other obligations contained in this Agreement, the following shall constitute conditions to Seller's obligation to sell the Property to Buyer and shall be for the benefit of Seller, the failure of any of which shall allow Seller to terminate this Agreement: (i) Delivery of Purchase Price. Buyer shall deliver the Purchase Price to Escrow Holder prior to the time set for Closing. (ii) Other Documents and Sums. Seller shall deliver to Escrow Holder all other documents and sums reasonably required of Seller to carry out the Closing. 24 25 (iii) Buyer's Representations and Warranties are True and Correct. Buyer shall not have delivered to Escrow Holder on or before the time set for Closing a certificate of Buyer that any of the representations and warranties are not true and correct as of the Closing Date and/or that Buyer has not complied with any covenants of Buyer contained therein. 3.02 Recordation of Grant Deed and Delivery of Funds. Upon receipt of the funds and instruments described in this Schedule "3," and upon the satisfaction (or deemed satisfaction as the case may be) or waiver of the conditions specified in this Schedule "3," Escrow Holder shall cause the Grant Deed to be recorded in the official records of the County Recorder of Santa Clara County, California, (with documentary transfer tax information to be affixed by separate affidavit) and shall deliver the proceeds of this escrow to Seller. All sums to be disbursed to Seller by Escrow Holder shall be in cash, by wire transfer, or in other immediately available funds. 3.03 Prorations. All prorations are to be apportioned as of 11:59 p.m. on the day preceding the Closing Date. (a) Real property taxes and assessments shall be prorated between Buyer and Seller based on the latest available tax information. In the event any supplemental tax bill is issued following the Closing, Seller shall pay to Buyer all additional amounts applicable to the time prior to the Closing upon written request of Buyer. (b) Said prorations shall be based on a 30-day month and a 360-day year. 3.04 Costs of Escrow. (a) Seller shall pay; (i) All costs not specifically referenced herein customarily allocated to Seller Santa Clara County, California; (ii) Pursuant to separate written agreement, a real estate brokerage commission in an amount equal to five percent (5%) of the Purchase Price to Cooper/Brady: (iii) The premium for a CLTA version without special endorsement of the Title Policy up to the amount of the Purchase Price; (iv) The cost of any of Seller's other obligations hereunder. (b) Buyer shall pay: (i) All costs not specifically referenced herein customarily allocated to Buyer in Santa Clara County, California. 25 26 (ii) The extra premium for an Owner's ALTA version of the Title Policy for such portion of the Title Insurance Amount that is in excess of the Purchase Price and the cost of any endorsements required by Buyer (unless offered by Seller in order to correct an exception to title disapproved by Buyer) and for any coverage for any amount in excess of the Purchase Price. (iii) The cost of any of Buyer's other obligations hereunder. 3.05 Escrow Cancellation Charges. In the event that any Closing shall fail to occur by reason of the default of either party, the defaulting party shall be liable for all escrow cancellation charges. In the event that any Closing shall fail to occur for any other reason, Buyer and Seller shall each be liable for one-half of any escrow cancellation charges. 3.06 Default. TIME IS OF THE ESSENCE in this Agreement and if Buyer or Seller (the "Defaulting Party") fails to deposit any of the amounts due pursuant to this Agreement, or to perform any other act when due, then the other party (the "Non-Defaulting Party") may terminate this Agreement by notice in writing to the Defaulting Party and Escrow Holder at which time Escrow Holder shall cancel this escrow and the Non-Defaulting Party shall thereupon be released from its obligations under this Agreement except for Buyer's liability under Section 5.4 of the Agreement. In the event that escrow shall fail to close by reason of the default of Seller, Buyer shall be entitled to the return of the Deposit and all accrued interest. 3.07 Additional Escrow Instructions. If required by Escrow Holder, Buyer and Seller shall execute Escrow Holder's usual form of supplemental escrow instructions for transactions of this type, provided, however, that (a) in the event that any portion of such additional escrow instructions shall be inconsistent with the provisions of this Agreement, the provisions of this Agreement shall prevail to the extent of any such inconsistency; and (b) no provision thereof shall have the effect of modifying this Agreement unless it is expressly so stated and such express statement is initialed by Buyer and Seller. 26 27 SCHEDULE "4" MISCELLANEOUS PROVISIONS 4.01 No Brokers. Except for Buyer's broker, Cooper/Brady, each party represents to the other that it has not had any contact or dealings regarding the Property, or any communication in connection with the subject matter of this transaction, through any real estate broker or other person who can claim a right to a commission or finder's fee. If any broker or finder makes a claim for a commission or finder's fee based upon a contact, dealings, or communications, the party through whom the broker or finder makes this claim shall indemnify, defend with counsel of the indemnified party's choice, and hold the indemnified party harmless from all expense, loss, damage, liability and claims, including the indemnified party's attorneys' fees, if necessary, arising out of the broker's or finder's claim. Seller has agreed by separate written agreement to pay at, and conditioned on, the Closing a commission to Cooper/Brady. 4.02 Attorneys' Fees. In any legal proceeding between Buyer and Seller seeking enforcement of or attempting to construe any of the terms and provisions of this Agreement, or in connection with the Property, including, without limitation, insolvency, bankruptcy, arbitration, declaratory relief or other litigation, the prevailing party in such action shall be awarded, in addition to damages, injunctive or other relief, its reasonable costs and expenses, not limited to service of process, filing fees, court and court reporter costs, investigation costs, expert witness fees and the cost of any bonds, and reasonable attorneys' fee (hereinafter "Legal Fees"). In addition, any Legal Fees incurred in enforcing any judgment, injunctive or other relief, shall be paid by the party against whom the judgment is being enforced. 4.03 Notices. Any notice sent by registered or certified mail, return receipt requested, shall be deemed delivered and effective upon the earlier of (i) if personally delivered, the date of the receipt of delivery by an individual at the address of the party to receive such notice; (ii) if delivered by overnight commercial carrier, on the date of delivery to the address of the party to receive such notice, as shown on the delivery receipt from such carrier; (iii) if mailed, on the date of delivery as shown by the sender's registry or certification receipt; or (iv) if given by telecopy, upon telephonic confirmation of receipt of such telecopy transmission and provided further that the telecopy shall be later confirmed by any of the above-noted three methods. Any communication sent by telecopy must be confirmed immediately by telephone and also within forty-eight (48) hours by letter mailed or delivered in accordance with this Section. Notice sent by any other manner shall be effective only upon actual receipt thereof. Any party may change its address for purposes of this Section by giving notice to the other party hereto and to Escrow Holder as herein provided. 27 28 4.04 Assignment. This Agreement shall be binding upon the parties hereto and their respective heirs, successors or representatives. 4.05 Relationship of Parties. The relationship of the parties to this Agreement shall be solely that of Buyer and Seller, and nothing herein contained shall be construed otherwise. 4.06 Governing Law. This Agreement shall be construed in accordance with the laws of the State of California. 4.07 Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the parties may require. 4.08 Headings. All headings of this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement. 4.09 Severability. If any paragraph, section, sentence, clause or phrase contained in this Agreement shall become illegal, null or void against public policy, or otherwise unenforceable, for any reason, or shall be held by any court of competent jurisdiction to be illegal, null or void, against public policy, or otherwise unenforceable, the remaining paragraphs, sections, sentences, clauses or phrases contained in this Agreement shall not be affected thereby. 4.10 Waiver. The waiver of any breach of any provision hereunder by Buyer or Seller shall not be deemed to be a waiver of any preceding or subsequent breach hereunder. No failure or delay of any party in the exercise of any right given hereunder shall constitute a waiver thereof nor shall any partial exercise of any right preclude further exercise thereof. 4.11 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which shall constitute one and the same instrument. 4.12 Time of Essence. TIME IS OF THE ESSENCE in this Agreement as to all dates and time periods set forth herein. 28 29 LIST OF EXHIBITS Exhibit "A" Legal Description of Property Exhibit "B" Grant Deed Exhibit "C" Buyer's Election to Continue Escrow Exhibit "D" Non-Foreign Status Affidavit 29 30 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY (TO BE PROVIDED BY SELLER) 30 31 EXHIBIT "B" RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: - ------------------ 10201 Torre Avenue Cupertino, CA 95014 Attention: Dakin Ferris MAIL TAX STATEMENTS TO: - ------------------ 10201 Torre Avenue Cupertino, CA 95014 Attention: Finance Department - -------------------------------------------------------------------------------- (SPACE ABOVE THIS LINE FOR RECORDER'S USE) GRANT DEED ---------- Documentary Transfer tax is $ ________________ ( ) Computed on full value of property conveyed, or ( ) Computed on full value less value of liens and encumbrances remaining at time of sale. ( ) Unincorporated area: ( ) City of ________________, FOR A VALUABLE CONSIDERATION, receipt of this is hereby acknowledged, Cupertino City Center Buildings Partnership, a California limited partnership hereby grants to ______________, a ___________, the following described real property in the County of Santa Clara, State of California: See Exhibit "A" which is attached hereto and incorporated by this reference. IN WITNESS WHEREOF, the parties hereto have executed this Grant Deed as of this day of ______________, 19___. Cupertino City Center Buildings Partnership, a California limited partnership, By:_________________________________ _______________ Its _____________ 31 32 EXHIBIT "A" to Grant Deed PROPERTY DESCRIPTION -------------------- [TO BE PROVIDED BY SELLER] 32 33 EXHIBIT "C" BUYER'S ELECTION TO CONTINUE ESCROW To: _______________ [Escrow Holder] Re: Buyer's Election to Continue Escrow for Escrow No. Ladies and Gentlemen: Under that certain Agreement for Purchase and Sale and Escrow Instructions (the "Agreement") dated May __, 1996 between Cupertino City Center Buildings Partnership, a California limited partnership ("Seller") and the Buyer therein, initially Symantec Corporation, a Delaware corporation ("Buyer"), the undersigned having succeeded to the interest of Buyer by assignment hereby elects to proceed with the purchase and tenders herewith the additional sum of One Hundred Fifty Thousand Dollars ($150,000) as an increase in the Deposit making the total Deposit Two Hundred Thousand Dollars ($200,000). Very truly yours, BUYER ____________________ a ___________________ By: ______________________________________ 33 34 EXHIBIT "D" NON-FOREIGN STATUS AFFIDAVIT To inform __________________________________, a _____________________(the "Transferee") that withholding of tax under Section 1445 of the Internal Revenue Code of 1986, as amended ("Code") and under Section 18805(a)(2) of the California Revenue and Taxation Code will not be required upon the transfer of certain real property to the Transferee by Cupertino City Center Buildings Partnership, a California limited partnership (the "Transferor"), the undersigned hereby certifies the following on behalf of the Transferor: 1. The Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder); 2. The Transferor's U.S. employer identification number is ________________; and 3. The Transferor's office address is _________________________________________. The Transferor understands that this Certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalty of perjury I declare that I have examined this Certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Transferor. Date _____________________________, 1996. Cupertino City Center Buildings Partnership, a California limited partnership By: ______________________________ ________________________, Its _____________________ 34 35 FIRST AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS This First Amendment ("Amendment") made effective July 30, 1996, amends that certain Agreement for Purchase and Sale and Escrow Instructions dated May 31, 1996 made by and between Symantec Corporation, a Delaware Corporation, therein and herein called "Buyer," and Cupertino City Center Buildings, a California Limited Partnership, therein and herein called "Seller." The terms of the Purchase Agreement are incorporated and made a part hereof by this reference. 1. Section 1.2.8 ("Feasibility Period") is restated in its entirety as follows: The period beginning on the Agreement Date and terminating at 5:00 p.m. Pacific Time on September 5, 1996. 2. The fourth sentence of Section 3.2.2 of the Purchase Agreement is restated in its entirety as follows: Buyer has made timely objections; Seller shall have until August 20, 1996 to inform Buyer and Escrow Holder in writing whether Seller shall use its diligent efforts to remove such disapproved exceptions prior to the Closing. 3. In all other respects, the Purchase Agreement remains unamended and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the dates set forth opposite their respective signatures. Dated: 7/25/96 SELLER: -------------- CUPERTINO CITY CENTER BUILDINGS, a California Limited Partnership By: SUNSET RIDGE DEVELOPMENT CO. INC., a California Corporation Its: General Partner [ILLEGIBLE] ---------------------------------- By: SANFORD M. DILLER Its: President Dated: 7/26/96 BUYER: -------------- SYMANTEC CORPORATION a Delaware Corporation [SIGNATURE] ---------------------------------- By: DEREK WITTE Its: VP -1- 36 DRAFT SECOND AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS This SECOND AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS ("Second Amendment") made effective as of September 5, 1996, amends that certain Agreement for Purchase and Sale and Escrow Instructions dated May 31, 1996 ("Purchase Agreement") by and between Symantec Corporation, a Delaware corporation, therein and herein called "Buyer," and Cupertino City Center Buildings, a California Limited Partnership, therein and herein called "Seller." The Purchase Agreement was previously amended by the First Amendment to Agreement for Purchase and Sale and Escrow Instructions made effective July 30, 1996 (the "First Amendment"). Those terms defined in the Purchase Agreement shall have the same definitions when used herein unless specifically modified hereby. Buyer and Seller now wish to further modify the Purchase Agreement, as amended by the First Amendment, as hereinafter set forth. 1. Section 1.2.6 (entitled "Deposit") is hereby amended to increase to Five Hundred Thousand Dollars ($500,000) the amount of the Second Deposit. 2. Section 1.2.8 (entitled "Feasibility Period") is hereby restated in its entirety as follows: "1.2.8 "Feasibility Period." The period beginning on the Agreement Date and terminating two (2) business days following the occurrence of and written notice from Seller to Buyer (the "Feasibility Completion Notice") that all of the following feasibility conditions ("Feasibility Conditions") have occurred: (A) As a Feasibility Condition, that certain "Parking Easement and Relocation Agreement" in the form attached hereto as Appendix A (the "Parking Agreement") shall have been executed by all the parties thereto and the Acknowledgementss in the forms attached hereto as Appendices B-1, B-2 and B-3 shall have been executed by CCCLand, Cupertino City Center Apartments II, and Cupertino City Center Owners Association, respectively. In connection therewith, as a covenant to survive the Closing and not a Feasibility Condition, Seller agrees to permit Buyer to exercise the right of election of CCCB set forth in the second sentence of paragraph 2(a) of such Parking Easement and Relocation Agreement (and to hereafter execute such documents as may be reasonably required by Buyer to evidence the same).The foregoing right of election in Buyer is qualified as follows (except for the term "Buyer" which is defined in this Agreement, the capitalized terms that follow refer to those same terms as capitalized and defined in such Parking Agreement). Buyer must elect to relocate the Existing Parking Rights to the Parcel A Commercial Garage to the extent rights to the Parcel A Commercial Garage are available for such purpose at the time of such election. However, if Buyer elects to relocate the Existing Parking Rights to the Parcel A Commercial Garage and, within three (3) months following such election, Buyer determines that such rights are not reasonably 1 37 available in the Parcel A Commercial Garage, then Buyer may elect to relocate the Existing Parking Rights to the Alternate Property. In any event, Buyer may elect to relocate the Existing Parking Rights to the Alternate Property only until the earlier of (x) 36 months following the date of the Owner Relocation Notice or (y) thirty (30) days after Seller or Seller's successors or assigns have obtained a use permit for the construction of permanent improvements on the Alternate Property at which time such Existing Parking Rights must be relocated off the Alternate Property. (B) To the extent the following is within the power or control of Seller (or any entity controlled by Seller or controlled by or under common control with Sanford Diller, collectively a "Controlled Party"), Seller or such Controlled Party, at no cost to Seller or such Controlled Party nor payment to Apple, shall take such action as is reasonably necessary to revoke the consent for, and require Apple Computer to move the "Apple Computer" monument from a portion of Lot 7 of Tract 7953 which is adjacent to the Property, to a location selected by Apple Computer that is not located in any portion of said Lot 7 adjacent to the Property, and Seller hereby represents to Buyer that, after diligent search, Seller has been unable to locate any evidence that any specific permission has been granted to Apple Computer to allow such monument to be so placed and maintained. To the extent that the foregoing is not within the power or control of Seller, this Feasibility Condition shall be satisfied upon written notice from Seller to Buyer representing to Buyer that neither Seller nor any Controlled Party has the requisite power and control to satisfy such condition, in which event, Seller covenants to utilize its reasonable efforts following the Closing to cause such monument to be so moved. (C) As a Feasibility Condition, a declaration in the form attached hereto as Appendix C (the "Special Declaration") shall have been executed by Seller, the Cupertino City Center Owners Association, and those parties referred to therein as "Declarant" and an easement in form attached hereto as Appendix D (the "Grant of Easement") shall have been executed by the Cupertino City Center Owners Association (the "Association"). (D) Intentionally Omitted. (E) Intentionally Omitted. (F) As a Feasibility Condition, the "Consent to Declaration" in the form attached hereto as Appendix F shall have been executed by Seller and all the parties thereto except for the signatures of CIGNA and Travelers Insurance Company ("Travelers") to the Consent to Declaration which shall be the sole responsibility of Buyer and not a Feasibility Condition. Based upon Seller's representation to Buyer that Seller has no reason to believe that Travelers will refuse or grant such consent if requested by Buyer, Buyer agrees to not seek the consent of Travelers prior to the Closing; (G) As a Feasibility Condition, the Association's Design Review Board shall have approved preliminary plans for Buyer's proposed Project to be built on the Property; (H) Intentionally Omitted; 2 38 (I) As a Feasibility Condition, the "Entry Permit for a Construction Staging Area" in the form attached hereto as Appendix G (the "Construction Staging Easement) shall have been executed by Cupertino City Center Land and delivered to Escrowholder with instructions that the Construction Staging Easement shall be delivered to Buyer at the Closing. As a covenant to survive Closing, but not as a Feasibility Condition, the Construction Staging easement shall be coordinated with and subject to any temporary parking requirements that need to be provided on such parcels pursuant to Section 5.3.1.2 of the Agreement and shall be of a duration limited to Buyer's contemplated construction period; (J) As a Feasibility condition, Seller shall have delivered to Buyer the commitment of the Title Insurer that as of the Closing the title exceptions listed in paragraph 8 below shall be removed. 3. Section 1.2.15 (entitled "Purchase Price") is hereby restated in its entirety as follows: "1.2.15 "Purchase Price". Six Million Five Hundred Thousand Dollars ($6,500,000), plus interest at the rate of ten percent (10%) per annum from September 30, 1996 through Closing." 4. Section 1.2.16 (entitled "Scheduled Closing Date") is hereby restated in its entirety as follows: "1.2.16 "Scheduled Closing Date". Shall occur on or before the later of (i) January 7, 1997, plus such additional time as Buyer may require if, despite using good faith efforts to complete the Closing, Buyer is unable to fulfill its requirements by such date or (ii) seven (7) days after the end of the Feasibility Period; provided, however, that in no event shall the Scheduled Closing Date be extended beyond January 31, 1997 without the written agreement of both Buyer and Seller. 5. In Section 2.2.1 (entitled "Deposit") the amount of Two Hundred Thousand Dollars ($200,000) shall be increased to Five Hundred Thousand Dollars ($500,000) and the following sentence shall be added: "When Seller has given the Feasibility Completion Notice [all conditions to the end of the Feasibility Period, have occurred] and Buyer has given the [e]Election to [p]Proceed under Section 3.3.1, the Deposit shall be increased to $500,000. Concurrently with Buyer's increase of the Deposit, Two Hundred Fifty Thousand Dollars ($250,000) will be released to Seller and shall be nonrefundable except in the event of a Seller material default under this Agreement. If Buyer fails to close, except in the event of a Seller material default under this Agreement, Seller shall be entitled to retain the $250,000 released to Seller as consideration to Seller for the making and entering into of this Second Amendment and, among other things, for Seller's holding the Property off the market during the Feasibility Period as extended by this Amendment and for the costs and expenses incurred by Seller in pursuing this Agreement and the transactions contemplated hereunder (including expenses of third party consultants and attorneys), and in addition, Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 3 39 Seller shall be entitled to the balance of the Deposit (then $250,000) as liquidated damages pursuant to Section 6.5. 6. The second sentence of Section 3.1 (entitled "Effect of Conditions Generally") shall be restated in its entirety as follows: "Subject to the provisions of Section 2.2.1, in the event that any such condition is neither satisfied within the time limits specified in each such Section nor waived in writing by the party specifically stated to be benefited by such Section, such condition shall be deemed to have failed and the party specifically stated to be benefited by such failed condition may elect to terminate this Agreement." The following clause is inserted at the beginning of the third sentence of Section 3.1: "Subject to the provisions of Section 2.2.1, " 7. The introductory sentence of Section 3.2 (entitled "Conditions for the Benefit of Buyer") is restated in its entirety as follows: "In addition to any other conditions to Buyer's obligations contained in Schedule 3, the following shall constitute conditions to Buyer's obligations to purchase the Property from Seller and are for the benefit of Buyer, the failure of any of which shall allow Buyer to terminate this Agreement subject to the provisions of Section 2.2.1." 8. Section 3.2.2 (entitled "Approval of Condition of Title") shall be restated in its entirety as follows: "Buyer has reviewed the preliminary title report prepared by the Title Insurer for the Property dated as of June 5. 1996 under its Order No. 511373-A (the "title Report"). All of the exceptions shown on the Title Report plus the Second Amendment to Declaration in the form attached hereto as Appendix H (the "Second Amendment to Declaration"), the Special Declaration, the Grant of Easement, the Parking Easement and Relocation Agreement, and the "Grant of Lot 4 Easement Rights" in the form attached hereto as Appendix I and the Amendment to Declaration in the form attached hereto as Appendix K. are approved by Buyer as Permitted Exceptions except for the following numbered exceptions, the removal of which shall be a condition to Buyer's obligation to Close and which Seller agrees to use its reasonable efforts to cause to be removed prior to Closing both as to the Property and to the portion of Lot 7 of Tract 7953 that is the subject of the easement described in 1.2.8.c":
EXCEPTION NO. GENERAL TOPIC 20 Travelers Deed of Trust 25 Apple Lease
4 40 26 Apple right of First Refusal 27 Apple lease/easements 28 Apple Right of First Refusal 33 TIAA Deed of Trust 34 Assignment of Leases-TIAA/Apple 35 Financing Statement-TIAA 38 Unrecorded leases and rights of first refusal
With respect to exception No. 18 (regarding City Resolution No. 7007) shown on the Title Report, Buyer has approved exception No. 18 and Seller hereby agrees (i) to indemnify Buyer against any and all loss, cost, damage or liability that may arise out of the failure of Seller to fulfill the requirements under City Resolution 7007 and (ii) to take prompt and reasonable steps to fulfill such requirements as may be imposed as a result of City Resolution 7007 and cause the effect thereof to be removed as an exception to Buyer's title to the Property. Such indemnity shall survive the Closing and the delivery of the Grant Deed. 9. The following subsections of Section 3.2 (entitled "Conditions for the Benefit of Buyer") shall be deleted in their entirety: (A) Section 3.2.3 (entitled "Approval to Enter Agreement"); (AA) Section 3.2.5 (entitled "Parking Agreement") (B) Section 3.2.6 (entitled "Access"), the substance of which is set forth in subsection 2 of this Second Amendment as revised Section 1.2.8(c); and (C) Section 3.2.7 (entitled "Construction Staging Area"), the substance of which is set forth in subsection 2 of this Second Amendment as revised Section 1.2.8(i). 10. The following subsections of Section 3.3 (entitled "Conditions for the Benefit of Seller") shall be deleted in their entirety (A) Section 3.3.2 (entitled "Approval to Enter Agreement"); and (AA) Section 3.3.3 (entitled "Parking Agreement"). (B) Section 3.3.4 (entitled "Access"), the substance of which is set forth in subsection 2 of this Second Amendment as revised Section 1.2.8(c). 5 41 11. Section 3.4 (entitled "Conditions of Deposit Refund to Buyer") is deleted in its entirety. 12. The following is added to Section 4.3 (entitled "Limitation of Actions"): "In addition, the twelve (12) month limitation for the commencement of legal action shall not apply to claims arising under the Parking Agreement, the Construction Staging Easement, Buyer's Parking Indemnity, or any other obligation the performance of which is by its express terms deferred to a period later than the Closing, and such claims shall be subject to the applicable statute of limitations." 13. The following Section 5.2.3 (entitled "Buyer's Parking Indemnity" is added to the Purchase Agreement: "5.2.3. Buyer's Parking Indemnity. Unless defined in this Agreement, the capitalized terms used in this Section shall have the meanings ascribed to such capitalized terms in the Parking Agreement. 5.2.3.1 Buyer's Limited Indemnity. Buyer agrees to indemnify, defend and hold Seller and the Controlled Parties, and their respective officers, directors, shareholders, partners and employees (the "Indemnified Parking Agreement Parties"), free and harmless from any and all expense, loss, damage, liability and claims of any kind or nature arising out of any actions against the Indemnified Parking Agreement Parties made by the Permittees alleging in effect that Buyer has not provided the Symantec Parking Facilities pursuant to the Parking Agreement ("Buyer's Parking Indemnity"). 5.2.3.2 Indemnity Procedures. Promptly, and in no event later than ten (10) days, after receipt by an Indemnified Parking Agreement Party of notice of the commencement of any action, such Indemnified Parking Agreement Party shall, if a claim in respect of such action is to be made against Buyer pursuant to Buyer's Parking Indemnity, notify Buyer in writing of the commencement thereof. In case any such action shall be brought against any Indemnfied Parking Agreement Party and such Indemnified Parking Agreement Party shall notify Buyer of the commencement thereof, Buyer shall be entitled to participate in such action and, to the extent that Buyer shall wish, to assume the defense thereof, with counsel satisfactory to such Indemnified Parking Agreement Party (which counsel shall not, except with the consent of the Indemnified Parking Agreement Party, be counsel to Buyer on other matters), and, after notice from Buyer to such Indemnified Parking Agreement Party of Buyer's election so to assume the defense thereof, Buyer shall not be liable to such Indemnified Parking Agreement Party for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such Indemnified Parking Agreement Party, in connection with the defense of such action, other than reasonable costs of investigation and legal expenses of other counsel in the event the counsel selected by Buyer has a conflict of interest in representing Buyer as well as any Indemnified Parking Agreement Party. 6 42 5.2.3.3. Other Indemnity Provisions. Notwithstanding anything in this Amendment or in the Agreement to the contrary, Buyer's Parking Indemnity shall survive the Closing, and the limitation for the commencement of legal action under Section 4.3 of the Agreement, as amended by this Amendment shall not apply to claims arising under Buyer's Parking Indemnity[. In all events, Buyer's obligation to indemnify shall apply only to actual compensatory damages to an Indemnified Parking Agreement Party and shall NOT extend to consequential damages of any kind.] 14. Sections 5.2.1.2 (entitled "Temporary Parking") and 5.3.1.1 (entitled "Parking Approvals") are modified by deleting therefrom the references to Apple Computer, Inc." The foregoing deletion is agreed by Buyer based upon Seller's representation that, other than the Apple Lease described in exception 25 of the Title Report, there are no agreements granting Apple Computer parking rights with respect to the Property. 15. Section 6.5 (entitled "Liquidated Damages"), is hereby restated in its entirety as follows: "IF BUYER FAILS TO COMPLETE THE PURCHASE PROVIDED FOR IN THIS AGREEMENT BY REASON OF ANY DEFAULT OF BUYER, SELLER SHALL BE RELEASED FROM SELLER'S OBLIGATION TO SELL THE PROPERTY TO BUYER. BUYER AND SELLER AGREE IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO FIX ACTUAL DAMAGES IN THE CASE OF BUYER'S DEFAULT AND THAT THE DEPOSIT OF FIFTY THOUSAND DOLLARS ($50,000) PRIOR TO THE END OF THE FEASIBILITY PERIOD, OR TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) AFTER THE EXPIRATION OF THE FEASIBILITY PERIOD WHICH SUM OF $250,000 OF LIQUIDATED DAMAGES IS DISTINCT AND INDEPENDENT FROM THE CONSIDERATION OF $250,000 WHICH MAY BE RETAINED BY SELLER UNDER SECTION 2.2.1. EACH SUCH SUM IS A REASONABLE ESTIMATE OF SELLER'S DAMAGES IN SUCH EVENT, AND THAT IN THE EVENT OF ANY DEFAULT BY BUYER HEREUNDER AS AFORESAID, SELLER MAY RETAIN THE SUM. SUCH SUM SHALL CONSTITUTE LIQUIDATED DAMAGES AND SELLER'S SOLE REMEDY ON ACCOUNT OF BUYER'S DEFAULT FOR FAILURE TO CLOSE, BUT SHALL NOT LIMIT BUYER'S LIABILITY UNDER SECTION 5.4 ABOVE. --------------- ----------------- Buyers Initials Seller's Initials 16. Buyer hereby agrees that at the Closing, Seller shall be entitled to grant to Cupertino City Center Apartments II, a California limited partnership ("CCCApartments II") one of the Controlled Parties and the owner of Lot 4, Tract 7953, a non-exclusive easement, in the form of the Grant of Lot 4 Easement Rights, within the parking area established and designated by Buyer on the Property for 12 parking spaces originally planned to be located within the portion of Lot 7 adjacent to Lot 4 and displaced by Buyer's use of said portion of Lot 7 pursuant to the Grant of Easement , provided, however, that the entitlement therefore for nine (9) of such spaces shall only include weekends, holidays and that time between 5 pm and 8 am on days other than weekends Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "] in the electronic format. 7 43 and holidays, and provided further, that such parking spaces and the holders of the rights thereto, shall be subject to reasonable, non-discriminatory rules and regulations (including, without limitation, instituting such security and administrative procedures as Buyer deems necessary for the safe, efficient operation of the parking facilities located thereon). The parties acknowledge that notwithstanding the Grant of the Lot 4 Easement rights, such parking rights will be unavailable to CCCApartments II during the period that Buyer is constructing the Project on Lot 5. Accordingly, during such period of construction, Buyer covenants, as a covenant surviving the Closing, that CCCApartments II shall have and enjoy said parking rights, including the right of access thereto, on Buyer's property commonly known as its World Headquarters having an address of 10201 Torre Avenue, Cupertino, California. If required in order to satisfy the City's parking requirements for Lot 4, the foregoing temporary parking rights will be expressed in a written instrument and recorded in the official Records of Santa Clara County. 17. Prior to, but not as a condition to Closing, and to the extent not completed at, Closing, Seller covenants and agrees to cooperate with Buyer and to use Seller's and any Controlled Party's reasonable good faith efforts (i) to enable Buyer to obtain permission (pursuant to written agreement which will include, inter alia, provisions by which Buyer will agree to minimize any disturbance to tenants and/or other users of the affected property, agree to repair and maintain any damage to the affected property, agree that the affected property will not be the subject of any lien by virtue of the activity of Buyer, agree to obtain and maintain comprehensive general liability insurance in the sum of Two Million Dollars ($2,000,000) protecting the affected property owners, and agree to give written notice to the affected property owners prior to the commencement of any work and/or the delivery of any materials so that the affected property owners may post notices of non-responsibility) from the Cupertino City Center Owners Association, the City, and other property owners and their lenders to construct, install and maintain a fiber-optic or similar "hard-wired" communications link between the Property, the property adjacent to the southern boundary of the Property which is occupied by and owned or to be acquired by Buyer and any other property owned or occupied by Buyer or Buyer's affiliates within the Cupertino City Center and (ii) to cause the Association and the Declarant members thereof to execute the Third Amendment providing for the cessation of the Class B Membership in the Cupertino City Center Owners Association not later than thirty-six (36) months from the date of the Closing. To the extent that the cooperation of Seller and the Controlled Parties requires Seller or the Controlled Parties to hire non-affiliated third parties, the reasonable out of pocket cost of hiring such third parties shall be reimbursed by Buyer. If not fulfilled as of the Closing, the covenants and agreements set forth in this paragraph shall survive the Closing. [Resolution No. 9751 ("Resolution 9751") of the City Council of the City of Cupertino adopted by the City Council on December 11, 1996 contemplates an agreement between Seller, Buyer and the City of Cupertino for the completion of certain improvements along Stevens Creek Boulevard and within the southeast corner of Stevens Creek and De Anza Boulevard. With respect to Resolution 9751 and the agreements contemplated thereby, Buyer agrees to be responsible for those items specified in Exhibit A to Resolution 9751 pursuant to which Buyer alone is mentioned and required to perform. With respect to those items specified in Exhibit A to Resolution 9751 in which Buyer and Seller are both mentioned and required to perform, Seller agrees that Seller shall be soley responsible for such performance, and, without limiting the generality of the foregoing.] Seller shall, on or before September 1, 1997, subject to extensions due to matters beyond the Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 8 44 reasonable control of Seller and/or the Controlled Parties, caused to be completed (i) the park roadway on Lots 1 and 8 of Tract 7953 in accordance with the plans therefore approved by the City of Cupertino, [and] (ii) the hardscape and landscape improvements on Lot 9 and adjacent to the northerly boundary of Lot 1 in accordance with the plans therefore approved by the City of Cupertino. 18. Notwithstanding the Closing, Seller agrees that Seller and the Controlled Parties will reasonably cooperate with Buyer in order to effectuate the intent of (i) the Agreement as amended and (ii) the other agreements to be consummated and delivered pursuant to the Agreement as amended. Without limiting the generality of the foregoing, to the extent that as of the Closing, any covenants of Seller or Buyer remain unfulfilled or Buyer or Seller has waived an unfulfilled condition to Closing, Seller or Buyer agrees that such unfulfilled covenants or conditions shall remain covenants that survive the Closing requiring Seller and the Controlled Parties to use reasonable efforts to fulfill, working in cooperation with the other. To the extent that the cooperation of Seller and the Controlled Parties, on the one hand and Buyer, on the other hand, requires Seller or the Controlled Parties to hire non-affiliated third parties, the reasonable out of pocket cost of hiring such third parties shall be reimbursed by Buyer[; provided, however, prior to hiring any such third parties the cost for which Seller shall expect to be reimbursed by Buyer, Seller agrees to give Seller not less than ten (10) days notice specifying the third parties that Seller desires to hire and the specific tasks that such third parties will be hired to undertake]. 19. The parties acknowledge that construction is under way and will continue with respect to the improvement of Lot 4 of Tract 7953, which construction includes some utilization of the "Burdened Property" shown on the Grant of Easement. Buyer and Seller, for itself and the Controlled Parties, covenant and agree that they will reasonably and in good faith cooperate and coordinate their development on and utilization of the Burdened Property so that neither will be unreasonably impeded. 20. Exhibit "C" (Election to Proceed) is revised and restated as set forth in the Appendix J attached hereto. Said Election to Proceed must be given, if at all, within three (3) business days of Seller having given the Feasibility Completion Notice. 21. Whenever in the Purchase Agreement and/or this First Amendment, a party has the right to "terminate" the agreement, the exercise of such right of termination shall mean only the extinction of the obligation of Buyer to purchase the Property and the obligation of Seller to sell the Property as well as the extinction of any obligations under any documents ancillary to the purchase of the Property. 22. To the extent this Second Amendment conflicts with the First Amendment, this Second Amendment shall control. 22. Except as herein and heretofore amended, the Purchase Agreement remains unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment on the dates set forth opposite their respective signatures below. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 9 45 SELLER: BUYER: CUPERTINO CITY CENTER BUILDINGS, a SYMANTEC CORPORATION, a Delaware California Limited Partnership corporation By: SUNSET RIDGE DEVELOPMENT CO. By: _________________________________ INC., a California corporation _________________________________ Its______________________________ Its: General Partner By: _________________________________ _________________________________ Its _____________________________ 10 46 LIST OF APPENDICES
APPENDIX TITLE A Parking Easement and Relocation Agreement B-1 Acknowledgement by CCCLand B-2 Acknowledgement by CCCApartments II B-3 Acknowledgement by CCC Owners Association C Special Declaration (Encroachment Easements) D Grant of Easement E List of Vacation of Easement Parties F Consent to Declaration G Contraction Staging Easement H Second Amendment to Declaration I Grant of Lot 4 Easement Rights J Revised Exhibit C (Election to Proceed) K Third Amendment to Declaration
1 47 APPENDIX A [PARKING EASEMENT AND RELOCATION AGREEMENT] 1 48 APPENDIX B ACKNOWLEDGEMENT AND AGREEMENT BY CUPERTINO CITY CENTER LAND, a California limited partnership ("CCCLand") CCCLand hereby represents that it is the fee owner of Lots 1 and 6, Tract 7953, Cupertino City Center Phase III, as shown on Map recorded February 27, 1987 in Book 571 of Maps, pages 36 and 37, Official Records of Santa Clara County, California ("Lots 1 and 6"). CCCLand hereby acknowledges that this ACKNOWLEDGEMENT AND AGREEMENT is being executed concurrently with the execution of that certain Second Amendment to Agreement for Purchase and Sale and Escrow Instructions by and between Symantec Corporation, a Delaware corporation ("Buyer") and Cupertino City Center Buildings, a California limited partnership ("Seller"). Said Agreement for Purchase and Sale and Escrow Instructions as amended by said Second Amendment and any further amendments thereto are herein referred to collectively as the "Agreement of Purchase and Sale". CCCLand understands that Seller is controlled by or under common control with Sanford Diller and CCCLand further represents that it is also an entity controlled by or under common control with Sanford Diller and CCCLand acknowledges that it is a "Controlled Party" as the term "Controlled Party" is used in the Agreement of Purchase and Sale. CCCLand hereby agrees that to the extent that the Agreement of Purchase and Sale requires Seller and the Controlled Parties to cooperate with Buyer before or after the Closing contemplated by such Agreement of Purchase and Sale, CCCLand will use its reasonable efforts to so cooperate. By a separate Parking Easement and Relocation Agreement (the "Parking Agreement"), Seller and CCCLand, among other parties, are agreeing that certain parking requirements for the benefit of the Benefited Property described below may, at the election of Buyer, be provided temporarily on Lots 1 and 6. The Benefited Property consists of the following: Lots 2 and 3, of said Tract 7953 and Lot 4, Tract 7734, Cupertino City Center Phase II, as shown on Map recorded October 9, 1985 in Book 550 of Maps, pages 24, 25 and 26, Official Records of Santa Clara County. 1 49 CCCLand hereby confirms the above representation and agrees to provide such temporary parking on Lots 1 and 6 when and if requested by Buyer in accordance with the terms and conditions of the Parking Agreement. CUPERTINO CITY CENTER LAND, a California Limited Partnership By: SUNSET RIDGE DEVELOPMENT CO. INC., a California corporation Its: General Partner By: _________________________________ _________________________________ Its ____________________________ 2 50 APPENDIX B-2 ACKNOWLEDGEMENT AND AGREEMENT BY CUPERTINO CITY CENTER APARTMENTS II, a California limited partnership ("CCCApartments II") CCCApartments II hereby represents that it is the fee owner of Lot 4, Tract 7953, Cupertino City Center Phase III, as shown on Map recorded February 27, 1987 in Book 571 of Maps, pages 36 and 37, Official Records of Santa Clara County, California ("Lots 1 and 6"). CCCApartments II hereby acknowledges that this ACKNOWLEDGEMENT AND AGREEMENT is being executed concurrently with the execution of that certain Second Amendment to Agreement for Purchase and Sale and Escrow Instructions by and between Symantec Corporation, a Delaware corporation ("Buyer") and Cupertino City Center Buildings, a California limited partnership ("Seller"). Said Agreement for Purchase and Sale and Escrow Instructions as amended by said Second Amendment and any further amendments thereto are herein referred to collectively as the "Agreement of Purchase and Sale". CCCApartments II understands that Seller is controlled by or under common control with Sanford Diller and CCCApartments II further represents that it is also an entity controlled by or under common control with Sanford Diller and CCCApartments II acknowledges that it is a "Controlled Party" as the term "Controlled Party" is used in the Agreement of Purchase and Sale. CCCApartments II hereby agrees that to the extent that the Agreement of Purchase and Sale requires Seller and the Controlled Parties to cooperate with Buyer before or after the Closing contemplated by such Agreement of Purchase and Sale, CCCApartments II will use its reasonable efforts to so cooperate. CUPERTINO CITY CENTER APARTMENTS II, a California Limited Partnership By: SUNSET RIDGE DEVELOPMENT CO. INC., a California corporation Its: General Partner By: ----------------------------- Name: Title: 1 51 APPENDIX B-3 ACKNOWLEDGEMENT AND AGREEMENT BY CUPERTINO CITY CENTER OWNERS ASSOCIATION, a California nonprofit corporation ("Association") Association hereby represents that it is the fee owner of Lot 7, Tract 7953, Cupertino City Center Phase III, as shown on Map recorded February 27, 1987 in Book 571 of Maps, pages 36 and 37, Official Records of Santa Clara County, California ("Lots 1 and 6"). Association hereby acknowledges that this ACKNOWLEDGEMENT AND AGREEMENT is being executed concurrently with the execution of that certain Second Amendment to Agreement for Purchase and Sale and Escrow Instructions by and between Symantec Corporation, a Delaware corporation ("Buyer") and Cupertino City Center Buildings, a California limited partnership ("Seller"). Said Agreement for Purchase and Sale and Escrow Instructions as amended by said Second Amendment and any further amendments thereto are herein referred to collectively as the "Agreement of Purchase and Sale". Association hereby agrees that to the extent that the Agreement of Purchase and Sale requires Seller and the Controlled Parties to cooperate with Buyer before or after the Closing contemplated by such Agreement of Purchase and Sale, Association will use its reasonable efforts to so cooperate. Without limiting the generality of the foregoing, Association specifically agrees to the provisions of paragraph 17 of said Second Amendment as such paragraph makes reference to Association. CUPERTINO CITY CENTER OWNERS ASSOCIATION, a California nonprofit corporation By:_______________________________ Its:________________________________ By:_________________________________ _________________________________ Its _____________________________ 1 52 APPENDIX C [SPECIAL DECLARATION-ENCROACHMENT EASEMENTS] 1 53 APPENDIX D [GRANT OF EASEMENTS] 1 54 APPENDIX E LIST OF VACATION OF EASEMENT PARTIES Central Fire District Cupertino Sanitary district PG&E Pacific Bell San Jose Water Co. TCI 1 55 APPENDIX F [CONSENT TO DECLARATION] 1 56 APPENDIX G [CONSTRUCTION STAGING EASEMENT 1 57 APPENDIX H [SECOND AMENDMENT TO DECLARATION] 58 APPENDIX I GRANT OF LOT 4 EASEMENT RIGHTS 59 APPENDIX J EXHIBIT "C" BUYER'S ELECTION TO CONTINUE ESCROW To: _______________ [Escrow Holder] Re: Buyer's Election to Continue Escrow for Escrow No. Ladies and Gentlemen: Under that certain Agreement for Purchase and Sale and Escrow Instructions (the "Agreement") dated May 30, 1996, as amended, between Cupertino City Center Buildings Partnership, a California limited partnership ("Seller") and the Buyer therein, initially Symantec Corporation, a Delaware corporation ("Buyer"), the undersigned having succeeded to the interest of Buyer by assignment hereby acknowledges that all conditions have been fulfilled or are waived by Buyer and Buyer elects to proceed with the purchase, subject to the fulfillment of those conditions for the benefit of Buyer in Schedule 3 to the Agreement and tenders herewith the additional sum of Four Hundred Fifty Thousand Dollars ($450,000) as an increase in the Deposit making the total Deposit Five Hundred Thousand Dollars ($500,000), Two Hundred Fifty Thousand Dollars ($250,000) out of which Deposit shall be immediately released to Seller.. Very truly yours, BUYER ____________________a_____________ By: ________________ 1 60 APPENDIX K [THIRD AMENDMENT TO DECLARATION] 1 61 THIRD AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS This THIRD AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS ("Second Amendment") made effective as of January __, 1997, amends that certain Agreement for Purchase and Sale and Escrow Instructions dated May 31, 1996 ("Purchase Agreement") by and between Symantec Corporation, a Delaware corporation, therein and herein called "Buyer," and Cupertino City Center Buildings, a California Limited Partnership, therein and herein called "Seller." The Purchase Agreement was previously amended by the First Amendment to Agreement for Purchase and Sale and Escrow Instructions made effective July 30, 1996 (the "First Amendment") and by the Second Amendment to Agreement for Purchase and Sale and Escrow Instructions made effective September 5, 1996 (the "Second Amendment"). Those terms defined in the Purchase Agreement as supplemented and modified by the Second Amendment shall have the same definitions when used herein unless specifically modified hereby. Buyer and Seller now wish to further modify the Purchase Agreement, as amended by the First Amendment and the Second Amendment, as hereinafter set forth. 1. The following is added as subsection (k) to Section 1.2.8, as amended by the Second Amendment: (k) CCCApartments II, one of the Controlled parties, is currently constructing an apartment project on Lot 4 of Tract 7953 (the "Lot 4 Project"). As a condition to the entitlements from the City of Cupertino for the Lot 4 Project, 12 parking spaces were to be provided adjacent to the western boundary of said Lot 4. Pursuant to the Grant of Easement and otherwise as described in paragraph 16 of the Second Amendment, CCCApartments II agreed to relinquish any rights to such 12 parking spaces and instead agreed to the temporary and permanent parking rights described in paragraph 16 of the Second Amendment. As a Feasibility Condition, the City of Cupertino shall have confirmed (the "City Entitlement Confirmation") that the temporary and permanent parking rights to be granted to CCCApartments II as described in paragraph 16 of the Second Amendment will satisfy the entitlement condition that would previously have been satisfied by having such 12 parking spaces located adjacent to the western boundary of said Lot 4. Seller agrees to use Seller's and to cause the Controlled Parties to use their reasonable efforts to obtain the "City Entitlement Confirmation" as soon as possible. Without limiting the generality of the foregoing, Seller agrees that if the City Council of the City of Cupertino acts to give the City Entitlement Confirmation, that this Feasibility Condition shall be deemed satisfied. 2. Section 1.2.16 (entitled "Scheduled Closing Date") is hereby restated in its entirety as follows: 1.2.16 "Scheduled Closing Date". Shall occur on or before the later of (i) January 28, 1997, plus such additional time as Buyer may require if, despite using good faith efforts to complete the Closing, Buyer is unable to fulfill its requirements by such date but 1 62 not later than February 15, 1997 or (ii) seven (7) days after the end of the Feasibility Period. Notwithstanding the foregoing, if, despite the exercise of reasonable efforts by Seller and the Controlled Parties, the Feasibility Condition described in Section 1.2.8(k) is not fulfilled because the City Entitlement Confirmation cannot be obtained, Buyer and Seller agree to cooperate in good faith to accommodate the requirement for the 12 parking spaces described in Section 1.2.8(k) and at the same time preserve the Project designed by Buyer for the Property, provided however, that if Buyer and Seller are unable to agree on a mutually agreeable plan (using such good faith efforts) by April 21, 1997, then either party may elect to terminate this Agreement, at which time it shall have no further force and effect. 3. To the extent this Third Amendment conflicts with the First Amendment or the Second Amendment, this Third Amendment shall control. 4. Except as herein and heretofore amended, the Purchase Agreement remains unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment on the dates set forth opposite their respective signatures below. SELLER: BUYER: CUPERTINO CITY CENTER BUILDINGS, a SYMANTEC CORPORATION, a Delaware California Limited Partnership corporation By: SUNSET RIDGE DEVELOPMENT CO. By: _________________________________ INC., a California corporation _________________________________ Its______________________________ Its: General Partner By:_________________________________ _________________________________ Its______________________________ EX-10.21 8 LOAN AGREEMENT DATED OCTOBER 18, 1996 1 EXHIBIT 10.21 EXECUTION COPY ================================================================================ LOAN AGREEMENT dated as of October 18, 1996 among SUMITOMO BANK LEASING AND FINANCE, INC. as Lessor, VARIOUS FINANCIAL INSTITUTIONS IDENTIFIED HEREIN, as Lenders, and THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH as Agent for the Lenders ================================================================================ 2 LOAN AGREEMENT THIS LOAN AGREEMENT dated as of October 18, 1996 (this "Loan Agreement"), among SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation (the "Lessor"), the various financial institutions as are or may from time to time become parties hereto as lenders hereunder (collectively, the "Lenders") and THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as Agent (the "Agent") for the Lenders, W I T N E S S E T H: WHEREAS, pursuant to the Participation Agreement dated as of the date hereof (the "Participation Agreement"), among Symantec Corporation, a Delaware (the "Lessee"), the Lessor, the Lenders and the Agent, the Lessor and the Lenders have agreed, subject to the terms thereof, to make Lessor Amounts and Loans available to the Lessor on each Acquisition Date, and the Lessor has agreed, subject to the terms thereof, to make Advances for the benefit of the Lessee on each Acquisition Date; WHEREAS, the Lessor desires to obtain Commitments from the Lenders pursuant to which Loans, in a maximum aggregate principal amount at any one time outstanding not to exceed $45,800,000.00 will be made to the Lessor in accordance with this Loan Agreement and the Participation Agreement; WHEREAS, each Lender is willing, on the terms and subject to the conditions hereinafter set forth (including Article III), to make Loans to the Lessor in an aggregate amount not to ecxeed its Commitment as set forth on Schedule II to the Participation Agreement, as such Schedule may be amended from time to time; and WHEREAS, the Lessor will use the proceeds of such Loans to fund Advances to the Lessee pursuant to the Participation Agreement; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS; INTERPRETATION Capitalized terms used but not otherwise defined in this Loan Agreement have the respective meanings specified in Appendix A to this Loan Agreement; and the rules of interpretation set forth in Appendix A to this Loan Agreement shall apply to this Loan Agreement. 3 Loan Agreement ARTICLE 11 AMOUNT AND TERMS OF LENDERS' COMMITMENTS SECTION II.1. Loan Commitments. Subject to the terms and conditions hereof and of the Participation agreement, each lender severally agrees to make loans (the "Loans") to the Lessor on each Acquisition Date for the purpose of enabling the Lessor to acquire the Properties and to pay Property Acquisition Costs, in an aggregate principal amount at any one time outstanding not to exceed the amount of such Lender's Commitment. No amounts paid or prepaid with respect to any Loans may be reborrowed. SECTION II.2. Notes. The Loans made by each Lender shall be evidenced by a promissory note of the Lessor, substantially in the form of Exhibit A (each, a "Note"), with appropriate insertions as to payee, date and principal amount, payable to the order of such Lender and in a principal amount equal to the initial Commitment of such Lender. Each Lender is hereby authorized to record the date and amount of each Loan made by such Lender, each continuation thereof, the date and amount of each payment or prepayment of principal thereof and the length of each Interest Period with respect thereto, on the schedule annexed to and constituting a part of its Note, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure to make any such recordation or any error in such recordation shall not affect the Lessor's obligations hereunder or under such Note. Each Note shall (i) be dated the date of the initial Acquisition Date, (ii) be stated to mature on the Maturity Date and (iii) provide for the payment of interest in accordance with this Loan Agreement. SECTION II.3. Prepayments. (a) Voluntary. The Lessor may in connection with a Casualty, Condemnation or purchase by the Lessee of a Property at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty (subject to Section 13.10 of the Participation Agreement), upon at least three (3) Business Days' written notice to the Agent, specifying the date and amount of prepayment and the Land Acquisition Costs and/or Property Improvement Costs to which such Loans are allocable. Upon receipt of any such notice the Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, -2- 4 Loan Agreement together with any amounts payable pursuant to Article XIII (including without limitation Section 13.6) of the Participation Agreement. (b) Mandatory. Notwithstanding the foregoing, all amounts payable by the Lessee pursuant to Article XV, XVIII or XX of the Master Lease shall be used to prepay the Loans and shall be applied to the Loans and the Lessor Amounts in the manner set forth in Article VII of the Participation. SECTION II.4. Interest Rates and Payment Dates. (a) Each Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the LIBO Rate (Reserve Adjusted) determined for such day plus the Loan Margin or, at the option of the Lessee, the Alternate Base Rate plus the Loan Margin. (b) If all or a portion of (i) the principal amount of any Loan, (ii) any interest payable thereon or (iii) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is equal to the Overdue Rate. Interest accruing pursuant to this clause (b) shall be payable from time to time on demand. (c) During the Base Lease Term, interest shall accrue on outstanding Loans and shall be paid on the Scheduled Payment Date. (d) Each prepayment of the Loans shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid. SECTION II.5. Repayment of Loans. (a) During the Base Lease Term the Lessor shall repay the Loans with respect to each Property on the dates and in the amount set forth in the Master Rent Schedule under the Lease. (b) The Loans shall be repaid in full on the Maturity Date. SECTION II.6. Computation of Interest. (a) If interest on the Loans shall be based on the LIBO Rate (Reserve Adjusted), then it shall be calculated on -3- 5 Loan Agreement the basis of a 360-day year and, if based on the Alternate Base Rate, then on a 360-day year basis if the Alternate Base Rate is calculated at the Federal Funds Rate, and a 365- or, if applicable, 366-, day year basis if the Alternate Base Rate is calculated at the Prime Rate, in each case for the actual days elapsed. The Agent shall as soon as practicable notify the Lessor and the Lenders of each determination of a LIBOR Rate. Any change in the interest rate on a Loan resulting from a change in the Alternate Base Rate or the LIBOR Reserve Percentage shall become effective as of the opening of business on the day on which such change becomes effective. The Agent shall as soon as practicable notify the Lessor and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Agent pursuant to any provision of this Loan Agreement shall be correct and binding on the Lessor and each Lender in the absence of demonstrable error. The Agent shall, at the request of the Lessor, deliver to the Lessor a statement prepared in good faith and in reasonable detail showing the quotations used by the Agent in determining any interest rate pursuant to Section 2.5(a). SECTION II.7. Pro Rata Treatment and Payments. Each borrowing by the Lessor from the Lenders hereunder shall be made pro rata among the Lenders according to the respective Commitment Percentage of each such Lender. Except as otherwise provided in Article VII of the Participation Agreement, each payment (including each prepayment) by the Lessor on account of principal of and interest on the Loans shall be made pro rata. among the Lenders according to the respective outstanding principal amounts of the Loans then held by each such Lender. Subject to Article V, all payments (including prepayments) to be made by the Lessor hereunder and under the Notes, whether on account of principal, interest or otherwise, shall be made without setoff or counterclaim and shall be made by the Lessor to the applicable Lender prior to 12:00 p.m., San Francisco, California time, to such Lender's Funding Office specified in Schedule II to the Participation Agreement (or to such other office as may be designated by such Lender from time to time in a written notice to the Owner Lessor) in funds consisting of lawful currency of the United States of America which shall be immediately available on the scheduled date when such payment is due. Payments received after 1:00 p.m., San Francisco, California time, on the date due shall for the purpose of Section 5.1 be deemed received on such day; provided, however, that for the purposes of Section 2.5(b), such payments shall be deemed received on the next -4 - 6 Loan Agreement succeeding Business Day and, unless the Lenders are otherwise able to invest or employ such funds on the date received, subject to interest at the Overdue Rate as provided in Section 2.5(b). ARTICLE III CONDITIONS PRECEDENT SECTION III.1. Conditions to Effectiveness. This Loan Agreement shall be effective on the Documentation Date upon satisfaction of the conditions precedent set forth in Section 2.1 of the Participation Agreement. ARTICLE IV PAYMENTS AND DISTRIBUTIONS SECTION IV.1. Payments and Distributions. All payments to be made by the Lessor hereunder, and all payments due and payable to the Lenders pursuant to any other Operative Document, shall be distributed by the Lessor to the Participants in accordance with Article VII of the Participation Agreement. ARTICLE V LOAN AGREEMENT EVENTS OF DEFAULT SECTION V.1. Loan Agreement Events of Default. The occurrence of any one or more of the following events (whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative the Loan Commitments shall immediately terminate and (y) with the consent of Lenders holding a majority of the outstanding Loans, the Agent may, or upon the request of Lenders holding a majority of the outstanding Loans, the Agent shall, by notice to the Lessor, declare all Loans hereunder (with accrued interest thereon) and all other amounts owing with respect to the Loans under this Loan Agreement and the Notes to be due and payable forthwith, whereupon all Loans shall immediately become due and payable (any of the foregoing occurrences or actions referred to in clause (i) or (ii) above, an "Acceleration"). Except as expressly provided above in this Article V, presentment, demand, protest and all other notices of any kind are hereby expressly waived. -5- 7 Loan Agreement (a) Upon the occurrence of any Loan Agreement Event of Default and at any time thereafter so long as any Loan Agreement Event of Default shall be continuing, the Agent shall, upon the written instructions of Lenders holding a majority in principal amount of the outstanding Loans, exercise any or all of the rights and powers and pursue any and all of the remedies available to it hereunder and (subject to the terms thereof) under the Lease and the other Loan Documents and shall have any and all rights and remedies available under the Uniform Commercial Code or any provision of law. (b) Upon the occurrence of any Loan Agreement Event of Default and at any time thereafter so long as any Loan Agreement Event of Default shall be continuing, the Agent shall, upon the written instructions of Lenders holding a majority in principal amount of the outstanding Loans, proceed to protect and enforce this Loan Agreement, the Notes, the Lease and the other Operative Documents by suit or suits or proceedings in equity, at law or in bankruptcy, and whether for the specific performance of any covenant or agreement herein contained or in execution or aid of any power herein granted, or for foreclosure hereunder, or for the appointment of a receiver or receivers for the Properties or any Property or for the recovery of judgment for the indebtedness secured thereby or for the enforcement of any other proper, legal or equitable remedy available under Applicable Law. (c) Subject to Section 8.11, the Lessor shall be liable for any and all accrued and unpaid amounts due hereunder before, after or during the exercise of any of the foregoing remedies, including all reasonable legal fees and other reasonable costs and expenses incurred by the Agent or any Lender by reason of the occurrence of any Loan Agreement Event of Default or the exercise of remedies with respect thereto. (d) With respect to the occurrence and continuance of any Lease Default under Section 16.1(a), (b) or (c) of the Master Lease, the Lessor agrees that the Agent or any Participant may give notice of such Lease Default on behalf of the Lessor to the Lessee. With respect to any other Lease Default, the Lessor agrees that the Agent may give notice of such Lease Default on behalf of the Lessor to the Lessee. When a Lease Event of Default has occurred and is continuing, the Agent, at the direction of Lenders holding a majority of the outstanding Loans, may exercise any or all of the remedies of the Lessor under Article XVI of the -6- 8 Loan Agreement Master Lease, and the Lessor shall exercise such remedies at the direction of the Agent. The Lessor shall demand the purchase of properties by the Lessee pursuant to Section 16.2(e) of the Master Lease at the direction of Lenders holding a majority of the outstanding Loans. In addition, the Lenders may request that the Agent, and upon direction of the Required Lenders the Agent shall, exercise its rights against the Additional Collateral under the Pledge Agreement. ARTICLE VI CERTAIN REMEDIAL MATTERS; RELEASE SECTION VI.1. Certain Remedial Matters. Notwithstanding any other provision of this Loan Agreement or any other Loan Document the Lessor shall at all times retain the right, but not to the exclusion of the Agent, (A) to receive from the Lessee all notices, certificates and other documents and all information that the Lessee is permitted or required to give or furnish to the "Lessor" or the "Lessor" pursuant to the Lease, the Participation Agreement or any other Operative Document, (B) to provide such insurance as the Lessee shall have failed to maintain and (C) subject to the other applicable provisions of this Loan Agreement, to perform for the Lessee under Article XVII of the Master Lease. SECTION VI.2. Release of Properties, etc. (a) If the Lessee shall at any time purchase any Property pursuant to Article XV of the Master Lease, or exercise its Purchase Option with respect to any Property under Article XVIII of the Master Lease, or if all of the Properties shall be sold in accordance with and the Lessee otherwise satisfies each of the obligations and conditions set forth at Article XX of the Master Lease, then, upon application of such amounts to prepay the Loans pursuant to Article IV and the Agent's and the Lenders' receipt of all accrued interest and any other payments due and owing from Lessee and/or the Lessor to the Agent and the Lenders on such date, including without limitation pursuant to Article XIII of the Participation Agreement, such Property shall be released from the Lien in favor of the Lenders created by the Assignment of Lease and Rent, to the extent relating to such Property, all without delivery of any instrument or performance of any act by any party. (b) Upon the termination of the Lenders' Commitments -7- 9 Loan Agreement and the payment in full of the Loans and all other amounts owing by the Lessor hereunder or under any other Loan Document, the Properties shall be released from the Lien in favor of the Lenders created by the Assignment of Lease and Rent, to the extent relating to such Property, without delivery of any instrument or performance of any act by any party. (c) Upon request of the Lessor following a release of any Property described in clause (a) or (b) above, the Agent shall, at the sole cost and expenses of the Lessor, execute and deliver to the Lessor or the Lessee such documents as the Lessor shall reasonably request to evidence such release, including, if requested, a release of Assignment of Lease and Rent to the extent relating to such Property. ARTICLE VII THE AGENT SECTION VII.l. Appointment. Each Lender hereby irrevocably designates and appoints the Agent as the agent of such Lender under this Loan Agreement and the other Operative Documents, and each such Lender irrevocably authorizes the Agent, in such capacity, to take such action on its behalf under the provisions of this Loan Agreement and the other Operative Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Loan Agreement and the other Operative Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Loan Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender or any other party to the Operative Documents, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Loan Agreement or any other Operative Document or otherwise exist against the Agent. SECTION VII.2. Delegation of Duties. The Agent may execute any of its duties under this Loan Agreement and the other Operative Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION VII.3. Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys- -8- 10 Loan Agreement in-fact or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Loan Agreement or any other Operative Document (except for its or such Person's own gross negligence or willful misconduct or breach of any of its representations, warranties or covenants under the Operative Documents) or (b) responsible in any manner to any of the Lenders or any other party to the Operative Documents for any recitals, statements, representations or warranties made by the Lessor or the Lessee or any officer thereof contained in this Loan Agreement or any other Operative Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Loan Agreement or any other Operative Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Loan Agreement or any other Operative Document or for any failure of the Lessor or the Lessee to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender or any other party to the Operative Documents to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Loan Agreement or any other Operative Document, or to inspect the properties, books or records of the Lessor or the Lessee. SECTION VII.4. Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, facsimile, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Lessor or the Lessee), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Loan Agreement or any other Operative Document unless it shall first receive the advice or concurrence of Lenders holding a majority of the outstanding Loans or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Loan Agreement and the other Operative Documents in accordance with a request of Lenders holding a majority of the outstanding Loans, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the -9- 11 Loan Agreement Lenders and all future holders of the Notes. SECTION VII.5. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Loan Agreement Default or Loan Agreement Event of Default hereunder unless the Agent has received notice from a Lender or the Lessor referring to this Loan Agreement, describing such Loan Agreement Default or Loan Agreement Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Lenders and the Lessee. The Agent shall take such action with respect to such Loan Agreement Default or Loan Agreement Event of Default as shall be directed by Lenders holding a majority of the outstanding Loans; provided, however, that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Loan Agreement Default or Loan Agreement Event of Default as it shall deem advisable in the best interests of the Lenders. SECTION VII.6. Non-Reliance on Agent and Other Lenders. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Lessor or the Lessee, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Lessor and the Lessee and made its own decision to make its Loans hereunder and enter into this Loan Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Loan Agreement and the other Operative Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Lessor and the Lessee. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Lessor or the -10- 12 Loan Agreement Lessee which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION VII.7. Indemnification. The Lenders agree to indemnify the Agent in its capacity as such (to the extent not reimbursed by the Lessee and without limiting the obligation of the Lessee to do so), ratably according to the percentage each Lender's Commitment bears to the total Commitments of all of the Lenders on the date on which indemnification is sought under this Section 7.7 (or, if indemnification is sought after the date upon which the Lenders' Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with the percentage that each Lender's Commitment bears to the Commitments of all of the Lenders immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever (including without limitation all reasonable fees and disbursements of any law firm or other external counsel of the Agent, the allocated cost of internal legal services and all disbursements of internal counsel of the Agent) which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of, the Commitments, this Loan Agreement, any of the other Operative Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct. The agreements in this Section 7.7 shall survive the payment of the Notes and all other amounts payable hereunder. SECTION VII.8. Agent in Its Individual Capacity. The Agent and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Lessor, the Lessee and their Affiliates as though The Sumitomo Bank, Limited, San Francisco Branch, were not the Agent hereunder and under the other Operative Documents and without notice to or consent of the Banks. Each Lender acknowledges that, pursuant to such activities, The Sumitomo Bank, Limited, San Francisco Branch, or its Affiliates may receive information regarding the Lessee, the Lessor or their Affiliates (including information that may be -11- 13 Loan Agreement subject to confidentiality obligations in favor of the Lessee, the Lessor or their Affiliates) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to any Loans made or renewed by it and any Note issued to it, The Sumitomo Bank, Limited, San Francisco Branch, shall have the same rights and powers under this Loan Agreement and the other Operative Documents as any Lender and may exercise the same as though it were not the Agent, and, in the event The Sumitomo Bank, Limited, San Francisco Branch, becomes a Lender, the terms "Lender" and "Lenders" shall include The Sumitomo Bank, Limited, San Francisco Branch, in its individual capacity. SECTION VII.9. Successor Agent. The Agent may resign as Agent upon 20 days' notice to the Lenders. If the Agent shall resign as Agent under this Loan Agreement and the other Operative Documents, then Lenders holding a majority of the outstanding Loans shall appoint a successor agent for Lenders, which successor agent shall be a commercial bank organized under the laws of the United States of America or any State thereof or under the laws of another country which is doing business in the United States of America and having a combined capital, surplus and undivided profits of at least $100,000,000 (and if no Lease Default or Lease Event of Default exists, shall be approved by the Lessee (which consent shall not be unreasonably withheld)), whereupon such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall mean such successor agent effective upon such appointment and approval, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Loan Agreement or any holders of the Notes. If no successor Agent has accepted appointment as Agent by the date which is 20 days following a resigning Agent's notice of resignation, the resigning Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as Lenders holding a majority of the outstanding Loans appoint a successor Agent as provided above. After any retiring Agent's resignation as Agent, all of the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Loan Agreement and the other Operative Documents. -12- 14 Loan Agreement ARTICLE VIII MISCELLANEOUS SECTION VIII.1. Amendments and Waivers. Neither this Loan Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of Section 14.5 of the Participation Agreement. SECTION VIII.2. Notices. All notices, requests and demands to or upon the respective parties hereto shall be given in accordance with Section 14.3 of the Participation Agreement. SECTION VIII.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. SECTION VIII.4. Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Loan Agreement and the Notes and the making of the Loans hereunder. SECTION VIII.5. Successors and Assigns; Assignment by Lessor. This Loan Agreement shall be binding upon and inure to the benefit of the Lessor, each Lender, the Agent, each future holder of a Note and their respective successors and assigns. SECTION VIII.6. Adjustments. If any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by setoff, pursuant to events or proceedings of the nature referred to in Section 5.1(e), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan, or shall provide such other Lenders -13- 15 Loan Agreement with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. SECTION VIII.7. Counterparts. This Loan Agreement may be executed by one or more of the parties to this Loan Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Loan Agreement signed by all the parties shall be lodged with the Lessor and the Agent. SECTION VIII.8. Severability. Any provision of this Loan Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION VIII.9. Intention. This Loan Agreement and the other Operative Documents represent the agreement of the Lessor, the Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Operative Documents. SECTION VIII.10. GOVERNING LAW. THIS LOAN AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS LOAN AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA. SECTION VIII.11. Limitation of Liability. The parties hereto agree that except as specifically set forth in the Lease or in any other Operative Document, Lessor shall have no personal liability whatsoever to the Lessee or its respective successors and assigns for any claim based on or in respect of this Master Lease or any of the other Operative Documents or arising in any way from the transactions contemplated hereby or thereby and the recourse shall be solely had against the Lessor's interest in the Property; provided, however, that Lessor shall be liable in its -14- 16 Loan Agreement individual capacity (a) for its own willful misconduct or gross negligence (or negligence in the handling of funds), (b) breach of any of its representations, warranties or covenants under the Operative Documents, or (c) for any Tax based on or measured by any fees, commission or compensation received by it for acting as the Lessor as contemplated by the Operative Documents. It is understood and agreed that, except as provided in the preceding sentence: (i) Lessor shall have no personal liability under any of the Operative Documents as a result of acting pursuant to and consistent with any of the Operative Documents; (ii) all obligations of Lessor to the Lessee are solely nonrecourse obligations except to the extent that it has received payment from others; and (iii) all such personal liability of Lessor is expressly waived and released as a condition of, and as consideration for, the execution and delivery of the Operative Documents by Lessor. -15- 17 Loan Agreement IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. SUMITOMO BANK LEASING AND FINANCE COMPANY, INC. as Lessor By__________________________________________ Name: Title: -16- 18 Loan Agreement THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH as Lender and Agent By__________________________________________ Name: Title: -17- 19 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS; INTERPRETATION ARTICLE II AMOUNT AND TERMS OF LENDERS' COMMITMENTS SECTION 2.1. Loan Commitments .......................................... 2 SECTION 2.2. Notes ..................................................... 2 SECTION 2.3. Prepayments ............................................... 2 SECTION 2.4. Interest Rates and Payment Dates .......................... 3 SECTION 2.5. Repayment of Loans ........................................ 3 SECTION 2.6. Computation of Interest ................................... 3 SECTION 2.7. Pro Rata Treatment and Payments ........................... 4 ARTICLE III CONDITIONS PRECEDENT SECTION 3.1. Conditions to Effectiveness ............................... 5 ARTICLE IV PAYMENTS AND DISTRIBUTIONS SECTION 4.1. Payments and Distributions ................................ 5 ARTICLE V LOAN AGREEMENT EVENTS OF DEFAULT SECTION 5.1. Loan Agreement Events of Default .......................... 5 SECTION 5.2. Remedies .................................................. 7 ARTICLE VI CERTAIN REMEDIAL MATTERS; RELEASE SECTION 6.1. Certain Remedial Matters .................................. 9 SECTION 6.2. Release of Properties, etc ................................ 9
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Page ---- ARTICLE VII THE AGENT SECTION 7.1. Appointment .............................................. 10 SECTION 7.2. Delegation of Duties ..................................... 10 SECTION 7.3. Exculpatory Provisions ................................... 10 SECTION 7.4. Reliance by Agent ........................................ 11 SECTION 7.5. Notice of Default ........................................ 11 SECTION 7.6. Non-Reliance on Agent and Other Lenders .................. 12 SECTION 7.7. Indemnification .......................................... 12 SECTION 7.8. Agent in Its Individual Capacity ......................... 13 SECTION 7.9. Successor Agent .......................................... 14 ARTICLE VIII MISCELLANEOUS SECTION 8.1. Amendments and Waivers ................................... 14 SECTION 8.2. Notices .................................................. 14 SECTION 8.3. No Waiver; Cumulative Remedies ........................... 14 SECTION 8.4. Survival of Representations and Warranties ............... 15 SECTION 8.5. Successors and Assigns; Assignment by Lessor ............. 15 SECTION 8.6. Adjustments .............................................. 15 SECTION 8.7. Counterparts ............................................. 15 SECTION 8.8. Severability ............................................. 16 SECTION 8.9. Intention ................................................ 16 SECTION 8.10. GOVERNING LAW ........................................... 16 SECTION 8.11. Limitation of Liability ................................. 16
EXHIBIT Exhibit A Form of Note -ii- 21 EXHIBIT A TO LOAN AGREEMENT NOTE $___________ [Acquisition Date] FOR VALUE RECEIVED, the undersigned, SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation (the "Lessor"), promises to pay to the order of __________ (the "Lender") on the Maturity Date the principal sum of ________________ DOLLARS ($__________) or, if less, the aggregate unpaid principal amount of all Loans made by the Lender pursuant to that certain Loan Agreement, dated as of October 18, 1996 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "Loan Agreement"), among the Lessor and the various financial institutions (including the Lender) as are, or may from time to time become, parties thereto. The Lessor also promises to pay interest on the unpaid principal amount hereof from time to time outstanding from the date hereof until maturity (whether by acceleration or otherwise) and, after maturity, until paid, at the rates per annum and on the dates specified in the Loan Agreement. Payments of both principal and interest are to be made without setoff or counterclaim in lawful money of the United States of America in same day or immediately available funds to the account of the Lender specified in Schedule II to the Participation Agreement (or to such other account as the Lender may from time to time designate in a written notice to the Lessor). This Note is one of the Notes referred to in, and evidences indebtedness incurred under, the Loan Agreement, to which reference is made for a description of the security for this Note, the limitations on recourse for this Note and for a statement of the terms and conditions on which the Lessor is permitted and required to make prepayments and repayments of principal of the indebtedness evidenced by this Note and on which such indebtedness may be declared to be or automatically become immediately due and payable. The Lender is authorized to endorse the schedule attached hereto (and any continuation thereof) in accordance with the provisions of the Loan Agreement. Capitalized terms used but not otherwise defined herein have the respective meanings specified in Appendix A to the Loan 22 Agreement. All parties hereto, whether as makers, endorsers, or otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. THIS NOTE HAS BEEN DELIVERED IN CALIFORNIA, AND SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE, OF CALIFORNIA. SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor By_____________________________________ Name: Title: -2- 23 LOANS AND PRINCIPAL PAYMENTS
AMOUNT OF AMOUNT OF PRINCIPAL UNPAID NOTATION DATE LOANS MADE REPAID PRINCIPAL MADE BY ---- ---------- ------ --------- ------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
EX-10.22 9 CONSTRUCTION AGENCY AGREEMENT DATED MARCH 3, 1997 1 EXHIBIT 10.22 EXHIBIT A - -------------------------------------------------------------------------------- CONSTRUCTION AGENCY AGREEMENT dated as of March 3, 1997 between SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor and SYMANTEC CORPORATION, as Construction Agent. -------------------------- Lease Financing of Three Properties Located in Cupertino, California and Construction of Certain Improvements for Symantec Corporation - -------------------------------------------------------------------------------- 2 CONSTRUCTION AGENCY AGREEMENT THIS CONSTRUCTION AGENCY AGREEMENT, dated as of March 3, 1997 (this "Agreement"), between SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation, as Lessor (the "Lessor"), and SYMANTEC CORPORATION, a Delaware corporation, as Construction Agent (in its capacity as Construction Agent, the "Construction Agent"). W I T N E S S E T H: WHEREAS, the Lessor and the Construction Agent are parties to that certain Master Lease and Deed of Trust dated as of October 18, 1996 (as amended by Master Amendment No. 1 (as defined below) and as amended, supplemented or otherwise modified from time to time, the "Master Lease"), pursuant to which the Lessee has agreed to lease from Lessor, and the Lessor has agreed to lease to Lessee, Lessor's interest in certain Properties; and WHEREAS, pursuant to Master Amendment No. 1 dated as of the date hereof (the "Master Amendment"), the Lessor, Symantec Corporation (in its capacity as Lessee, Pledgor, Guarantor and Construction Agent), the Lenders and the Agent have agreed to amend certain provisions of the Operative Documents for the purpose of providing financing for the construction of certain Improvements (the "Subject Improvements") located on the Land subject to Lease Supplement No. 3 (which Land is described on Schedule 1 attached hereto); WHEREAS, subject to the terms and conditions hereof, (i) the Lessor desires to appoint the Construction Agent as its sole and exclusive agent for the construction of the Subject Improvements in accordance with the Plans and Specifications described on Schedule 2 attached hereto (the "Plans and Specifications") and pursuant to the Master Lease and this Agreement, and (ii) the Construction Agent desires, for the benefit of the Lessor, to cause the Subject Improvements to be constructed in accordance with the Plans and Specifications and pursuant to the Master Lease and this Agreement, in each case in accordance with the terms set forth herein and in the Master Lease; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: 3 ARTICLE I DEFINITIONS; INTERPRETATION I.1. Definitions; Interpretation. Unless the context shall otherwise require, capitalized terms used and not defined in this Agreement (including the recitals hereto) shall have the meanings assigned thereto in Appendix A to the Participation Agreement (as amended by Master Amendment No. 1 and as amended, supplemented, amended and restated or otherwise modified from time to time, "Appendix A") for all purposes hereof; and the rules of interpretation set forth in Appendix A shall apply to this Agreement. ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT II.1. Appointment. Pursuant to and subject to the terms and conditions set forth herein and in the Lease and the other Operative Documents, the Lessor hereby irrevocably designates and appoints the Construction Agent as its exclusive agent for the construction of the Subject Improvements in accordance with the Plans and Specifications, and the Construction Agent hereby unconditionally accepts the designation and appointment as Construction Agent. II.2. Term. This Agreement shall commence on the date hereof and shall terminate upon the first to occur of: (a) payment by the Lessee of the Lease Balance and termination of the Lease in accordance with the terms and conditions of the Lease; (b) termination of this Agreement pursuant to Article V hereof; and (c) the completion of the Construction, including completion of punch list items referred to in Section 2.5(e) and the full performance of all other obligations of the Construction Agent hereunder. II.3. Construction Documents. (a) Subject to Section 3.1, the Construction Agent shall enter into the Prime Construction Contract and such other agreements with architects and contractors as the Construction Agent deems necessary or desirable for the completion of the Construction pursuant hereto (collectively, the "Construction Documents"); provided, however, that the Prime Construction -2- 4 Contract shall include a retainage provision in an amount equal to at least ten percent (10%) of the construction costs payable pursuant thereto (or, after payment to the Prime Contractor of more than fifty percent (50%) of the construction costs payable to the Prime Contractor thereunder (assuming for purposes hereof that no retainage had been withheld), an amount equal to at least five percent (5%) of the construction costs payable pursuant thereto); provided, further, that no such delegation shall limit or reduce in any way the Construction Agent's duties and obligations under this Agreement; provided, further, that contemporaneously with the execution and delivery of this Agreement, the Construction Agent will execute and deliver to the Lessor the Construction Documents Assignment in the form of Annex I attached hereto, pursuant to which the Construction Agent assigns to the Lessor, among other things, all of the construction Agent's rights under and interest in such Construction Documents. II.4. Scope of Authority. (a) Subject to the terms, conditions, restrictions and limitations set forth in the Operative Documents, the Lessor hereby expressly authorizes the Construction Agent, or any agent or contractor of the Construction Agent, and the Construction Agent unconditionally agrees, for the benefit of the Lessor, to take all action necessary or desirable for the performance and satisfaction of all of the Construction Agent's obligations hereunder, including, without limitation: (i) performing all design and supervisory functions and all engineering work related to the Construction; (ii) negotiating and entering into all contracts or arrangements to procure the equipment necessary to construct the Subject Improvements on such terms and conditions as are customary and reasonable in light of local standards and practices; (iii) obtaining all necessary Material permits, licenses, consents, approvals and other authorizations, including those required under Applicable Law (including Environmental Laws), from all Governmental Authorities in connection with the Construction and granting on behalf of the Lessor such easements as are necessary or appropriate to effect the Construction or that otherwise would not have an adverse effect on the value of the Subject Improvements or the Land on which the Subject Improvements are located; (iv) maintaining all books and records with respect to the Construction; and (v) performing any other acts necessary in connection -3- 5 with the construction and development of the Subject Improvements in accordance with the Plans and Specifications. (b) Subject to the terms hereof, the Construction Agent may execute any of its duties under this Agreement by or through agents, contractors, employees or attorneys-in-fact. (c) Subject to the terms and conditions of this Agreement and the other Operative Documents, the Construction Agent shall have sole management and control over the construction means, methods, sequences and procedures with respect to the Construction. (d) Neither the Construction Agent nor any of its Affiliates or agents shall enter into any contract which would, directly or indirectly, impose any material liability or obligation on the Lessor for which the Lessor is not indemnified by the Construction Agent or the Lessee under this Agreement or any of the other Operative Documents. II.5. Covenants of the Construction Agent. The Construction Agent hereby covenants and agrees that it will: (a) promptly commence the Construction following the Improvements Closing Date and prosecute the Construction diligently and without interruption (subject only to delays caused by Force Majeure Events) in accordance in all Material respects with the Plans and Specifications, all Requirements of Law and all Insurance Requirements; (b) notify the Lessor in writing as soon as practical after the occurrence of each Force Majeure Event; (c) take all reasonable and practical steps to minimize the disruption of the construction process arising from Force Majeure Events; (d) cause the Substantial Completion of the Construction to occur on or prior to the Outside Completion Date, and cause all Liens (including, without limitation, Liens or claims for materials supplied or labor or services performed in connection with the construction of the Subject Improvements), other than Permitted Liens, to be discharged; and (e) following the Substantial Completion of the Construction, cause all outstanding punch list items with respect to the Construction to be promptly and expeditiously completed following Substantial Completion. -4- 6 ARTICLE III THE SUBJECT IMPROVEMENTS III.1. Construction of the Subject Improvements. The Construction Agent shall (a) cause the Subject Improvements to be constructed in accordance with the Plans and Specifications (as such Plans and Specifications may be modified from time to time in accordance with Section 3.3) and (b) cause the Subject Improvements to be constructed, equipped, maintained and used in compliance in all Material respects with all Requirements of Law and Insurance Requirements, and otherwise in compliance with the requirements of this Agreement, the Lease and the other Operative Documents. III.2. Estimated Improvement Costs. The Construction Agent hereby certifies that the aggregate amount which the Construction Agent in good faith expects to be expended in order to achieve Substantial Completion of the Subject Improvements, including all costs of Construction and all Transaction Expenses related thereto, does not exceed the Construction Commitment Amount. III.3. Amendments and Modifications to Plans and Specifications and Construction Documents. The Construction Agent may, subject to the conditions, restrictions and limitations set forth herein and in the other Operative Documents, at any time during the term hereof revise, amend or modify the Plans and Specifications and/or the Construction Documents without the consent of the Lessor; provided, however, that: (a) the Lessor's prior written consent will be required (except to the extent that such revision, amendment or modification constitutes a Required Modification) if (i) such revision, amendment or modification would result in the Substantial Completion of the Construction occurring after the Outside Completion Date, or (ii) the aggregate effect of such revision, amendment or modification, when taken together with any previous or contemporaneous revisions, amendments or modifications to the Plans and Specifications and Construction Documents, would be to reduce the Fair Market Sales Value of the Subject Improvements upon completion of the Construction, or (iii) such revision, amendment or modification would materially change the nature of the contemplated Subject Improvements or the utility of such Subject Improvements for the purposes contemplated by the parties hereto as of the date hereof; (b) the Construction Agent shall not terminate any Construction Document or modify any provision of any Construction Document relating to requiring retainage without the prior written consent of the Lessor; and (c) the Construction Agent shall regularly furnish copies of all such revisions, amendments and modifications to the Lessor. -5- 7 ARTICLE IV PAYMENT OF FUNDS IV.1. Funding of Property Improvements Costs. (a) In connection with and during the course of the construction of the Subject Improvements, the Construction Agent may request that the Lessor advance funds for the payment of Property Improvements Costs, and the Lessor will comply with such request to the extent provided for under, and subject to the conditions, restrictions and limitations contained in, the Lease. The Construction Agent and the Lessor acknowledge and agree that the Lessee's right to request funds and the Lessor's obligation to advance funds for the payment of Property Improvements Costs is subject in all respects to the terms and conditions of the Lease and each of the other Operative Documents. (b) The proceeds of any funds made available to the Lessor to pay Property Improvements Costs shall be made available to the Construction Agent or its designee(s) in accordance with the Funding Request relating thereto and the terms of the Lease. The Construction Agent will use such proceeds only to pay the Property Improvements Costs set forth in the Funding Request relating to such funds. (c) If, for any reason, the Construction Agent shall at any time incur costs to complete the Construction that shall be in excess of the amounts then payable under this Article IV, then all such excess costs shall be borne by the Construction Agent from its own funds. (d) The Construction Agent shall at all times cause to be and remain vested in the Lessor's control any and all construction materials and equipment not yet incorporated into the Properties for which funds shall have been requested pursuant to this Article IV, and cause such title to be and remain free of all Liens other than Permitted Liens. ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT V.1. Construction Agency Events of Default. If any one or more of the following events (each a "Construction Agency Event of Default") shall occur: (a) the Construction Agent fails to apply any funds paid by the Lessor to the Construction Agent or its designee(s) to the payment of the appropriate Property -6- 8 Improvements Costs; or (b) the Construction Agent shall fail to observe or perform any term, covenant or condition of this Agreement (except those specified in clause (a) above), and such failure shall remain uncured for a period of thirty (30) days; provided, however, that no Construction Agency Event of Default shall be deemed to occur if such failure or breach cannot reasonably be cured within such period, so long as the Construction Agent shall have promptly commenced the cure thereof and continues to act with diligence to cure such failure or breach and in fact cures such failure or breach within one hundred eighty (180) days, then, in any such event, the Lessor may, in addition to the other rights and remedies provided for in this Article V and under the Lease, immediately terminate this Agreement by giving the Construction Agent written notice of such termination, and upon the giving of such notice, all rights of the Construction Agent and all obligations of the Lessor under this Agreement shall cease. Upon any such termination, the Construction Agent shall immediately pay to the Lessor, as and for liquidated damages, an amount equal to the Lease Balance as of the date of such payment (whereupon the Lessor shall convey title to the Properties to the Lessee or its designee in accordance with Article XXII of the Lease). Alternatively, the Lessor, with or without terminating this Agreement and without waiving or releasing the Construction Agent from any obligation or Construction Agency Event of Default, may (but shall be under no obligation to) remedy any Construction Agency Event of Default for the account of and at the sole cost and expense of the Construction Agent. The Construction Agent shall pay upon demand all costs, expenses, losses, expenditures and damages (including, without limitation, attorneys' fees) incurred by or on behalf of Lessor in connection with any Construction Agency Event of Default, together with interest thereon at the Overdue Rate from the date on which such amounts are paid by the Lessor. V.2. Survival. The termination of this Agreement pursuant to Section 5.1 shall in no event relieve the Construction Agent of its liability and obligations hereunder which accrued prior to such termination, all of which shall survive any such termination. V.3. Remedies Cumulative; Waivers. (a) If a Construction Agency Event of Default shall have occurred and be continuing, the Lessor shall have, in addition to the rights and remedies provided for in Section 5.1, all rights and remedies available under the Operative Documents or available at law, equity or otherwise. -7- 9 (b) No failure to exercise and no delay in exercising, on the part of the Lessor, any right, remedy, power or privilege under this Agreement or under the other Operative Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Agreement, including with particularity Section 5.1, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. ARTICLE VI NO CONSTRUCTION AGENCY FEE VI.1. Lease as Fulfillment of Lessor's Obligations. All obligations, duties and requirements imposed upon or allocated to the Construction Agent shall be performed by the Construction Agent at the Construction's Agent's sole cost and expense, and the Construction Agent will not be entitled to, and the Lessor shall have no obligation to pay, any agency fee or other fee or compensation, and the Construction Agent shall not be entitled to, and the Lessor shall have no obligation to make or pay, any reimbursement therefor, it being understood that this Agreement is being entered into as consideration for and as an inducement to the Lessor and the Construction Agent entering into the Lease and the other Operative Documents. ARTICLE VII MISCELLANEOUS VII.1. Notices. All notices, consents, directions, approvals, instructions, requests, demands and other communications required or permitted by the terms hereof to be given to any Person shall be given in writing in the manner provided in, shall be sent to the respective addresses set forth in, and the effectiveness thereof shall be governed by the provisions of, Section 14.3 of the Participation Agreement. VII.2. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Lessor, the Construction Agent and their respective successors and assigns. VII.3. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF CALIFORNIA (EXCLUDING ANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO -8- 10 ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. VII.4. Amendments, etc. The Lessor and the Construction Agent may from time to time, enter into written amendments, supplements or modifications hereto. VII.5. Counterparts. This Agreement may be executed in any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. VII.6. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. VII.7. Headings and Table of Contents. The headings and table of contents contained in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. -9- 11 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. SYMANTEC CORPORATION as Construction Agent By:_______________________________ Name: Title: -1- 12 SUMITOMO BANK LEASING AND FINANCE, INC., as Lessor By: -------------------------------- Name: Title: CONSTRUCTION AGENCY AGREEMENT S-2 13 Schedule 1 Description of Land Real Property in the City of Cupertino, County of Santa Clara, State of California, described as follows: PARCEL ONE: Lot 5, as shown on that certain Map entitled Tract No. 7953 Cupertino City Center Phase III, which Map was filed for record in the office of the Recorder of the County of Santa Clara, State of California on February 27, 1987, in Book 571 of Maps, pages 36 and 37. PARCEL TWO: Easements as described in the Section entitled "Easements and Rights Reserved for Owners" of the Article entitled "Easements and Rights of Entry" of the Declaration of Covenants, Conditions, and Restrictions and Grant of Easement for Cupertino City Center recorded October 9, 1985, in Book J482, page 1907, as amended by that certain First Amendment to Declaration of Covenants, Conditions, and Restrictions and Grant of Easements recorded September 2, 1987, in Book K281, page 2071, each in the Official Records of Santa Clara County, California. PARCEL THREE: Easements for parking, landscaping, support, settlement and encroachment as granted to Cupertino City Center Buildings, a California Limited Partnership, in the Grant of Easement (Cupertino City Center 5) recorded February 5, 1997 under Series No. 13602286. 14 Schedule 2 Plans and Specifications 15 ANNEX I TO CONSTRUCTION AGENCY AGREEMENT CONSTRUCTION DOCUMENTS ASSIGNMENT FOR VALUE RECEIVED, and to secure the performance by SYMANTEC CORPORATION, a Delaware corporation (hereinafter referred to as either the "Lessee" or "Assignor"), of all of its obligations under that certain Construction Agency Agreement dated as of March 3, 1997 (as the same may be amended, modified or restated from time to time, and together with all supplements thereto, the "Construction Agency Agreement"), between the Lessee and Sumitomo Bank Leasing and Finance, Inc. (the "Lessor" or "Secured Party"), the Lessee does hereby quitclaim, sell, assign, transfer and set over unto the Secured Party and its successors and assigns, all of the Lessee's right, title and interest in and to the following (referred to collectively herein as the "Collateral"): I all construction contracts relating to the Construction of the Subject Improvements (including, without limitation, the Prime Construction Contract), as each such agreement may hereafter be supplemented, modified or amended from time to time (collectively, the "Construction Contracts"); (ii) all architectural services agreements pertaining to the Construction, as each such agreement may hereafter be supplemented, modified or amended from time to time (collectively, the "Architect's Agreements"); (iii) all plans, specifications and drawings of any and every kind heretofore or hereafter prepared for use in connection with the Construction of the Properties (including, without limitation, the Plans and Specifications), and any supplements, amendments or modifications thereto (collectively, the "Plans"); and (iv) all building and other permits, licenses and governmental approvals which are necessary or useful to the commencement and completion of the Construction, or otherwise relate to the Construction, heretofore or hereafter obtained or applied for by or on behalf of the Assignor or any architects, engineers or contractors working on any aspect of the Construction, and any deposits made in connection therewith (collectively, the "Permits"); provided, however, that the Secured Party shall have no obligation or liability of any kind under or with respect to the Construction Contracts, the Architect's Agreements, the Permits 16 or the Plans, either before or after the Secured Party's exercise of any rights hereby granted to it, and the Assignor agrees to save and hold the Secured Party harmless of and from, and to indemnify the Secured Party against, any and all such obligations and liabilities, contingent or otherwise, including without limitation attorneys' fees and expenses incurred in connection therewith. This Construction Documents Assignment shall inure to the benefit of the Secured Party and its successors and assigns, and shall be binding upon the Assignor and its successors and assigns, and shall continue in full force and effect until all obligations, liabilities and indebtedness of any kind now or hereafter due the Secured Party from the Assignor under or with respect to the Lease or any of the other Operative Documents, or which are otherwise secured hereby, whether now existing or hereafter arising or incurred (collectively, the "Liabilities"), have been fully paid, performed and satisfied, and all Commitments have terminated, at which time this Construction Documents Assignment will terminate. The Secured Party will not exercise any of its rights hereunder until there shall have occurred and be continuing a Lease Event of Default. For purposes of completing the Construction after any Lease Event of Default shall have occurred and be continuing, the Secured Party may, at its option, further assign its right, title and interest in the Collateral without the consent of the Assignor, or any contractor or architect. This Construction Documents Assignment is a present, perfected and absolute assignment; provided, however, that the Secured Party shall not have the right to undertake completion of the Construction or directly to enforce the provisions of any Construction Contract or any Architect's Agreement until a Lease Event of Default shall have occurred and be continuing. During the continuance of any such Event of Default, the Secured Party may, without affecting any other right or remedy available to it, exercise its rights under this Construction Documents Assignment as provided herein in any manner permitted by law. If any notice to the Assignor is required by law, such notice shall be deemed commercially reasonable if given at least ten (10) days prior to the date of intended action. This Construction Documents Assignment may be effectively waived, modified, amended or terminated only by a written instrument executed by the Secured Party and the Lessee. Any waiver by the Secured Party shall be effective only with respect to the specific instance described therein. Delay or course of conduct shall not constitute a waiver of any right or remedy of the Secured Party. Unless the context shall otherwise require, capitalized 17 terms used and not defined in this Construction Documents Assignment shall have the meanings assigned thereto in Appendix A (as defined in the Construction Agency Agreement) for all purposes hereof; and the rules of interpretation set forth in Appendix A shall apply to this Construction Documents Assignment. THIS CONSTRUCTION DOCUMENTS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF CALIFORNIA (EXCLUDING ANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 18 IN WITNESS WHEREOF, the undersigned has executed and delivered this Construction Documents Assignment as of this third day of March, 1997 pursuant to proper authority duly granted. SYMANTEC CORPORATION, as Construction Agent By: -------------------------------- Name: Title: 19 TABLE OF CONTENTS
SECTION Page ARTICLE I DEFINITIONS; INTERPRETATION 1.1. Definitions; Interpretation....................................... 2 ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT 2.1. Appointment....................................................... 2 2.2. Term.............................................................. 2 2.3. Construction Documents............................................ 2 2.4. Scope of Authority................................................ 3 2.5. Covenants of the Construction Agent............................... 4 ARTICLE III THE SUBJECT IMPROVEMENTS 3.1. Construction of the Subject Improvements........................... 5 3.2. Estimated Improvement Costs........................................ 5 3.3. Amendments and Modifications to Plans and Specifications and Construction Documents......................................... 5 ARTICLE IV PAYMENT OF FUNDS 4.1. Funding of Property Improvements Costs............................ 6 ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT 5.1. Construction Agency Events of Default............................. 6 5.2. Survival.......................................................... 7 5.3. Remedies Cumulative; Waivers...................................... 7 ARTICLE VI NO CONSTRUCTION AGENCY FEE 6.1. Lease as Fulfillment of Lessor's Obligations...................... 8
20 ARTICLE VII MISCELLANEOUS 7.1. Notices........................................................... 8 7.2. Successors and Assigns............................................ 8 7.3. GOVERNING LAW..................................................... 8 7.4. Amendments, etc................................................... 9 7.5. Counterparts...................................................... 9 7.6. Severability...................................................... 9 7.7. Headings and Table of Contents.................................... 9
Schedules and Annex Schedule 1 Description of Land Schedule 2 Plans and Specifications for Subject Improvements Annex I Form of Construction Documents Assignment 21 [EXECUTION COPY] CONSTRUCTION DOCUMENTS ASSIGNMENT FOR VALUE RECEIVED, and to secure the performance by SYMANTEC CORPORATION, a Delaware corporation (hereinafter referred to as either the "Lessee" or "Assignor"), of all of its obligations under that certain Construction Agency Agreement dated as of February __, 1997 (as the same may be amended, modified or restated from time to time, and together with all supplements thereto, the "Construction Agency Agreement"), between the Lessee and Sumitomo Bank Leasing and Finance, Inc. (the "Lessor" or "Secured Party"), the Lessee does hereby quitclaim, sell, assign, transfer and set over unto the Secured Party and its successors and assigns, all of the Lessee's right, title and interest in and to the following (referred to collectively herein as the "Collateral"): I. all construction contracts relating to the Construction of the Subject Improvements (including, without limitation, the Prime Construction Contract), as each such agreement may hereafter be supplemented, modified or amended from time to time (collectively, the "Construction Contracts"); (ii) all architectural services agreements pertaining to the Construction, as each such agreement may hereafter be supplemented, modified or amended from time to time (collectively, the "Architect's Agreements"); (iii) all plans, specifications and drawings of any and every kind heretofore or hereafter prepared for use in connection with the Construction of the Properties (including, without limitation, the Plans and Specifications), and any supplements, amendments or modifications thereto (collectively, the "Plans"); and (iv) all building and other permits, licenses and governmental approvals which are necessary or useful to the commencement and completion of the Construction, or otherwise relate to the Construction, heretofore or hereafter obtained or applied for by or on behalf of the Assignor or any architects, engineers or contractors working on any aspect of the Construction, and any deposits made in connection therewith (collectively, the "Permits"); provided, however, that the Secured Party shall have no obligation or liability of any kind under or with respect to the Construction Contracts, the Architect's Agreements, the Permits or the Plans, either before or after the Secured Party's exercise of any rights hereby granted to it, and the Assignor agrees to 22 save and hold the Secured Party harmless of and from, and to indemnify the Secured Party against, any and all such obligations and liabilities, contingent or otherwise, including without limitation attorneys' fees and expenses incurred in connection therewith. This Construction Documents Assignment shall inure to the benefit of the Secured Party and its successors and assigns, and shall be binding upon the Assignor and its successors and assigns, and shall continue in full force and effect until all obligations, liabilities and indebtedness of any kind now or hereafter due the Secured Party from the Assignor under or with respect to the Lease or any of the other Operative Documents, or which are otherwise secured hereby, whether now existing or hereafter arising or incurred (collectively, the "Liabilities"), have been fully paid, performed and satisfied, and all Commitments have terminated, at which time this Construction Documents Assignment will terminate. The Secured Party will not exercise any of its rights hereunder until there shall have occurred and be continuing a Lease Event of Default. For purposes of completing the Construction after any Lease Event of Default shall have occurred and be continuing, the Secured Party may, at its option, further assign its right, title and interest in the Collateral without the consent of the Assignor, or any contractor or architect. This Construction Documents Assignment is a present, perfected and absolute assignment; provided, however, that the Secured Party shall not have the right to undertake completion of the Construction or directly to enforce the provisions of any Construction Contract or any Architect's Agreement until a Lease Event of Default shall have occurred and be continuing. During the continuance of any such Event of Default, the Secured Party may, without affecting any other right or remedy available to it, exercise its rights under this Construction Documents Assignment as provided herein in any manner permitted by law. If any notice to the Assignor is required by law, such notice shall be deemed commercially reasonable if given at least ten (10) days prior to the date of intended action. This Construction Documents Assignment may be effectively waived, modified, amended or terminated only by a written instrument executed by the Secured Party and the Lessee. Any waiver by the Secured Party shall be effective only with respect to the specific instance described therein. Delay or course of conduct shall not constitute a waiver of any right or remedy of the Secured Party. Unless the context shall otherwise require, capitalized terms used and not defined in this Construction Documents Assignment shall have the meanings assigned thereto in Appendix A -2- 23 (as defined in the Construction Agency Agreement) for all purposes hereof; and the rules of interpretation set forth in Appendix A shall apply to this Construction Documents Assignment. THIS CONSTRUCTION DOCUMENTS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF CALIFORNIA (EXCLUDING ANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. -3- 24 IN WITNESS WHEREOF, the undersigned has executed and delivered this Construction Documents Assignment as of this _____ day of _________________, 1997 pursuant to proper authority duly granted. SYMANTEC CORPORATION, as Construction Agent By: -------------------------------- Name: Title: -4- EX-10.23 10 SYMANTEC - CC5 OFFICE BUILDING & PARKING STRUCTURE 1 EXHIBIT 10.23 AGREEMENT made as of the _________Fifth_________________ day of____May____ in the year of Nineteen Hundred and Ninety-Seven BETWEEN the Owner: SYMANTEC CORPORATION (Name and address) 10201 Torre Avenue Cupertino, CA 95014 and the Contractor: WEBCOR BUILDERS (Name and address) 2755 Campus Drive San Mateo, CA 94403-2514 the Project is: SYMANTEC - CC5 OFFICE BUILDING/PARKING STRUCTURE (Name and address) 10200 S. DeAnza Boulevard Cupertino, CA 95014 the Architect is: HELLMUTH, OBATA & KASSABAUM, INC. (Name and address) 71 Stevenson Street, Suite 2200 San Francisco, CA 94105 The Owner and Contractor agree as set forth below. ARTICLE 1 THE CONTRACT DOCUMENTS 1.1 The Contract Documents consist of this Agreement, Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, Addenda issued prior to execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement; these form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. An enumeration of the Contract Documents, other than Modifications, appears in Article 16. If anything in the other Contract Documents is inconsistent with this Agreement, this Agreement shall govern except that the General Conditions shall govern if they are inconsistent with this Agreement. 2 ARTICLE 2 THE WORK OF THIS CONTRACT 2.1 The Contractor shall execute the entire Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others, or as follows: Construction of a four story, 143,000 square foot office building ("Office Building") with a four level, 291,000 square foot, 777 stall subterranean parking structure ("Parking Structure") and related site work ("Site Work"). The scope of the Work shall include all shell work for the Office Building and related Site Work ("Shell Improvements"), the construction of the Parking Structure and related Site Work ("Parking Improvements") and, at the option of and in the sole discretion of Owner, some or all of the tenant improvements for the Office Building ("Tenant Improvements"). If Owner elects to have the Contractor construct the Tenant Improvements, such election shall be confirmed in a Change Order signed by the Owner and Contractor containing the terms upon which such improvements will be constructed by Contractor (including an increase in the Guaranteed Maximum Price). ARTICLE 3 RELATIONSHIP OF THE PARTIES 3.1 The Contractor accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to cooperate with the Owner, Architect and Development Manager and utilize the Contractor's best skill, efforts and judgment in furthering the interests of the Owner; to furnish efficient business administration and supervision; to make best efforts to furnish at all times an adequate supply of workers and materials; and to perform the Work in the best way and most expeditious and economical manner consistent with the interests of the Owner. The Owner agrees to exercise best efforts to enable the Contractor to perform the Work in the best way and most expeditious manner by furnishing and approving in a timely way information required by the Contractor and making payments to the Contractor in accordance with requirements of the Contract Documents. 3.2 Nothing contained in the Contract Documents shall create a contractual relationship between Owner and any third party. It is understood and agreed, however, that Owner shall be an intended third party beneficiary of all contracts between Contractor and third parties for labor or materials related to the Project. The Contractor shall include a provision in each subcontract, and shall require each subcontractor to include a similar provision in any sub-subcontracts, providing that Owner is a third party beneficiary of such subcontract or sub-subcontract. ARTICLE 4 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION 4.1 The date of commencement is the date from which the Contract Time of Subparagraph 4.2 is measured; it shall be the date of this Agreement, as first written above, unless a different date is stated below or provision is made for the date to be fixed in a notice to proceed issued by the Owner. 2 3 (Insert the date of commencement, if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.) The date of commencement shall be March 17, 1997 ("Commencement Date"). Unless the date of commencement is established by a notice to proceed issued by the Owner, the Contractor shall notify the Owner in writing not less than five days before commencing the Work to permit the timely filing of mortgages, mechanic's liens and other security interests. 4.2 The Contractor shall achieve Substantial Completion (i) of the entire Work excluding Tenant Improvements not later than July 10, 1998, and (ii) of the entire Work, including Tenant Improvements, if applicable, not later than August 14, 1998; provided, however, that Substantial Completion with respect to item (ii) shall be extended to the extent the programming, design and permitting for the tenant improvements is not concluded, through no fault of Contractor, in time to commence construction of the of the tenant improvements on or before March 26, 1998. (Insert the calendar date or number of calendar days after the date of commence. Also insert any requirements for earlier Substantial Completion of certain portions of the Work, if not stated elsewhere in the Contract Documents.) , subject to adjustments of this Contract Time as provided in the Contract Documents. (Insert provisions, if any, for liquidated damages relating to failure to complete on time.) ARTICLE 5 CONTRACT SUM 5.1 The Owner shall pay the Contractor in current funds for the Contractor's performance of the Contract the Contract Sum consisting of the Cost of the Work as defined in Article 7 and the Contractor's Fee determined as follows: (State a lump sum of Cost of the Work or other provision for determining the Contractor's Fee, and explain how the Contractor's Fee is to be adjusted for changes in the Work.) The Contractor's Fee for the Shell Improvements, Parking Improvements and Site Work shall be two and one-half percent (2.5%) of the Cost of the Work for such improvements. The Contractor's Fee for the Tenant Improvements, if applicable, shall be three percent (3%) of the Cost of the Work for such improvements. 5.2 GUARANTEED MAXIMUM PRICE (IF APPLICABLE) 5.2.1 The sum of the Cost of the Work and the Contractor's Fee is guaranteed by the Contractor not to exceed the amount to be established pursuant to this Paragraph 5.2.1 [Dollars($_________)] subject to additions and deductions by Change Order as provided in the Contract Documents. Such maximum sum is referred to in the Contract Documents as the Guaranteed Maximum Price. Language indicted as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 3 4 Costs which would cause the Guaranteed Maximum Price to be exceeded shall be paid by the Contractor without reimbursement by the Owner. (Insert specific provisions if the Contractor is to participate in any savings.) Within fifteen (10) days after Contractor receives completed Construction Drawings and Specifications, Contractor shall submit to Owner a proposed Guaranteed Maximum Price (excluding Tenant Improvements) based on the subcontractor bids selected in accordance with Article 10 of this Agreement and Article 5 of the General Conditions and in such detail as Owner shall reasonably request but in any event is such detail as the schedule of values contemplated in Paragraph 12.5.1. The actual Guaranteed Maximum Price shall be determined and agreed upon by Owner and Contractor within ten (10) days of Owner's receipt of such proposal, but in no event later than June 30, 1997. In the event Owner and Contractor cannot agree on the actual Guaranteed Maximum Price by such date, then either party may terminate this Agreement and such termination shall be deemed a Termination for Convenience pursuant to Paragraph 14.2 of the General Conditions. The estimate of the Guaranteed Maximum Price (exclusive of the Contractor's Fee) based on preliminary construction drawings and specifications ("Preliminary Guaranteed Maximum Price") is as follows: Office Building $ 9,822,855 ----------------------------------- Parking Structure $ 9,652,125 ----------------------------------- Site Work $ 1,048,331 ----------------------------------- CC5/WHQ Interconnect $ 121,763 ----------------------------------- $20,645,074 ----------------------------------- 5.2.2 The Guaranteed Maximum Price is based upon the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner: (State the numbers or other identification of accepted alternates, not only if a Guaranteed Maximum Price is inserted in Subparagraph 5.2.1. If decisions on other alternates are to be made by the Owner subsequent to the execution of this Agreement, attach a schedule of such other alternates showing the amount for each and the date until which that amount is valid.) 5.2.3 The amounts agreed to for unit prices, if any, are as follows: (State unit prices only if a Guaranteed maximum Price is inserted in Subparagraph 5.2.1) ARTICLE 6 CHANGES IN THE WORK 6.1 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE 6.1.1 Adjustments to the Guaranteed Maximum Price on account of changes in the Work may be determined by any of the methods listed in subparagraph 7.3.3 of the General Conditions. 4 5 6.1.2 In calculating adjustments to subcontracts (except those awarded with the Owner's prior consent on the basis of cost plus a fee), the terms "cost" and "fee" as used in Clause 7.3.3.3 of the General Conditions and the terms "costs" and "a reasonable allowance for overhead and profit" as used in Subparagraph 7.3.6 of the General Conditions shall have the meanings assigned to them in the General Conditions and shall not be modified by Articles 5, 7 and 8 of this Agreement. Adjustments to subcontracts awarded with the Owner's prior consent on the basis of cost plus a fee shall be calculated in accordance with the terms of [those subcontracts] this Agreement, unless the Owner has furnished the Contractor with prior written approval of the form and substance of a subcontract, in which case such adjustments shall be calculated in accordance with the terms and conditions of that subcontract. 6.1.3 In calculating adjustments to this Contract, the terms "cost" and "costs" as used in the above-referenced provisions of the General Conditions shall mean the Cost of the Work as defined in Article 7 of this Agreement and the terms "fee" and "a reasonable allowance for overhead and profit" shall mean the Contractor's Fee as defined in Paragraph 5.1 of this Agreement. 6.1.4 Contractor understands and agrees that neither the Contract Sum nor the Contract Time may be increased or extended except as provided in the Contract Documents. Contractor agrees that the Contract Sum and Contract Time cannot be changed by implication, oral agreement, course of conduct, course of dealing, or other method not specifically set forth in the Contract Documents. The Owner's decision in any instance to increase the Contract Sum or extend the Contract Time when such increase or extension is not required by the Contract Documents (e.g., pursuant to an oral agreement) shall not serve to waive Owner's right to require a written Change Order or Change Directive in every other instance and shall not estop Owner from denying any other increase or extension that is not required under the express provisions of the Contract Documents. [6.2 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE] [6.2.1 Increased costs for the items set forth in Article 7 which result from changes in the Work shall become part of the Cost of the Work, and the Contractor's Fee shall be adjusted as provided in Paragraph 5.1.] [6.3 ALL CONTRACTS] [6.3.1 If no specific provision is made in Paragraph 5.1 for adjustment of the Contractor's Fee in the case of changes in the Work, or if the extent of such changes is such, in the aggregate, that application of the adjustment provisions of Paragraph 5.1 will cause substantial inequity to the Owner or Contractor, the Contractor's Fee shall be equitably adjusted on the basis of the Fee established for the original Work.] Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 5 6 ARTICLE 7 COSTS TO BE REIMBURSED 7.1 The term Cost of the Work shall mean costs necessarily incurred by the Contractor in the proper performance of the Work. Such costs shall be at rates not higher than the standard paid at the place of the Project except with prior consent of the Owner. The Cost of the Work shall include only the items set forth in this Article 7 and Paragraph 7.5.2 of the General Conditions. Notwithstanding anything to the contrary contained in this Article 7, the Cost of the Work shall not include items set forth in Paragraph 7.5.1 of the General Conditions. 7.1.1 LABOR COSTS 7.1.1.1 Wages of construction workers directly employed by the Contractor to perform the construction of the Work at the site or, with the Owner's agreement, at off-site workshops. 7.1.1.2 Wages or salaries of the Contractor's supervisory and administrative personnel when stationed at the site with the Owner's agreement. (If it is intended that the wages or salaries of certain personnel stationed at the Contractor's principal or other offices shall be included in the Cost of the Work, identify in Article 14 the personnel to the included and whether for all or only part of their time.) 7.1.1.3 Wages and salaries of the Contractor's supervisory or administrative personnel engaged, at factories, workshops or on the road, in expediting the production or transportation of materials or equipment required for the Work, but only for that portion of their time required for the Work. 7.1.1.4 Costs paid or incurred by the Contractor for taxes, insurance, contributions, assessments and benefits required by law or collective bargaining agreements and, for personnel not covered by such agreements, customary benefits such as sick leave, medical and health benefits, holidays, vacations and pensions (but not merit bonuses), provided such costs are based on wages and salaries included in the Cost of the Work under Clauses 7.1.1.1 through 7.1.1.3. 7.1.2 SUBCONTRACT COSTS Payments made by the Contractor to Subcontractors in accordance with the requirements of the subcontracts properly entered into under the terms of the Contract Documents. 7.1.3 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION 7.1.3.1 Costs, including transportation, of materials and equipment incorporated or to be incorporated in the completed construction. 7.1.3.2 Costs of materials described in the preceding Clause 7.1.3.1 in excess of those actually installed but required to provide reasonable allowance for waste and for spoilage. Unused excess materials, if any, shall be [handed] properly stored at the Project site, or in accordance with the Owner's instructions, turned over to the Owner at the completion of the Work or, at the Owner's Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 6 7 option, shall be sold by the Contractor; amounts realized, if any, from such sales shall be credited to the Owner as a deduction from the Cost of the Work. 7.1.4 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED ITEMS 7.1.4.1 Costs, including transportation, [installation,] and maintenance, [dismantling and removal] of materials, supplies, temporary facilities, [machinery,] equipment, and hand tools not customarily owned by the construction workers, [which are provided by the Contractor at the site and fully consumed in the performance of the Work; and cost less salvage value on such items if not fully consumed, whether sold to others or retained by the Contractor. Cost for items previously used by the Contractor shall mean fair market value.] and consumed in the performance of the Work. Any such items used but not consumed, which are paid for by the Owner, shall become the property of the Owner and shall be delivered to the Owner upon completion of the Work in accordance with instructions furnished by the Owner. If the Owner elects, however, the Contractor shall purchase any such items from the Owner at a purchase price equal to the original cost charged to the Owner, less the reduction in fair market value resulting directly from use of any such item in connection with the Work or such other price which is mutually acceptable to the Owner and the Contractor. Upon demand by the Owner, the Contractor shall furnish the Owner with any information and documentation necessary to verify the period of time for which such items were used in connection with the Work. 7.1.4.2 [Rental charges for temporary facilities, machinery, equipment, and hand tools not customarily owned by the construction workers, which are provided by the Contractor at the site, whether rented from the Contractor or others, and costs of transportation, installation, minor repairs and replacements, dismantling and removal thereof. Rates and quantities of equipment rented shall be subject to the Owner's prior approval.] Rental charges of all necessary machinery and equipment, exclusive of hand tools, used at the site of the Work, whether rented from the Contractor, including installation, minor repairs and replacements, dismantling, removal, transportation and delivery costs thereof. Such rental charges shall be consistent with those generally prevailing in the location of the Project. The Contractor shall obtain bids for all machinery and equipment to be rented from no less than two (2) responsible suppliers other than the Contractor itself or an affiliate. The Owner shall, with the advice of the Contractor and the Development Manager, determine which bid is to be accepted and, if the Contractor is offering to rent its equipment or machinery, determine whether to accept one of the bids or whether to accept Contractor's offer to rent such equipment or machinery. In no event shall the Contractor be entitled to reimbursement for any cumulative total of rental charges in connection with any single piece of machinery or equipment in excess of the difference between (x) the fair market value of the piece of machinery or equipment on the date it is first rented in connection with the Work, and (y) the fair market value of the piece of machinery or equipment on the last day it is rented in connection with the Work. The Contractor shall pay any excess rental charges. 7.1.4.3 Costs of removal of debris from the site. 7.1.4.4 Costs of telegrams and long-distance telephone calls, postage and parcel delivery charges, telephone service at the site and reasonable petty cash expenses of the site office. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 7 8 7.1.4.5 That portion of the reasonable travel and subsistence expenses of the Contractor's personnel incurred while traveling in discharge of duties connected with the Work. Expenses shall be substantiated by documentation in form and substance satisfactory to Owner. 7.1.5 MISCELLANEOUS COSTS 7.1.5.1 That portion directly attributable to this Contract of premiums for insurance and bonds required by the Contract; provided, however, that such bond costs (other than those paid to Subcontractors or Sub-subcontractors) shall not be included in the Cost of the Work for purposes of calculating the Contractor's Fee. 7.1.5.2 Sales, use or similar taxes imposed by a governmental authority which are related to the Work and for which the Contractor is liable. 7.1.5.3 Fees and assessments for the building permit and for other permits, licenses and inspections for which the Contractor is required by the Contract Documents to pay. 7.1.5.4 Fees of testing laboratories for tests required by the Contract Documents, except those related to defective or nonconforming Work for which reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or other provisions of the Contract Documents and which do not fall within the scope of Subparagraphs 7.2.2 through 7.2.4 below. 7.1.5.5 Royalties and license fees paid for the use of a particular design, process or product required by the Contract Documents; the cost of defending suits or claims for infringement of patent rights arising from such requirement by the Contract Documents; payments made in accordance with legal judgments against the Contractor resulting from such suits or claims and payments of settlements made with the Owner's consent; provided, however, that such costs of legal defenses, judgment and settlements shall not be included in the calculation of the Contractor's Fee or of a Guaranteed Maximum Price, if any, and provided that such royalties, fees and costs are not excluded by the last sentence of subparagraph 3.17.1 of the General Conditions or other provisions of the Contract Documents. 7.1.5.6 Deposits lost for causes other than the Contractor's fault or negligence. 7.1.5.7 Costs incurred by Contractor prior to the date of commencement in good faith with written approval of Owner. 7.1.6 OTHER COSTS 7.1.6.1 Other costs incurred in the performance of the Work if and to the extent approved in advance in writing by the Owner. 8 9 7.2 EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK The Cost of the Work shall also include costs described in Paragraph 7.1 which are incurred by the Contractor: 7.2.1 In taking action to prevent threatened damage, injury or loss in case of an emergency affecting the safety of persons and property, as provided in Paragraph 10.3 of the General Conditions to the extent not (i) caused by the Contractor, a Subcontractor or anyone for whom either is responsible, or (ii) capable of being prevented through timely notice of an unsafe condition to the Owner. 7.2.2 In repairing or correcting Work damaged or improperly executed by construction workers in the employ of the Contractor, provided such damage or improper execution did not result from the fault or negligence of the Contractor or the Contractor's foremen, engineers or superintendents, or other supervisory, administrative or managerial personnel of the Contractor. 7.2.3 In repairing damaged Work [other than that described in Subparagraph 7.2.2, provided such damage [did not result from the fault or negligence of] was not caused by the Contractor, [or the Contractor's personnel] a Subcontractor, a Sub-subcontractor or anyone for whom either is responsible, and only to the extent that the cost of such repairs is not recoverable by the Contractor from others and the Contractor is not compensated therefor by insurance or otherwise provided that any absence of collectible insurance is not due to the Contractor's breach of the Contract or a contract for insurance. 7.2.4 In correcting defective or nonconforming Work performed or supplied by a Subcontractor or material supplier and not corrected by them, provided such defective or nonconforming Work did not result from the fault or neglect of the Contractor or the Contractor's personnel adequately to supervise and direct the Work of the Subcontractor or material supplier, and only to the extent that the cost of correcting the defective or nonconforming Work is not recoverable by the Contractor from the Subcontractor or material supplier. 7.3 GENERAL CONDITIONS 7.3.1 Costs as defined herein shall be actual costs paid by the Contractor, less all discounts, rebates and salvages which shall be taken by the Contractor, subject to Article 9 of the Agreement. All payments made by the Owner pursuant to this Article 7, whether those payments are actually made before or after the execution of the Contract, are to be included within the Guaranteed Maximum Price to be established pursuant to Paragraph 5.2 above; provided, however, that in no event shall the Owner be required to reimburse the Contractor for any portion of the Cost of the Work incurred prior to the Commencement Date unless the Contractor has received the Owner's written consent prior to incurring such cost. 7.3.2 Notwithstanding the breakdown or categorization of any costs to be reimbursed in this Article 7 or elsewhere in the Contract Documents, there shall be no duplication of payment in the Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 9 10 event of any particular items for which payment is requested can be characterized as falling into more than one of the types of compensable or reimbursable categories. 7.3.3 Any costs which comprise the Cost of the Work as described in Article 7 or in Paragraph 7.5.2, which are also set forth in the Schedule of General Conditions Costs attached hereto as Exhibit G, are subject to an aggregate limit of ____________ Dollars ($_________). ARTICLE 8 COSTS NOT TO BE REIMBURSED 8.1 The Cost of the Work shall not include (i) those items set forth in Paragraph 7.5.1 of the General Conditions, and (ii) the following: 8.1.1 Salaries and other compensation of the Contractor's personnel stationed at the Contractor's principal office or offices other than the site office, except as specifically provided in Clauses 7.1.1.2 and 7.1.1.3 or as may be provided in Article 14. 8.1.2 Expenses of the Contractor's principal office and offices other than the site office. 8.1.3 Overhead and general expenses, except as may be expressly included in Article 7. 8.1.4 The contractor's capital expenses, including interest on the Contractor's capital employed for the Work. 8.1.5 Rental costs of machinery and equipment, except as specifically provided in Clause 7.1.4.2. 8.1.6 Except as provided in Subparagraphs 7.2.2 through 7.2.4 and Paragraph 13.5 of this Agreement, costs due to the fault or negligence of, or failure to comply with the requirements of the Contract Documents by, the Contractor, Subcontractors, anyone directly or indirectly employed by any of them, or for whose acts any of them may be liable, including but not limited to costs for the correction of damaged, defective or nonconforming Work, disposal and replacement of materials and equipment incorrectly ordered or supplied, and making good damage to property not forming part of the Work. 8.1.7 Any cost not specifically and expressly described in Article 7 of this Agreement or in Paragraph 7.5.2 of the General Conditions. 8.1.8 Costs which would cause the Guaranteed Maximum Price, if any, to be exceeded. ARTICLE 9 DISCOUNTS, REBATES AND REFUNDS 9.1 Cash discounts obtained on payments made by the contractor shall accrue to the Owner if (1) before making the payment, the Contractor included them in an Application for Payment and received payment therefor from the Owner, or (2) the Owner has deposited funds with the contractor with which to make payments; otherwise, cash discounts shall accrue to the 10 11 Contractor. Trade discounts, rebates, refunds and amounts received from sales of surplus materials and equipment shall accrue to the Owner, and the contractor shall make provisions so that they can be secured. The Contractor shall not obtain for its own benefit any cash discounts in connection with the Work prior to providing the Owner with seven (7) days prior written notice of the potential discount and an opportunity to furnish funds necessary to obtain such discount on behalf of the Owner. 9.2 Amounts which accrue to the Owner in accordance with the provisions of Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of the Work and a reduction in the Guaranteed Maximum Price. ARTICLE 10 SUBCONTRACTS AND OTHER AGREEMENTS 10.1 Those portions of the Work that the Contractor does not customarily perform with the Contractor's own personnel shall be performed under subcontracts or by other appropriate agreements with the Contractor. The Contractor shall obtain bids from Subcontractors and from suppliers of materials or equipment fabricated especially for the Work and shall deliver such bids to the [Architect] Development Manager. The Owner will then determine, with the advice of the Contractor and subject to the reasonable objection of the Development Manager or Architect, which bids will be accepted. The Owner may designate specific persons or entities from whom the Contractor shall obtain bids; however, if a Guaranteed Maximum Price has been established, the Owner may not prohibit the Contractor from obtaining bids from others. The Contractor shall not be required to contract with anyone to whom the Contractor has reasonable objection. 10.2 If a Guaranteed Maximum Price has been established and a specific bidder among those whose bids are delivered by the Contractor to the Development Manager [Architect] (1) is recommended to the Owner by the Contractor; (2) is qualified to perform that portion of the Work; [and] (3) has submitted a bid which conforms to the requirements of the Contract Documents without reservations or exceptions, but the Owner requires that another bid be accepted, and (4) Owner's objection to the specific bidder recommended to Owner by Contractor is not reasonable; then the Contractor may require that a Change Order be issued to adjust the Guaranteed Maximum Price by the lesser of (i) the difference between the bid of the person or entity recommended to the Owner by the Contractor and the amount of the subcontract or other agreement actually signed with the person or entity designated by the Owner, and (ii) the difference between the bid of the person or entity recommended by the Owner to the Contractor and the amount attributable to such subcontract or other agreement in the original schedule of values with respect to the Guaranteed Maximum Price submitted by the Contractor and accepted by the Owner. 10.3 Subcontracts or other agreements shall conform to the payment provisions of Paragraphs 12.7 and 12.8, and shall not be awarded on the basis of cost plus a fee without the prior consent of the Owner. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 11 12 ARTICLE 11 ACCOUNTING RECORDS 11.1 The Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Contract; the accounting and control systems shall be satisfactory to the Owner. The Owner and the Owner's accountants shall be afforded access to the Contractor's records, books, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Contract, and the Contractor shall preserve these for a period of three years alter final payment, or for such longer period as may be required by law. 11.2 If any inspection by Owner of Contractor's records, books, correspondence, instructions, drawings, receipts, vouchers, memoranda or any other data relating to the Contract Documents reveals an overcharge, Contractor shall pay Owner upon demand an amount equal to the overcharge, plus simple interest from the date of such overcharge at the annual rate of 10% as reimbursement for said overcharge and the administrative expenses incurred in determining the overcharge. The requirements of this Paragraph 11.2 shall not apply to any portion of an overcharge which is the subject of a good faith dispute between the Owner and the Contractor. ARTICLE 12 PROGRESS PAYMENTS 12.1 Based upon Applications for Payment and all supporting documentation submitted to the [Architect] Development Manager by the Contractor and Certificates for Payment issued [by the Architect] pursuant to Article 9 of the General Conditions, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents. 12.2 The period covered by each Application for Payment shall be [one calendar month ending on the last day of the month, or as follows] as established in Article 9 of the General Conditions.[:] 12.3 [Provided an Application for Payment is received by the Architect not later than the ______________ day of a month, the Owner shall make payment to the Contractor not later than the ______________________ day of the ______________ month. If an Application for Payment is received by the Architect after the application date fixed above, payment shall be made by the Owner not later than ______________ days after the Architect receives the Application for Payment.] Applications for Payment shall be submitted and paid in accordance with the provisions set forth in the General Conditions. 12.4 With each Application for Payment the Contractor shall submit payrolls, petty cash accounts, receipted invoices or invoices with check vouchers attached, and any other evidence required by the Owner or [Architect] Development Manager to demonstrate that cash disbursements already made by the Contractor on account of the Cost of the Work equal or exceed (1) progress payments already received by the Contractor; less (2) that portion of those payments attributable to the Contractor's Fee; plus (3) payrolls for the period covered by the present Application for Payment; plus (4) retainage provided in Subparagraph 12.5.4, if any, Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 12 13 applicable to prior progress payments. In addition to any other items required in this Paragraph 12.4 or in Paragraph 9.3.1.3 of the General Conditions, each Application for Payment shall be accompanied by the following, all in form and substance reasonably satisfactory to the Owner and in compliance with applicable California statutes: (1) Duly executed waivers of mechanics' and materialmen's liens from the Contractor and all such Subcontractors, establishing payment or satisfaction of the payment requested by the Contractor in the Application for Payment; and (2) Such other information, documentation and materials as the Owner or the Development Manager may require, including without limitation invoices from Subcontractors or Sub-subcontractors evidencing amounts requested in such Application for Payment. 12.5 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE 12.5.1 Each Application for Payment shall be based upon the most recent schedule of values submitted by the Contractor in accordance with the Contract Documents. The schedule of values shall allocate the entire Guaranteed Maximum Price among the various portions of the Work, except that the Contractor's Fee shall be shown as a single separate item. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the [Architect] Development Manager may require. This schedule, unless objected to by the [Architect] Development Manager or the Owner, shall be used as a basis for reviewing the Contractor's Applications for Payment. 12.5.2 Applications for Payment shall show the percentage completion of each portion of the Work as of the end of the period covered by the Application for Payment. The percentage completion shall be the lesser of (1) the percentage of that portion of the Work which has actually been completed or (2) the percentage obtained by dividing (a) the expense which has actually been incurred by the Contractor on account of that portion of the Work for which the Contractor has made or intends to make actual payment prior to the next Application for Payment by (b) the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. 12.5.3 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows: 12.5.3.1 Take that portion of the Guaranteed Maximum Price properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute may be included as provided in subparagraph 7.3.7 of the General Conditions, even though the Guaranteed Maximum Price has not yet been adjusted by Change order. 12.5.3.2 If approved in advance in writing by the Owner, [Add] add that portion of the Guaranteed Maximum Price properly allocable to materials and equipment delivered and suitably Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 13 14 stored at the site for subsequent incorporation in the Work or, if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing. 12.5.3.3 Add the Contractor's Fee, less retainage of ten percent (10%). The Contractor's Fee shall be computed upon the Cost of the Work described in the two preceding Clauses at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that Paragraph, shall be an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the two preceding Clauses bears to a reasonable estimate of the probable Cost of the Work upon its completion. 12.5.3.4 Subtract the aggregate of previous payments made by the Owner. 12.5.3.5 Subtract the shortfall, if any, indicated by the Contractor in the documentation required by Paragraph 12.4 to substantiate prior Applications for Payment, or resulting from errors subsequently discovered by the Owner's accountants in such documentation. 12.5.3.6 Subtract amounts, if any, for which the Architect and Development Manager has withheld or nullified a Certificate for Payment as provided in Paragraph 9.5 of the General Conditions and other amounts, not including retainage described in Paragraph 12.5.3.3, properly held by the Owner under the Contract Documents at the time of each progress payment. 12.5.4 Additional retainage, if any, shall be as follows: The Owner shall withhold as retainage ten percent (10%) of all Cost of the Work items and of the Contractor's Fee included in each Application for Payment; provided, however, at no time shall retainage in the aggregate exceed five percent (5%) of the Cost of the Work. Retainage for Cost of the Work attributable to rebar, concrete, shoring, mass excavation and certain other trades may be subject to a further limitation on retainage as approved in writing by Owner, Lender and Contractor. Any retainage under this Paragraph 12.5.4 shall not duplicate any amounts retained pursuant to Subparagraphs 12.5.3.3, 12.7.1, or 12.7.2. The Owner shall have the option, but not the obligation, to reduce the retainage requirement of this Agreement or release any portion of retainage prior to the date specified in the Contract Documents. Any exercise of this option, however, shall be in writing and shall not be a waiver of (1) any of the Owner's rights to retainage in connection with other payments to the Contractor, or (2) any other right or remedy that the Owner has under the Contract Documents, at law or in equity. (If it is intended to retain additional amounts from progress payments to the Contractor beyond (1) the retainage from the Contractor's Fee provided in Clause 12.5.3.3, (2) the retainage from Subcontractors provided in Paragraph 12.7 below, and (3) the retainage, if any, provided by other provisions of the contract, insert provision for such additional retainage here. Such provision, if made, should also describe any arrangement for limiting or reducing the amount retained after the Work reaches a certain state of completion.) [12.6 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE 12.6.1 Applications for Payment shall show the Cost of the Work actually incurred by the Contractor through the end of the period covered by the Application for Payment and for which the Contractor has made or intends to make actual payment prior to the next Application for Payment.] Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 14 15 [12.6.2 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows: 12.6.2.1 Take the Cost of the Work as described in subparagraph 12.6.1. 12.8.2.2 Add the Contractor's Fee, less retainage of ________________ percent (________%). The Contractor's Fee shall be computed upon the Cost of the Work described in the preceding Clause 12.6.2.1 at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that Paragraph, an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the preceding Clause bears to a reasonable estimate of the probable Cost of the Work upon its completion. 12.6.2.3 Subtract the aggregate of previous payments made by the Owner. 12.6.2.4 Subtract the shortfall, if any, indicated by the Contractor in the documentation required by Paragraph 12.4 or to substantiate prior Applications for Payment or resulting from errors subsequently discovered by the Owner's accountants in such documentation. 12.6.2.5 Subtract amounts, if any, for which the Architect has withheld or withdrawn a Certificate for Payment as provided in the Contract Documents. 12.6.3 Additional retainage, if any, shall be as follows:] 12.7 Except with the Owner's prior approval, payments to Subcontractors included in the Contractor's Applications for Payment shall not exceed an amount for each Subcontractor calculated as follows: 12.7.1 Take that portion of the Subcontract Sum properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Subcontractor's Work by the share of the total Subcontract Sum allocated to that portion in the Subcontractor's schedule of values, less retainage of ten percent (10%). Pending final determination of amounts to be paid to the Subcontractor for changes in the Work, amounts not in dispute may be included as provided in Subparagraph 7.3.7 of the General Conditions even though the Subcontract Sum has not yet been adjusted by Change order. 12.7.2 If approved in writing in advance in writing by Owner, Add add that portion of the Subcontract Sum properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work or, if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing, less retainage of ten percent (10%). 12.7.3 Subtract the aggregate of previous payments made by the Contractor to the Subcontractor. 12.7.4 Subtract amounts, if any, for which the Architect has withheld or nullified a Certificate for Payment by the Owner to the Contractor for reasons which are the fault of the Subcontractor Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 15 16 and other amounts, not including retainage described in Paragraph 12.7.1 and 12.7.2, properly held by the Owner under the Contract Documents at the time of each progress payment. 12.7.5 Add, upon Substantial Completion of the entire Work of the Contractor, a sum sufficient to increase the total payments to the Subcontractor to one hundred percent (100%) of the Subcontract Sum, less amounts, if any, for incomplete Work and unsettled claims; and, if final completion of the entire Work is thereafter materially delayed through no fault of the Subcontractor, add any additional amounts payable on account of Work of the Subcontractor in accordance with Subparagraph 9.10.3 of the General Conditions. (If it is intended, prior to Substantial Completion of the entire Work of the Contractor, to reduce or limit the retainage from Subcontractors resulting from the percentages inserted in Subparagraphs 12.7.1 and 12.7.2 above, and this is not explained elsewhere in the Contract Documents, insert here provisions for such reduction or limitation.) The Subcontract Sum is the total amount stipulated in the subcontract to be paid by the Contractor to the Subcontractor for the Subcontractor's performance of the subcontract. 12.8 Except with the Owner's prior approval, the Contractor shall not make advance payments to suppliers for materials or equipment which have not been delivered and stored at the site. 12.9 In taking action on the Contractor's Applications for Payment, the Architect and Development Manager shall be entitled to rely on the accuracy and completeness of the information furnished by the Contractor and shall not be deemed to represent that the Architect or Development Manager has made a detailed examination, audit or arithmetic verification of the documentation submitted in accordance with Paragraph 12.4 or other supporting data; that the Architect or Development Manager has made exhaustive or continuous on-site inspections or that the Architect or Development Manager has made examinations to ascertain how or for what purposes the Contractor has used amounts previously paid on account of the Contract. Such examinations, audits and verifications, if required by the Owner, will be performed by the Owner's accountants acting in the sole interest of the Owner. ARTICLE 13 FINAL PAYMENT 13.1 Final payment shall be made by the Owner to the Contractor when (1) the Contract has been fully performed by the Contractor except for the Contractor's responsibility to correct defective or nonconforming Work, as provided in Subparagraph 12.2.2 of the General Conditions, and to satisfy other requirements, if any, which necessarily survive final payment; (2) a final Application for Payment and a final accounting for the Cost of the Work and all required supporting documentation have been submitted by the Contractor and reviewed by the Owner's accountants; and (3) a final Certificate for Payment has then been issued by the Development Manager and Architect; such final payment shall be made by the Owner not more than 30 days after the issuance of the Architect's final Certificate for Payment., [or as follows:] 13.2 The amount of the final payment shall be calculated as follows: Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 16 17 13.2.1 Take the sum of the Cost of the Work substantiated by the Contractor's final accounting and the Contractor's Fee; but not more than the Guaranteed Maximum Price, [if any.] 13.2.2 Subtract amounts, if any, for which the Development Manager and Architect withholds, in whole or in part, a final Certificate for Payment as provided in Subparagraph 9.5.1 of the General Conditions or other provisions of the Contract Documents. 13.2.3 Subtract the aggregate of previous payments made by the Owner. If the aggregate of previous payments made by the Owner exceeds the amount due the Contractor, the Contractor shall reimburse the difference to the Owner. 13.3 The Owner's accountants will review and report in writing on the Contractor's final accounting within 30 days after delivery of the final accounting to the Architect by the Contractor. Based upon such Cost of the Work as the Owner's accountants report to be substantiated by the Contractor's final accounting, and provided the other conditions of Paragraph 13.1 have been met, the Architect will, within seven days after receipt of the written report of the Owner's accountants, either issue to the Owner a final Certificate for Payment with a copy to the Contractor, or notify the Contractor and Owner in writing of the Architect's reasons for withholding a certificate as provided in subparagraph 9.5.1 of the General Conditions. The time periods stated in this Paragraph 13.3 supersede those stated in subparagraph 9.4.1 of the General Conditions. 13.4 If the Owner's accountants report the Cost of the Work as substantiated by the Contractor's final accounting to be less than claimed by the Contractor, the Contractor shall be entitled to demand arbitration of the disputed amount without a further decision of the Architect. Such demand for arbitration shall be made by the Contractor within 30 days after the Contractor's receipt of a copy of the Architect's final Certificate for Payment; failure to demand arbitration within this 30-day period shall result in the substantiated amount reported by the Owner's accountants becoming binding on the Contractor. Pending a final resolution by arbitration, the Owner shall pay the Contractor the amount certified in the Architect's final Certificate for Payment. 13.5 If, subsequent to final payment and at the Owner's request, the Contractor incurs costs described in Article 7 and not excluded by Article 8 to correct defective or nonconforming Work, the Owner shall reimburse the Contractor such costs and the Contractor's Fee applicable thereto on the same basis as if such costs had been incurred prior to final payment, but not in excess of the Guaranteed Maximum Price, if any. [If the Contractor has participated in savings as provided in Paragraph 5.2, the amount of such savings shall be recalculated and appropriate credit given to the Owner in determining the net amount to be paid by the Owner to the Contractor.] Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 17 18 ARTICLE 14 MISCELLANEOUS PROVISIONS 14.1 Where reference is made in this Agreement to a provision of the General Conditions or another Contract Document, the reference refers to that provision as amended or supplemented by other provisions of the Contract Documents. 14.2 Payments due and unpaid under the Contract shall bear interest from the date payment is due at the rate stated below, or in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located. (Insert rate of interest agreed upon, if any.) (Usury laws and requirements under the Federal Truth in lending Act, similar state and local consumer credit laws and other regulations at the Owner's and Contractor's principal places of business, the location of the Project and elsewhere may affect the validity of this provision. Legal advice should be obtained with respect to deletions or modifications, and also regarding requirements such as written disclosures or waivers.) 14.3 Other provisions: A. (i) Contractor has included zero (0) days of weather related delays in the schedule. In the event the work is delayed by weather, the completion date shall be extended by the actual number of days lost. (ii) The construction schedule is based on all design information, permits and approvals being available when needed to allow for a proper and continuous flow of the construction. Subject to the limitations on delay contained in the General Conditions, including without limitation Paragraphs 7.5 and 8.3 thereof, any deviation from this will delay the completion date shown in Section 4.2. B. Contingency Fund - Included in the Guaranteed Maximum Price is a contingency fund in the amount of $_________ (to be determined). This contingency fund shall be administered jointly by Owner and Contractor, neither of which shall unreasonably withhold approval. This fund is not to be used for changes in the scope or for upgrades in the quality of the Work as reflected in the Contract Documents. The fund is intended to be used for additional costs necessary to complete the Project which relate to necessary work about which Contractor had no knowledge and would not reasonably be expected to have knowledge at the time Contractor and Owner agreed upon the Guaranteed Maximum Price. In general, the fund is to be used for coordination of items necessary for a completed building and inadvertently missed. Examples included items not shown on the Plans and Specifications that cause a "gap" between any subcontractors' scope of work or a "gap" between Contractor's and a subcontractor's work, and items that are improperly coordinated or are impractical in the Plans and Specifications and must be modified at a cost. C. Savings - All savings which are generated after the Guaranteed Maximum Price is established will be returned to the Owner. 18 19 D. Subcontractors - All trades will be bid to a minimum of three qualified subcontractors approved by the Owner, except the concrete work which shall be performed by the Contractor. Concrete work is to be performed on a cost plus 10% markup basis with a savings split of 70% to the Owner and 30% to the Contractor. Owner or Owner's Representative will have the right to full audit of all concrete estimates and cost reports upon completion of the work. The HVAC and electrical work shall be negotiated with Critchfield Mechanical and Schwartz & Lindheim, providing these subcontractors do not exceed their schematic budgets. After competitive bidding, all bids will be analyzed by the Contractor and a recommendation for selection will be presented to the Owner for approval. E. Design-build - Electrical, HVAC, Plumbing and Fire Protection will be done on a design-build basis. The engineering for each of these trades will be included in the subcontractor scopes of work. Owner will engage consulting engineers who will provide the following services: i. Performance outline specifications and definition of finish/quality levels during the schematic design phase. ii. Reviews of design-build bids for compliance with performance criteria, including evaluation of proposed designs and alternates. iii. Review and approval of design drawings provided by design-build subcontractors prior to permit submittal. iv. Review of shop drawings and submittals during construction. ARTICLE 15 TERMINATION OR SUSPENSION 15.1 The Contract may be terminated by the Contractor as provided in Article 14 of the General Conditions; however, the amount to be paid to the Contractor under Subparagraph 14.1.2 or 14.2.5 (excluding the fee described in Paragraph 14.2.5(c) of the General Conditions, if applicable) of the General Conditions shall not exceed the amount the Contractor would be entitled to receive under Paragraph 15.3 below, except that the Contractor's Fee shall be calculated as if the Work had been fully completed by the Contractor, including a reasonable estimate of the Cost of the Work for Work not actually completed. 15.2 If a Guaranteed Maximum Price is established in Article 5, the Contract may be terminated by the Owner for cause as provided in Article 14 of the General Conditions; however, the amount, if any, to be paid to the Contractor under Subparagraph 14.2.4 of the General Conditions shall not cause the Guaranteed Maximum Price to be exceeded, nor shall it exceed the amount the Contractor would be entitled to receive under Paragraph 15.3 below. 15.3 If no Guaranteed Maximum Price is established in Article 5, the Contract may be terminated by the Owner for cause as provided in Article 14 of the General Conditions; however, the Owner shall then pay the Contractor an amount calculated as follows: 19 20 15.3.1 Take the Cost of the Work incurred by the Contractor to the date of termination. 15.3.2 Add the Contractor's Fee computed upon the Cost of the Work to the date of termination at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that Paragraph, an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work at the time of termination bears to a reasonable estimate of the probable Cost of the Work upon its completion. 15.3.3 Subtract the aggregate of previous payments made by the Owner. The Owner shall also pay the Contractor fair compensation, either by purchase or rental at the election of the Owner, for any equipment owned by the Contractor which the Owner elects to retain and which is not otherwise included in the Cost of the Work under Subparagraph 15.3.1. To the extent that the Owner elects to take legal assignment of subcontracts and purchase orders (including rental agreements), the Contractor shall, as a condition of receiving the payments referred to in this Article 15, execute and deliver all such papers and take all such steps, including the legal assignment of such subcontracts and other contractual rights of the Contractor, as the Owner may require for the purpose of fully vesting in the Owner the rights and benefits of the Contractor under such subcontracts or purchase orders. 15.4 The Work may be suspended by the Owner as provided in Article 14 of the General Conditions; in such case, the Guaranteed Maximum Price, if any, shall be increased as provided in Subparagraph 14.3.2 of the General Conditions except that the term "cost of performance of the Contract" in that Subparagraph shall be understood to mean the Cost of the Work and the term "profit" shall be understood to mean the Contractor's Fee as described in Paragraphs 5.1 [and 6.3] of this Agreement. ARTICLE 16 ENUMERATION OF CONTRACT DOCUMENTS 16.1 The Contract Documents, except for Modifications issued after execution of this Agreement, are enumerated as follows: 16.1.1 The Agreement is this executed [Standard Form of Agreement Between Owner and Contractor, AIA Document A111, 1987 Edition (as modified)] Agreement. 16.1.2 The General Conditions are the General Conditions of the Contract for Construction[, AIA Document A201, 1987 Edition (as modified)] attached hereto as Exhibit A. 16.1.3 The Supplementary and other Conditions of the Contract are listed on Exhibit B attached hereto. [those contained in the Project Manual dated ,and are as follows: DOCUMENT TITLE PAGES] Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 20 21 16.1.4 The specifications are those contained in the Project Manual dated as in Paragraph 16.1.3, and are [as follows:] listed on Exhibit C attached hereto. (Either list the Specifications here or refer to an exhibit attached to this Agreement.) [SECTION TIDE PAGES] 16.1.5 The Drawings are listed on the attached Exhibit D. [as follows, and are dated unless a different date is shown below:] (Either list the Drawings here or refer to an exhibit attached to this Agreement.) [NUMBER TIDE DATE] 16.1.6 The addenda, if any, are [as follows:] listed on Exhibit E attached hereto. [NUMBER DATE PAGES] Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 21 22 Portions of Addenda relating to bidding requirements are not part of the Contract Documents unless the bidding requirements are also enumerated in [this Article 16] Exhibit E. 16.1.7 Other Documents, if any, forming part of the Contract Documents are [as follows:] listed on Exhibit F. (List here any additional documents which are intended to form part of the Contract Documents. The General Conditions provide that bidding requirements such as advertisement or invitation to bid, Instructions to Bidders, sample forms and the Contractor's bid are not part of the Contract Documents unless enumerated in this Agreement. They should he listed here only if intended to he part of the Contract Documents.) This Agreement is entered into as of the day and year first written above and is executed in at least three original copies of which one is to be delivered to the Contractor, one to the [Architect] Development Manager for use in the administration of the Contract, and the remainder to the Owner. 16.1.8 This Agreement, and the General Conditions, are based on AIA Documents A111 and A201, respectively, but each excludes certain provisions contained therein and includes certain provisions that have been negotiated by the parties which are not contained in the AIA documents. Text that is plain or underlined in this document is a part of this Agreement; text that is overstriked is not a part of this Agreement. No comparison or other reference to AIA Documents A111 or A201 shall affect the interpretation of this Agreement, the General Conditions, or any of the other Contract Documents. OWNER CONTRACTOR - ------------------------------------ ----------------------------------- (Signature) (Signature) - ------------------------------------ ----------------------------------- (Printed name and title) (Printed name and title) Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 22 23 ARTICLE 1 GENERAL PROVISIONS 1.1 BASIC DEFINITIONS 1.1.1 THE CONTRACT DOCUMENTS The Contract Documents consist of the Agreement between Owner and Contractor (hereinafter the Agreement), Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, addenda issued prior to execution of the Contract, other documents listed in the Agreement and Modifications issued after execution of the Contract. A Modification is (l) a written amendment to the Contract signed by both parties, (2) a Change Order, (3) a Construction Change Directive or (4) a written order for a minor change in the Work issued by the [Architect] Development Manager pursuant to Paragraph 7.4 or by the Owner. Unless specifically enumerated in the Agreement, the Contract Documents do not include other documents such as bidding requirements (advertisement or invitation to bid, instructions to Bidders, sample forms, the Contractor's bid or portions of addenda relating to bidding requirements). 1.1.2 THE CONTRACT The Contract Documents form the Contract for Construction. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Modification. [The Contract Documents shall not be construed to create a contractual relationship of any kind (l) between the Architect and Contractor, (2) between the Owner and a Subcontractor or Sub-subcontractor or (3) between any persons or entities other than the Owner and Contractor. The Architect shall, however, be entitled to performance and enforcement of obligations under the Contract intended to facilitate performance of the Architect's duties.] The Contract Documents shall not be construed to create a contractual relationship of any kind (1) between the Architect and Contractor, (2) between the Development Manager and Contractor, (3) between the Architect and Development Manager, (4) between the Owner and a Subcontractor or Sub-subcontractor (except as provided in Paragraph 5.4 hereof) or (5) between any persons or entities other than the Owner and Contractor. The Development Manager and Architect shall, however, be entitled to performance by the Contractor and to enforce the obligations of the Contractor under the Contract as the same are intended to facilitate performance of their duties. 1.1.3 THE WORK The term "Work" means the construction and services required by the Contract Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor's obligations. The Work may constitute the whole or a part of the Project. 1.1.4 THE PROJECT The Project is the total construction of which the Work performed under the Contract Documents may be the whole or a part and which may include construction by the Owner or by separate contractors. 1.1.5 THE DRAWINGS The Drawings are the graphic and pictorial portions of the Contract Documents, wherever located and whenever issued, showing the design, location and dimensions of the Work, generally including plans, elevations, sections, details, schedules and diagrams. 1.1.6 THE SPECIFICATIONS The Specifications are that portion of the Contract Documents consisting of the written requirements for materials, equipment, construction systems, standards and workmanship for the Work, and performance of related services. 1.1.7 THE PROJECT MANUAL The Project Manual is the volume usually assembled for the Work which may include the bidding requirements, sample forms, conditions of the Contract and Specifications. 1.1.8 ADDENDUM A change to the Contract Documents issued by Architect or Development Manager's approval prior to the execution of the Agreement and specifically listed in the Agreement. 1.1.9 FINAL COMPLETION The date the Contract has been fully performed, all the Work has been completed and a Final Certificate for payment approved by the owner has been issued by the Architect. 1.1.10 INDICATED AND SHOWN Shall each mean as detailed, scheduled, or called for in the Contract Documents. 1.1.11 LAW All federal, state, and local statues, rules, and regulations and ordinances applicable to performance of the Work or construction or operation of the Project, including, without limitation, building codes, environmental laws (including toxic waste and dust control), social security and unemployment compensation laws, workers' compensation laws, safety laws, and archaeological and paleontological preservation laws. 1.1.12 CONCEALED CONDITIONS Conditions at site which are (i) subsurface or otherwise concealed physical conditions which differ materially from those indicated in the Contract Documents, or (ii) unknown physical conditions of an unusual nature which differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract Documents (including, without limitation, existence of asbestos, phychlorinated biphenyls, or other hazardous materials) which adversely affect the quality or cost of the Work. 1.2 EXECUTION, CORRELATION AND INTENT 1.2.1 The Contract Documents shall be signed by the Owner and Contractor as provided in the Agreement. If either the Owner or Contractor or both do not sign all the Contract Documents, the Architect shall identify such unsigned Documents upon request. 1.2.2 [Execution of the Contract by the Contractor is a representation that the Contractor has visited the site, become familiar with local conditions under which the Work is to be performed and correlated personal observations with requirements of the Contract Documents.] Execution of the Contract by the Contractor is a representation that said Contract Documents [are full and complete,] are sufficient to have enabled the Contractor to determine the cost of the Work therein to enter into the Contract, and that the Contract Documents are sufficient to enable it to contract the Work outlined therein, and otherwise to fulfill all its obligations hereunder, including, but not limited to, contractor's obligation to construct the Work for an amount not in excess of the Contract Sum on or before the date(s) of Substantial Completion established in the Agreement. The Contractor further acknowledges and declares that it has visited and examined the site, examined all physical, legal, and other conditions affecting the Work and is fully familiar with all of the conditions thereon and thereunder affecting the same. In connection therewith, Contractor specifically represents and warrants to Owner that it has, by careful examination, satisfied itself as to: (1) The nature, location, and character of the Project and the site, including, without limitation, the surface [and subsurface] conditions of the site and all structures and obstructions thereon [and thereunder], both natural and man-made, and all surface [and subsurface] water conditions of the site and the surrounding area; (2) the nature, location, and character of the general area in which the Project is located, Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 1 24 including without limitation, its climatic conditions, available labor supply and labor costs, and available equipment supply and equipment costs; and (3) the quality and quantity of all materials, supplies, tools, equipment, labor, and professional services necessary to complete the Work in the manner and within the cost and time frame required by the Contract Documents. In connection with the foregoing, and having carefully examined all Contract Documents, as aforesaid, and having visited the site, the Contractor acknowledges and declares that it has no knowledge of any discrepancies, omissions, ambiguities, or conflicts in said Contract Documents, and that if it becomes aware of any such discrepancies, or conflicts, it will promptly notify Development Manager and Architect of such fact. 1.2.3 [The intent of the Contract Documents is to include all items necessary for the proper execution and completion of the Work by the Contractor. The Contract Documents are complementary, and what is required by one shall be as binding as if required by all; performance by the Contractor shall be required only to the extent consistent with the Contract Documents and reasonably inferable from them as being necessary to produce the intended results.] The intent of the Contract Documents is to include all items necessary for the proper execution and completion of the Work by the Contractor. The Work shall consist of all items specifically [included] shown in the Contract Documents as well as all additional items of Work which are reasonably inferable from that which is specified in order to complete the Work in accordance with the Contract Documents. The Contract Documents are complementary, and what is required by any one Contract Document shall be as binding as if required by all. Any differences between the requirements of the Drawings and the Specifications or any differences noted within the Drawing themselves or within the Specifications themselves will be referred to the Owner, Development Manager and Architect by Contractor. 1.2.4 Organization of the Specifications into divisions, sections and articles, and arrangement of Drawings shall not control the Contractor in dividing the Work among Subcontractors or in establishing the extent of Work to be performed by any trade. 1.2.5 Unless otherwise stated in the Contract Documents, words and abbreviations which have well-known technical or construction industry meanings are used in the Contract Documents in accordance with such recognized meanings. 1.3 OWNERSHIP AND USE OF ARCHITECT'S DRAWINGS, SPECIFICATIONS AND OTHER DOCUMENTS 1.3.1 [The Drawings, Specifications and other documents prepared by the Architect are instruments of the Architect's service through which the Work to be executed by the Contractor is described. The Contractor may retain one contract record set.] The Drawings, Specifications, and other similar or related documents and copies thereof are furnished to the Contractor for the purpose of performing the Work are, and shall remain, the property of the Owner. Neither the Contractor nor any Subcontractor, Sub-subcontractor or material or equipment supplier shall own or claim a copyright in the Drawings, Specifications [and other documents prepared by the Architect, and unless otherwise indicated the Architect shall be deemed the author of them and will retain all common law, statutory and other reserved rights, in addition to the copyright. All copies of them, except the Contractor's record set, shall be returned or suitably accounted for to the Architect, on request, upon completion of the Work.] and other similar or related documents, and Owner will retain all common law, statutory, and other reserved rights, in addition to the copyright (including, without limitation, the right to create derivative works therefrom). [All copies of such document shall be returned to the Owner upon completion of the Work.] The Drawings, Specifications and other similar or related documents [prepared by the Architect], and copies thereof furnished to the Contractor, are for use solely with respect to this Project. They are not to be used by the Contractor or any Subcontractor, Sub-subcontractor or material or equipment supplier on other projects or for additions to this Project outside the scope of the Work without the specific written consent of the Owner [and Architect]. The Contractor, Subcontractors, Sub-subcontractors and material or equipment suppliers are granted a limited license to use and reproduce applicable portions of the Drawings, Specifications and other documents [prepared by the Architect] appropriate to and solely for use in the execution of their Work under the Contract Documents. All copies made under this license shall bear the statutory copyright notice, if any, shown on the Drawings, Specifications and other documents prepared by the Architect. Submittal or distribution to meet official regulatory requirements or for other purposes in connection with this Project is not to be construed as publication in derogation of [the Architect's] any copyright or other reserved rights. 1.4 CAPITALIZATION 1.4.1 Terms capitalized in these General Conditions include those which are (l) specifically defined, (2) the titles of numbered articles and identified references to Paragraphs, Subparagraphs and Clauses in the document (3) the titles of other documents published by the American Institute of Architects. 1.5 INTERPRETATION 1.5.1 In the interest of brevity the Contract Documents frequently omit modifying words such as "all" and "any" and articles such as "the" and "an," but the fact that a modifier or an article is absent from one statement and appears in another is not intended to affect the interpretation of either statement. ARTICLE 2 OWNER 2.1 DEFINITION 2.1.1 The Owner is the person or entity identified as such in the Agreement and is referred to throughout the Contract Documents as if singular in number. The term "Owner" means the Owner or the Owner's authorized representative. 2.1.2 The Owner upon reasonable written request shall furnish to the contractor in writing information which is necessary and relevant for the Contractor to evaluate, give notice of or enforce mechanic's lien rights. Such information shall include a correct statement of the record legal title to the property on which the Project is located, usually referred to as the site, and the Owner's interest therein at the time of execution of the Agreement, and, within five days after any change, information of such change in title, recorded or unrecorded. 2.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER 2.2.1 The Owner shall, at the request of the Contractor, prior to execution of the Agreement and promptly from time to time thereafter furnish to the Contractor reasonable evidence that financial arrangements have been made to fulfill the Owner's obligations under the Contract. [note: Unless such reasonable evidence were furnished on request prior to the execution of the Agreement, the prospective contractor would not be required to execute the Agreement or to commence the Work.] The Owner may select the Architect, the Development Manager, or any other designee or designees, including any employee or agent of the Owner, to be the Owner's Representative, and such person or persons shall have all powers of the Owner enumerated herein. The Owner may specify an Owner's Representative as to all issues hereunder or may specify an Owner's Representative as to any specific issue or issues. The Owner shall specify an Owner's Representative in writing to both the Architect (if the Owner's Representative is other than the Architect) and the Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 2 25 Contractor. The Architect, the Development Manager and the Contractor shall have no right or authority to rely on the authority of any alleged Owner's Representative unless the architect and the Contractor are in possession of a document signed by the Owner specifying said person as the Owner's Representative as to the particular issue or issues in question. 2.2.2 The Owner shall furnish any surveys in its possession describing physical characteristics, legal limitations and utility locations for the site of the Project, and a legal description of the site. 2.2.3 Except for permits and fees which are the responsibility of the Contractor under the Contract Documents, the Owner shall secure and pay for necessary approvals, easements, assessments and charges required for construction, use or occupancy of permanent structures or for permanent changes in existing facilities. Such approvals and the like shall be provided by Owner within a time and in a manner so as to avoid any unreasonable delays in the Work or schedule of Contractor and shall include only such approvals for permanent facilities which are necessary to perform the Work as set forth in the Contract Documents. 2.2.4 Information or services [under the Owner's control] required to be furnished by Owner shall be furnished by the Owner with reasonable promptness to avoid delay in orderly progress of the Work. 2.2.5 Unless otherwise provided in the Contract Documents, the Contractor will be furnished, free of charge, such copies of Drawings and Project Manuals as are reasonably necessary for execution of the Work.[ ten (10) copies of the Drawings and Specifications prepared by Owner's Architect; all other drawings and documents necessary for the execution and completion of the Work shall be furnished at Contractor's expense.] 2.2.6 The foregoing are in addition to other duties and responsibilities of the Owner enumerated herein and especially those in respect to Article 6 (Construction by Owner or by Separate Contractors), Article 9 (Payments and Completion) and Article II (Insurance and Bonds). 2.3 OWNER'S RIGHT TO STOP THE WORK 2.3.1 [If the Contractor fails to correct Work which is not in accordance with the requirements of the Contract Documents as required by Paragraph 12.2 or persistently fails to carry out Work in accordance with the Contract Documents, the Owner, by written order signed personally or by an agent specifically so empowered by the Owner in writing, may order the Contractor to stop the Work, or any portion thereof, until the cause for such order has been eliminated; however, the right of the Owner to stop the Work shall not give rise to a duty on the part of the Owner to exercise this right for the benefit of the Contractor or any other person or entity, except to the extent required by Subparagraph 6.1.3.] If the Contractor fails to correct defective Work as required by Paragraph 12.2, or fails to complete the Work within the Contract Time or fails or refuses to provide a sufficient amount of properly supervised and coordinated labor, materials, or equipment so as to be able to complete the Work within the Contract Time, or fails to remove or discharge (within ten days) any lien resulting from the Work for which the Contractor has been paid in accordance with the Agreement filed upon Owner's property by anyone claiming by, through, or under Contractor, or disregards the instructions of Architect, Development Manager or Owner when based upon the requirements of the Contract Documents, or is in default of any of its obligations hereunder, the Owner, by a written order signed by any agent specifically so empowered by the Owner in writing, may order the Contractor to stop the Work, or any portion thereof, until cause of such order has been eliminated; however, this right of the Owner to stop the Work shall not give rise to any duty on the part of the Owner to exercise this right for the benefit of the Contractor or any other person or entity. This right shall be in addition to, and not in restriction of, the Owner's rights under Paragraph 12.2. 2.4 OWNER'S RIGHT TO CARRY OUT THE WORK 2.4.1 If the Contractor defaults or neglects to carry out the Work in accordance with the Contract Documents and fails within a seven-day period after receipt of written notice from the Owner to commence and continue correction of such default or neglect with diligence and promptness, [the Owner may after such seven-day period give the Contractor a second written notice to correct such deficiencies within a second seven-day period. If the Contractor within such second seven-day period after receipt of such second notice fails to commence and continue to correct any deficiencies,] or fails within such seven-day period to eliminate (or diligently commence to eliminate) the cause of any stop work order issued under Subparagraph 2.3.1 hereof, the Owner may, without prejudice to other remedies the Owner may have, correct such deficiencies. In such case an appropriate Change Order shall be issued deducting from payments then or thereafter due the Contractor the cost of correcting such deficiencies, including compensation for the Development Manager's and Architect's and their consultants' additional services and expenses made necessary by such default, neglect or failure. [Such action by the Owner and amounts charged to the Contractor are both subject to prior approval of the Architect.] If payments then or thereafter due the Contractor are not sufficient to cover such amounts, the Contractor shall pay the difference to the Owner. ARTICLE 3 CONTRACTOR 3.1 DEFINITION 3.1.1 The Contractor is the person or entity identified as such in the Agreement and is referred to throughout the Contract Documents as if singular in number. The term "Contractor" means the Contractor or the Contractor's authorized representative. The plural term "Contractors" refers to persons or entities who perform construction or operations related to the Project under these or similar Conditions of the Contract. 3.2 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR 3.2.1 [The] In addition to and not in derogation of Contractor's duties under Subparagraphs 1.2.2 and 1.2.3 hereof, Contractor shall carefully study and compare the Contract Documents with each other and with information furnished by the Owner pursuant to Subparagraph 2.2.2 and shall at once report to the Development Manager and Architect errors, inconsistencies or omissions discovered. The Contractor shall not be liable to the Owner, Development Manager or Architect for damage resulting from errors, inconsistencies or omissions in the Contract Documents that would not have been discovered by a prudent and experienced contractor in advance and that are not of the nature of items described in and intended to be covered in Subparagraphs 1.2.2 and 1.2.3 hereof unless the Contractor recognized or reasonably should have recognized such error, inconsistency or omission and [knowingly] failed to report it to the Development Manager and Architect. If the Contractor performs any construction activity [knowing it involves a recognized] involving an error, inconsistency or omission in the Contract Documents [without such notice to the Architect] that Contractor recognized or reasonably should have recognized without such notice to the Development Manager and Architect, the Contractor shall assume appropriate [complete] responsibility for such performance and shall bear an appropriate [the full] amount of the attributable costs for correction. 3.2.1.1 If any errors, inconsistencies, or omissions in Contract Documents are recognized or reasonably should have been recognized by the Contractor, any member of its organization, or any of its Subcontractors, the Contractor shall be responsible for notifying the Development Manager Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 3 26 and Architect in writing of such error, inconsistency, or omission before proceeding with the Work. The Architect will take such notice under advisement and within a reasonable time commensurate with job progress render a decision. The Architect's decision shall be subject to Owner's approval. The Contractor shall be liable for damage, loss or expense to Owner, Development Manager and Architect resulting from Contractor's (i) failure to report any such discovery or (ii) performance of any construction activity if Contractor knows or should have known of such error, inconsistency, omission or violation. 3.2.2 The In addition to and not in derogation of Contractor's duties under Subparagraph 1.2.2 and 1.2.3 hereof, Contractor shall take field measurements and verify field conditions and shall carefully compare such field measurements and conditions and other information known (or which reasonably should have been known) to the Contractor with the Contract Documents before commencing activities. Errors, inconsistencies or omissions discovered (or which reasonably should have been discovered) shall be reported to the Architect and Development Manager at once. 3.2.3 The Contractor shall perform the Work in accordance with the Contract Documents and submittals approved pursuant to Paragraph 3.12. 3.2.4 Should the Specifications and Drawings fail to particularly describe the material or kind of goods to be used where shown or reasonably inferable, then it shall be the duty of the Contractor to make inquiry of the Owner and Architect as to what is best-suited. The material that is consistent with the level of quality of adjacent materials shall be considered a part of the Contract. 3.2.5 Before undertaking each part of the Work, the Contractor shall coordinate the Architect to check and verify all pertinent data in the Drawings and Specifications, against field measurements actually made at the site and report at once in writing to the Owner any discrepancies which the Contractor may discover. The Contractor shall establish and implement procedures to be followed by the Contractor and Subcontractors for expediting the processing and approval of shop drawings, catalogs and samples, and the scheduling of requirements for materials and equipment. The Contractor shall maintain and cause the Subcontractors and Sub-subcontractors to maintain at the site current marked sets of working drawing prints and specifications reflecting "as built" conditions for each portion of the Work. Upon Final Completion, the Contractor shall deliver the marked sets to the Architect for correction of the original drawings. 3.2.6 Contractor shall be held to the standard of care exercised by major professional reputable general contractors in Santa Clara County, California area. References herein to "the knowledge of Contractor" or the like shall mean either that which the Contractor should have know had it exercised such standard of care. 3.3 SUPERVISION AND CONSTRUCTION PROCEDURES 3.3.1 The Contractor shall supervise and direct the Work, using the Contractor's best skill and attention. The Contractor shall be solely responsible for and have control over construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work under the Contract, unless Contract Documents give other specific instructions concerning these matters. 3.3.2 The Contractor shall be responsible to the Owner for acts and omissions of the Contractor's employees, Subcontractors and their agents and employees, and other persons performing portions of the Work under a contract or other arrangement with the Contractor. It is understood and agreed that the relationship of Contractor to Owner shall be that of an independent Contractor. Nothing contained herein or inferable herefrom shall be deemed or construed to (1) make Contractor the agent, servant or employee of the Owner, or (2) create any partnership, joint venture, or other association between Owner and Contractor. Any direction or instruction by Owner in respect of the Work shall relate to the results the Owner desires to obtain from the Work, and shall in no way affect Contractor's independent contractor status as described herein. 3.3.3 The Contractor shall not be relieved of obligations to perform the Work in accordance with the Contract Documents either by activities or duties of the Architect, Development Manager or Owner in their [Architect's] administration of the Contract, or by tests, inspections or approvals required or performed by persons other than the Contractor. 3.3.4 The Contractor shall be responsible for inspection of portions of Work already performed under this Contract to determine that such portions are in proper condition to receive subsequent Work. 3.3.5 The Contractor has the responsibility to ensure that all material suppliers and Subcontractors, their agents, and employees adhere to the Contract Documents, and that they order materials on time, taking into account the current market and delivery conditions and that they provide materials on time. The Contractor shall coordinate its Work with that of all others on the Project including deliveries, storage, installations, and construction utilities. The Contractor shall be responsible for the space requirements, locations, and routing of its equipment. In areas and locations where the proper and most effective space requirements, locations, and routing cannot be made as indicated, the Contractor shall meet with all others involved, before installation, to plan the most effective and efficient method of overall installation. 3.3.6 The services to be performed under this Agreement shall be performed by the Contractor's own staff, unless otherwise authorized by the Owner. The employment of, contract with, or use of the services of any other person or firm by the Contractor (except with respect to Subcontractors discussed elsewhere in the Contract) as consultant or otherwise, shall be subject to the prior written approval of the Owner. Such approval shall not be construed as constituting an agreement between the Owner and any such person or firm. 3.4 LABOR AND MATERIALS 3.4.1. Unless otherwise provided in the Contract Documents, the Contractor shall provide and pay for labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation, and other facilities and services necessary for proper execution and completion of the Work, whether temporary or permanent and whether or not incorporated or to be incorporated in the Work. 3.4.2 The Contractor shall enforce strict discipline and good order among the Contractor's employees and other persons carrying out the Contract. The Contractor shall not permit employment of unfit persons or persons not skilled in tasks assigned to them. Contractor shall also be responsible for labor peace on the Project and shall at all times use its best efforts and judgment as an experienced contractor to adopt and implement policies and practices designed to avoid work stoppages, slowdowns, disputes, or strikes where reasonably possible and practical under the circumstances and shall at all times maintain Project-wide labor harmony. Except as specifically provided in Subparagraph 8.3.1 hereof, Contractor shall be liable to Owner for all damages suffered by Owner occurring as a result of work stoppages, slowdowns, disputes, or strikes which are caused by the Contractor. 3.4.3 Materials shall conform to manufacturer's standards in effect at the date of execution of the Agreement and shall be installed in strict accordance with manufacturer's directions. The Contractor shall, if required by the Owner, Development Manager or Architect, furnish satisfactory evidence as to the kind and quality of any materials. All packaged materials shall be shipped to the site in the original containers clearly labeled, and delivery slips shall be Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 4 27 submitted with bulk materials identifying thereon the source, and warranting quality and compliance with Contract Documents. After the Contract has been executed, the Owner and the Architect will consider a formal request for the substitution of products in place of those specified only under the conditions specified in the General Requirements. 3.5 WARRANTY 3.5.1 [The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless otherwise required or permitted by the Contract Documents, that the Work will be free from defects not inherent in the quality required or permitted, and that the Work will conform with the requirements of the Contract Documents.] The contractor warrants to the Owner that the Work, whether performed by Contractor or by Subcontractors, including all materials and equipment, will be of good quality, free of defects, in material and workmanship, will strictly conform to the Contract Documents, and that, if applicable, the Project will perform to the specifications set forth in the Contract Documents . In the event of breach of this Warranty, the Owner may elect (i) to require the Contractor at its sole cost and expense to repair or remedy such breach within ten (10) days of notice thereof (or if such breach cannot reasonably be cured within such ten (10) day period, then the Contractor shall commence to cure such breach within ten (10) days and thereafter diligently prosecute such cure to completion); (ii) to repair or remedy such breach and be entitled to full reimbursement from Contractor, if Contractor has failed to so repair as provided in subsection (i); or (iii) any other remedy at law or in equity. In the event Contractor cures any breach hereunder or reimburses Owner for the expenses of such breach Contractor shall be subrogated to the rights of Owner against any Subcontractor. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. The Contractor's warranty excludes remedy for damage or defect caused by abuse not committed by Contractor, modifications not executed by the Contractor, improper or insufficient maintenance the performance of which Contractor was not responsible for, improper operation not performed by Contractor, or normal wear and tear under normal usage. If required by the Architect, Development Manager or Owner, the Contractor shall furnish satisfactory evidence as to the kind and quality of materials and equipment. 3.5.2 The Contractor shall issue in writing to the Owner as a condition precedent to final payment a "General Warranty" reflecting the terms and conditions of this Paragraph 3.5 for all Work under the Contract. 3.5.3 Except when a longer warranty time is specifically called for in the Specifications Sections or is otherwise provided by law, the General Warranty shall be eighteen (18) months and shall be in form and content otherwise satisfactory to the Owner; provided, however, that the General Warranty for equipment shall be twelve (12) months. 3.5.5 Warranties shall become effective on a date established by the Owner and Architect in accordance with the Contract Documents. This date shall be the Date of Substantial Completion of the entire Work or beneficial occupancy and use of any portion of the Work by the Owner, unless otherwise provided in any Certificate of Partial Substantial Completion approved by the parties. If the date is determined on the basis of partial occupancy or use by the Owner, then only the warranties for Work so occupied or used shall become effective on such date. 3.5.6 The Contractor shall warrant for a period of eighteen (18) months that the building(s) shall be watertight and leakproof at every point and in every area, except where leaks can be attributed to damage to the building(s) by external forces beyond Contractor's control. The Contractor shall, immediately upon notification by the Owner of water penetration, determine the source of water penetration and, at its own expense, do any work necessary to make the building(s) watertight. Contractor shall also, at its own expense, repair or replace any other damaged material, finishes, and furnishings, damaged as a result of this water penetration, to return the building(s) to its (their) original condition. 3.5.7 In addition to the foregoing stipulations, the Contractor shall comply with all other warranties referred to in any portions of the Contract Documents or otherwise provided by law or in equity, and where warranties overlap, the more stringent requirement shall govern. 3.6 TAXES 3.6.1 The Contractor shall pay sales, consumer, use and similar taxes for the Work or portions thereof provided by the Contractor which are legally enacted, [when bids are received or negotiations concluded, whether or not yet effective or merely scheduled to go into effect] and in a timely manner, complete and submit to the appropriate governmental authorities all required tax reports. 3.7 PERMITS, FEES AND NOTICES 3.7.1 [Unless otherwise provided in the Contract Documents, the Contractor shall secure and pay for the building permit and other permits and governmental fees, licenses and inspections and other consents for general constructions, including, without limitation, street opening, sidewalk, and other obstructions, access over public ways and storage necessary for proper execution and completion of the Work which are customarily secured after execution of the Contract and which are legally required when bids arc received or negotiations concluded.] The Contractor shall procure all certificates of inspection, use, occupancy, permits and licenses and give all notices necessary and incidental to the due and lawful prosecution of the Work. Certificates of inspection, use, and occupancy shall be delivered to the Owner upon completion of the Work in sufficient time for occupation of the Project in accordance with the approval schedule for the Work. Owner shall be responsible for the cost of such certificates, permits and licenses. 3.7.2 [The Contractor shall comply with and give notices required by laws, ordinances, rules, regulations and lawful orders of public authorities bearing on performance of the Work.] The Contractor shall comply with all Law in the preparation for and performance of the Work (and give all notices required by Law with a copy to Development Manager and Architect) and agrees to and does hereby indemnify, defend and hold Owner harmless from any and all fines and penalties which may arise out of the Contractor's failure to do so. 3.7.3 It is not the Contractor's responsibility to ascertain that the Contract Documents are in accordance with applicable laws, statutes, ordinances, building codes, and rules and regulations. However, if the Contractor observes that portions of the Contract Documents are at variance therewith, the Contractor shall promptly notify the Architect and Owner in writing, and necessary changes shall be accomplished by appropriate Modification. 3.7.4 If the Contractor performs Work [knowing it to be] (including, without limitation, the installation of any materials or equipment) that it knows or reasonably should have known would be contrary to laws, statutes, ordinances, building codes, and rules and regulations without such notice to express written approval of the Owner, the Contractor shall assume full responsibility for such Work and shall bear [the attributable costs] all costs attributable to the correction thereof or related thereto (including all fines and penalties). 3.8 ALLOWANCES 3.8.1 The Contractor shall include in the Contract Sum all allowances stated in the Contract Documents. Items covered by allowances shall be supplied for such amounts and by such persons or entities as the Owner may direct, but the Contractor shall not be required to employ persons or entities against which the Contractor makes reasonable objections. 3.8.2 Unless otherwise provided in the Contract Documents: Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 5 28 .1 materials and equipment under the allowance shall be selected promptly by the Owner to avoid any delay in the Work; .2 allowances shall cover the cost to the Contractor of materials and equipment delivered at the site and all required taxes, less applicable trade discounts; [.3 Contractor's costs for unloading and handling at the site, labor, installation costs, overhead, profit and other expenses contemplated for stated allowance amounts shall be included in the Contract Sum and not in the allowances;] .4 whenever costs are more than or less than allowances, the Contract Sum shall be adjusted accordingly by Change Order. The amount of the Change Order to the extent provided in Paragraph 7.5 shall reflect (1) the difference between actual costs and the allowances under Clause 3.8.2.2 and (2) changes in Contractor's costs under Clause 3.8.2.3. 3.9 SUPERINTENDENT 3.9.1 The Contractor shall employ a competent superintendent and necessary assistants who shall be in attendance at the Project site during performance of the Work. The superintendent shall represent the Contractor, and communications given to the superintendent shall be as binding as if given to the Contractor. Important communications shall be confirmed in writing. Other communications shall be similarly confirmed on written request in each case. 3.10 CONTRACTOR'S CONSTRUCTION SCHEDULES 3.10.1 The Contractor, promptly after being awarded the Contract, shall prepare and submit for the [Owner's and] Architect's information and the Development Manager's and Owner's review and approval a Contractor's construction schedule for the Work. The schedule shall not exceed time limits current under the Contract Documents, shall be revised as required herein and at appropriate intervals as required by the conditions of the Work and Project, shall be related to the entire Project to the extent required by the Contract Documents, and shall provide for expeditious and practicable execution of the Work. The Schedule shall indicate the proposed starting and completion dates for the various subdivisions of the Work as well as the totality of the Work. The schedule shall be updated every thirty (30) days and submitted to Development Manager with Contractor's Applications for Payment. Each schedule shall contain a comparison of actual progress with the estimated progress for such point in time stated in the original schedule. If any schedule submitted sets forth a date for Substantial Completion for the Work or any phase of the Work beyond the Date(s) of Substantial Completion established in the Contract (as the same may be extended as provided in the Contract Documents), then Contractor shall submit to Development Manager and Owner for their review and approval a narrative description of the means and methods which Contractor intends to employ to expedite the progress of the Work to ensure timely completion of the various phases of the Work as well as the totality of the Work. To ensure such timely completion, Contractor shall take all necessary action, including, without limitation, increasing the number of personnel and labor on the Project and implementing overtime and double shifts. In that event, Contractor shall not be entitled to an adjustment in the Contract Sum or the schedule. 3.10.2 The Contractor shall prepare and keep current, for the Development Manager's and Architect's approval, a schedule of submittals which is coordinated with the Contractor's construction schedule and allows the Development Manager and Architect reasonable time to review submittals. 3.10.3 The Contractor shall conform to the most recent schedules. 3.10.4 Prior to execution of this Contract, the Contractor shall have prepared a preliminary project schedule, estimating completion dates for a design, review, approval, bidding, award and construction of the various phases of the Project. After approval by the Owner, the preliminary project schedule will be automatically incorporated as an exhibit and shall be updated and amended as approved by Owner and Contractor to reflect changes in the estimated completion dates for the various activities noted above. The Contractor shall conduct pre-construction conferences with Subcontractors. The Contractor shall schedule and conduct meetings to be attended by the Subcontractors and representatives of the Owner, the Development Manager and the Architect to discuss such matters as procedures, progress, problems, scheduling, and compliance with Laws. The Contractor shall take, transcribe, and distribute minutes of such meetings and deliver such to all parties in attendance or otherwise involved in the Project unless done so by another party. The Contractor shall also prepare a report not later than thirty (30) calendar days after the contract is awarded which shall include a complete list of suppliers, items to be purchased from the suppliers or fabricators, time required for fabrication and the schedule delivery dates for each item. As soon as available, copies of purchase orders shall be furnished to the Development Manager and Owner. The Contractor shall hold weekly progress meetings at the site, or at such other time and frequency as are acceptable to the Owner. Progress of the Work shall be reported in detail with reference to construction schedules. Each interested Subcontractor shall have present a competent representative to report the condition of its work and to receive information. 3.10.5 The Contractor shall cooperate with the Development Manager in scheduling and performing the Contractor's Work to avoid conflict, delay in or interference with the Work of other Contractors or the construction or operations of the Owner's own forces. 3.11 DOCUMENTS AND SAMPLES AT THE SITE 3.11.1 The Contractor shall maintain at the site for the Owner one record copy of the Drawings, Specifications, addenda, Change Orders and other Modifications, in good order and marked currently to record changes and selections made during construction, and in addition approved Shop Drawings, Product Data, Samples and similar required submittals. These shall be available to the Development Manager and Architect and shall be delivered to the Architect Development Manager for submittal to the Owner upon completion of the Work. 3.11.2 At the Date of Substantial Completion and as a condition precedent to final payment, the Contractor shall furnish the following documents to the Development Manager for submittal to the Owner: Record Drawings showing the field changes and selections (all changes and selections to be approved by the Owner and the Architect in advance ) affecting the general construction, mechanical, electrical, plumbing, and all other work, and indicating the Work as actually installed. These shall consist of carefully drawn markings on a set of reproducible prints of the Architect's most recent and complete Drawings, including all changes issued with bulletins and requests for information, obtained and paid for by Owner. The Contractor shall maintain at the job site one (1) set of Architect's Drawings and indicate thereon each field change as it occurs. 3.12 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES 3.12.1 Shop Drawings are drawings, diagrams, schedules and other data specially prepared for the Work by the Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 6 29 Contractor or a Subcontractor, Sub-subcontractor, manufacturer, supplier or distributor to illustrate some portion of the Work. 3.12.2 Product Data are illustrations, standard schedules, performance charts, instructions, brochures, diagrams and other information furnished by the Contractor to illustrate materials or equipment for some portion of the Work. 3.12.3 Samples are physical examples which illustrate materials equipment or workmanship and establish standards by which the work will be judged. 3.12.4 Shop Drawings, Product Data, Samples and similar submittals are not Contract Documents. The purpose of their submittal is to demonstrate for those portions of the Work for which submittals are required the way the Contractor proposes to conform to the information given and the design concept expressed in the Contract Documents. Review by the Architect is subject to the limitations of Subparagraph 4.2.7. 3.12.5 The Contractor shall review, approve and submit to the Architect, with a copy to Development Manager and Owner, Shop Drawings, Product Data, Samples and similar submittals required by the Contract Documents with reasonable promptness and in such sequence as to cause no delay in the Work or in the activities of the Owner or of separate contractors. The Contractor shall cooperate with the Development Manager in the coordination of the Contractor's Shop Drawings, Product Data, Samples and similar submittals with related documents submitted by other Contractors. Submittals made by the Contractor which are not required by the Contract Documents may be returned without action. 3.12.6 The Contractor shall perform no portion of the Work requiring submittal and review of Shop Drawings, Product Data, Samples or similar submittals until the respective submittal has been approved by the Development Manager and Architect. Such Work shall be in accordance with approved submittals. 3.12.7 By [approving] reviewing and submitting Shop Drawings, Product Data, Samples and similar submittals, the Contractor represents that the Contractor has determined and verified materials, field measurements and field construction criteria related thereto, or will do so, and has checked and coordinated the information contained within such submittals with the requirements of the Work and of the Contract Documents. 3.12.8 The Contractor shall not be relieved of responsibility for deviations from requirements of the Contract Documents by the Development Manager's or Architect's approval of Shop Drawings, Product Data, Samples of similar submittals unless the Contractor has specifically informed the Development Manager and Architect in writing of such deviation at the time of submittal and the Development Manager and Architect [has] have given written approval to the specific deviation. The Contractor shall not be relieved of responsibility for errors or omissions in Shop Drawings, Product Data, Samples or similar submittals by the Architect's approval thereof. 3.12.9 The Contractor shall direct specific attention, in writing or on resubmitted Shop Drawings, Product Data, Samples or similar submittals, to revisions other than those requested by the Development Manager and Architect on previous submittals. 3.12.9.1 Shop drawings for Architectural, Structural, Mechanical and Electrical work shall be submitted for approval to the Development Manager and the Architect. 3.12.9.2 The Contractor shall assemble for the Development Manager's and Architect's approval and transmittal to the Owner three (3) complete copies of loose leaf binders of all operating and maintenance data from all manufacturers whose equipment is installed in the Work. 3.12.10 Informational submittals upon which the Development Manager and Architect is are not expected to take responsive action may be so identified in the Contract Documents. 3.12.11 When professional certification of performance criteria of materials, systems or equipment is required by the Contract Documents, the Development Manager and Architect shall be entitled to rely upon the accuracy and completeness of such calculations and certifications. 3.13 USE OF SITE 3.13.1 The Contractor shall confine operations at the site to areas permitted by law, ordinances, permits and the Contract Documents and shall not unreasonably encumber the site with materials or equipment. 3.14 CUTTING AND PATCHING 3.14.1 The Contractor shall be responsible for cutting, fitting or patching required to complete the Work or to make its parts fit together properly and shall restore all portions of the Work which are cut, fitted or patched to a completely finished condition acceptable to the Development Manager and Architect. 3.14.2 The Contractor shall not damage or endanger a portion of the Work or fully or partially completed construction of the [Owner or separate contractors] Owner's own forces or of other Contractors by cutting, patching or otherwise altering such construction, or by excavation. The Contractor shall not cut or otherwise alter such construction by the Owner or a separate contractor except with written consent of the Owner and [of such separate contractor] such other Contractors; such consent shall not be unreasonably withheld. The Contractor shall not unreasonably withhold from the Owner or [a separate contractor] the other Contractors the Contractor's consent to cutting or otherwise altering the Work. 3.15 CLEANING UP 3.15.1 The Contractor shall keep the premises and surrounding area free from accumulation of waste materials or rubbish caused by operations under the Contract. At completion of the Work the Contractor shall remove from and about the Project waste materials, rubbish, the Contractor's tools, construction equipment, machinery and surplus materials. 3.15.2 If the Contractor fails to clean up as provided in the Contract Documents, the Owner may do so and the cost thereof shall be charged to the Contractor. 3.15.3 The Contractor shall be responsible for broken glass, and at completion of the Work shall replace such damaged or broken glass. In addition to general broom cleaning, the Contractor shall perform the following final cleaning for all trades at completion of the Work: .1 Remove temporary protections. .2 Remove marks, stains, fingerprints and other soil or dirt from painted, decorated, and natural-finished woodwork and other work. .3 Remove spots, mortar, plaster, soil and point from ceramic tile, marble, and other finish materials and wash or wipe clean. .4 Clean fixtures, cabinetwork and equipment, removing stains, paint, dirt, and dust and leave it in an undamaged, new condition. .5 Clean aluminum in accordance with recommendations of the manufacturer. .6 Clean resilient floors thoroughly with a well rinsed mop containing only enough moisture to clean off any surface dirt or dust and buff dry by machine or bring the surfaces to sheen. .7 Remove all labels and wash both sides of all glass. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 7 30 3.16 ACCESS TO WORK 3.16.1 The Contractor shall provide the Owner, Development Manager and Architect access to the Work in preparation and progress wherever located. 3.16.2 The Contractor shall forward all communications to the Owner directly, with a copy to the Development Manager and Architect. 3.17 ROYALTIES AND PATENTS 3.17.1 The Contractor shall pay all royalties and license fees. The Contractor shall defend suits or claims for infringement of patent rights and shall indemnify, defend and hold the Owner, Development Manager and Architect harmless from loss on account thereof, but shall not be responsible for such defense or loss when a particular design, process or product of a particular manufacturer or manufacturers is required by the Contract Documents. However, if the Contractor has reason (or should have had reason) to believe that the required design, process or product is an infringement of a patent, the Contractor shall be responsible for such loss unless such information is promptly furnished to the Architect. 3.18 INDEMNIFICATION 3.18.1 [To the fullest extent permitted by law, the Contractor shall indemnify and hold harmless the Owner, Architect, Architect's consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefrom, but only to the extent caused in whole or in part by negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 3.18.] To the greatest extent permitted by law, the Contractor shall indemnify, defend and hold harmless the Owner, Development Manager, Architect and their agents, shareholders, directors, employees, affiliates, consultants, successors and assigns ("Indemnitees") from and against any and all of the following ("Claims"): (i) claims, damages, losses, liability and expenses, including but not limited to attorneys' fees, arising out of or resulting from the act, omission, negligence or willful misconduct of the Contractor, Subcontractors, Sub-subcontractors or their employees or agents or in connection with the performance of the Work; and (ii) any claim for payment or damages by a Subcontractor or Sub-subcontractor, except for claims resulting from Owner's failure to pay Contractor in accordance with the Agreement for Work performed by such Subcontractor or Sub-subcontractor. Such Claims may include, but are not limited to, mechanics' liens, unperfected claims of mechanics, materialmen or laborers, bodily injury, sickness, disease or death, injury to or destruction of tangible property, or a patent infringement. Such indemnity obligation shall not be construed to negate, abridge, or otherwise reduce any other right or obligation of indemnity which would otherwise exist in favor or any person or party described in this Paragraph 3.18 under the Contract Documents or at law or in equity. Nothing herein shall be deemed to abridge the right of Owner to seek contribution where appropriate. 3.18.2 In claims against any person or entity indemnified under this paragraph 3.18 by an employee of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Paragraph 3.18 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Contractor or a Subcontractor under workers' or workmen's compensation acts, disability benefit acts or other employee benefit acts. 3.18.3 The obligations of the Contractor under this paragraph 3.18 shall not extend to the liability of the Development Manager, Architect, [the Architect's] their consultants, and agents and employees of any of them arising out of (1) the preparation or approval of maps, drawings, opinions, reports, surveys, Change Orders, designs or specifications, or (2) the giving of the failure to give directions or instructions by the Architect, the Architect's consultants, and agents and employees of any of them provided such giving or failure to give is the primary cause of the injury or damage. 3.18.4 The Contractor shall defend Indemnitees, through counsel reasonably approved by Owner, in any action, proceeding or arbitration brought against the Indemnitees, or any of them, by reason of any such claim described above in this paragraph 3.18. The Contractor's obligation to defend Indemnitees shall extend to any action, proceeding or arbitration alleging any claim described in this paragraph 3.18, except if such action, proceeding or arbitration asserts or alleges only that the injury to the claimant results solely from the negligence or misconduct of Indemnitees, or any of them, and from no other cause, or if a final judgment is obtained establishing that such injury to the claimant resulted solely from the negligence or misconduct of Indemnitees, or any of them, in which event Contractor's obligation to defend Indemnitees shall cease upon the date such judgment becomes final and each Indemnitee shall thereupon reimburse Contractor for its reasonable attorneys' fees, consultant's fees and court costs incurred in so defending that Indemnitee. 3.18.5 If any claim or lien or stop-notice or any other demand for payment or security therefor, including claims or demands upon the performance and payment bond sureties, is made or filed with or against the Owner or the Project by Contractor or by any Person claiming that the Contractor or any Subcontractor, Sub-Subcontractor, Supplier or other person under it has failed to perform its contractual obligations or to make payment for any labor, services, materials, equipment, taxes, trust fund contribution or other items or obligations furnished or incurred for, or in connection with, the Work, or if the Contractor or any Subcontractor, Sub-Subcontractor, Supplier or other person under it causes damage to the Work or fails to comply with the terms or provisions of the Contract Documents (and Owner has not received insurance proceeds fully compensating it for such damage or failure), then the Owner shall have the right to retain from any payment then due or thereafter to become due an amount sufficient to (1) satisfy, discharge and defend against any such claim of lien or stop notice or other demand, or any action or proceeding thereon which may be brought to judgment or award; (2) make good any such nonpayment, nonperformance, damage, failure or default; and (3) compensate the Owner and other Indemnitees for, and indemnify them against, any and all losses, reasonable accountants', reasonable consultants' and reasonable experts' fees and costs which may be sustained or incurred, by the Owner and other Indemnitees through counsel reasonably approved by Owner in connection therewith. The Owner shall have the right to apply and charge against any amount due to be paid to the Contractor, or any amounts retained from such payments, as may be required for the foregoing purposes. If the amount to be paid, or the amount retained, is insufficient therefor, the Contractor shall be liable for the difference and upon written demand shall immediately pay the same to the Owner. The provisions of this paragraph are in addition to such other rights and entitlements as the Indemnitees may enjoy against Contractor under this Agreement, the Contract Documents, and at law and in equity, provided, however, the provisions of this paragraph shall not apply to any claim of lien, stop-notice or other demand for payment or security which arise out of Owner's breach of this Agreement, including Owner's failure or the failure of the lender(s) for the Project to pay for the Work which is the subject of the lien, stop notice or other demand. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 8 31 3.18.6 Should any Subcontractor, Sub-Subcontractor, Supplier or other person under them make, record or file, or maintain any action on or respecting, a claim of mechanic's lien, a stop-notice or equitable lien, a claim of the payment or performance bond, or a lis pendens, the Contractor shall immediately and at its own expense procure, furnish and record appropriate statutory release bonds, or take other action reasonably approved by Owner, which would under applicable law extinguish or expense said claim, stop-notice or lis pendens. Any failure of the Contractor to procure, furnish and record such release bond may be treated by the Owner as an event of default under the Contract Documents. Notwithstanding the foregoing, Contractor shall have no obligations to take the action required under this paragraph if any such claim, lien or lis pendens results from Owner's failure to make progress payments required hereunder. 3.19.1 If the Owner furnishes to the Contractor a construction loan agreement or similar agreement between Owner and any lender, Contractor agrees to fully cooperate with Owner in reasonably complying with the provisions thereof and agrees to furnish any and all information, reports and certificates which are required thereunder. Contractor specifically agrees to make such changes to the Contract Documents as the lender may reasonably request, including without limitation, changes to the monthly payment schedule, retentions, data to be delivered with invoices, lender inspections, delivery of notices to the lender regarding various matters and assignment of the Contract Documents to the lender. 3.19.2 The Contractor shall provide all documents, reports and other information requested by any escrow agent or title insurer, and shall cooperate with such persons to the fullest extent possible. 3.19.3 In the event any lender of the Owner shall designate an inspecting architect or other representative, the Owner may require the concurrence of such architect or representative in each instance in which approval of Owner, Development Manager or Architect is required by any Provision of these General Conditions or other Contract Documents. The Contractor agrees to cooperate with such inspecting architect or representative. 3.20 Contractor shall, in addition to any other Contractor duties and obligations set forth in this Contract and subject to the terms and provisions of this Contract, perform the following: 3.20.1 The Contractor, and any Subcontractor if expressly requested by Owner or Development Manager, shall provide Owner and Development Manager with a copy of the current contractor's license and certificate of insurance for the Contractor prior to payment of the first Application for Payment. The Contractor shall remain at all times during the term of this Contract fully qualified and capable of performing every phase of the Work to complete the Project, either itself or through the Subcontractors. 3.20.2 The Contractor shall maintain at the site on a current basis records of all Subcontracts, orders for materials and equipment, shop drawings, samples, and any other related documents and revisions thereto which arise out of the Contract Documents or the Work. 3.20.3 After Substantial Completion, the Contractor shall perform or assist Owner or Development Manager in the start-up of all Equipment and other mechanical operations and systems included as a part of the Work. ARTICLE 4 ADMINISTRATION OF THE CONTRACT 4.1 ARCHITECT AND DEVELOPMENT MANAGER 4.1.1 The Architect is the person lawfully licensed to practice architecture or an entity lawfully practicing architecture identified as such in the Agreement and is referred to throughout the Contract Documents as if singular in number. The term "Architect" means the Architect or the Architect's authorized representative. 4.1.2 The Development Manager is Sares-Regis Group of Northern California, LP, with offices at 393 Vintage Park Drive, Suite 100, Foster City, CA 94404-1134 or such successor as the Owner may appoint from time to time by written notice to the Contractor. 4.1.[2]3 [Duties, responsibilities and limitations of authority of the Architect as set forth in the Contract Documents shall not be restricted, modified or extended without written consent of the Owner, Contractor and Architect. Consent shall not be unreasonably withheld.] The duties, responsibilities and limitations of authority of the Architect and Development Manager as set forth in the Contract Documents shall not be modified or extended without written consent of the Owner and the Architect or Development Manager and written notice to the Contractor, except that the Owner may unilaterally limit the Architect's or Development Manager's authority from time to time by written notice to the Contractor; however, the limiting of the Development Manager's or Architect's authority cannot be retroactive. Except to the extent provided in Paragraph 7.5, Owner shall have no liability for the negligence, willful misconduct or defaults of Development Manager or Architect. If Contractor incurs any expense or liability as a result thereof, Contractor shall be subrogated to the rights, if any, of Owner against Development Manager or Architect. It is the intent of the parties that if there are any errors or inconsistencies in the Specifications and Drawings or if the Specifications or Drawings are in violation of Law, then (i) Contractor and the Architect preparing such Specifications and Drawings shall allocate such liability and responsibility, should they so elect, in a separate document of which Owner shall not be a party, (ii) as between Owner and Contractor, Owner shall have no liability or responsibility whatsoever (except to the limited extent provided in Paragraph 7.5). 4.1.4 In case of termination of employment of the Architect or Development Manager, [the Owner shall appoint an architect against whom the Contractor makes no reasonable objection and whose status under the Contract Documents shall be that of the former architect.] Owner may at any time employ or retain any licensed Architect or person or entity qualified to act as Architect or Development Manager to perform all or any part of their duties hereunder or to exercise any of their rights hereunder. Owner shall notify all parties in writing (setting forth the scope of said replacement Architect's or Development Manager's duties and responsibilities). 4.1.4 Disputes arising under Subparagraphs 4.1.2 and 4.1.3 shall be subject to arbitration. 4.2 [ARCHITECT'S] ADMINISTRATION OF THE CONTRACT 4.2.1 [The Architect will provide administration of the Contract 2s described in the Contract Documents, and will be the Owner's representative (I) during construction, (2) until final payment is due and (3) with the Owner's concurrence, from time to time during the correction period described in Paragraph 12.2. The Architect will advise and consult with the Owner. The Architect will have authority to act on behalf of the Owner only to the extent provided in the Contract Documents, unless otherwise modified by written instrument in accordance with other provisions of the Contract.] The Owner shall provide administration of the Contract as hereinafter described and may delegate any part of such obligation to the Development Manager or Architect, but such delegation shall not limit the Owner's right to require its concurrence or approval of the Development Manager's or Architect's actions, if the Owner so elects. The Owner may participate in all major meetings as required, and may serve as the person through whom the Contractor special communications and needs are passed, including requests for information and special consultation with architects, engineers, outside consultants and lending institutions. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 9 32 The Development Manager, with the concurrence of the Owner and Architect, shall have general supervision and direction of the Work. The Architect, with the approval of the Owner in each case shall supervise and instruct the Contractor with regard to matters set forth in the Drawings and Specifications. In addition to any specific responsibilities assigned elsewhere in the Contract Documents, the Owner shall decide any and all questions which may arise as to the rate of progress of the Work. The Development Manager and Architect will have authority to act on behalf of the Owner only to the extent provided in the Contract Documents, unless otherwise modified by written instrument executed by Owner. 4.2.2 The Architect will visit the site at intervals appropriate to the stage of construction to become generally familiar with the progress and quality of the completed Work and to determine in general if the Work is being performed in a manner indicating that the Work, when completed, will be in accordance with the Contract Documents. However, the Architect will not be required to make exhaustive or continuous on-site inspections to check quality or quantity of the Work. On the basis of on-site observations as an architect, the Architect will keep the Owner informed of progress of the Work, and will endeavor to guard the Owner against defects and deficiencies in the Work. 4.2.3 The Development Manager and The the Architect will not have control over or charge of and will not be responsible for construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with the Work, since these are solely the Contractor's responsibility as provided in Paragraph 3.3. The Architect will not be responsible for the Contractor's failure to carry out the Work in accordance with the Contract Documents. The Architect will not have control over or charge of and will not be responsible for acts or omissions of the Con-tractor, Subcontractors, or their agents or employees, or of any other persons performing portions of the Work. 4.2.4 COMMUNICATIONS FACILITATING CONTRACT ADMINISTRATION. Except as otherwise provided in the Contract Documents or when direct communications have been specially authorized by Owner, the Owner and Contractor shall [endeavor to] communicate through the [Architect] Development Manager; provided, however, that Owner may instruct, correspond or negotiate with Contractor directly. Communications by and with the Architect's consultants shall be through the Architect. Communications by and with Subcontractors and material suppliers shall be through the Contractor. Communications by and with [separate contractors] other Contractors shall be through the [Owner] Development Manager. 4.2.5 [Based on the Architect's observations and evaluations of the Contractor's Applications for Payment, the Architect will review and certify the amounts due the Contractor and will issue Certificates for Payment in such amounts.] 4.2.6 The Owner, Development Manager and Architect will have authority to reject Work which does not conform to the Contract Documents. Whenever the Architect considers it necessary or advisable for implementation of the intent of the Contract Documents, and after consulting with Development Manager, the Architect will have authority to require additional inspection or testing of the Work in accordance with Subparagraphs 13.5.2 and 13.5.3, whether or not such Work is fabricated, installed or completed. However, neither this authority of the Owner, Development Manager and Architect nor a decision made in good faith either to exercise or not to exercise such authority shall give rise to a duty or responsibility of the Owner, Development Manager or Architect to the Contractor, Subcontractors, material and equipment suppliers, their agents or employees, or other persons performing portions of the Work. 4.2.7 The Architect will review and approve or take other appropriate action upon the Contractor's submittals such as Shop Drawings, Product Data and Samples, but only for the limited purpose of checking for conformance with information given and the design concept expressed in the Contract Documents. The Architect's action will be taken with such reasonable promptness as to cause no delay in the Work or in the activities of the Owner, Contractor or separate contractors, while allowing sufficient time in the Architect's professional judgment to permit adequate review. Review of such submittals is not conducted for the purpose of determining the accuracy and completeness of other details such as dimensions and quantities, or for substantiating instructions for installation or performance of equipment or systems, all of which remain the responsibility of the Contractor as required by the Contract Documents. The Architect's review of the Contractor's submittals shall not relieve the Contractor of the obligations under Paragraphs 3.3, 3.5 and 3.12. The Architect's review shall not constitute approval of safety precautions or, unless otherwise specifically stated by the Architect, of any construction means, methods, techniques, sequences or procedures. The Architect's approval of a specific item shall not indicate approval of an assembly of which the item is a component. 4.2.8 The Architect Development Manager will [prepare] direct the Architect to issue Change Orders and Construction Change Directives, and may authorize minor changes in the Work as provided in Paragraph 7.4. All Change Orders and Construction Change Directives shall require the approval of Owner in writing to be binding on Owner. 4.2.9 The Architect will conduct inspections to determine the date or dates of Substantial Completion and the date of Final Completion, will receive and forward to the Owner for the Owner's review and records written warranties and related documents required by the Contract and assembled by the Contractor, and will issue a final Certificate for Payment upon compliance with the requirements of the Contract Documents approve, subject to Owner's review and approval, the final Application for Payment in such amounts. 4.2.10 If the Owner and Architect agree, the Architect will provide one or more project representatives to assist in carrying out the Architect's responsibilities at the site. The duties, responsibilities and limitations of authority of such project representatives shall be as set forth in an exhibit to be incorporated in the Contract Documents. 4.2.11 Subject to Paragraph 4.3 hereinbelow in respect of claims, the [The] Architect will, in the first instance, interpret and decide matters concerning performance under and requirements of the Contract Documents on written request of either the Owner, Development Manager or Contractor. The Architect's response to such requests will be made with reasonable promptness and within any time limits agreed upon. If no agreement is made concerning the time within which interpretations required of the Architect shall be furnished in compliance with this Paragraph 4.2, then delay shall not be recognized on account of failure by the Architect to furnish such interpretations until 15 days after written request is made for them. Should a conflict be discovered within the Contract Documents, the CONTRACTOR SHALL BE DEEMED TO HAVE AGREED TO PERFORM THE WORK IN ACCORDANCE WITH THE LEVEL OF QUALITY ESTABLISHED IN THE PLANS AND SPECIFICATION AND ACCEPTED INDUSTRY STANDARDS FOR SIMILAR PROJECTS unless it shall have asked for and obtained a decision, in writing, approved by Owner, from the Architect before entering into the Contract. 4.2.12 Interpretations and decisions of the Architect will be consistent with the intent of and reasonably inferable from the Contract Documents and will be in writing or in the form of drawings. When making such interpretations and decisions, the Architect will endeavor to secure faithful performance by both Owner and Contractor, will not show partiality to either and will not be liable for results of interpretations or decisions so rendered in good faith. 4.2.13 The Architect's decisions on matters relating to aesthetic effect will be final if consistent with the intent expressed in the Contract Documents. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 10 33 4.3 CLAIMS AND DISPUTES 4.3.1 DEFINITION. A Claim is a demand or assertion by one of the parties seeking, as a matter of right, adjustment [or interpretation] of Contract terms, payment of money, extension of time or other relief with respect to the terms of the Contract. The term "Claim" also includes other disputes [and matters in question] between the Owner and Contractor arising out of or relating to the Contract. Claims must be made by written notice. The responsibility to substantiate Claims shall rest with the party making the Claim. 4.3.2 DECISION OF ARCHITECT. Claims, including those alleging an error or omission by the Development Manager or Architect, shall be referred initially to the Architect for action as provided in Paragraph 4.4. A decision by the Architect, as provided in Subparagraph 4.4.4, shall be required as a condition precedent to arbitration or litigation of a Claim between the Contractor and Owner as to all such matters arising prior to the date final payment is due, regardless of (1) whether such matters relate to execution and progress of the Work or (2) the extent to which the Work has been completed. The decision by the Architect in response to a Claim shall not be a condition precedent to arbitration or litigation in the event (l) the position of Architect is vacant, (2) the Architect has not received evidence or has failed to render a decision within agreed time limits, (3) the Architect has failed to take action required under Subparagraph 4.4.4 within 30 days after the Claim is made, (4) 45 days have passed after the Claim has been referred to the Architect or (5) the Claim relates to a mechanic's lien. 4.3.3 TIME LIMITS ON CLAIMS. Claims by either party must be made within 21 days after occurrence of the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim, whichever is later. Claims must be made by written notice. An additional Claim made after the initial Claim has been implemented by Change Order will not be considered unless submitted in a timely manner. 4.3.4 CONTINUING CONTRACT PERFORMANCE. Pending final resolution of a Claim including arbitration, unless otherwise agreed in writing the Contractor shall proceed diligently with performance of the Contract and the Owner shall continue to make payments in accordance with the Contract Documents. 4.3.5 WAIVER OF CLAIMS: FINAL PAYMENT. The making of final payment shall constitute a waiver of Claims by the Owner except those arising from: .1 liens, Claims, security interests or encumbrances arising out of the Contract and unsettled; .2 failure of the Work to comply with the requirements of the Contract Documents; or .3 terms of special warranties required by the Contract Documents. 4.3.6 CLAIMS FOR CONCEALED OR UNKNOWN CONDITIONS. If a Concealed Condition is discovered at the site [which are (1) subsurface or otherwise concealed physical conditions which differ materially from those indicated in the Contract Documents, or (2) unknown physical conditions of an unusual nature which differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract Documents], then notice by the observing party shall be given to the other party promptly before conditions are disturbed and in no event later than 21 days after first observance of the conditions. The Architect will promptly investigate such conditions and, if they differ materially and cause an increase or decrease in the Contractor's cost of, or time required for, performance of any part of the Work, and if Contractor neither knew nor should have known of such Concealed Condition prior to entering into this Agreement or prior to establishing the Guaranteed Maximum Price, will recommend an equitable adjustment in the Contract Sum or Contract Time, or both. If the Architect determines that the conditions at the site are not materially different from those indicated in the Contract Documents or that Contractor either knew or should have known of such Concealed Condition prior to the time established above, and that no change in the terms of the Contract is justified, the Architect shall so notify the Owner and Contractor in writing, stating the reasons. Claims by either party in opposition to such determination must be made within 21 days after the Architect has given notice of the decision. If the Owner and Contractor cannot agree on an adjustment in the Contract Sum or Contract Time, the adjustment shall be referred to the Architect for initial determination, subject to further proceedings pursuant to Paragraph 4.4. 4.3.7 CLAIMS FOR ADDITIONAL COST. If the Contractor wishes to make Claim for an increase in the Contract Sum, written notice as provided herein shall be given before proceeding to execute the Work. Prior notice is not required for Claims relating to an emergency endangering life or property arising under Paragraph 10.3. [If the Contractor believes additional cost is involved for reasons including but not limited to (1) a written interpretation from the Architect, (2) an order by the Owner to stop the Work where the Contractor was not at fault, (3) a written order for a minor change in the Work issued by the Architect, (4) failure of payment by the Owner, (5) termination of the Contract by the Owner, (6) Owner's suspension or (7) other reasonable grounds, Claim shall be filed in accordance with the procedure established herein.] Contractor shall only be allowed to make and recover on a Claim for an increase in the Contract Sum resulting from events specifically listed in Paragraph 7.5; no other increase in the Cost of the Work shall result in an increase in the Contract Sum. 4.3.8 CLAIMS FOR ADDITIONAL TIME 4.3.8.1 If the Contractor wishes to make Claim for an increase in the Contract Time, written notice as provided herein shall be given. The Contractor's Claim shall include an estimate of cost and of probable effect of delay on progress of the Work. In the case of a continuing delay only one Claim is necessary. 4.3.8.2 If adverse weather conditions are the basis for a Claim for additional time, such Claim shall be documented by data substantiating that weather conditions [were abnormal for the period of time and could not have been reasonably anticipated, and that weather conditions] had an adverse effect on the scheduled construction. 4.3.9 INJURY OR DAMAGE TO PERSON OR PROPERTY. If either party to the Contract suffers injury or damage to person or property because of an act or omission of the other party, of any of the other party's employees or agents, or of others for whose acts such party is legally liable, written notice of such injury or damage, whether or not insured, shall be given to the other party within a reasonable time not exceeding 2 I days after first observance. The notice shall provide sufficient detail to enable the other party to investigate the matter. If a Claim for additional cost or time related to this Claim is to be asserted, it shall be filed as provided in Subparagraphs 4.3.7 or 4.3.8. 4.4 RESOLUTION OF CLAIMS AND DISPUTES 4.4.1 The Architect will review Claims and take one or more of the following preliminary actions within ten days of receipt of a Claim: (1) request additional supporting data from the claimant, (2) submit a schedule to the parties indicating when the Architect expects to take action, (3) reject the Claim in whole or in part, stating reasons for rejection, (4) recommend approval of the Claim by the other party or (5) suggest a compromise. The Architect may also, but is not obligated to, notify the surety, if any, of the nature and amount of the Claim. 4.4.2 If a Claim has been resolved, the Architect, or at Owner's sole option, Owner will prepare or obtain appropriate documentation. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 11 34 4.4.3 If a Claim has not been resolved, the party making the Claim shall, within ten days after the Architect's preliminary response, take one or more of the following actions: (1) submit additional supporting data requested by the Architect, (2) modify the initial Claim or (3) notify the Architect that the initial Claim stands. 4.4.4 If a Claim has not been resolved after consideration of the foregoing and of further evidence presented by the parties or requested by the Architect, the Architect will notify the parties in writing that the Architect's decision will be made within seven days, which decision shall be [final and] considered advisory only and not binding on the parties [but subject to arbitration]. Upon expiration of such time period, the Architect will render to the parties the Architect's written decision relative to the Claim, including any change in the Contract Sum or Contract Time or both. If there is a surety and there appears to be a possibility of a Contractor's default, the Architect may, but is not obligated to, notify the surety and request the surety's assistance in resolving the controversy. 4.5 ARBITRATION 4.5.1 CONTROVERSIES AND CLAIMS SUBJECT TO ARBITRATION. Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof, except controversies or Claims relating to aesthetic effect and except those waived as provided for in Subparagraph 4.3.5. Such controversies or Claims upon which the Architect has given notice and rendered a decision as provided in Subparagraph 4.4.4 shall be subject to arbitration upon written demand of either party. Arbitration may be commenced when 45 days have passed after a Claim has been referred to the Architect as provided in Paragraph 4.3 and no decision has been rendered. 4.5.2 RULES AND NOTICES FOR ARBITRATION. Claims between the Owner and Contractor not resolved under Paragraph 4,4 shall, if subject to arbitration under Subparagraph 4.5.1, be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect, unless the parties mutually agree otherwise. Notice of demand for arbitration shall be filed in writing with the other party to the Agreement between the Owner and Contractor and with the American Arbitration Association, and a copy shall be filed with the Architect. 4.5.3 CONTRACT PERFORMANCE DURING ARBITRATION. During arbitration proceedings, the Owner and Contractor shall comply with Subparagraph 4.3.4. 4.5.4 WHEN ARBITRATION MAY BE DEMANDED. Demand for arbitration of any Claim may not be made until the earlier of (1) the date on which the Architect has rendered a final written decision on the Claim, (2) the tenth day after the parties have presented evidence to the Architect or have been given reasonable opportunity to do so, if the Architect has not rendered a final written decision by that date, or (3) any of the five events described in Subparagraph 4.3.2. 4.5.4.1 When a written decision of the Architect states that (1) the decision is final but subject to arbitration and (2) a demand for arbitration of a Claim covered by such decision must be made within 30 days after the date on which the party making the demand receives the final written decision, then failure to demand arbitration within said 30 days' period shall result in the Architect's decision becoming final and binding upon the Owner and Contractor. If the Architect renders a decision after arbitration proceedings have been initiated, such decision may be entered as evidence, but shall not supersede arbitration proceedings unless the decision is acceptable to all parties concerned. 4.5.4.2 A demand for arbitration shall be made within the time limits specified in Subparagraphs 4.5.1 and 4.5.4 and Clause 4.5.4.1 as applicable, and in other cases within a reasonable time after the Claim has arisen, and in no event shall it be made after the date when institution of legal or equitable proceedings based on such Claim would be barred by the applicable statute of limitations as determined pursuant to Paragraph 13.7. 4.5.5 Limitation on Consolidation or Joinder. No arbitration arising out of or relating to the Contract Documents shall include, by consolidation or joinder or in any other manner, the Architect, the Architect's employees or consultants, except by written consent containing specific reference to the Agreement and signed by the Architect, Owner, Contractor and any other person or entity sought to be joined. No arbitration shall include, by consolidation or joinder or in any other manner, parties other than the Owner, Contractor, a separate contractor as described in Article 6 and other persons substantially involved in a common question of fact or law whose presence is required if complete relief is to be accorded in arbitration. No person or entity other than the Owner, Contractor or a separate contractor as described in Article 6 shall be included as an original third party or additional third party to an arbitration whose interest or responsibility is insubstantial. Consent to arbitration involving an additional person or entity shall not constitute consent to arbitration of a dispute not described therein or with a person or entity not named or described therein. The foregoing agreement to arbitrate and other agreements to arbitrate with an additional person or entity duly consented to by parties to the Agreement shall be specifically enforceable under applicable law in any court having jurisdiction thereof. 4.5.6 CLAIMS AND TIMELY ASSERTION OF CLAIMS. A party who files a notice of demand for arbitration must assert in the demand all Claims then known to that party on which arbitration is permitted to be demanded. When a party fails to include a Claim through oversight, inadvertence or excusable neglect, or when a Claim has matured or been acquired subsequently, the arbitrator or arbitrators may permit amendment. 4.5.7 JUDGMENT ON FINAL AWARD. The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. ARTICLE 5 SUBCONTRACTORS 5.1 DEFINITIONS 5.1.1 A Subcontractor is a person or entity who has a direct contract with the Contractor to perform a portion of the Work at the site. The term "Subcontractor" is referred to throughout the Contract Documents as if singular in number and means a Subcontractor or an authorized representative of the Subcontractor. The term "Subcontractor does not include [a separate contractor] other Contractors or subcontractors of [a separate contractor] other Contractors. 5.1.2 A Sub-subcontractor is a person or entity who has a direct or indirect contract with a Subcontractor to perform a portion of the Work at the site. The term "Sub-subcontractor" is referred to throughout the Contract Documents as if singular in number and means a Sub-subcontractor or an authorized representative of the Sub-subcontractor. 5.1.3 The terms Subcontractor and Sub-subcontractor also include persons supplying materials and equipment incorporated into, used in connection with, or consumed by the Work. 5.2 AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE WORK 5.2.1 Unless otherwise stated in the Contract Documents or the bidding requirements, the Contractor, as soon as practicable after award of the Contract, shall furnish in writing to the [Owner through the Architect] Development Manager for review by the Owner, Development Manager and Architect the names of persons or entities (including Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 12 35 those who are to furnish materials or equipment fabricated to a special design) proposed for each portion of the Work.[ The Architect will promptly reply to the Contractor in writing stating whether or not the Owner or the Architect, after due investigation, has reasonable objection to any such proposed person or entity. Failure of the Owner or Architect to reply promptly shall constitute notice of no reasonable objection.] Copies of all bids or other proposals from Subcontractors shall, upon request of the Owner, be submitted to the Owner. All Subcontractors shall be subject to the approval of Owner which approval shall not be unreasonably withheld. 5.2.2 The Contractor shall not contract with a proposed person or entity to whom the Owner, Development Manager or Architect has made reasonable and timely objection. The Contractor shall not be required to contract with anyone to whom the Contractor has made reasonable objection. 5.2.3 If the Owner, Development Manager or Architect has reasonable objection to a person or entity proposed by the Contractor, the Contractor shall propose another to whom the Owner, Development Manager or and Architect has have no reasonable objection. The Contract Sum shall be increased or decreased by the difference in cost occasioned by such change and an appropriate Change Order shall be issued. However, no increase in the Contract Sum shall be allowed for such change unless the Contractor has acted promptly and responsively in submitting names as required. 5.2.4 The Contractor shall not change a Subcontractor, person or entity previously selected if the Owner, Development Manager or Architect makes reasonable objection to such change. The Owner may require the Contractor to change any Subcontractor previously approved and, if at such time the Contractor is not in default hereunder, the Contract Sum shall be increased or decreased by the difference in cost occasioned by such change. 5.2.5 Prior to solicitation of bids from Subcontractors and material suppliers, Contractor shall submit to the Owner, Development Manager and Architect a proposed list of bidders. The Owner reserves the right to approve and add to such bidders list. Such approval shall be in writing. 5.2.6 It is understood that in the event of a conflict between Owner, on the one hand, and the Development Manager or Architect, on the other hand, regarding the selection of subcontractors, the Owner's decision in selection of subcontractors shall govern. 5.3 SUBCONTRACTUAL RELATIONS 5.3.1 By appropriate written agreement, [written where legally required for validity,] the Contractor shall require each Subcontractor, to the extent of the Work to be performed by the Subcontractor, to be bound to the Contractor by terms of the Contract Documents, and to assume toward the Contractor all the obligations and responsibilities which the Contractor, by these Documents, assumes toward the Owner, Development Manager and Architect. Each subcontract agreement shall preserve and protect the rights of the Owner, Development Manager and Architect under the Contract Documents with respect to the Work to be performed by the Subcontractor so that subcontracting thereof will not prejudice such rights, and shall allow to the Subcontractor, unless specifically provided otherwise in the subcontract agreement, the benefit of all rights, remedies and redress against the Contractor that the Contractor, by the Contract Documents, has against the Owner. Where appropriate, the Contractor shall require each Subcontractor to enter into similar agreements with Sub-subcontractors. The Contractor shall make available to each proposed Subcontractor, prior to the execution of the subcontract agreement, copies of the Contract Documents to which the Subcontractor will be bound, and, upon written request of the Subcontractor, identify to the Subcontractor terms and conditions of the proposed subcontract agreement which may be at variance with the Contract Documents. Subcontractors shall similarly make copies of applicable portions of such documents available to their respective proposed Sub-subcontractors. 5.3.2 Any part of the work performed for the Contractor by a Subcontractor shall be pursuant to a written Subcontract between the Contractor and such Subcontractor, which shall be prepared on the form of Subcontract which the Owner has approved. Each Subcontract shall: .1 require that such work be performed in accordance with the requirements of the Contract Documents; .2 waive all rights the contracting parties may have against one another or that the Subcontractor may have against the Owner for damages caused by fire or other perils covered by the property insurance described in the Contract Documents; .3 require the Subcontractor to carry and maintain liability insurance in accordance with the Contract Documents; and .4 require the Subcontractor to furnish such certificates and waivers of liens as Owner, any lender or title insurer may reasonably request including waivers of mechanics' lien rights to the extent permitted by law. 5.4 CONTINGENT ASSIGNMENT OF SUBCONTRACTS 5.4.1 [Each subcontract agreement for a portion of the Work is assigned by the Contractor to the Owner provided that: .1 assignment is effective only after termination of the Contract by the Owner for cause pursuant to Paragraph 14.2 and only for those subcontract agreements which the Owner accepts by notifying the Subcontractor in writing; and .2 assignment is subject to the prior rights of the surety, if any, obligated under bond relating to the Contract.] All subcontract agreements shall conform to the requirements of the Contract Documents and Contractor hereby assigns to Owner (and Owner's permitted assigns) all its interest in any subcontract agreements and purchase orders now existing or hereinafter entered into by Contractor for performance of any part of the Work, which assignment will be effective upon acceptance by Owner in writing and only as to those subcontract agreements and purchase orders that Owner designates in said writing. It is agreed and understood that Owner may only accept said assignment upon (i) Termination for Cause pursuant to Paragraph 14.2.1, or (ii) upon Termination for Convenience pursuant to Paragraph 14.2.5 and payment of the fee as provided under Paragraph 14.2.6.2. Upon such acceptance by Owner, (1) Contractor shall promptly furnish to Owner true and correct copies of the designated subcontract agreements, and purchase orders, and (2) Owner shall only be required to compensate the designated Subcontractor(s) or supplier(s) for compensation accruing to such party(ies) for Work done or materials delivered from and after the date on which Owner determines to accept the subcontract agreement(s) or purchase order(s). All sums due and owing by Contractor to the designated Subcontractor(s) or supplier(s) for work performed or material supplied prior to Owner's determination to accept the subcontract agreement(s) or purchase order(s) shall constitute a debt between such parties and Contractor. It is further agreed that all subcontract agreements and purchase orders shall provide that they are freely assignable by Contractor to Owner and assigns under the terms and conditions stated hereinabove. It is further agreed and understood that such assignment is part of the consideration to Owner for entering into the Contract with Contractor any may not be withdrawn prior to Final Completion. Contractor shall deliver or cause to be delivered to Owner a written acknowledgment in form and substance satisfactory to Owner from each of its Subcontractors and suppliers of the contingent assignment described herein no later than ten (10) days after the date of Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 13 36 execution of each subcontract agreement and purchase order with such parties. 5.4.2 If the Work has been suspended for more than 30 days, he Subcontractor's compensation shall be equitably adjusted. 5.5 CONTRACTOR'S RESPONSIBILITY FOR ACTS OF SUBCONTRACTORS 5.5.1 The Contractor shall be totally responsible and liable for all acts and omissions of the Subcontractors and each of their employees, agents and independent contractors and all other parties for whose acts any of such Subcontractors may be liable, to the same extent as the Contractor is responsible and liable for the acts and omissions of parties directly employed by the Contractor. The Contractor shall also be solely responsible for the payment of the Subcontractor and all other persons directly or indirectly employed by the Contractor or the Subcontractors, whether or not such persons are entitled to assert mechanics' lien, stop notice, equitable lien or labor and material lien rights against the Project or the site. ARTICLE 6 CONSTRUCTION BY OWNER OR BY [SEPARATE] OTHER CONTRACTORS 6.1.1 OWNER'S RIGHT TO PERFORM CONSTRUCTION WITH OWN FORCES AND TO AWARD [SEPARATE] OTHER CONTRACTS 6.1.1 The Owner reserves the right to perform construction or operations related to the Project with the Owner's own forces, which include persons or entities under separate contracts not administered by the Development Manager. The Owner further reserves the right to award other contracts in connection with other portions of the Project or other construction or operations on the site [and to award separate contracts in connection with other portions of the Project or other construction or operations on the item] under Conditions of the Contract identical or substantially similar to these including those portions related to insurance and waiver of subrogation. If the Contractor claims that delay or additional cost is involved because of such action by the owner, the Contractor shall make such Claim as provided elsewhere in the Contract Documents. 6.1.2 [When separate contracts are awarded for different portions of the Project or other construction or operations on the site, the term "Contractor" in the Contract Documents in each case shall mean the Contractor who executed each separate Owner-Contractor Agreement.] When the Owner performs construction or operations with the Owner's own forces, including persons or entities under separate contracts not administered by the Development Manager, the Owner shall provide for coordination of such forces with the Work of the Contractor in order to prevent any disruption or delay to the Work of the Contractor, who shall cooperate with them. 6.1.3 [The Owner shall provide for coordination of the activities of the Owner's own forces and of each separate contractor with the Work of the Contractor, who shall cooperate with them. The Contractor shall participate with other separate contractors and the Owner in reviewing their construction schedules when directed to do so. The Contractor shall make any revisions to the construction schedule and Contract Sum deemed necessary after a joint review and mutual agreement. The construction schedules shall then constitute the schedules to be used by the Contractor, separate contractors and the Owner until subsequently revised. 6.1.4 Unless otherwise provided in the Contract Documents, when the Owner performs construction or operations related to the Project with the Owner's own forces, the Owner shall be deemed to be subject to the same obligations and to have the same rights which apply to the Contractor under the Conditions of the Contract, including, without excluding others, those stated in Article 3, this Article 6 and Articles 10, 11 and 12.] 6.2 MUTUAL RESPONSIBILITY 6.2.1 The Contractor shall afford [the Owner and separate contractors] the Owner's own forces, Development Manager and other Contractors reasonable opportunity for introduction and storage of their materials and equipment and performance of their activities and shall connect and coordinate the Contractor's construction and operations with theirs as required by the Contract Documents. 6.2.2 If part of the Contractor's Work depends for proper execution or results upon construction or operations by the [Owner or a separate contractor] Owner's own forces or other Contractors, the Contractor shall, prior to proceeding with that portion of the Work, promptly report to the Owner, Development Manager and Architect [apparent] discrepancies or defects in such other construction that would render it unsuitable for such proper execution and results or would render it incompatible with Contractor's Work. Failure of the Contractor so to report shall constitute an acknowledgment that the Owner's [or separate contractors'] or other Contractors' completed or partially completed construction is fit and proper to receive the Contractor's Work[, except as to defects not then reasonably discoverable] and is fully compatible therewith. 6.2.3 [Costs] Subject to Paragraph 8.3 hereof, costs caused by delays or by improperly timed activities or defective construction shall be borne by the party responsible therefor. 6.2.4 The Contractor shall promptly remedy damage wrongfully caused by the Contractor to completed or partially completed construction or to property of the Owner or [separate contractors] other Contractors as provided in Subparagraph 10.2.5 or to other completed or partially completed construction or property on the site or to property of any adjoining owner or other party. 6.2.5 Claims and other disputes and matters in question between the Contractor and a separate contractor shall be subject to the provisions of Paragraph 4.3 provided the separate contractor has reciprocal obligations. 6.2.6 The Owner and each separate contractor shall have the same responsibilities for cutting and patching as are described for the Contractor in Paragraph 3.14. 6.3 OWNER'S RIGHT TO CLEAN UP 6.3.1 If a dispute arises among the Contractor[, separate contractors and the Owner] and other Contractors as to their responsibility [under their respective contracts for maintaining the premises and surrounding area free from waste materials and rubbish as described in Paragraph 3.15, the Owner may clean up and allocate the cost among those responsible as the Architect determines to be just.] for cleaning up as required by Paragraph 3.15, assignment of this clean-up will be determined by the Development Manager. ARTICLE 7 CHANGES IN THE WORK 7.1 CHANGES 7.1.1 Changes in the Work may be accomplished after execution of the Contract, and without invalidating the Contract, only by Change Order, Construction Change Directive or order for a minor change in the Work as provided in Paragraph 7.4, subject to the limitations stated in this Article 7 and elsewhere in the Contract Documents. When submitting a proposal for a Change Order or Construction Change Directive, the Contractor shall include and set forth in clear and precise detail breakdowns of labor and materials for all trades involved and the estimated impact on the construction schedule. The Contractor shall furnish spread sheets from which the breakdowns were prepared, plus spread sheets, if requested, of any Subcontractors. 7.1.2 A Change Order shall be based upon agreement among the Owner, and Contractor; a Construction Change Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 14 37 Directive requires agreement by the Owner, Development Manager and Architect and may or may not be agreed to by the Contractor; an order for a minor change in the Work may be issued by the Architect Development Manager alone. 7.1.3 Changes in the Work shall be performed under applicable provisions of the Contract Documents, and the Contractor shall proceed promptly, unless otherwise provided in the Change Order, Construction Change Directive or order for a minor change in the Work. 7.1.4 If unit prices are stated in the Contract Documents or subsequently agreed upon, and if quantities originally contemplated are so changed in a proposed Change Order or Construction Change Directive that application of such unit prices to quantities of Work proposed will cause substantial inequity to the Owner or Contractor, the applicable unit prices shall be equitably adjusted. 7.2 CHANGE ORDERS 7.2.1 A Change Order is a written instrument prepared by the [Architect] Development Manager and signed by the Owner, Contractor, Development Manager and Architect, stating their agreement upon all of the following for the item covered in each Change Order as well as the cumulative effect and impact of all previous Change Orders: .1 a change in the Work; .2 the amount of the adjustment in the Contract Sum, if any; and .3 the extent of the adjustment in the Contract Time, if any[.]; and .4 the portion of the cost thereof to be applied against the Contractor's Contingency or the Owner's Contingency. 7.2.2 Methods used in determining adjustments to the Contract Sum may include those listed in Subparagraph 7.3.3. 7.3 CONSTRUCTION CHANGE DIRECTIVES 7.3.1 A Construction Change Directive is a written order [prepared by the Architect] directed to the Contractor and signed by the Owner [and architect], directing a change in the Work and stating a proposed basis for adjustment, if any, in the Contract Sum or Contract Time, or both. The Owner may by Construction Change Directive, without invalidating the Contract, order changes in the Work within the general scope of the Contract consisting of additions, deletions or other revisions, the Contract Sum and Contract Time being adjusted accordingly. 7.3.2 A Construction Change Directive shall be used in the absence of total agreement on the terms of a Change Order. 7.3.3 If the Construction Change Directive provides for an adjustment to the Contract Sum, the adjustment shall be based on one of the following methods: .1 mutual acceptance of a lump sum properly itemized and supported by sufficient substantiating data to permit evaluation; .2 unit prices stated in the Contract Documents or subsequently agreed upon .3 cost to be determined in a manner agreed upon by the parties and a mutually acceptable fixed or percentage fee; or .4 as provided in Subparagraph 7.3.6. 7.3.4 Upon receipt of a Construction Change Directive, the Contractor shall promptly proceed with the change in the Work involved and within five days of receipt of same advise the [Architect] Development Manager and Owner of the Contractor's agreement or disagreement with the method, if any, provided in the Construction Change Directive for determining the proposed adjustment in the Contract Sum or Contract Time. 7.3.5 A Construction Change Directive signed by the Contractor indicates the agreement of the Contractor therewith, including adjustment in Contract Sum and Contract Time or the method for determining them for the item covered in each Change Directive as well as the cumulative effect and impact of all previous Change Directives. Such agreement shall be effective immediately and shall be recorded as a Change Order. 7.3.6 If the Contractor does not respond [promptly] within the five-day period prescribed above, or disagrees with the method for adjustment in the Contract Sum, the method and the adjustment shall be determined by the [Architect] Development Manager on the basis of reasonable expenditures and savings of those performing the Work attributable to the change, including, in case of an increase in the Contract Sum, a reasonable allowance for overhead and profit as provided in Paragraph 7.3.3. In such case, and also under Clause 7.3.3.3, the Contractor shall keep and present, in such form as the [Architect] Development Manager may prescribe, an itemized accounting together with appropriate supporting data. Unless otherwise provided in the Contract Documents, costs for the purposes of this Subparagraph 7.3.6 shall be limited to the following: .1 costs of labor, including social security, old age and unemployment insurance, fringe benefits required by agreement or custom, and workers' or workmen's compensation insurance; .2 costs of materials, supplies and equipment, including cost of transportation, whether incorporated or consumed; .3 reasonable rental costs of machinery and equipment, exclusive of hand tools, obtained and used specifically for such Work, whether rented from the Contractor or others; .4 costs of premiums for all bonds (if any) and insurance, permit fees, and sales, use or similar taxes directly attributable to such Work [related to the Work]; and .5 additional costs of supervision and field office personnel directly attributable to the change. 7.3.7 Pending final determination of actual cost to the Owner, amounts not in dispute may be included in Applications for Payment. The amount of credit to be allowed by the Contractor to the Owner for a deletion or change which results in a net decrease in the Contract Sum shall be actual net cost as confirmed by the [Architect] Development Manager and Owner. When both additions and credits covering related Work or substitutions are involved in a change, the allowance for overhead and profit shall be figured on the basis of net increase, if any, with respect to that change. 7.3.8 If the Owner and Contractor do not agree with the adjustment in Contract Time or the method for determining it, the adjustment or the method shall be [referred to the Architect for determination] determined in accordance with Paragraph 8.3 hereof. 7.3.9 When the [Owner and Contractor agree with the determination made by the Architect concerning the] adjustments in the Contract Sum and Contract Time[, or otherwise reach agreement upon the adjustments] are determined as provided herein, such [agreement] determination shall be effective immediately and shall be recorded by preparation and execution of an appropriate Change Order. 7.4 MINOR CHANGES IN THE WORK 7.4.1 The [Architect] Owner and Development Manager will each have authority to order minor changes in the Work not involving adjustment in the Contract Sum or extension of the Contract Time and not inconsistent with the intent of the Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 15 38 Contract Documents. Such changes shall be effected by written order and shall be binding on the Owner and Contractor. The Contractor shall carry out such written orders promptly. 7.5 ALLOCATION OF ADDITIONAL COSTS 7.5.1 Additional Costs caused by the following events shall not constitute a Cost of the Work or entitle the Contractor to an increase in the Contract Sum or extension of the Contract Time: .1 Any act or omission constituting a default or negligence by Contractor, Subcontractors, Sub-subcontractors or their employees or agents. .2 The cost of repair of improper Work or Work damaged by Contractor, Subcontractor, Sub-subcontractor or their employees or agents. .3 Intentionally omitted. .4 Additional testing, inspections or approvals pursuant to Paragraph 13.5.3. .5 Deposits lost because of Contractor's fault or negligence. 7.5.2 Additional costs caused by the following events shall constitute a Cost of the Work and shall entitle Contractor to an increase in the Contract Sum and/or an extension of the Contract Time without application against the Contingency: .1 Willful misconduct or breach of this Agreement by Owner. .2 Voluntary changes in the Work requested by Owner constituting changes in the Project not required by Law or reasonably necessary to cause the Project to operate as generally contemplated by the Plans and Specifications. .3 Changes in Subcontractors required by Owner without cause pursuant to Paragraph 5.2.4. .4 Suspensions, delays or interruptions pursuant to Paragraph 14.3 without cause or resulting from the negligence or willful misconduct or defaults of Architect or Development Manager. .5 Damage to the project caused by Owner due to move in. .6 Increases in the Contractor's cost of performance of any part of the Work to the extent such increase is the result of the negligence or willful misconduct or defaults of Architect or Development Manager. 7. Except as otherwise provided in this Agreement (including without limitation Paragraphs 1.2 or 3.2), errors, discrepancies, omissions or interfacing omissions in the Drawings and Specifications. 7.5.3 After execution of a Change Order, the change in the Contract Sum and Contract Time, if any, shall be final and binding on both parties. Thereafter, Contractor shall not be entitled to request any additional increase to the Contract Sum as a result of such Change Order for direct, indirect, delay, acceleration or other costs or extension of the Contract Time, whether caused as a result of facts known prior to such determination or thereafter. In determining any claim for an increase, the Contract Sum or extensions of the contract Time as a result of delays, any and all "float time" (i.e., delay in portions of the Work not directly causing a delay in Substantial Completion; i.e., critical path) shall be owned by Owner. The Contractor shall use its best efforts to rearrange the Work so as to minimize delays and minimize any valid Cost of the Work increase or any valid Contract Time extensions. In any event, no claim by Contractor for an increase in the Contract Sum whether by a claim based on additional direct costs, delay costs, acceleration costs, unjust enrichment, quantum merit or otherwise, or for an extension of the Contract Time, shall be valid. 7.5.4 Failure of both parties to agree to any change to the Contract Sum, Contract Time or other Contract term pursuant to a Change Directive shall be treated as provided in Paragraph 4.4. However, nothing shall excuse the Contractor from proceeding with performance of the Contract as changed by Change Directive from Owner, provided Owner continues to pay Contractor in accordance with the Contract Documents and Contractor shall use its best efforts to rearrange the Work so as to avoid or minimize delays and additional costs resulting from delays in final agreement on such disputed matters. 7.5.5 References in the Contract Documents to "the expense of Contractor", "charged to Contractor", "Contractor shall bear the cost of" or the like shall mean that the Contractor shall absorb the cost thereof which shall not constitute a Cost of the Work, whether or not any Contractor's Contingency then exists. ARTICLE 8 TIME 8.1 DEFINITIONS 8.1.1 Unless otherwise provided, Contract Time is the period of time, including authorized adjustments, allotted in the Contract Documents for Substantial Completion of the Work. 8.1.2 The date of commencement of the Work is the date established in the Agreement. The date shall not be postponed by the failure to act of the Contractor or of persons or entities for whom the Contractor is responsible. 8.1.3 The date of Substantial Completion is the date certified by the Architect and approved by the Owner in accordance with Paragraph 9.8. 8.1.4 The term "day" as used in the Contract Documents shall mean calendar day unless otherwise specifically defined. 8.2 PROGRESS AND COMPLETION 8.2.1 Time limits stated in the Contract Documents are of the essence of the Contract. By executing the Agreement the Contractor confirms that the Contract Time is a reasonable period for performing the Work. 8.2.2 The Contractor shall not [knowingly], except by agreement or instruction of the Owner in writing, prematurely commence operations on the site or elsewhere prior to the effective date of insurance required by Article II to be furnished by the Contractor. The date of commencement of the Work shall not be changed by the effective date of such insurance. Unless the date of commencement is established by a notice to proceed given by the Owner, the Contractor shall notify the Owner in writing not less than five days or other agreed period before commencing the Work to permit the timely filing of mortgages, mechanic's liens and other security interests. 8.2.3 The Contractor shall proceed expeditiously with adequate forces and shall achieve Substantial Completion within the Contract Time. 8.3 DELAYS AND EXTENSIONS OF TIME 8.3.1 Subject to the provisions of Paragraph 7.5, if [If] the Contractor is delayed at any time in progress of the Work by an act or neglect of the Owner or Architect, or of an employee of either, or of a separate contractor employed by the Owner, or by changes ordered in the Work, or by [labor disputes, fire, unusual delay in deliveries, unavoidable casualties or other causes beyond the Contractor's control, or by delay authorized by the Owner pending arbitration, or by other causes which the Architect determines may justify delay, then the Contract Time shall be extended by Change Order for such reasonable time as the Architect may determine] occurrences beyond the control and without the fault or negligence of the Contractor Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 16 39 and which by the exercise of reasonable diligence the Contractor is unable to prevent or provide against, including labor disputes (other than disputes limited to the work force of, or provided by, the Contractor or its Subcontractors), fire, unusual delay in deliveries not reasonably anticipatable, unavoidable casualties, or by other occurrences which the Development Manager, subject to the Owner's approval, determines may justify delay, then, provided that the Contractor is in compliance with Subparagraph 4.3.3 hereof, the Contract Time Shall be extended and the Contract Sum shall be increased by Change Order or Construction Change Directive for the length of time actually and directly caused by such occurrence as determined by the Development Manager and approved by the Contractor and Owner (such approval not to be unreasonably withheld, delayed, or conditioned); provided, however, that such extension of Contract Time shall be net of any delays caused by or due to the fault or negligence of the Contractor or which are otherwise the responsibility of the Contractor and shall also be net of any contingency of "float" time allowance included in the Contractor's construction schedule. The Contractor shall, in the event of any occurrence likely to cause a delay, cooperate in good faith with the Development Manager and Owner to minimize and mitigate the impact of any such occurrence and do all things reasonable under the circumstances to achieve this goal. 8.3.2 Claims relating to time shall be made in accordance with applicable provisions of Paragraphs 4.3 and Article 7. A copy of any claim for extension shall be delivered to the Owner, and the Contractor shall immediately take all steps reasonably possible to lessen the adverse impact of such delay. 8.3.3 This Paragraph 8.3 does not preclude recovery of damages for delay by either party under other provisions of the Contract Documents; provided, however, that Contractor's sole and exclusive remedy for delays of the type described in Paragraph 8.3.1 shall be an extension of the Contract Time or an increase in the Contract Sum as provided in this Article 8. 8.3.4 The Owner may seek recovery for actual damages suffered due to delays of the Contractor; such actual damages will be considered to commence five (5) days after each or all of the following: (1) scheduled Substantial Completion date for any portion of the Work, (2) scheduled occupancy date for any portion of the Work, (3) scheduled Substantial Completion date for the entire Work; and (4) scheduled occupancy date for the entire Work. The dates referenced herein shall be subject to adjustment as provided in the Contract Documents. 8.3.5 No change in the Work, whether by way of alteration or addition to the Work, shall be the basis of an extension in the Contract Time unless and until such alteration or addition has been authorized by a Change Order or Change Directive executed and issued in accordance with and in strict compliance with the requirements of the Contract Documents. Any claim for increased cost for delay shall be asserted in accordance with the provisions of Paragraph 4.3.3 unless the time is extended in writing by the Owner. This requirement is of the essence of the Contract Documents. Accordingly, no course of conduct or dealings between the parties, no express or implied acceptance of alterations or additions to the Work, and no claim that the Owner has been unjustly enriched by any alteration or addition to the Work, whether or not there is in fact any such unjust enrichment, shall be the basis for any claim to an increase in the Contract sum or an extension in the Contract Time. ARTICLE 9 PAYMENTS AND COMPLETION 9.1 CONTRACT SUM 9.1.1 The Contract Sum is stated in the Agreement and, including authorized adjustments, is the total amount payable by the Owner to the Contractor for performance of the Work under the Contract Documents. 9.2 SCHEDULE OF VALUES 9.2.1 Before the first Application for Payment, the Contractor shall submit to the Architect a schedule of values allocated to various portions of the Work, prepared in such form and supported by such data to substantiate its accuracy as the Architect may require. This schedule, unless objected to by the Architect, shall be used as a basis for reviewing the Contractor's Applications for Payment. 9.3 APPLICATIONS FOR PAYMENT 9.3.1 At least ten days before the date established by the lender(s) for the Project for each progress payment, the Contractor shall submit to the Architect Development Manager an itemized Application for Payment for operations completed in accordance with the schedule of values. Such application shall be notarized, if required, and supported by such data substantiating the Contractor's right to payment as the Owner or Architect Development Manager may require, such as copies of requisitions from Subcontractors and material suppliers, and reflecting retainage if provided for elsewhere in the Contract Documents. 9.3.1.1 Such applications may include requests for payment on account of changes in the Work which have been properly authorized by Construction Change Directives but not yet included in Change Orders. 9.3.1.2 Such applications may not include requests for payment of amounts the Contractor does not intend to pay to a Subcontractor or material supplier because of a dispute or other reason. 9.3.1.3 Such Application for Payment shall be accompanied by waivers of lien and other documentation from subcontractors as may be reasonably required by the Owner, any lender and title insurer to establish the absence of any claims for mechanics or other statutory liens. 9.3.1.4 Copies of all Applications for Payment shall be submitted to the Owner and, upon the Owner's request, directly to the lender(s) for the Project. 9.3.2 Unless otherwise provided in the Contract Documents, payments shall be made on account of materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work. If approved in advance by the Owner, payment may similarly be made for materials and equipment suitably stored off the site at a location agreed upon in writing. Payment for materials and equipment stored on or off the site shall be conditioned upon compliance by the Contractor with procedures satisfactory to the Owner to establish the Owner's title to such materials and equipment or otherwise protect the Owner's interest, and shall include applicable insurance, storage and transportation to the site fur such materials and equipment stored off the site. 9.3.3 The Contractor warrants that title to all Work covered by an Application for Payment will pass to the Owner no later than the time of payment. The Contractor further warrants that upon submittal of an Application for Payment all Work for which Certificates for Payment have been previously issued and payments received from the Owner shall, to the best of the Contractor's knowledge, information and belief, be free and clear of liens, claims, security interests or encumbrances in favor of the Contractor, Subcontractors, material suppliers, or other persons or entities making a claim by reason of having provided labor, materials and equipment relating to the Work. 9.4 CERTIFICATES FOR PAYMENT 9.4.1 [The Architect will, within seven days after receipt of the Contractor's Application for Payment, either issue to the Owner a Certificate for Payment, with a copy to the Contractor, for such amount as the Architect determines is properly due, or notify the Contractor and Owner in writing of the Architect's reasons for withholding certification in whole or in part as provided in Subparagraph 9.5.1.] The Development Manager will assemble a Project Application for Payment by combining the Contractor's applications with Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 17 40 similar applications for progress payments from other Contractors and, after certifying the amounts due on such applications, forward them to the Architect within seven days. 9.4.1.1 Within seven days after the Architect's receipt of the Project Application for Payment, the Development Manager and Architect will either issue to the Owner a Project Certificate for Payment, with a copy to the Contractor, for such amount as the Development Manager and Architect determine is properly due, or notify the Contractor and Owner in writing of the Development Manager's and Architect's reasons for withholding certification in whole or in part as provided in Subparagraph 9.5.1. Such notification will be forwarded to the Contractor by the Development Manager. 9.4.2 The issuance of a separate Certificate for Payment or a Project Certificate for Payment will constitute a representations made separately by the Development Manager and Architect to the Owner, based on their Architect's individual observations at the site and the data comprising the Application for Payment submitted by the Contractor, that the Work has progressed to the point indicated and that, to the best of the Development Manager's and Architect's knowledge, information and belief, quality of the Work is in accordance with the Contract Documents. The foregoing representations are subject to an evaluation of the Work for conformance with the Contract Documents upon Substantial Completion, to results of subsequent tests and inspections, to minor deviations from the Contract Documents correctable prior to completion and to specific qualifications expressed by the Development Manager or Architect. The issuance of a separate Certificate for Payment or a Project Certificate for Payment will further constitute a representation that the Contractor is entitled to payment in the amount certified. However, the issuance of a separate Certificate for Payment or a Project Certificate for Payment will not be a representation that the Development Manager or Architect has (1) made exhaustive or continuous on-site inspections to check the quality or quantity of the Work, (2) reviewed construction means, methods, techniques, sequences or procedures, (3) reviewed copies of requisitions received from Subcontractors and material suppliers and other data requested by the Owner to substantiate the Contractor's right to payment or (4) made examination to ascertain how or for what purpose the Contractor has used money previously paid on account of the Contract Sum. 9.5 DECISIONS TO WITHHOLD CERTIFICATION 9.5.1 The Development Manager and Architect may decide not to certify payment and may withhold a Certificate for Payment in whole or in part, to the extent reasonably necessary to protect the Owner, if in the Development Manager's or Architect's opinion the representations to the Owner required by Subparagraph 9.4.2 cannot be made. If the Architect is unable to certify payment in the amount of the Application, the Architect will notify the Contractor and Owner as provided in Subparagraph 9.4.1. If the Development Manager or Architect is unable to certify payment in the amount of the Application, the Development Manager or Architect will notify the Contractor and Owner as provided in Subparagraph 9.4.1.1. If the Contractor, Development Manager and Architect cannot agree on a revised amount, the Development Manager and Architect will promptly issue a Certificate for Payment for the amount for which the Development Manager and Architect is are able to make such representations to the Owner. The Development Manager or Architect may also decide not to certify payment or, because of subsequently discovered evidence or subsequent observations, may nullify the whole or a part of a Certificate for Payment previously issued, to such extent as may be necessary in the Development Manager's or Architect's opinion to protect the Owner from loss because of: .1 defective Work not remedied; .2 third party claims filed or reasonable evidence indicating probable filing of such claims: .3 failure of the Contractor to make payments properly to Subcontractors or for labor, materials equipment. .4 reasonable evidence that the Work cannot be completed for the unpaid balance of the Contract Sum, .5 damage to the Owner or another contractor, .6 reasonable evidence that the Work will not be completed within the Contract Time, and that the unpaid balance would not be adequate to cover actual or liquidated damages for the anticipated delay: or .7 persistent failure to carry, out the Work in accordance with the Contract Documents. 9.5.2 When the above reasons for withholding certification are removed, certification will be made for amounts previously withheld. 9.5.3 If Contractor disputes any determination by the Development Manager or Architect with regard to any Certificate of Payment, Contractor shall nevertheless expeditiously continue to prosecute the Work. 9.5.4 The Owner may independently dispute payment in whole or part, whether or not a Certificate for Payment has been issued regarding the same, and in such event shall promptly notify the Development Manager, Architect and Contractor in writing of the dispute and the reason or reasons therefor. The Owner shall not be deemed to be in breach of this Contract by reason of the withholding of any payment pursuant to any provision of the Contract Documents, provided the Development Manager or Architect has approved the Owner's action, or the Work in question shall have been rejected by any governmental authority, the Owner or any lender of the Owner. 9.6 PROGRESS PAYMENTS 9.6.1 After the Development Manager and Architect has have issued a Project Certificate for Payment or a separate Certificate for Payment, the Owner shall make payment in the manner and within the time provided in the Contract Documents, [and shall so notify the Architect] subject to Subparagraph 9.6.4. 9.6.1.1 The Owner shall have the option, but not the obligation, to issue joint checks to the Contractor and various Subcontractors at the Owner's discretion with respect to all or any part of the payments discussed in this Article. Any payment in joint check form or the lack thereof shall not constitute a waiver of the same as to later payments. 9.6.2 The Contractor shall promptly pay each Subcontractor, upon receipt of payment from the Owner, out of the amount paid to the Contractor on account of such Subcontractor's portion of the Work, the amount to which said Subcontractor is entitled, reflecting percentages actually retained from payments to the Contractor on account of such Subcontractor's portion of the Work. The Contractor shall, by appropriate agreement with each Subcontractor, require each Subcontractor to make payments to Sub-subcontractors in similar manner. 9.6.3 The Architect Development Manager will, on request, furnish to a Subcontractor, if practicable, information regarding percentages of completion or amounts applied for by the Contractor and action taken thereon by the Development Manager, Architect and Owner on account of portions of the Work done by such Subcontractor. 9.6.4 Neither the Owner, Development Manager nor Architect shall have an obligation to pay or to see to the payment of money to a Subcontractor except as may otherwise be required by law. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 18 41 9.6.5 Payment to material suppliers shall be treated in a manner similar to that provided in Subparagraphs 9.6.2, 9.6.3 and 9.6.4. 9.6.6 A Certificate for Payment, a progress payment, or partial or entire use or occupancy of the Project by the Owner shall not constitute acceptance of Work not in accordance with the Contract Documents. 9.7 FAILURE OF PAYMENT 9.7.1 If, through no fault of the Contractor, (1) the Architect does not issue a Project Certificate for Payment, [through no fault of the Contractor,] within seven days after receipt of the Development Manager's receipt of the Contractor's Application for Payment, or (2) if the Owner does not pay the Contractor within seven days after the date established in the Contract Documents the amount certified by the Development Manager and Architect or awarded by arbitration or reference, then the Contractor may, upon seven additional days' written notice to the Owner, Development Manager and Architect, stop the Work until payment of the amount owing has been received. The Contract Time shall be extended appropriately and the Contract Sum shall be increased by the amount of the Contractor's reasonable costs of shut-down, delay and start-up, which shall be accomplished as provided in Article 7. Notwithstanding the foregoing, the Contractor may not stop the Work during the pendency of a bona fide dispute between Owner and Contractor provided any sums in dispute claimed by the Contractor are placed in escrow. 9.8 SUBSTANTIAL COMPLETION 9.8.1 Substantial Completion is the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so the Owner can occupy or utilize the Work for its intended use. 9.8.2 When the Contractor considers that the Work, or a portion thereof which the Owner agrees to accept separately, is substantially complete, the Contractor and Development Manager shall jointly prepare and submit to the Architect and Owner a comprehensive list of items to be completed or corrected. The Contractor shall proceed promptly, to complete and correct items on the list. Failure to include an item on such list does not alter the responsibility of the Contractor to complete all Work in accordance with the Contract Documents. Upon receipt of the Contractor's list, the Architect and Owner, assisted by the Development Manager, will make an inspection to determine whether the Work or designated portion thereof is substantially complete. If the Architect's inspection discloses any item, whether or not included on the Contractor's list, which is not in accordance with the requirements of the Contract Documents, the Contractor shall, before issuance of the Certificate of Substantial Completion, complete or correct such item upon notification by the Architect. The Contractor shall then submit a request for another inspection by the Architect and Owner, assisted by the Development Manager, to determine Substantial Completion. When the Work or designated portion thereof is substantially complete, the Architect will prepare a Certificate of Substantial Completion which shall establish assist in the determination of the date of Substantial Completion, shall establish responsibilities of the Owner and Contractor for security, maintenance, heat, utilities, damage to the Work and insurance, and shall fix the time within which the Contractor shall finish all items on the list accompanying the Certificate. Warranties required by the Contract Documents shall commence on the date of Substantial Completion of the Work or designated portion thereof unless otherwise provided in the Certificate of Substantial Completion. The Certificate of Substantial Completion shall be submitted to the Owner and Contractor for their written acceptance of responsibilities assigned to them in such Certificate. 9.8.2.1 Upon receipt of the Contractor's list of items to be completed or corrected, the Development Manager and Architect will promptly make a thorough review and prepare a "punch list," setting forth in accurate detail any items on the Contractor's list and additional items that are not acceptable. 9.8.2.2 When the "punch list" has been prepared, the Development Manager and Architect, if requested, will meet with the Contractor and any Subcontractor to identify and explain all "punch list" items and answer questions on the work which must be done before final acceptance. 9.8.2.3 If the Contractor gives notice that a major subcontractor has completed his "punch list" items, the Development Manager and Architect will review that portion of the work and, if the items are found to be satisfactorily completed, advise the Contractor accordingly. 9.8.3 Upon Substantial Completion of the Work or designated portion thereof and upon application by the Contractor, and certification by the Development Manager and Architect, and acceptance by the Owner, all lenders for the Project and applicable governmental authorities, the Owner shall make payment, reflecting adjustment in retainage, if any, for such Work or portion thereof as provided in the Contract Documents. 9.9 PARTIAL OCCUPANCY OR USE 9.9.1 The Owner may occupy or use any completed or partially completed portion of the Work at any stage when such portion is designated by separate agreement with the Contractor, provided such occupancy or use is consented to by the insurer as required under Subparagraph 11.3.11 and authorized by public authorities having jurisdiction over the Work. Such partial occupancy or use may commence whether or not the portion is substantially complete, provided the Owner and Contractor have accepted in writing the responsibilities assigned to each of them fur payments, retainage if any, security. maintenance, heat, utilities, damage to the Work and insurance, and have agreed in writing concerning the period for correction of the Work and commencement of warranties required by the Contract Documents. When the Contractor considers a portion substantially complete, the Contractor and Development Manager shall jointly prepare and submit a list to the Architect as provided under Subparagraph 9.8.2. Consent of the Contractor to partial occupancy or use shall out be unreasonably withheld. The stage of the progress of the Work shall be determined by written agreement between the Owner and Contractor or, if an agreement is reached, by decision of the Architect after consultation with the Development Manager. 9.9.2 Immediately prior to such partial occupancy or use, the Owner, Development Manager, Contractor and Architect shall jointly inspect the area be occupied or portion of the Work to be used in order determine and record the condition of the Work. 9.9.3 Unless otherwise agreed upon, partial occupancy or use of a portion or portions of the work shall not constitute acceptance of Work not complying with the requirements of the Contract Documents. 9.10 FINAL COMPLETION AND FINAL PAYMENT 9.10.1 Upon completion of the Work, the Contractor shall forward to the Development Manager and Owner a written notice that the Work is ready for final inspection and acceptance and a final Contractor's Application for Payment. Upon [receipt of written notice that the Work is ready for final inspection and acceptance and upon receipt of a final Application for Payment,] the Development Manager will forward the notice and Application for Payment to the Architect, who will promptly make such inspection. [and, when]When the Architect, based on the recommendation of the Development Manager, finds the Work acceptable under the Contract Documents and the Contract fully performed, the Architect will promptly issue a final Certificate for Payment stating that to the best of the Architect's knowledge, information and belief, and on the basis of the Architect's observations and inspections, the Work has been completed in accordance with terms and conditions of the Contract Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 19 42 Documents and that the entire balance found to be due the Contractor and noted in said final Certificate is due and payable. The Architect's final Certificate for Payment will constitute a further representation that conditions listed in Subparagraph 9.10.2 as precedent to the Contractor's being entitled to final payment have been fulfilled. The Owner shall approve or disapprove the final Certificate for Payment, stating whether the same is correct and accurate and, if the Owner disapproves the final Certificate for Payment, stating the reasons therefor. 9.10.2 Neither final payment nor any remaining retained percentage shall become due until the Contractor submits to the Architect through the Development Manager (1) an affidavit that payrolls, bills for materials and equipment, and other indebtedness connected with the Work for which the Owner or the Owner's property might be responsible or encumbered (less amounts withheld by Owner) have been paid or otherwise satisfied, (2) a certificate evidencing that insurance required by the Contract Documents to remain in force after final payment is currently in effect and will not be canceled or allowed to expire until at least 30 days' prior written notice has been given to the Owner, (3) a written statement that the Contractor knows of no substantial reason that the insurance will not be renewable to cover the period required by the Contract Documents, (4) consent of surety, if any, to final payment and (5), if required by the Owner, other data establishing payment or satisfaction of obligations, such as receipts, releases and waivers of liens, claims, security interests or encumbrances arising out of the Contract, to the extent and in such form as may be designated by the Owner. If a Subcontractor refuses to furnish a release or waiver required by the Owner, the Contractor may furnish a bond satisfactory to the Owner to indemnify the Owner against such lien. If such lien remains unsatisfied after payments are made, the Contractor shall refund to the Owner all money that the Owner may be compelled to pay in discharging such lien, including all costs and reasonable attorneys' fees. 9.10.2.1 A reasonable sum may be withheld until the Contractor delivers to the Owner record drawings and other items required pursuant to Subparagraph 3.11.2, and the warranties, instructions and maintenance manuals required to be furnished pursuant to Subparagraphs 3.5 and 3.12.9.2, and a final statement of the cost of the Work allocated in accordance with the budget and in a form which has been approved by the lender(s) for the Project has been furnished. All submittals required to be made to Architect or Development Manager hereunder shall concurrently be made to Owner. 9.10.3 If, after Substantial Completion of the Work, Final Completion thereof is materially delayed through no fault of the Contractor or by issuance of Change Orders affecting Final Completion, and the Development Manager and Architect so confirms, the Owner shall, upon application by the Contractor and certification by the Development Manager and Architect, and without terminating the Contract, make payment of the balance due for that portion of the Work fully completed and accepted. If the remaining balance for Work Out fully completed or corrected is less than retainage stipulated in the Contract Documents, and if bonds have been furnished, the written consent of surety to payment of the balance due for that portion of the Work fully completed and accepted shall be submitted by the Contractor to the Architect through the Development Manager prior to certification of such payment. Such payment shall be made under terms and conditions concerning final payment, except that it shall not constitute a waiver of claims. The making of final payment shall constitute a waiver of claims by the Owner as provided in Subparagraph 4.3.5. 9.10.4 Acceptance of final payment by the Contractor, a Subcontractor or material supplier shall constitute a waiver claims by that payee except those previously made in writing and identified by that payee as unsettled at the time of final Application for Payment. Such waivers shall be in addition to the waiver described in Subparagraph 4.3.5. ARTICLE 10 PROTECTION OF PERSONS AND PROPERTY 10.1 SAFETY PRECAUTIONS AND PROGRAMS 10.1.1 The Contractor shall be responsible for initiating, maintaining and supervising all safety precautions and programs in connection with the performance of the Contract. The Contractor shall submit the Contractor's safety program to the Development Manager for review and coordination with the safety programs of other Contractors. 10.1.2 In the event the Contractor encounters on the site material reasonably believed to be asbestos or polychlorinated biphenyl (PCB) which has not been rendered harmless, the Contractor shall immediately stop Work in the area affected and report the condition to the Owner, Development Manager and Architect in writing. The Work in the affected area shall not thereafter be resumed except by written agreement of the Owner and Contractor if in fact the material is asbestos or polychlorinated biphenyl (PCB) and has not been rendered harmless. The Work in the affected area shall be resumed in the absence of asbestos or polychlorinated biphenyl (PCB), or when it has been rendered harmless, by written agreement of the Owner and Contractor, or in accordance with final determination by the Architect on which arbitration has not been demanded, or by arbitration under Article 4. 10.1.3 The Contractor shall not be required pursuant to Article 7 to perform without consent any Work relating to asbestos or polychlorinated biphenyl (PCB). 10.1.4 To the fullest extent permitted by law, the Owner shall indemnify and hold harmless the Contractor, Development Manager, Architect, Architect's their consultants and agents and employees of any of them from and against claims damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work in the affected area if in fact the material is asbestos or polychlorinated biphenyl (PCB) and has not been rendered harmless, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefrom, but only to the extent caused in whole or in part by negligent acts or omissions of the Owner, anyone directly or indirectly employed by the Owner or anyone for whose acts the Owner may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Subparagraph 10.1.4. 10.2 SAFETY OF PERSONS AND PROPERTY 10.2.1 The Contractor shall take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury or loss to: .1 employees on the Work and other persons who may be affected thereby; .2 the Work and materials and equipment to be incorporated therein, whether in storage on or off the site, under care, custody or control of the Contractor or the Contractor's Subcontractor or Sub-subcontractors; and .3 other property at the site or adjacent thereto, such as trees, shrubs, lawns, walks, pavements, roadways, structures and utilities not designated for removal, relocation or replacement in the course of construction. 10.2.2 The Contractor shall give notices and comply with applicable laws, ordinances, rules, regulations and lawful orders of public authorities bearing on safety of persons or 20 43 property or their protection from damage, injury or loss. Without limiting the foregoing, Contractor shall provide all facilities and shall follow all procedures required by the Occupational Safety and Health Act. 10.2.3 The Contractor shall erect and maintain, as required by existing conditions and performance of the Contract, reasonable safeguards for safety and protection including posting danger signs and other warnings against hazards, promulgating safety regulations and notifying owners and users of adjacent sites and utilities. 10.2.4 When use or storage of explosives or other hazardous materials or equipment or unusual methods are necessary for execution of the Work, the Contractor shall exercise utmost care and carry out such activities under supervision of properly qualified personnel. 10.2.5 The Contractor shall promptly remedy at its sole cost damage and loss (other than damage or loss resulting from earthquake and flood or insured under property insurance required by the Contract Documents) to property referred to in Clauses 10.2.1.2 and 10.2.1.3 caused in whole or in part by the Contractor, a Subcontractor, a Sub-subcontractor, or anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable and for which the Contractor is responsible under Clauses 10.2.1.2 and 10.2.1.3, except damage or loss attributable to acts or omissions of the Owner, Development Manager or Architect or anyone directly or indirectly employed by either of them, or by anyone for whose acts either of them may be liable, and not attributable to the fault or negligence of the Contractor. The foregoing obligations of the Contractor are in addition to the Contractor's obligations under Paragraph 3.18. 10.2.6 The Contractor shall designate a responsible member of the Contractor's organization at the site whose duty shall be the prevention of accidents. This person shall be the Contractor's superintendent unless otherwise designated by the Contractor in writing to the Owner, Development Manager and Architect. 10.2.7 The Contractor shall designate a responsible member of the Contractor's organization at the site whose duty shall be the prevention of accidents. This person shall be the Contractor's superintendent unless otherwise designated by the Contractor in writing to the Owner and Architect. 10.3 EMERGENCIES 10.3.1 In an emergency, affecting safety of persons or property, the Contractor shall act, at the Contractor's discretion, to prevent threatened damage, injury or loss. Additional compensation or extension of time claimed by the Contractor on account of an emergency shall be determined as provided in Paragraph 4.3 and Article 7. ARTICLE 11 INSURANCE AND BONDS 11.1 CONTRACTOR'S LIABILITY INSURANCE 11.1.1 [The Contractor shall purchase from and maintain in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located such insurance as will protect the Contractor from claims set forth below which may arise out of or result from the Contractor's operations under the Contract and for which the Contractor may be legally liable, whether such operations be by the Contractor or by a Subcontractor ore by anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable: .1 claims under workers' or workmen's compensation, disability benefit and other similar employee benefit acts which arc applicable to the Work to be performed. .2 claims for damages because of bodily injury, occupational sickness or disease, or death of the Contractor's employees; .3 claims for damages because of bodily injury, sickness or disease, or death of any person other than the Contractor's employees; .4 claims for damages insured by usual personal injury liability coverage which are sustained (1) by a person as a result of an offense directly or indirectly related to employment of such person by the Contractor, or (2) by another person; .5 claims for damages, other than to the Work itself, because of injury to or destruction of tangible property, including loss of use resulting therefrom; .6 claims for damages because of bodily injury, death of a person or property damage arising out of ownership, maintenance or use of a motor vehicle; AND .7 claims involving contractual liability insurance applicable to the Contractor's obligations under Paragraph 3 18.] Contractor shall procure and maintain, at its own expense' with companies satisfactory to Owner, the following insurance coverage: .1 Workers' compensation and Employers' Liability Insurance as required by California law affording 30 days notice of cancellation to the Owner. The employers' liability coverage minimum limits are as follows: Bodily Injury by Accident -- $100,000 each accident; Bodily Injury by Disease $100,000 each employee And $500,000 policy limit. .2 General Liability Insurance in the amount of $1,000,000 each occurrence for bodily injury and/or property damage liability combined written on an "occurrence" basis including: (a) Premises and Operations coverage with X, C, and U exclusion deleted, if applicable. (b) Owners and Contractors Protective coverage. (c) Products and Completed Operations coverage. (d) "Broad Form Property Damage" coverage including Completed Operations. (e) Blanket contractual obligations coverage including both written and oral contracts and tort liability as prescribed by law. (f) Personal Injury Coverage. (g) An endorsement naming Owner, and such other entities or persons as Owner may designate, as additional insured. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 21 44 (h) An endorsement affording 30 days' notice of cancellation to Owner in the event of cancellation, nonrenewal or material reduction in coverage to the extent available. (i) An endorsement providing that such insurance as is afforded under Contractor's policy is primary insurance as respect Owner and that any other insurance maintained by Owner is excess and noncontributing with the insurance required hereunder. .3 Business Auto Liability in the amount of $1,000,000 each occurrence for bodily injury and/or property damage liability combined including: (a) Owned autos, (b) Hired or borrowed autos, (c) Non-owned autos, and (d) An endorsement, affording 30 days' notice of cancellation to Owner in event of cancellation, or material reduction in coverage to the extent available. .4 Excess or Umbrella Liability Insurance with limits not less that $3,000,000 per occurrence, for bodily injury and/or property damage combined written on an "occurrence basis" listing the General Liability, Employers' Liability and Business Liability policies required as underlying policies and including: (a) An endorsement naming Owner and such other entities or persons as Owner may designate as additional insureds. (b) An endorsement affording 30 days' notice to Owner of cancellation or material reduction in coverage to the extent available. (c) An endorsement providing that any insurance maintained by Owner is excess and noncontributing with the insurance required hereunder. 11.1.1.1 Owner and Contractor acknowledge that the insurance requirements set forth in the Contract Documents may be required to be varied by the lender for the Project or by Owner's insurance carrier and Contractor agrees to enter into suitable modifications of the provisions hereof upon the request of the Owner, provided Owner bears any additional cost occasioned thereby. 11.1.2 The insurance required by Subparagraph 11.1.1 shall be written for not less than limits of liability specified in the Contract Documents or required by law, whichever coverage is greater, and shall name Owner as an additional insured. Coverages, whether written or an occurrence or claims-made basis, shall be maintained without interruption from date of commencement of the Work until date of final payment and termination of any coverage required to be maintained after final payment. 11.1.3 Certificates of Insurance acceptable to the Owner shall be filed with the Owner prior to commencement of the Work. These Certificates and the insurance policies required by this Paragraph 11. It shall contain a provision that coverages afforded under the policies will not be canceled or allowed to expire until at least 30 days' prior written notice has been given to the Owner. If any of the foregoing insurance coverages are required to remain in force after final payment and are reason ably available, an additional certificate evidencing continuation of such coverage shall be submitted with the final Application other than the Owner has an insurable interest in the property required by this Paragraph 11.3 to be covered, whichever is earlier. This insurance shall include interests of the Owner, and the Contractor, [Subcontractors and Sub-subcontractors] in the Work. 11.1.4 Copies of policies or a certificate and endorsements, providing coverage required under this Paragraph 11.1 must be delivered to Owner prior to commencement of performance under this Contract. The requirements for the foregoing insurance shall not derogate from Contractor's obligations to indemnify Owner under the Contract Documents. 11.1.5 Contractor shall maintain all of the foregoing insurance coverage in force until Final Completion of the Work other than the Products and Completed Operations Coverage required under subparagraph 11.1.2(c) above which shall be maintained in force until expiration of the applicable statute of limitations for claims related to latent defects in construction of improvements to real property. 11.1.6 If Contractor fails to secure and maintain the required insurance, Owner shall have the right (without any obligation to do so, however) to secure same in the name and for the account of Contractor, in which event Contractor shall pay the cost thereof and shall furnish upon demand all information that may be required in connection therewith. 11.1.7 Contractor shall require its Subcontractors to provide insurance with maximum limits of not less than $1,000,000 except as may otherwise be approved in writing by Owner where Contractor would be required to carry insurance under the Contract Documents endorsed to name as additional insureds those individuals and entities set forth in subparagraphs 11.1.1.2(g) and 11.1.1.5(a), above. 11.1.8 Contractor shall not begin any of the Work until all necessary evidence of insurance has been furnished to Owner. 11.2 OWNER'S LIABILITY INSURANCE 11.2.1 The Owner shall be responsible for purchasing and maintaining the Owner's usual liability insurance. Optionally the Owner may purchase and maintain other insurance for self protection against claims which may arise from operations under the Contract. The Contractor shall not be responsible for purchasing and maintaining this optional Owner's liability insurance unless specifically required by the Contract Documents. 11.3 PROPERTY INSURANCE 11.3.1 Unless otherwise provided, the Owner shall purchase and maintain, in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located, property insurance in the amount of the initial Contract Sum as well as subsequent modifications thereto for the entire Work at the site on a replacement cost basis. Such property insurance shall be maintained, unless otherwise provided in the Contract Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance, until final payment has been made as provided in Paragraph 9.10 or until no person or entity other than the Owner has an insurable interest in the property required by this Paragraph 11.3 to be covered, whichever is earlier. This insurance shall include interests of the Owner, the Contractor, Subcontractors and Sub-subcontractors in the Work. 11.3.1.1 Property insurance shall be on an all-risk policy form and shall insure against the perils of fire and extended coverage and physical loss or damage including, without duplication of coverage, theft, vandalism, malicious mischief, collapse, falsework, temporary buildings and debris removal Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 22 45 including demolition, and shall cover reasonable compensation for Architect's services and expenses required as a result of such insured loss. Coverage for other perils shall not be required unless otherwise provided in the Contract Documents. 11.3.1.2 If the Owner does not intend to purchase such property insurance required by the Contract and with all of the coverages in the amount described above, the Owner shall so inform the Contractor in writing prior to commencement of the Work. The Contractor may then effect insurance which will protect the interests of the Contractor, Subcontractors and Sub-subcontractors in the Work, and by appropriate Change Order the cost thereof shall be charged to the Owner. If the Contractor is damaged by the failure or neglect of the Owner to purchase or maintain insurance as described above, without so notifying the Contractor, then the Owner shall bear all reasonable costs properly attributable thereto. 11.3.1.3 If the property insurance requires minimum deductibles and such deductibles are identified in the Contract Documents, the Contractor shall pay costs not covered because of such deductibles. If the Owner or insurer increases the required minimum deductibles above the amounts so identified or if the Owner elects to purchase this insurance with voluntary deductible amounts, the Owner shall be responsible for payment of the additional costs not covered because of such increased or voluntary deductibles. If deductibles are not identified in the Contract Documents, the Owner shall pay costs not covered because of deductibles. 11.3.1.4 Unless otherwise provided in the Contract Documents, this property insurance shall cover portions of the Work stored off the site after written approval of the Owner at the value established in the approval, and also portions of the Work in transit. 11.3.2 BOILER AND MACHINERY INSURANCE. The Owner shall purchase and maintain boiler and machinery insurance required by the Contract Documents or by law, which shall specifically cover such insured objects during installation and until final acceptance the Owner, this insurance shall include interests of the Owner, Contractor, Subcontractors and Sub-subcontractors in the Work, and the Owner and Contractor shall be named insureds. 11.3.3 LOSS OF USE INSURANCE. The Owner, at the Owner's option, may purchase and maintain such insurance as will insure the Owner against loss of use of the Owner's property due to fire or other hazards, however caused. [The Owner waives all rights of action against the Contractor for loss of use of the Owner's property including consequential losses due to fire or other hazards however caused.] To the extent that the Owner actually receives insurance proceeds to cover such losses, and only to the extent permitted by the Owner's insurer, Owner shall waive any rights of action it may have against Contractor for loss of use of the Owner's property, including consequential losses due to fire or other hazard however caused. In addition, Owner acknowledges that it shall not have a right of action against Contractor for loss of use of the Owner's property unless such loss was caused by Contractor, its Subcontractors, Sub-subcontractors, or other persons for whom Contractor is responsible. 11.3.4 If the Contractor requests in writing that insurance for risks other than those described herein or for other special hazards be included in the property insurance policy, the Owner shall, if possible, include such insurance and the cost thereof shall be charged to the Contractor by appropriate Change Order. 11.3.5 If during the Project construction period the Owner insures properties, real or personal or both, adjoining or adjacent to the site by property insurance under policies separate from those insuring the Project, or if after final payment property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period, the Owner shall waive all rights in accordance with the terms of Subparagraph 11.3.7 for damages caused by fire or other perils covered by this separate property insurance. All separate policies shall provide this waiver of subrogation by endorsement or otherwise. 11.3.6 Before an exposure to loss may occur, the Owner shall file with the Contractor a copy of each policy that includes insurance coverages required by this Paragraph 11.3. Each policy shall contain all generally applicable conditions, definitions, exclusions and endorsements related to this Project. Each policy shall contain a provision that the policy will not be canceled or allowed to expire until at least 30 days' prior written notice has been given to the Contractor. 11.3.7 WAIVERS OF SUBROGATION. The Owner and Contractor waive all rights against [(1) each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other, and (2) the Architect, Architect's consultants, separate contractors] each other and against the Development Manager, Architect, Owner's other Contractors and own forces described in Article 6, if any, and any of their subcontractors, sub-subcontractors, agents and employees, for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Paragraph 11.3 or other property insurance applicable to the Work, except such rights as they have to proceeds of such insurance held by the Owner as fiduciary. [The Owner or Contractor, as appropriate, shall require of the Architect, Architect's consultants, separate contractors described in Article 6, if any, and the subcontractors, sub-subcontractors, agents and employees of any of them, by appropriate agreements, written where legally required for validity, similar waivers each in favor of other parties enumerated herein.] The policies shall provide such waivers of subrogation by endorsement or otherwise to the extent such waiver is permitted by Owner's and Contractor's insurers and does not prejudice the insurance required to be carried by the Owner and Contractor under this Agreement. A waiver of subrogation shall be effective as to a person or entity even though that person or entity would otherwise have a duty of indemnification, contractual or otherwise, did not pay the insurance premium directly or indirectly, and whether or not the person or entity had an insurable interest in the property damaged. 11.3.8 A loss insured under Owner's property insurance shall be adjusted by the Owner as fiduciary and made payable to the Owner as fiduciary for the insureds, as their interests may appear, subject to requirements of any applicable mortgagee clause and of Subparagraph 11.3.10. The Contractor shall pay Subcontractors their just shares of insurance proceeds received by the Contractor, and by appropriate agreements, written where legally required for validity, shall require Subcontractors to make payments to their Sub-subcontractors in similar manner. 11.3.9 If required in writing by a party in interest, the Owner as fiduciary shall, upon occurrence of an insured loss, give bond for proper performance of the Owner's duties. The cost of required bonds shall be charged against proceeds received as fiduciary. The Owner shall deposit in a separate account proceeds so received, which the Owner shall distribute in accordance with such agreement as the parties in interest may teach, or in accordance with an arbitration award in which case the procedure shall be as provided in Paragraph 4.5. If after such loss no other special agreement is made, replacement of damaged property shall be coveted by appropriate Change Order. 11.3.10 The Owner as fiduciary shall have power to adjust and settle a loss with insurers unless one of the parties in interest shall object in writing within five days after occurrence of loss to the Owner's exercise of this power; if such objection be made, arbitrators shall be chosen as provided in Paragraph 4.5. The Owner as fiduciary shall, in that case, make settlement with insurers in accordance with directions of such arbitrators. If distribution of insurance proceeds by arbitration is required, the arbitrators will direct such distribution. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 23 46 11.3.11 Partial occupancy or use in accordance with Paragraph 9.9 shall not commence until the insurance company or companies providing property insurance have consented to such partial occupancy or use by endorsement or otherwise. The Owner and the Contractor shall take reasonable steps to obtain consent of the insurance company or companies and shall, without mutual written consent, take no action with respect to partial occupancy or use that would cause cancellation, lapse or reduction of insurance. 11.3.12 Contractor hereby releases, and shall cause its subcontractors and suppliers to release, Owner, Owner's partners, parent companies, affiliates, shareholders, directors, officers, employees, agents, Development Manager, Architect and any of the above-mentioned parties (the "Released Parties") from any and all claims or causes of action whatsoever which Contractor and/or such parties might otherwise possess in or from or in any way connected with any loss covered or which should have been covered by insurance, including the deductible portion thereof, maintained and/or required to be maintained by the Contractor and/or its subcontractor pursuant to the Contract. 11.4 PERFORMANCE BOND AND PAYMENT BOND 11.4.1 The Owner shall have the right to require the Contractor to furnish bonds covering faithful performance of the Contract and payment of obligations arising thereunder as stipulated in bidding requirements or specifically required in the Contract Documents on the date of execution of the Contract. 11.4.2 Upon the request of any person or entity appearing to be a potential beneficiary of bonds covering payment of obligations arising under the Contract, the Contractor shall promptly furnish a copy of the bonds or shall permit a copy to be made. ARTICLE 12 UNCOVERING AND CORRECTION OF WORK 12.1 UNCOVERING OF WORK 12.1.1 If a portion of the Work is covered contrary to the Owner's, Development Manager's or Architect's request or to requirements specifically expressed in the Contract Documents, it must, if required in writing by either [the Architect], be uncovered for [the Architect's] their observation and be replaced at the Contractor's expense without change in the Contract Time or Contract Sum. 12.1.2 If a portion of the Work has been covered which the Owner, Development Manager or Architect has not specifically requested to observe prior to its being covered, the Owner, Development Manager or Architect may request to see such Work and it shall be uncovered by the Contractor. If such Work is in accordance with the Contract Documents, costs of uncovering and replacement shall, by appropriate Change Order, be charged to the Owner. If such Work is not in accordance with the Contract Documents, the Contractor shall pay such costs unless the condition was caused by the Owner [or a separate contractor] one of the other Contractors in which event the Owner shall be responsible for payment of such costs. 12.2 CORRECTION OF WORK 12.2.1 The Contractor shall promptly correct Work rejected by the Owner, Development Manager or Architect or failing to conform to the requirements of the Contract Documents, whether observed before or after Substantial Completion and whether or not fabricated, installed or completed. The Contractor shall beat costs of correcting such rejected Work, including additional testing and inspections and compensation for the Architect's services and expenses made necessary thereby. 12.2.1.1 The Owner shall have authority at all times, until Final Completion and acceptance of the Work, to inspect and reject work and materials which in the Owner's judgment are not in conformity with the Contract Documents. 12.2.2 If, within one year after the date of Substantial Completion of the Work of designated portion thereof, or after the date for commencement of warranties established under Subparagraph 9.9.1, or by terms of an applicable special warranty required by the Contract Documents, any of the Work is found to be not in accordance with the requirements of the Contract Documents, the Contractor shall correct it promptly after receipt of written notice from the Owner to do so unless the Owner has previously given the Contractor a written acceptance of such condition. This period of one year shall be extended with respect to portions of Work first performed after Substantial Completion by the period of time between Substantial Completion and the actual performance of the Work. This obligation under this Subparagraph 12.2.2 shall survive acceptance of the Work under the Contract and termination of the Contract. The Owner shall give such notice promptly after discovery of the condition. 12.2.3 The Contractor shall remove from the site portions of the Work which are not in accordance with the requirements of the Contract Documents and ate neither corrected by the Contractor nor accepted by the Owner. 12.2.4 If the Contractor fails to correct nonconforming Work within a reasonable time, the Owner may correct it in accordance with Paragraph 2.4. If the Contractor does not proceed with correction of such nonconforming Work within a reasonable time fixed by written notice from the Owner [Architect], the Owner may remove it and store the salvable materials or equipment at the Contractor's expense. If the Contractor does not pay costs of such removal and storage within ten days after written notice, the Owner may upon ten additional days' written notice sell such materials and equipment at auction or at private sale and shall account for the proceeds thereof, after deducting costs and damages that should have been borne by the Contractor, including compensation for the Development Manager's and Architect's services and expenses made necessary thereby. If such proceeds of sale do not cover costs which the Contractor should have borne, the Contract Sum shall be reduced by the deficiency. If payments then or thereafter due the Contractor are not sufficient to cover such amount, the Contractor shall pay the difference to the Owner. 12.2.5 The Contractor shall beat the cost of correcting destroyed or damaged construction, whether completed or partially completed, of the Owner or [separate contractors] or other Contractors caused by the Contractor's correction or removal of Work which is not in accordance with the requirements of the Contract Documents. 12.2.6 Nothing contained in this Paragraph 12.2 shall be construed to establish a period of limitation with respect to other obligations which the Contractor might have under the Contract Documents. Establishment of the time period of one year as described in Subparagraph 12.2.2 relates only to the specific obligation of the Contractor to correct the Work, and has no relationship to the time within which the obligation to comply with the Contract Documents may be sought to be enforced, nor to the time within which proceedings may be commenced to establish the Contractor's liability with respect to the Contractor's obligations other than specifically to correct the Work. 12.3 ACCEPTANCE OF NONCONFORMING WORK 12.3.1 If the Owner prefers to accept Work which is not in accordance with the requirements of the Contract Documents, the Owner may do so instead of requiring its removal and correction, in which case the Contract Sum will be reduced as appropriate and equitable. Such adjustment shall be effected whether or not final payment has been made. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 24 47 ARTICLE 13 MISCELLANEOUS PROVISIONS 13.1 GOVERNING LAW 13.1.1 The Contract shall be governed by the laws of the [place where the Project is located] State of California. 13.2 SUCCESSORS AND ASSIGNS 13.2.1 The Owner and Contractor respectively bind themselves, their partners, successors, assigns and legal representatives the other party hereto and to partners, successors, assigns and legal representatives of such other party in respect to covenants, agreements and obligations contained in the Contract Documents. [Neither party to the Contract shall assign the Contract as a whole without written consent of the other. If either party attempts to make such an assignment without such consent, that party shall nevertheless remain legally responsible for all obligations under the Contract.] Contractor may not assign its rights under this Contract. Owner may, without Contractor's consent, assign its interest in the Contract as security to a lender and in the event the lender(s) for the Project succeeds to the interest of Owner by foreclosure, deed in lieu of foreclosure or otherwise, Contractor agrees to perform all of its obligations under this Agreement for such lender(s) on the terms and conditions provided in this Agreement. Any entity which shall succeed to the rights of Owner shall be entitled to enforce the rights of Owner hereunder. 13.3 WRITTEN NOTICE 13.3.1 Written notice shall be deemed to have been duly served if delivered in person to the individual or a member of the firm or entity or to an officer of the corporation for which it was intended, or if delivered at or sent by registered or certified mail to the last business address known to the party giving notice. At Owner's request a copy of all written notices shall be delivered to any lender for the project. 13.4 RIGHTS AND REMEDIES 13.4.1 Duties and obligations imposed by the Contract Documents and rights and remedies available thereunder shall be in addition to and not a limitation of duties, obligations, rights and remedies otherwise imposed or available by law. 13.4.2 No action or failure to act by the Owner, Development Manager, Architect or Contractor shall constitute a waiver of a right or duty afforded them under the Contract, not shall such action or failure to act constitute approval of or acquiescence in a breach thereunder, except as may be specifically agreed in writing. 13.4.2 The invalidity of any part or provision of the Contract Documents shall not impair or affect in any manner whatsoever the validity, enforceability or effect of the remainder of the Contract Documents. 13.5 TESTS AND INSPECTIONS 13.5.1 Tests, inspections and approvals of portions of the Work required by the Contract Documents or by laws, ordinances, rules, regulations or orders of public authorities having jurisdiction shall be made at an appropriate time. Unless otherwise provided, the Contractor shall make arrangements for such tests, inspections and approvals with an independent testing laboratory or entity acceptable to the Owner, or with the appropriate public authority, and shall beat all related costs of tests, inspections and approvals. The Contractor shall give the Development Manager and Architect timely notice of when and where tests and inspections are to be made so the [Architect] they may observe such procedures. The Owner shall bear costs of tests, inspections or approvals which do not become requirements until after bids ate received or negotiations concluded. 13.5.2 If the Development Manager, Architect, Owner or public authorities having jurisdiction determine that portions of the Work require additional testing, inspection or approval not included under Subparagraph 13.5.1, the Development Manager and Architect will, upon written authorization from the Owner, instruct the Contractor to make arrangements for such additional testing, inspection or approval by an entity acceptable to the Owner, and the Contractor shall give timely notice to the Development Manager and Architect of when and where tests and inspections are to be made so they [Architect] may observe such procedures. The Owner shall bear such costs except as provided in Subparagraph 13.5.3. 13.5.3 If such procedures for testing, inspection or approval under Subparagraphs 13.5.1 and 13.5.2 reveal failure of the portions of the Work to comply with requirements established by the Contract Documents, the Contractor shall hear all costs made necessary by such failure including those of repeated procedures and compensation for the Development Manager's and Architect's services and expenses. 13.5.4 Required certificates of testing, inspection or approval shall, unless otherwise required by the Contract Documents, be secured by the Contractor and promptly delivered to the Development Manager for transmittal to the Architect. 13.5.5 If the Development Manager or Architect is to observe tests, inspections or approvals required by the Contract Documents, the Development Manager or Architect will do so promptly and, where practicable, at the normal place of testing. 13.5.6 Tests or inspections conducted pursuant to the Contract Documents shall be made promptly to avoid unreasonable delay in the Work. 13.6 INTEREST 13.6.1 Payments due and unpaid under the Contract Documents shall bear interest from the date that final determination is made that such payment is due at such rate as the parties may agree upon in writing or, in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located. 13.7 COMMENCEMENT OF STATUTORY LIMITATION PERIOD 13.7.1 As between the Owner and Contractor: .1 BEFORE SUBSTANTIAL COMPLETION. As to acts or failures to act occurring prior to the relevant date of Substantial Completion, any applicable statute of limitations except with respect to limitations based on discovery shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion; .2 BETWEEN SUBSTANTIAL COMPLETION AND FINAL CERTIFICATE FOR PAYMENT. As to acts or failures to act occur- ring subsequent to the relevant date of Substantial Completion and prior to issuance of the final Certificate for Payment, any applicable statute of limitations except with respect to limitations based on discovery shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than the date of issuance of the final Certificate for Payment; and .3 AFTER FINAL CERTIFICATE FOR PAYMENT. As to acts or failures to act occurring after the relevant date of issuance of the Final Certificate for Payment, any applicable statute of limitations except with respect to limitations based on discovery shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than the Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 25 48 date any act or failure to act by the Contractor pursuant any warranty provided under Paragraph 3.5, the date any correction if the Work of failure to correct the Work by the Contractor under Paragraph 12.2, or the date of actual commission of any other act or failure perform any duty or obligation by the Contractor Owner, whichever occurs last. ARTICLE 14 TERMINATION OR SUSPENSION OF THE CONTRACT 4.1 TERMINATION BY THE CONTRACTOR 14.1.1 The Contractor may terminate the Contract if the Work is stopped for a period of 30 days through no act or fault of the Contractor or a Subcontractor, Sub-subcontractor or their agents or employees or any other persons performing portions of the Work under contract with the Contractor, for any of the following reasons: .1 issuance of an order of a court or other public authority having jurisdiction; .2 an act of government, such as a declaration of national emergency, making material unavailable; .3 because the Development Manager or Architect has not issued a Certificate for Payment and has not notified the Contractor of the reason for withholding certification as provided in Subparagraph 9.4.1, or because the Owner has not made payment on a Certificate for Payment within the time stated in the Contract Documents; .4 if repeated suspensions, delays or interruptions by the Owner as described in Paragraph 14.3 constitute in the aggregate more than 100 percent of the total number of days scheduled for completion, or 120 days in any 365-day period, whichever is less; or .5 the Owner has failed to furnish to the Contractor promptly, upon the Contractor's request, reasonable evidence as required by Subparagraph 2.2.1. 14.1.2 If one of the above reasons exists, the Contractor may, upon seven additional days' written notice to the Owner, Development Manager and Architect, terminate the Contract and recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery, including reasonable overhead, profit and damages. 14.1.3 If the Work is stopped for a period of 60 days through no act or fault of the Contractor or a Subcontractor or their agents or employees or any other persons performing portions the Work under contract with the Contractor because the Owner has persistently failed to fulfill the Owner's obligations under the Contract Documents with respect to matters important to the progress of the Work, the Contractor may, upon seven additional days' written notice to the Owner, Development Manager and the Architect, terminate the Contract and recover from the Owner as provided in Subparagraph 14.1.2. 14.2 TERMINATION BY THE OWNER [FOR CAUSE] 14.2.1 The Owner may terminate the Contract if the Contractor: .1 [persistently or repeatedly] refuses or fails to supply enough properly skilled workers or proper materials; .2 fails to make payment to Subcontractors for materials or labor in accordance with the respective agreements between the Contractor and the Subcontractors; .3 [persistently] disregards laws, ordinances, or rules, regulations or orders of a public authority having jurisdiction; or .4 otherwise is guilty of substantial breach of a provision the Contract Documents. Termination for any of the above reasons shall be referred to in this Agreement as "Termination for Cause." 14.2.2 When any of the above reasons exist, the Owner, [upon certification by the Architect that sufficient cause exists to justify such action,] may without prejudice to any other rights or remedies of the Owner and after giving the Contractor and the Contractor's surety, if any, seven days' written notice, terminate employment of the Contractor and may, subject to any prior rights of the surety: .1 take possession of the site and of all materials, equipment, tools, and construction equipment and machinery thereon owned by the Contractor; .2 accept assignment of subcontracts pursuant to Paragraph 5.4; and .3 finish the Work by whatever reasonable method the Owner may deem expedient. 14.2.3 [When the Owner terminates the Contract for one of the reasons stated in Subparagraph 14.2.1] Upon a Termination for Cause, the Contractor shall not be entitled to receive further payment until the Work is finished. 14.2.4 Once the Work is finished, [If] if the unpaid balance of the Contract Sum [exceeds] exceeded the costs of finishing the Work, including compensation for the Development Manager's and Architects services and expenses made necessary thereby, such excess shall be paid to the Contractor. If such costs exceed the unpaid balance, the Contractor shall pay the difference to the Owner. The amount to he paid to the Contractor or Owner, as the case may be, shall, upon application, be certified by the Architect after consultation with the Development Manager[, upon application], and this obligation for payment shall survive termination of the Contract. 14.2.5 The Owner may, at its option, terminate this Contract in whole or in part from time to time at any time by seven days' written notice thereof to the Contractor and Contractor's surety, if any ("Termination for Convenience"). Upon a Termination for Convenience, Contractor agrees to waive any claims for damages, including loss of anticipated profits, on account thereof, and as the sole right and remedy of Contractor, Owner shall pay Contractor in accordance with Subparagraph 14.2.3(c) below. The provisions of the Contract, which by their nature survive final acceptance of the Work, shall remain in full force and effect after such Termination for Convenience to the extent provided in such provisions. (a) Upon receipt of a notice instituting a Termination for Cause or a Termination for Convenience, Contractor shall, unless the notice directs otherwise, immediately discontinue the Work on that date and to the extent specified in the notice, place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work as is not discontinued, promptly make every reasonable effort to procure cancellation upon terms satisfactory to Owner of all orders and subcontracts to the extent they relate to the performance of the discontinued portion of the Work, and thereafter do only such Work as may be necessary to preserve and protect work already in progress and to protect materials, plants and equipment on the Site or in transit thereto. Language indicated as being shown by strike out in the typeset document is enclosed in brackets "[" and "]" in the electronic format. 26 49 (b) Upon a Termination for Convenience or a Termination for Cause, the obligations of the Contract shall continue as to portions of the Work already performed and as to bona fide obligations assumed by Contractor prior to the date of termination. (c) Upon a Termination for Convenience, Contractor shall be entitled to be paid the full cost of all Work properly done by Contractor to the date of termination not previously paid for, less sums already received by Contractor on account of the portion of the Work performed. If at the date of such termination Contractor has properly prepared or fabricated off the Site any goods for subsequent incorporation in the Work, and if Contractor delivers such goods to the Site or to such other place as the Owner shall reasonably direct, then Contractor shall be paid for such goods or materials. 14.2.6 Upon a Termination for Convenience, the Owner may without prejudice to any other rights or remedies of the Owner and subject to any prior rights of the surety: .1 take possession of the site and of all materials, equipment, tools, and construction equipment and machinery thereon owned by the Owner or rented on its behalf by Contractor; .2 accept assignment of subcontracts pursuant to Paragraph 5.4 if but only if Owner pays Contractor, in addition to any other sums owing hereunder, a fee equal to twenty percent (20%) of the difference between (x) the Contractor's Fee calculated as if the Cost of the Work were equal to the Guaranteed Maximum Price at the time of termination (or, if the Guaranteed Maximum Price has not yet been established, the Preliminary Guaranteed Maximum Price established in the Agreement), and (y) the Contractor's Fee paid or owing to Contractor as a result of the actual Cost of the Work completed prior to termination; provided, however, that upon Final Completion, the value for (x) will be recalculated based on the actual Cost of the Work rather than the Guaranteed Maximum Price or estimate thereof, and Contractor will refund to Owner the difference between the fee paid by Owner based on the initial calculation and the amount owed based on such recalculation. .3 finish the Work by whatever reasonable method the Owner may deem expedient. 14.3 SUSPENSION BY THE OWNER FOR CONVENIENCE 14.3.1 The Owner may, without cause, order the Contractor in writing to suspend, delay or interrupt the Work in whole or in part for such period of time as the Owner may determine. 14.3.2 An ad99justment shall be made for increases in the cost of performance of the Contract, including profit on the increased cost of performance, caused by suspension, delay or interruption. No adjustment shall be made to the extent: .1 that performance is, was or would have been so suspended, delayed or interrupted by another cause for which the Contractor is responsible; or .2 that an equitable adjustment is made or denied under another provision of this Contract. 14.3.3 Adjustments made in the cost of performance may have a mutually agreed fixed or percentage fee. 50 EXHIBIT C PROJECT MANUAL SPECIFICATIONS HOK & Associates Design Development Specifications dated January 31, 1997. NOTE: Final specifications will be issued with completed Construction Drawings and Specifications and incorporated into the contract with the GMP. 51 EXHIBIT D SYMANTEC CC5 OFFICE BUILDING EXHIBIT "D" CONTRACT DOCUMENTS MAY 5,1997 WEBCOR BUELDERS JOB #295 1. Design Development Submittal - Architectural Specifications by HOK dated 1/31/97. 2. Geotechnical Investigation - Soils Report by Treadwell & Rollo dated 2/10/97. 3. Drawings as listed below:
Sheet# Description Date - ----------------------------------------------------------------------------------- Architectural Drawings by HOK: -------- Title Page 1/31/97 1.1A-1 Drawing Index 1/31/97 1.1A-2 Gen. Notes, Symbols & Abbreviations 1/31/97 Civil Drawings by Kier & Wright: C.0-1 Topographic Survey 1/8/97 C.0-2 Basement Excavation 1/26/97 C.0-3 Basement Excavation - Notes & Sections 1/26/97 Landscape Drawings by Guzzardo & Associates, Inc.: 2.2A-01 Site Layout Plan 1/31/97 2.2C-01 Site Details 1/31/97 2.5A-01 Site Planting Plan 1/31/97 Structural Drawings by Nishkian & Associates: 3.1-1 General Notes 1/31/97 3.2-1 Foundation/Level B4 Plan 1/31/97 3.2-2 Level B3 Framing Plan 1/31/97 3.2-3 Level B2 Framing Plan 1/31/97 3.2-4 Level B1 Framing Plan 1/31/97 3.2-5 Ground Level Framing Plan 1/31/97 3.2-6 Second Level Framing Plan 1/31/97 3.2-7 Third Level Framing Plan 1/31/97 3.2-8 Fourth Level Framing Plan 1/31/97 3.2-10 Penthouse Roof Framing Plan 1/31/97 3.2-9 Roof Framing Plan 1/31/97
52 Symantec CC5 Office Building EXHIBIT "D" - Contract Documents May 5, 1997 Webcor Builders Job #295 Page 2
- ----------------------------------------------------------------------------------- 3.3-1 Non-Frame Column Schedule 1/31/97 3.3-2 Braced Frame Elevations 1/31/97 3.3-3 Braced Frame Elevations and Details 1/31/97 3.4-1 Concrete Column Details 1/31/97 3.4-2 Typical Concrete Beam Details 1/31/97 3.4-4 Concrete Beam Schedule 1/31/97 3.6-1 Typical Steel Details 1/31/97 3.6-2 Typical Steel Details 1/31/97 3.6-3 Typical Steel Details 1/31/97 Architectural Drawings by HOK: 4.2-01 Level B4 Plan 1/31/97 4.2-02 Level B3 Plan 1/31/97 4.2-03 Level B2 Plan 1/31/97 4.2-04 Level B1 Plan 1/31/97 4.2-05 Ground Level Plan 1/31/97 4.2-06 Level 2 Floor Plan 1/31/97 4.2-07 Level 3 Floor Plan 1/31/97 4.2-08 Level 4 Floor Plan 1/31/97 4.2-09 Penthouse/Roof Plan 1/31/97 4.3A-01 Stair Plans 1/31/97 4.3A-02 Stair Plans 1/31/97 4.3A-03 Stair Plans 1/31/97 4.3A-04 Core Plans 1/31/97 4.3A-05 Core Plans 1/31/97 4.3A-06 Ground Level Toilet Room Plan 1/31/97 4.3B-1 Enlarged Plan Main Lobby 1/31/97 4.4-1 Reflected Ceiling Plans - Lobby Levels 1 & 2 1/31/97 4.4-2 Reflected Ceiling Plan - Lobby Level 2 1/31/97 4.5-01 Exterior Elevations 1/31/97 4.5-02 Exterior Elevations 1/31/97 4.5A-01 Enlarged Elevations 1/31/97 4.5A-02 Enlarged Elevations 1/31/97 4.5A-03 Enlarged Elevation 1/31/97 4.5A-04 Enlarged Elevation 1/31/97 4.5A-05 Enlarged Elevation 1/31/97 4.5A-06 Enlarged Elevation 1/31/97 4.5A-07 Enlarged Elevation 1/31/97 4.5A-08 Enlarged Elevation 1/31/97 4.5A-09 Enlarged Elevation 1/31/97 4.6-01 Toilet Room Interior Elevations 1/31/97
53 Symantec CC5 Office Building EXHIBIT "D" - Contract Documents May 5, 1997 Webcor Builders Job #295 Page 3
- ----------------------------------------------------------------------------------- 4.6-2 Enlarged Lobby Elevation 1/31/97 4.6-3 Enlarged Lobby Elevations 1/31/97 4.7-01 Sections 1/31/97 4.8-1 Stair Sections 1/31/97 4.8-3 Elevator Hoistway Sections 1/31/97 4.20A-01 Waterproofing Details 1/31/97 4.20D-01 Built-up Roofing Details 1/31/97 4.20E-01 Cement Plaster Exterior Soffits 1/31/97 4.30A-01 Hollow Metal Frames-Hold Open Details 1/31/97 4.30A-02 Door Threshold Details 1/31/97 4.40A-01 General Notes/Partition Types 1/31/97 4.40A-02 Partition Types 1/31/97 4.40B-01 Partition Termination Details 1/31/97 4.40B-02 Partition Details 1/31/97 4.40B-03 CMU Partition Details 1/31/97 4.40C-01 Acoustical Panel on T-Bar System 1/31/97 4.40C-02 Gypsum Board Ceiling and Soffits 1/31/97 4.40C-03 Ceiling Section Details 1/31/97 4.40D-01 ADA - Restroom Fixture & Accessory Details 1/31/97 4.40D-02 ADA - Restroom Lavatory Details 1/31/97 4.40D-03 Toilet Room Shower Details 1/31/97 4.50A-01 Stair Railing Details 1/31/97 4.50A-02 Concrete Filled Metal Pan Stair Details 1/31/97 4.50B-01 Passenger Elevator Cab Interior Elev. & Details 1/31/97 4.50B-02 Freight Elevator Cab Interior Elev. & Details 1/31/97 4.50B-03 Elevator Details 1/31/97 HVAC Drawings by C.M.I.: 6.1-1 Drawing List, Notes, Legend & Schedule 1/31/97 6.1-2 Schedules 1/31/97 6.2-1 Level B4 Plan 1/31/97 6.2-2 Level B2-B3 Plan 1/31/97 6.2-3 Level B1 Plan 1/31/97 6.2-4 Ground Level Plan 1/31/97 6.2-5 Level 2 Floor Plan 1/31/97 6.2-6 Level 3 Floor Plan 1/31/97 6.2-7 Level 4 Floor Plan 1/31/97 6.3-1 Penthouse/Roof Plan 1/31/97 6.5-1 Piping Schematic Chilled & Condenser Water 1/31/97 6.5-2 Piping Schematic Hot Water 1/31/97
54 Symantec CC5 OFFICE Building EXHIBIT "D" - Contract Documents May 5, 1997 Webcor Builders Job #295 Page 4
- ----------------------------------------------------------------------------------- Electrical Drawings by Schwartz & Lindheim, Inc.: 7.1-00 Legend, Ltg. Fixture Schedule & Drawing List 1/31/97 7.1-01 Fixtures Schedule 1/31/97 7.1-02 Site Electrical Plan 1/31/97 7.2-00 Level B4 Electrical Plan 1/31/97 7.2-01 Level B3 Lighting Plan 1/31/97 7.2-02 Level B2 Lighting Plan 1/31/97 7.2-03 Level B1 Lighting Plan 12/12/96 7.2-04 Ground Level Electrical Plan 1/31/97 7.2-04P Ground Level Power Plan 1/31/97 7.2-05 Level 2 Electrical Plan 1/31/97 7.2-06 Level 3 Electrical Plan 1/31/97 7.2-07 Level 4 Electrical Plan 1/31/97 7.2-08 Penthouse/Roof Electrical Plan 1/31/97 7.5-00 Single Line Diagram 1/31/97 7.5-01 Riser Diagrams 1/31/97 7.7-00 Details - Electrical Rooms 1/31/97
55 WEBCOR BUILDERS EXHIBIT "F" May 5, 1997 WEBCOR BUILDERS JOB #295 PROJECT SYSTEMS SUMMARY PROJECT: CC5 OFFICE BUILDING LOCATION: CUPERTINO, CA CM: SARES REGIS OWNER: SYMANTEC ARCHITECT: HOK ESTIMATE DATE: 25-Feb-97 ESTIMATOR: SRN & Rich Lamb ESTIMATE #: DD January 31, 1997 Drawings
- --------------------------------------------------------------------------------------------------- OFFICE BUILDING PARKING STRUCTURE LINE WBI CODE DESCRIPTION 144,378 SF 290,862 SF PRICE $/SF PRICE $/SF - --------------------------------------------------------------------------------------------------- 1 01000 GENERAL CONDITIONS $ 356,772 $ 2.47 $ 356,772 $ 1.23 2 02000 SITEWORK $ - $ - $1,823,993 $ 6.27 3 03000 LANDSCAPE AND IRRIGATION $ - $ - $ - $ - 4 04000 FOUNDATIONS $ 471,319 $ 3.26 $ 307,255 $ 1.06 5 05000 BUILDING STRUCTURE $2,678,350 $18.55 $5,461,932 $18.78 6 06000 EXTERIOR ENVELOPE (VERTICAL) $2,187,332 $15.15 $ 18,750 $ 0.06 7 07000 WATERPROOFING, INSULATION & ROOFING $ 564,796 $ 3.91 $ 180,679 $ 0.62 8 08000 INTERIOR CONSTRUCTION $ 801,003 $ 5.55 $ 91,330 $ 0.31 9 09000 SPECIALTIES $ 38,200 $ 0.26 $ 4,200 $ 0.01 10 10000 BUILDING EQUIPMENT $ 38,000 $ 0.26 $ - $ - 11 11000 SPECIAL CONSTRUCTION $ - $ - $ - $ - 12 15300 BUILDING FURNISHINGS $ - $ - $ - $ - 13 15400 ELEVATORS $ 225,000 $ 1.56 $ 128,000 $ 0.44 14 15500 FIRE SPRINKLERS $ 175,000 $ 1.21 $ 231,323 $ 0.80 15 16000 PLUMBING $ 320,000 $ 2.22 $ 56,000 $ 0.19 16 18000 H.V.A.C. $ 842,032 $ 5.83 $ 216,866 $ 0.75 17 19000 ELECTRICAL $ 646,071 $ 4.47 $ 296,094 $ 1.02 18 24000 MISCELLANEOUS EXPENSES $ 115,505 $ 0.80 $ 119,854 $ 0.41 19 19000 CONTINGENCY $ 100,000 $ 0.69 $ 100,000 $ 0.34 20 24000 CONTRACTOR JOB EQUIPMENT $ 23,660 $ 0.16 $ 23,660 $ 0.06 ---------- ------ ---------- ------ SUBTOTAL $9,583,274 $66.38 $9,416,707 $32.38 CONTRACTORS FEE @ 2.6% $ 239,582 $ 1.66 $ 235,418 $ 0.81 ---------- ------ ---------- ------ TOTAL COST $9,822,855 $68.04 $9,652,125 $33.18 ---------- ----------
- --------------------------------------------------------------------------------------------------- SITEWORK LINE WBI CODE DESCRIPTION 95,417 SF TOTAL PRICE $/SF - --------------------------------------------------------------------------------------------------- 1 01000 GENERAL CONDITIONS $ - $ - $ 713,545 2 02000 SITEWORK $ 462,594 $ 4.85 $ 2,286,587 3 03000 LANDSCAPE AND IRRIGATION $ 272,300 $ 2.85 $ 272,300 4 04000 FOUNDATIONS $ - $ - $ 778,575 5 05000 BUILDING STRUCTURE $ 7,500 $ 0.08 $ 8,147,782 6 06000 EXTERIOR ENVELOPE (VERTICAL) $ - $ - $ 2,206,082 7 07000 WATERPROOFING, INSULATION & ROOFING $ 150,800 $ 1.58 $ 896,275 8 08000 INTERIOR CONSTRUCTION $ - $ - $ 892,333 9 09000 SPECIALTIES $ - $ - $ 42,400 10 10000 BUILDING EQUIPMENT $ - $ - $ 38,000 11 11000 SPECIAL CONSTRUCTION $ - $ - $ - 12 15300 BUILDING FURNISHINGS $ - $ - $ - 13 15400 ELEVATORS $ - $ - $ 353,000 14 15500 FIRE SPRINKLERS $ - $ - $ 406,556 15 16000 PLUMBING $ - $ - $ 376,000 16 18000 H.V.A.C. $ 80,500 $ 0.84 $ 1,139,398 17 19000 ELECTRICAL $ 18,000 $ 0.19 $ 960,164 18 24000 MISCELLANEOUS EXPENSES $ 9,068 $ 0.10 $ 244,426 19 19000 CONTINGENCY $ 22,000 $ 0.23 $ 222,000 20 24000 CONTRACTOR JOB EQUIPMENT $ - $ - $ 47,320 ---------- ------ ----------- SUBTOTAL $1,022,762 $10.72 $20,022,743 CONTRACTORS FEE @ 2.6% $ 25,569 $ 0.27 $ 500,569 ---------- ------ ----------- TOTAL COST $1,048,331 $10.99 $20,523,311 ---------- -----------
PAGE 1 56 Webcor Builders EXHIBIT "F" May 5, 1997 WEBCOR BUILDERS JOB #295 SYSTEMS ESTIMATE Project: CCS-OFFICE BUILDING Location: CUPERTINO CM: SARES REGIS Owner: SYMANTEC Architect: HOK Estimate Date: 25-Feb-97 Estimator: SRN & Rich Lamb Building Size: 144,378 Square Feet Estimate #: DD Budget January 31, 1997 Schedule: 15 months
- --------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION PRICE $/SF COMMENTS - --------------------------------------------------------------------------------------------------------------------------- 1 GENERAL CONDITIONS 356,772 $ 2.47 2 BUILDING PAD EARTHWORK 0 $ - 3 LANDSCAPE AND IRRIGATION 0 $ - 4 FOUNDATIONS 471,319 $ 3.26 5 BUILDING STRUCTURE 2,678,350 $ 18.55 6 EXTERIOR ENVELOPE (VERTICAL) 2,187,332 $ 15.15 7 WATERPROOFING, INSULATION, & ROOFING 564,796 $ 3.91 8 INTERIOR CONSTRUCTION 801,003 $ 5.55 9 SPECIALTIES 38,200 $ 0.26 10 BUILDING EQUIPMENT 38,000 $ 0.26 11 SPECIAL CONSTRUCTION 0 $ - 12 BUILDING FURNISHINGS 0 $ - 13 ELEVATORS 225,000 $ 1.56 14 FIRE SPRINKLERS 175,232 $ 1.21 15 PLUMBING 320,000 $ 2.22 16 HVAC 842,032 $ 5.83 17 ELECTRICAL 646,071 $ 4.47 18 MISCELLANEOUS EXPENSES 115,505 $ 0.80 19 CONTINGENCY 100,000 $ 0.69 20 CONTRACTOR JOB EQUIPMENT 23,660 $ 0.16 ---------- ------- SUBTOTAL 9,583,274 $ 66.38 CONTRACTORS FEE @ 2.5% 239,582 $ 1.66 ---------- ------- TOTAL BUILDING COSTS $9,822,855 ---------- Cost per sf $68.04
ALTERNATES ADD COOLING DUCT LOOPS $200,000 Add ADD FOR 800KW GENERATOR $388,400 Add Page 1 57 WEBCOR BUILDERS
GENERAL CONDITIONS WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 01 - 010 1 GENERAL CONDITIONS 1 LS 356,772 356,772 2.47 Pro rata with Parking TOTAL GENERAL CONDITIONS 356,772 ------------------------ ------- BUILDING PAD EARTHWORK WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 2 Clear & Grub Site 0 SF 0.00 0 0.00 See Sitework Estimate 2 Asphalt Patch 0 LS 0.00 0 0.00 See Sitework Estimate 2 Storm/Sewer/Water 0 LS 0.00 0 0.00 See Sitework Estimate TOTAL BUILDING PAD EARTHWORK 0 ---------------------------- ------- LANDSCAPE & IRRIGATION WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 3 Landscape/Hardscape Area 0 SF 0.00 0 0.00 See Sitework Estimate TOTAL LANDSCAPE & IRRIGATION 0 ---------------------------- ------- FOUNDATIONS WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 4 Substructure Rebar 208,365 LBS 0.45 93,764 0.65 4 Substructure Concrete 1 LS 377,555 377,555 2.62 TOTAL FOUNDATIONS 471,319 ----------------- ------- BUILDING STRUCTURE WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 5 Rebar @ Decks, Pits, Misc. 113,906 LBS 0.45 51,257 0.36 5 Mesh @ Metal Decking 151,874 SF 0.45 68,343 0.47 5 Superstructure Concrete 1 ls 381,927 381,927 2.65 5 Block Walls @ Loading Dock 3,209 SF 11.00 35,299 0.24 5 Steel Framing @ Building Shell 973 TNS 1,600.00 1,556,800 10.78 12#/sf + 1# for Panel Attach 5 Steel Framing @ Penthouse 43 TNS 1,600.00 68,800 0.48 Based on 10#/sf 5 Metal Decking 151,874 SF 2.20 334,123 2.31 5 Metal Stairs & Landings 7 FLTS 7,800.00 54,600 0.38 5 Misc Metals 1 LS 40,000.00 40,000 0.28 5 Awning Frames 1,744 SF 50.00 87,200 0.60 5 2nd Floor Lobby Rail 0 LF 0.00 0 0.00 TOTAL BUILDING STRUCTURE 2,678,350 ------------------------ ---------
Page 2 58 Webcor Builders
EXTERIOR ENVELOPE (VERTICAL) - ------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------ 6 Precast Panel System 1 LS 1,333,000 1,333,000 9.23 6 Punched Windows 12,214 SF 28.76 351,275 2.43 6 Ribbon Windows - 4th Floor 3,189 SF 28.11 89,643 0.62 6 Main Lobby 2,372 SF 50.00 118,600 0.82 6 East Lobby 728 SF 50.00 36,400 0.25 6 Awning Glazing 1744 SF 30.00 52,320 0.36 6 Entry Doors 5 PR 7,627.00 38,135 0.26 6 Single Entry Door 1 EA 2,500.00 2,500 0.02 6 5" x 5" extruded aluminum trim (10ft +\- pcs) 10 EA 1,174.00 11,740 0.08 Penthouse Trim 6 Sheet Metal Wall Panels EIFS @ Penthouse 5,280 SF 6.00 31,680 0.22 6 Penthouse EIFS 6420 SF 16.00 102,720 0.71 6 Backside of Parapet 2415 SF 8.00 19,320 0.13 TOTAL EXTERIOR ENVELOPE (VERTICAL) 2,187,332 ---------------------------------- ---------
WATERPROOFING, INSULATION, & ROOFING - ---------------------------------------------------------------------------------------------------------------------- UNIT WBI CODE SYS DESCRIPTION QUANTITY UNIT PRICE PRICE $/SF COMMENTS - ---------------------------------------------------------------------------------------------------------------------- 7 Thermal Wall Insulation 50,000 SF 0.40 20,000 0.14 7 Thermal insulation under ground floor 37,858 SF 1.41 53,380 0.37 7 Safing insulation @ Perimeter 3,640 LF 2.85 10,374 0.07 7 Insulation @ Spandrel Glass 140 SF 3.00 420 0.00 7 Thermal Roof Insulation 40,045 SF 0.75 30,034 0.21 7 Fireproofing @ Steel 151,874 SF 1.85 280,967 1.95 7 Built up Roofing System 40,045 SF 2.25 90,101 0.62 7 Tapred insulation 23,688 SF 1.60 37,901 0.26 7 Water Proofing @ Showers 540 SF 3.00 1,620 0.01 7 Flashing & Sheet Metal 1 LS 35,000.00 35,000 0.24 7 Misc. Joint Sealers 1 LS 5,000.00 5,000 0.03 TOTAL WATERPROOFING, INSULATION, & ROOFING 564,796 ------------------------------------------ -------
INTERIOR CONSTRUCTION - -------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - -------------------------------------------------------------------------------------------------------------- 8 Restroom Countertops 8 EA 1,250.00 10,000 0.07 8 Thresholds 10 EA 200.00 2,000 0.01 8 Misc. Rough Carpentry 1 LS 20,000.00 20,000 0.14 8 Doors & Frames - Singles 56 EA 900.00 50,400 0.35 8 Doors & Frames - Pairs 9 PR 2,000.00 18,000 0.12 8 Total Doors @ Elevators 6 PR 2,500.00 15,000 0.10 8 PG&E Service Door 12 FT wide 1 EA 6,500.00 6,500 0.05 8 Loading Dock Service Door 24 Ft Wide 1 EA 15,000.00 15,000 0.10 8 Core & Shaft Walls 4 FLR 70,000.00 280,000 1.94 Per Floor Allowance 8 Cement Board @ Showers 1 LS 1,000.00 1,000 0.01 8 3RD Floor Soffit 1,200 SF 20.00 24,000 0.17 Includes Scaffolding 8 Core Restrooms Ceramic Tile 4,930 SF 8.00 39,440 0.27 8 Ceramic Tile @ Showers 1,063 SF 11.00 11,693 0.08 8 Balcony Pavers 0 SF 0.00 0 0.00 Non Accessible Balconies 8 Misc @ Cores 4 FLR 600.00 2,400 0.02 8 Misc. Painting 4 FLR 5,500.00 22,000 0.15 8 Vinyl Wallcovering in Restrooms 2,856 SF 1.25 3,570 0.02 8 Lobby Wall/Floor/Ceiling Finish Allowance 1 LS 240,000.00 240,000 1.66 Allowance 8 Lighting 0 LS 0.00 0 0.00 Included in Ceiling Allowance 8 New Bathrooms off Lobby 2 EA 20,000.00 40,000 0.28 Allowance 8 Furnishings 0 LS 0.00 0 0.00 NIC TOTAL INTERIOR CONSTRUCTION 801,003 --------------------------- ------- SPECIALTIES - --------------------------------------------------------------------------------------------------------------
Page 3 59 WEBCOR BUILDERS - ---------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ 9 Louvers near Dock Door 140 SF 50.00 7,000 0.05 9 Lockers @ Shower Rooms 8 EA 300.00 2,400 0.02 9 Fire Extinguishers & Cabinets 6 EA 200.00 1,600 0.01 9 Toilet Accessories & Partitions 4 FLR 6,000.00 24,000 0.17 9 Shower Accessories 4 EA 700.00 2,800 0.02 9 Benches @ Shower Rooms 2 EA 200.00 400 0.00 ------------------------------------- ------------ TOTAL SPECIALTIES 38,200 ------------------------------------- ------------ - ---------------------------------------------------- BUILDING EQUIPMENT - ------------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ 10 Window Washing Tiebacks 1 LS 30,000.00 30,000 0.21 Tiebacks Only 10 Dock Leveler 1 EA 8,000.00 8,000 0.06 ------------------------------------- ------------ TOTAL BUILDING EQUIPMENT 38,000 ------------------------------------- ------------ - ---------------------------------------------------- SPECIAL CONSTRUCTION - ------------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ 11 Special Construction 0 EA 0.00 0 0.00 ------------------------------------- ------------ TOTAL SPECIAL CONSTRUCTION 0 ------------------------------------- ------------ - ---------------------------------------------------- BUILDING FURNISHINGS - ------------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ 12 Window Coverings 0 EA 0.00 0 0.00 NIC, By Owner ------------------------------------- ------------ TOTAL BUILDING FURNISHINGS 0 ------------------------------------- ------------ - ---------------------------------------------------- ELEVATORS - ------------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ 13 4 Stop Hydraulic Passenger Elevator 2 EA 60,000.00 120,000 0.83 13 4 Stop Hydraulic Freight Elevator 1 EA 75,000.00 75,000 0.52 13 Cab Allowance 2 EA 15,000.00 30,000 0.21 Allowance ------------------------------------- ------------ TOTAL ELEVATORS 225,000 ------------------------------------- ------------ - ---------------------------------------------------- FIRE SPRINKLERS - ------------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ 14 14 Fire Sprinkler System 152,376 SF 1.15 175,232 1.21 ------------------------------------- ------------ TOTAL FIRE SPRINKLERS 175,232 ------------------------------------- ------------
Exhibit F Steve Bldg DD.xls Page 4 60 WEBCOR BUILDERS
PLUMBING - ----------------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- Wall Hung Water Closets 24 EA 220,000 1.52 Urinals 8 EA with above 0.00 Lavatories 16 EA with above 0.00 Dual Drinking Fountains 4 EA with above 0.00 Janitor sinks 2 EA with above 0.00 Floor drains 8 EA with above 0.00 Roof/Balcony Drains 30 EA with above 0.00 Fuel Oil Tank & Piping 1 LS 30,000.00 30,000 0.21 Revised Bath Layout 1 LS 37,000.00 37,000 0.26 Showers (4) each 1 LS 16,000.00 16,000 0.11 New Drinking Fountains (4) each 1 LS 6,000.00 6,000 0.04 Upgrade to Automatic Flush Valves 1 LS 8,000.00 8,000 0.06 New Janitor sinks (2) each 1 LS 3,000.00 3,000 0.02 TOTAL PLUMBING 320,000 -------------- ------- H.V.A.C. - ----------------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 16 Built-up Chilled Water Fans sized for 4 watts System Without Duct Loops 142,275 SF 6.06 865,032 5.99 Chillers aired for 6 watts 16 Generator Exhaust 1 LS 5,000.00 5,000 0.03 16 Preheat Coils in Fan Rooms 1 LS 12,000.00 12,000 0.08 16 PG & E Rebates 1 LS -40,000.00 (40,000) -0.28 TOTAL H.V.A.C. 842,032 -------------- ------- ELECTRICAL - ----------------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 17 Electrical System 142,275 SF 4.54 646,071 4.47 5 watts/sf + 125 low generator TOTAL ELECTRICAL 646,071 ---------------- -------
Page 5 61 WEBCOR BUILDERS
MISCELLANEOUS EXPENSES - ----------------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 18 SAFETY INSPECTIONS 19 DY 375 7,125 0.05 18 LIABILITY INSURANCE 0.58% LS 9,823,000 56,973 0.39 18 PRIME CONTRACTOR BOND 0.00% LS 0 0 0.00 NOT INCLUDED 18 SUBCONTRACTOR BONDS 1.50% LS 1,983,335 29,750 0.21 MEPS Only 18 ARCHITECTURAL/ENGR. SERVICES 0 LS 0 0 0.00 BY OWNER 18 TESTING AND INSPECTION 0 LS 0 0 0.00 BY OWNER 18 FINAL CLEAN UP 144,378 SF 0.15 21,657 0.15 18 FEES AND PERMITS 0 LS 0 0 0.00 BY OWNER TOTAL CONTRACTOR SERVICES 115,505 ------------------------- ------- CONTINGENCY - ----------------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 19 PROJECT CONTENTENCY @ 1% 1.00% EA 100,000 100,000 0.69 TOTAL CONTINGENCY 100,000 ----------------- ------- CONTRACTOR JOB EQUIPMENT - ----------------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 20 JOBSITE CRANES 1 LS 0.00 0 0.00 By subcontractors 20 TEMPORARY EQUIPMENT 1 LS 0.00 0 0.00 20 MANLIFT 1 LS 0.00 0 0.00 20 EQUIPMENT, TOOLS, VEHICLES 1 LS 18,760.00 18,760 0.13 20 EXPENDABLE MATERIALS 1 LS 4,900.00 4,900 0.03 TOTAL CONTRACTOR JOB EQUIPMENT 23,660 ------------------------------ -------
Page 6 62 WEBCOR BUILDERS EXHIBIT "F" May 5, 1997 WEBCOR BUILDERS JOB #295 SYSTEMS ESTIMATE Project: CC5 PARKING STRUCTURE Location: CUPERTINO CM: SARES REGIS Owner: SYMANTEC Arch: HOK Parking Stalls: 777 Estimate Date: 05-May-97 Parking Structure Size: 290,862 Estimator: SRN & Rich Lamb Square Feet Estimat #: DD Budget January 31, 1997 Schedule: 15 months
WBI CODE SYS DESCRIPTION PRICE $/SF % COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 1 GENERAL CONDITIONS 356,772 $ 1.23 2 SITEWORK 1,823,993 $ 6.27 3 LANDSCAPE AND IRRIGATION 0 $ - 4 FOUNDATIONS 307,255 $ 1.06 5 BUILDING STRUCTURE 5,461,932 $18.78 6 EXTERIOR ENVELOPE (VERTICAL) 18,750 $ 0.06 7 WATERPROOFING, INSULATION, & ROOFING 180,679 $ 0.62 8 INTERIOR CONSTRUCTION 91,330 $ 0.31 9 SPECIALTIES 4,200 $ 0.01 10 BUILDING EQUIPMENT 0 $ - 11 SPECIAL CONSTRUCTION 0 $ - 12 BUILDING FURNISHINGS 0 $ - 13 ELEVATORS 128,000 $ 0.44 14 FIRE SPRINKLERS 231,323 $ 0.80 15 PLUMBING 56,000 $ 0.19 16 HVAC 216,866 $ 0.75 17 ELECTRICAL 296,094 $ 1.02 18 MISCELLANEOUS EXPENSES 119,854 $ 0.41 19 CONTINGENCY 100,000 $ 0.34 20 CONTRACTOR JOB EQUIPMENT 23,660 $ 0.08 --------- ------ SUBTOTAL 9,416,707 $32.38 CONTRACTORS FEE 2.5% 235,418 $ 0.81 --------- ------ PARKING STRUCTURE COST $9,652,125 --------- Cost per sf $33.18 Cost per Stall $12,422 Efficiency (SF/Stall) 374
Page 1 63 Webcor Builders
- -------------------------------------- GENERAL CONDITIONS - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 01-010 1 GENERAL CONDITIONS 1 LS 356,772.25 356,772 1.23 Pro rata with Building ------- TOTAL GENERAL CONDITIONS 356,772 ------- - -------------------------------------- SITEWORK - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 2 Clear & Grub Site 0 SF 0.00 0 0.00 See Sitework 2 Mass Excavation 1 LS 725,000.00 725,000 2.49 2 Site Grading 1 LS 50,000.00 50,000 0.17 Allowance 2 Shoring & Underpinning 1 LS 940,100.00 940,100 3.23 Malcolm Bid 2 Foundation Drain 3,062 LF 25.00 76,550 0.26 2 Foundation Drain Rock 4,593 CY 5.35 24,573 0.08 2 Asphalt Patch 0 LS 0.00 0 0.00 See Sitework 2 Stall & Directional Striping 777 STL 10.00 7.770 0.03 Striping only 2 Storm/Sewer/Water 0 LS 0.00 0 0.00 See Sitework --------- TOTAL SITEWORK 1,823,993 --------- - -------------------------------------- LANDSCAPE & IRRIGATION - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 3 0 0.00 -- TOTAL LANDSCAPE & IRRIGATION 0 -- - -------------------------------------- FOUNDATIONS - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 4 Substructure Rebar 179,514 LBS 0.45 80,781 0.28 4 Substructure 1 LS 226,474 226,474 0.78 ------- TOTAL FOUNDATIONS 307,255 ------- - -------------------------------------- BUILDING STRUCTURE - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 5 Superstructure Rebar 2,431,924 LBS 0.45 1,094,366 3.76 5 Superstructure Concrete 1 LBS 4,053,566 4,053,566 13.94 5 Block Walls - 4 ft high 3,324 SF 11.00 36,564 0.13 5 Block Walls - 8'2" high 3,955 SF 11.00 43,505 0.15 5 Block Walls - 12'-2" high 4,162 SF 11.00 45,782 0.16 5 Metal Stairs & Landings 13 FLTS 7,800.00 101,400 0.35 5 Temporary Stair Tower 1 LS 15,000.00 15,000 0.05 5 Misc Metals 1 LS 30,000.00 30,000 0.10 5 Railing @ Ramps & SE Stair 334 LF 125.00 41,750 0.14 --------- TOTAL BUILDING STRUCTURE 5,461,932 ---------
Page 2 64 Webcor Builders
EXTERIOR ENVELOPE (VERTICAL) - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 6 HM Doors & Frames - 3' x 7' 17 EA 750.00 12.750 0.04 6 HM Doors & Frames - 6' x 7' 3 EA 2,000.00 6,000 0.02 6 Overhead Rolling Grill 0 EA 0.00 0 0.00 Not Required ------ TOTAL EXTERIOR ENVELOPE (VERTICAL) 18,750 ------ WATERPROOFING, INSULATION & ROOFING - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 7 Miradrain @ Perimeter Walls 46,893 SF 3.00 140,679 0.48 With Volclay backing 7 Flashing & Sheet Metal 1 LS 5,000.00 5,000 0.02 7 Exhaust Grates/Hoods 4 EA 7,500.00 30,000 0.10 ALLOWANCE 7 Misc. Joint Sealers 1 LS 5,000.00 5,000 0.02 ------- TOTAL WATERPROOFING, INSULATION, & ROOFING 180,679 ------- INTERIOR CONSTRUCTION - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 8 Misc. Rough Carpentry 1 LS 15,000.00 15,000 0.05 8 Core & Shaft Walls 3.5 FLR 10,000.00 35,000 0.12 Per Floor Allowance 8 Elevator Floors + Base 844 SF 7.50 6,330 0.02 8 Misc. Painting 3.5 FLR 10,000.00 35,000 0.12 ------ TOTAL INTERIOR CONSTRUCTION 91,330 ------ SPECIALTIES - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 9 Signage 0 LS 0.00 0 0.00 9 Fire Extinguisher & Cabinets 28 EA 150.00 4,200 0.01 9 Toilet and Bath Accessories 0 EA 0.00 0 0.00 ----- TOTAL SPECIALTIES 4,200 ----- BUILDING EQUIPMENT - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 10 Parking Control Equipment 0 0.00 0 0.00 Not Provided -- TOTAL BUILDING EQUIPMENT 0 -- SPECIAL CONSTRUCTION - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 11 Special Construction 0 EA 0.00 0 0.00 -- TOTAL SPECIAL CONSTRUCTION 0 -- Page 3
65 WEBCOR BUILDERS
BUILDING FURNISHINGS WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 12 WINDOW COVERINGS 0 EA 0.00 0 0.00 TOTAL BUILDING FURNISHINGS 0 -------------------------- ------- ELEVATORS WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 13 Four Stop Hydro, 150 fpm 2 EA 62,500.00 125,000 0.43 Standard Cabs 13 Cab Floors 2 EA 1,500.00 3,000 0.01 Floors Only TOTAL ELEVATORS 128,000 --------------- ------- FIRE SPRINKLERS WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 14 Fire Sprinkler System 289,154 SF 0.80 231,323 0.80 TOTAL FIRE SPRINKLERS 231,323 --------------------- ------- PLUMBING WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 15 Parking Drainage 1 LS 56,000.00 56,000 0.19 Floor/trench Drains TOTAL PLUMBING 56,000 -------------- ------- H.V.A.C. WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 16 Ventilation & Exhaust 289,154 SF 0.75 216,866 0.75 TOTAL H.V.A.C. 216,866 -------------- ------- ELECTRICAL WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 17 Electrical System 289,154 SF 1.02 296,094 1.02 17 Plaza Lighting, Allowance 0 LS 0.00 0 0.00 See Sitework TOTAL ELECTRICAL 296,094 ---------------- -------
Page 4 66 WEBCOR BUILDERS
MISCELLANEOUS EXPENSES - ----------------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 18 SAFETY INSPECTIONS 22 DY 375 8,250 0.03 18 LIABILITY INSURANCE 0.58% LS 9,650,000 55,970 0.19 18 PRIME CONTRACTOR BOND 0.00% LS 0 0 0.00 NOT INCLUDED 18 SUBCONTRACTOR BONDS 1.50% LS 800,282 12.004 0.04 MEPS Only 18 ARCHITECTURAL/ENGR. SERVICES 0 LS 0 0 0.00 BY OWNER 18 TESTING AND INSPECTION 0 LS 0 0 0.00 BY OWNER 18 FINAL CLEAN UP 290,862 SF 0.15 43,629 0.15 18 FEES AND PERMITS 0 LS 0 0 0.00 BY OWNER TOTAL MISCELLANEOUS SERVICES 119,854 ---------------------------- ------- CONTINGENCY - ----------------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 19 PROJECT CONTENTENCY @ 1% 1.00% EA 10,100,000 100,000 0.34 TOTAL CONTINGENCY 100,000 ----------------- ------- CONTRACTOR JOB EQUIPMENT - ----------------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 20 JOBSITE CRANES 1 LS 0.00 0 0.00 By subcontractors 20 CRANE MOBILIZATION 1 LS 0.00 0 0.00 20 TEMPORARY EQUIPMENT 1 LS 0.00 0 0.00 20 MANLIFT 1 LS 0.00 0 0.00 20 EQUIPMENT, TOOLS, VEHICLES 1 LS 18,760.00 18,760 0.06 20 EXPENDABLE MATERIALS 1 LS 4,900.00 4,900 0.02 TOTAL CONTRACTOR JOB EQUIPMENT 23,660 ------------------------------ -------
Page 5 67 WEBCOR BUILDERS EXHIBIT "F" May 5, 1997 WEBCOR BUILDERS JOB #295 SYSTEMS ESTIMATE Project: CCS-OFFICE BUILDING Location: CUPERTINO CM: SARES REGIS Owner: SYMANTEC Architect: HOK/GUZZARDO Estimate Date: 25-Feb-97 Estimator: SRN & Rich Lamb Site Area O/S Building: 57,000 Square Feet Estimate #: DD-January 31, 1997 Schedule: 12 months
- --------------------------------------------------------------------------------------------------------------------------- WBI CODE SYS DESCRIPTION PRICE COMMENTS - --------------------------------------------------------------------------------------------------------------------------- 1 GENERAL CONDITIONS 0 2 SITEWORK 462,594 3 LANDSCAPE AND IRRIGATION 272,300 4 FOUNDATIONS 0 5 BUILDING STRUCTURE 7,500 6 EXTERIOR ENVELOPE (VERTICAL) 0 7 WATERPROOFING, INSULATION, & ROOFING 150,800 8 INTERIOR CONSTRUCTION 0 9 SPECIALTIES 0 10 BUILDING EQUIPMENT 0 11 SPECIAL CONSTRUCTION 0 12 BUILDING FURNISHINGS 0 13 ELEVATORS 0 14 FIRE SPRINKLERS 0 15 PLUMBING 80,500 16 HVAC 0 17 ELECTRICAL 16,000 18 MISCELLANEOUS EXPENSES 9,068 19 CONTINGENCY 22,000 20 CONTRACTOR JOB EQUIPMENT 0 ---------- SUBTOTAL 1,022,762 ---------- CONTRACTORS FEE 2.5% 25,569 ---------- TOTAL SITEWORK COSTS $1,048,331 ----------
Page 1 68 WEBCOR BUILDERS
GENERAL CONDITIONS WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 01 - 010 1 GENERAL CONDITIONS 1 LS 0 0.00 ------- TOTAL GENERAL CONDITIONS 0 ------- SITEWORK WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 2 Clear & Grub Site 0 SF 0.75 0 0.00 2 City Street A/C repair 1 LS 20,000.00 20,000 0.35 Allowance 2 Grading @ S/E P.L. for ramp & Turf Road 1 LS 7,500.00 7,500 0.13 2 Heavy base for East P.L. sidewalk 1,800 SF 3.00 5,400 0.09 Vehicular Concrete Paving NIC 2 Concrete Plaza Paving 8,380 SF 6.00 50,280 0.88 Front & Rear Plaza 2 Slate Paving 2,680 SF 19.50 52,260 0.92 Front & Rear Plaza 2 Foam Fill @ Slate & Int. Type Paving 480 CY 71.67 34,402 0.60 Front & Rear Plaza 2 Turf Paver Fire Lane 5,371 SF 6.00 32,226 0.57 At East Property line 2 Asphalt Fire Lane 1,500 SF 4.25 6,375 0.11 At East Property line 2 West City Sidewalk 1,900 SF 4.50 8,550 0.15 Includes Base Prep. 2 North Sidewalk 714 SF 4.50 3,213 0.06 Includes Base Prep. 2 On site Sidewalks 1,517 SF 5.50 8,344 0.15 Includes Base Prep. 2 New curbs at No. & East P.L.'s 600 LF 11.00 6,600 0.12 2 Storm/Sewer/Water 1 LS 40,000.00 40,000 0.70 Allowance 2 Fountain & Pool 0 LS 0.00 0 0.00 Eliminated From Scope 2 Concrete Sealing Walls 4ft wide 130 LF 370.00 48,100 0.84 2 Concrete Planter seat wall 18" wide 792 LF 145.00 114,840 2.01 2 Concrete Mow Bands 101 LF 5.00 505 0.01 2 Entry Steps 160 LF 25.00 4,000 0.07 2 Project Sign Wall 1 LS 20,000.00 20,000 0.35 PIP Concrete Sign Allowance --------- TOTAL SITEWORK 462,594 --------- LANDSCAPE & IRRIGATION WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 3 Planting 1 LS 61,600.00 61,600 1.08 Jensen Quote 3 Redwood Headerboard 1 LS 10,000.00 10,000 0.18 Jensen Quote 3 Irrigation 1 LS 53,100.00 53,100 0.93 Jensen Quote 3 Normal Weight Soil on Structure 1 LS 65,300.00 65,300 1.15 Jensen Quote 3 Soil Preparation, fertilizer, bark mulch 1 LS 9,800.00 9,800 0.17 Jensen Quote 3 Volleyball Pit 1 LS 10,000.00 10,000 0.18 No Equipment 3 Clean up and 60 day maintenance 1 LS 2,600.00 2,600 0.05 Jensen Quote 3 Redwood Headerboard 998 LF 50.00 49,900 0.88 Assume 2 ft Tall 3 Redwood Headerboard 1 LS 10,000.00 10,000 0.18 @ S/E P.L. -------- TOTAL LANDSCAPE & IRRIGATION 272,300 -------- FOUNDATIONS WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 4 Foundation Rebar 0 LBS 0.00 0 0.00 4 Foundation Rebar 0 CY 0.00 0 0.00 ------- TOTAL FOUNDATIONS 0 -------
Page 2 69 WEBCOR BUILDERS
- -------------------------------------- BUILDING STRUCTURE - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 5 Shotcrete Wall Rebar 0 LBS 0.45 0 0.00 5 Metal Deck Topping Mesh 0 SF 0.45 0 0.00 5 Misc 0 LBS 0.45 0 0.00 5 Misc - Elevator Pits, Curbs, Etc 0 LS 0.00 0 0.00 5 Topping over Waterproofed Deck @ grade 0 SF 2.00 0 0.00 5 Shotcrete Walls 0 CY 0.00 0 0.00 5 Interior Ramp Wall 0 SF 0.00 0 0.00 5 Column Bases 0 EA 0.00 0 0.00 5 Topping @ Metal Deck 0 SF 0.00 0 0.00 5 Block Walls - 4 ft high 0 SF 11.00 0 0.00 5 Steel Framing @ Parking Garage 0 TNS 0.00 0 0.00 5 Metal Decking 0 SF 0.00 0 0.00 5 Metal Stairs & Landings 0 FLTS 7,800.00 0 0.00 5 Hand Rails 50 LF 150.00 7,500 0.13 ----- TOTAL BUILDING STRUCTURE 7,500 ----- - -------------------------------------- EXTERIOR ENVELOPE (VERTICAL) - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 6 Hollow Metal Doors & Frames 0 EA 750.00 0 0.00 6 Overhead Rolling Grill 0 EA 10,000.00 0 0.00 -- TOTAL EXTERIOR ENVELOPE (VERTICAL) 0 -- - -------------------------------------- WATERPROOFING, INSULATION, & ROOFING - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 7 Fireproofing @ Steel 0 SF 1.65 0 0.00 7 Waterproof Deck o/s Bldg Line @ Concrete 15,000 SF 3.00 45,000 0.79 7 Waterproof Deck o/s Bldg Line @ Landscape 42,000 SF 2.40 100,800 1.77 7 Shotcrete Wall Waterproofing 0 SF 3.00 0 0.00 7 Flashing & Sheet Metal 0 SF 5,000.00 0 0.00 7 Louvers @ Elevator Shafts/ Garage 0 LS 10,000.00 0 0.00 7 Misc. Joint Sealers 1 LS 5,000.00 5,000 0.09 ------- TOTAL WATERPROOFING, INSULATION, & ROOFING 150,800 ------- - -------------------------------------- INTERIOR CONSTRUCTION - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 8 Misc. Rough Carpentry 0 LS 15,000.00 0 0.00 8 Core & Shaft Walls 0 FLR 15,000.00 0 0.00 Per Floor Allowance 8 Misc. Painting 0 FLR 2,500.00 0 0.00 -- TOTAL INTERIOR CONSTRUCTION 0 --
Page 3 70 WEBCOR BUILDERS
- -------------------------------------- SPECIALTIES - -------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 10-520 9 FIRE EXTINGUISHERS & CABINETS 0 EA 150.00 0 0.00 10-800 9 TOILET AND BATH ACCESSORIES 0 EA 155.00 0 0.00 ------- TOTAL SPECIALTIES 0 ------- - -------------------------------------- BUILDING EQUIPMENT - -------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 11-400 10 FOOD SERVICE EQUIPMENT 0 ------- TOTAL BUILDING EQUIPMENT 0 ------- - -------------------------------------- SPECIAL CONSTRUCTION - -------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 13-000 11 SPECIAL CONSTRUCTION 0 EA 0.00 0 0.00 ------- TOTAL SPECIAL CONSTRUCTION 0 ------- - -------------------------------------- BUILDING FURNISHINGS - -------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 12-500 12 WINDOW COVERINGS 0 EA 0.00 0 0.00 ------- TOTAL BUILDING FURNISHINGS 0 ------- - -------------------------------------- ELEVATORS - -------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 13 Four Stop Hydro, 150 fpm 0 EA 50,000.00 0 0.00 Standard Cabs 14-205 13 CAB FLOORS 0 EA 1,500.00 0 0.00 ------- TOTAL ELEVATORS 0 ------- - -------------------------------------- FIRE SPRINKLERS - -------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 14 Fire Sprinkler System 0 SF 0.80 0 0.00 ------- TOTAL FIRE SPRINKLERS 0 ------- - -------------------------------------- PLUMBING - -------------------------------------- WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ----------------------------------------------------------------------------------------------------------------------------------- 15 Parking Drainage 0 LS 53,000.00 0 0.00 15 Drainage for Area o/s Building Line 1 LS 71,500.00 71,500 1.25 15 Water Supply For Irrigation 1 LS 9,000.00 9,000 0.16 ------- TOTAL PLUMBING 80,500 ------- - -------------------------------------- H.V.A.C. - --------------------------------------
Page 4 71 Webcor Builders
- ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 16 Ventilation & Exhaust 0 SF 0.75 0 0.00 -- TOTAL H.V.A.C. 0 -- ELECTRICAL - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 17 Electrical System 0 SF 1.10 0 0.00 17 Plaza Lighting, Allowance 1 LS 18,000.00 18,000 0.32 ------ TOTAL ELECTRICAL 18,000 ------ MISCELLANEOUS EXPENSES - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 18 - 200 18 SAFETY INSPECTIONS 4 DY 375 1,500 0.03 BY OWNER 18 - 250 18 LIABILITY INSURANCE 0.58% LS 1,050,000 6,090 0.11 18 - 300 18 PRIME CONTRACTOR BOND 0.00% LS 0 0 0.00 NOT INCLUDED 18 - 400 18 SUBCONTRCTOR BONDS 1.50% LS 98,500 1,478 0.03 MEPS ONLY 18 - 500 18 GROSS RECEIPTS TAX (S.F. ONLY) 0.00% LS 1,050,000 0 0.00 18 - 675 18 ARCHITECTURAL/ENGR. SERVICES 0 LS 0 0 0.00 BY OWNER 18 - 750 18 TESTING AND INSPECTION 0 LS 0 0 0.00 BY OWNER 18 - 900 18 FINAL CLEAN UP 0 SF 0.15 0 0.00 18 - 950 18 FEES AND PERMITS 0 LS 0 0 0.00 BY OWNER ----- TOTAL MISCELLANEOUS EXPENSES 9,068 ----- CONTINGENCY - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 19 - 100 19 PROJECT CONTINGENCY @2% 2% EA 1,100,000 22,000 0.39 ------ TOTAL CONTINGENCY 22,000 ------ CONTRACTOR JOB EQUIPMENT - ------------------------------------------------------------------------------------------------------------------------------ WBI CODE SYS DESCRIPTION QUANTITY UNIT UNIT PRICE PRICE $/SF COMMENTS - ------------------------------------------------------------------------------------------------------------------------------ 17 - 061 20 JOBSITE CRANES 0 LS 7,500.00 0 0.00 17 - 062 20 CRANE MOBILIZATION 0 LS 0.00 0 0.00 17 - 063 20 TEMPORARY EQUIPMENT 0 LS 3,300.00 0 0.00 17 - 064 20 MANLIFT 0 LS 0.00 0 0.00 17 - 065 20 EQUIPMENT, TOOLS, VEHICLES 0 LS 14,175.00 0 0.00 17 - 066 20 EXPENDABLE MATERIALS 0 LS 4,200.00 0 0.00 -- TOTAL CONTRACTOR JOB EQUIPMENT 0 -- Page 5
72 SYMANTEC CC5 OFFICE BUILDING/PARKING STRUCTURE EXHIBIT "F" MAY 5, 1997 WEBCOR BUILDERS JOB #295 ASSUMPTIONS/QUALIFICATIONS 1. OFFICE BUILDING: a. Structural steel frame weight is 12 lb/sf. b. Precast is a white matrix for the bulk of the facade with a darker color as accented on the drawings. c. Walls in loading dock/vault area are 8" CMU block. d. Stairs are pre-fab, pre-poured Sharon Stairs (or equal). No floor covering is provided in the shell estimate. e. Roofing, including terraces, is a 4-ply built-up roof. f. Doors at core rooms are 3' x 8'0" oak or equal with non-mortised latch sets. g. Doors off elevator lobbies are manufactured assemblies by "Total Door". h. The punched and strip windows are standard extrusions (2" x 4-1/2") with Kynar finish. The curtain wall at the entries is a 2-1/2" x 10" internally reinforced extrusion. The steps in the glazing are accomplished by applying surface stops to the mullions at the rear of the mullion. The entry doors are 1/2" tempered glass with Von Duprin panic hardware. i. The drywall scope includes all core walls, shaft walls, and penthouse but does not include perimeter or column furring. j. The rest rooms will have ceramic tile on the floor in the toilet areas, full height on the three wet walls in the toilet area and tile base only in the lavatory area. The remaining walls will have vinyl wall covering and the lavatory area floor will be carpeted with the tenant improvements. k. Painting is limited to exterior metals, all door and frames, rest room ceilings, and stairwells. 73 SYMANTEC - CC5 OFFICE BUILDING/PARKING STRUCTURE ASSUMPTIONS/QUALIFICATIONS Page 2 - -------------------------------------------------------------------------------- l. The lobby allowance is based on the sketches by HOK dated February 14, 1997. No allowance is included for the upper floors. m. Window washing sockets and tiebacks are included. Davit arms and scaffold are excluded. n. Insulation between the B1 level and the first floor is a sprayed on material with R-11 rating. o. Canopies are assumed to be painted steel with 9/16" laminated glass. p. The passenger elevators are standard hydraulic 3000#, 150 fpm with center opening doors. The "freight" elevator is a standard 4000# premanufactured hydraulic car as made by Otis, Schindler, etc. This is not an industrial type freight elevator. q. Janitor sinks are included on all floors. r. Faucets are manual and flush valves are automatic with battery operators. s. The HVAC system is a built-up chilled water system with fan capacity for 4 watts/sf and chiller capacity for 6 watts/sf. The HVAC price takes into account the PG&E rebates which are available. The duct loops and fan coils are not included in the shell estimate. t. The electrical system provides a 3000 amp 480/277 service and a 125 kw backup generator to handle egress lighting, telephone switch, security, fire alarm, and one elevator. This system will provide 5 watts/sf for plug loads. 2. PARKING STRUCTURE a. The basement will be shored and then have shotcrete walls installed against a miradrain with volclay backing. The shotcrete finish will be a rubber float. b. A perimeter foundation drain is installed around the base of the perimeter footings which ties into a central sump/ejector. c. Structural design is a combination of the January 31, 1997 design development drawings and Nishkian input provided on December 31, 1996. d. Interior walls at stairs are 4 ft. CMU with drywall above to the underside of the deck. Elevator shafts are full height CMU. e. Doors and frames are 3' x 7' hollow metal with non mortised latch sets. 74 SYMANTEC - CC5 OFFICE BUILDING/PARKING STRUCTURE ASSUMPTIONS/QUALIFICATIONS Page 3 - ------------------------------------------------------------------------------- f. No gates or grilles are provided at the two ramps to restrict access and no parking control equipment is included. g. Painting is limited to the elevator and stair cores. The columns, walls, and ceiling are not painted. h. The elevators are 3000 lb, 150 fpm, standard hydraulic elevators. The cabs are to be standard with an allowance included for the floors only. i. The parking structure will be ventilated as required by code and will have CO sensors regulating the fans. j. The basement slab on grade will be installed over the insitu subgrade material without rock or sand. k. Lighting will be provided by high pressure sodium lamps. l. All signage and graphics in the basement shall be provided by the Owner. 3. SITEWORK: a. An allowance is included to upgrade the sub-base for the sidewalk at the apartments on the east side. b. Plaza paving is slate tile bands set in between colored concrete fields. c. The fountain and pool have been deleted per the design development drawings. d. All plaza lighting is included as an $18,000 allowance. e. The curb and gutter and sidewalk along De Anza are to remain as is and are therefore not included as new in the estimate. f. Volleyball equipment is to be provided by the Owner. g. All site walls are standard gray concrete. h. The soil on top of the deck will be a standard weight material as Nishkian has designed the structure to accommodate this. EX-10.43 11 ASSET PURCHASE AGREEMENT DATED MARCH 27, 1997 1 EXHIBIT 10.43 HP AND SYMANTEC CONFIDENTIAL EXECUTION COPY ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into and is effective this 27th day of March, 1997, by and between Hewlett-Packard Company, a California corporation ("HP") and Symantec Corporation, a Delaware corporation ("Symantec"). RECITALS: A. Symantec has been operating a business to design, develop, enhance, test, manufacture, distribute and support the products, technologies and intellectual property known to Symantec and its customers as all versions of Norton Administrator for Networks ("NAN"), Norton Desktop Administrator ("NDA"), Expose ("Expose") and work-in-progress and developments intended for the upcoming "Big Bang" release (collectively, the "Business"). B. Symantec's business of (i) designing, developing, enhancing and testing the Products and Work-in-Progress, (ii) manufacturing and distributing specifically for the Products and Work-in-Progress, and (iii) supporting primarily the Products and Work-in-Progress, constitutes the "Products Business." C. Pursuant to this Agreement, Symantec is selling and HP is buying the Assets. D. Pursuant to the License Agreement, HP is licensing from Symantec certain intellectual property relating to the Business, and Symantec is licensing from HP certain intellectual property relating to the Business. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants, representations, warranties, conditions and agreements herein contained, the parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS Section 1.1 Definitions. In this Agreement, the following terms have the meanings specified or referred to in this Section 1.1 and shall be equally applicable to both the singular and plural forms. Any agreement referred to below shall mean such agreement as amended, supplemented and modified from time to time to the extent permitted by the applicable provisions thereof and by this Agreement. "Affiliate" means any entity which controls, is controlled by, or is under common control with, Symantec or HP, as the case may be. An entity shall be deemed to be in control of another entity only if, and for so long as, it owns or controls more than fifty percent (50%) of the shares of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority). "Assets" has the meaning specified in Section 2.1 hereto. "Assumed Liabilities" has the meaning specified in Section 2.4 below. 1 2 "Books and Records" means all copies of all books, records, files and papers related to the Products Business or the Assets including drawings, engineering information, computer programs (including source code), software programs, manuals and data, sales and advertising materials, sales and purchases correspondence, trade association files, research and development records, softcopy of lists and databases of present and former customers, suppliers, end user registrations and order history, research and development personnel, sales and marketing personnel, employment and other records (including, without limitation, the personnel files for the New HP Regular Personnel), and all copies and recordings of the foregoing. To the extent that Books and Records relate primarily to operations other than the Products Business, Symantec will only deliver to Purchaser a copy of such Books and Records and shall retain the original. "Business" has the meaning specified in paragraph A of the Recitals to this Agreement. "HP" has the meaning specified in the first paragraph of this Agreement. "HP Ancillary Agreements" means all agreements, instruments and documents being or to be executed and delivered by HP under this Agreement or in connection herewith pursuant to Section 3.3 below. "HP Group Member" means HP and its Affiliates and their respective successors and assigns. "CDA" means the Confidential Disclosure Agreement between Symantec and HP effective November 15, 1996. "Claim Notice" has the meaning specified in Section 10.4 below. "Closing" has the meaning specified in Section 3.1 below. "Closing Date" has the meaning specified in Section 3.1 below. "Code" means the Internal Revenue Code of 1986, as amended. "Components" means component parts, raw materials supplies and other materials which are of a type generally quantified in the bills of materials and which are required for the production and test of the Products and the Work-in-Process. "Court Order" means any judgment, order, award or decree of any foreign, federal, state, local or other court or tribunal, or any Governmental Body and any award in any arbitration proceeding. "Disclosure Letter" has the meaning specified in Article 4 below. "Encumbrance" means any lien, claim, charge, security interest, mortgage, pledge, easement, conditional sale or other title retention agreement, defect in title, covenant or other restrictions of any kind. "Environmental Laws" shall mean all Requirements of Laws which relate to any Hazardous Material or the use, handling, transportation, production, spill, leaking, pumping, injection, deposit, disposal, discharge, dispersal, release, threatened release, migration, emission, sale, or storage of, or the exposure of any Person to, a Hazardous Material. 2 3 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Excluded Assets" has the meaning specified in Section 2.3 below. "Expenses" means any and all expenses incurred in connection with investigating, mitigating, re-engineering to avoid, mitigate or terminate, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including, without limitation, court filing fees, court costs, arbitration fees or costs, witness fees, any engineering costs, and reasonable fees and disbursement of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals). "Expose" has the meaning described in Recital A above. "Government Contract" means any Government prime contract, or any subcontract at whatever tier under a Government prime contract, or any basic ordering agreement, letter contract, purchase order or delivery order of any kind, including without limitation, as to all of the foregoing, all amendments, modifications and options thereunder relating thereto. "Governmental Body" means any federal, state, county, local, district, public authority, public agency, court, or any other political subdivision, public corporation, or governmental or regulatory authority whether foreign or domestic. "Governmental Permits" has the meaning specified in Section 4.5 below. "HSR Filing" has the meaning specified in Section 7.14 "Hazardous Material" shall mean any material or substance that is now or hereafter prohibited or regulated by any Requirement of Law or that is now or hereafter designated by any Governmental Body to be radioactive, toxic, hazardous or otherwise a danger to health, reproduction or the environment. "Instrument of Assignment and Assumption" means the Instrument of Assignment and Assumption in the form of Exhibit C hereto executed as of the Closing Date. "Intellectual Property" means worldwide patents, patent applications, patent rights, trademarks, trademark registrations, trademark applications, licenses, service marks, products marks, trade names, all other names embodying products or product goodwill (or both) copyright registrations, mask works, copyrights (including those in computer programs, software, including all source code and object code, programming tools, drawings, specifications and data), designs, trade secrets, technology, inventions, discoveries and improvements, know-how; proprietary rights, formulae, processes, technical information, confidential and proprietary information, whether tangible or intangible, and all other intellectual property rights, whether or not subject to statutory registration or protection. "IRS" means the Internal Revenue Service. "Leased Premises" means approximately 31,276 square feet of office space located at 2501 Colorado Avenue, Santa Monica, California and approximately 7,230 square feet of lab space located at 2500 Broadway, Santa, Monica, California which is leased or occupied by Symantec under the Premises Lease at a current monthly rental rate on a gross basis of approximately $3 per square foot. 3 4 "Letter of Intent" means the Outline of Principal Terms dated February 19, 1997 by and between Symantec and HP. "License Agreement" means the License Agreement in the form of Exhibit D hereto, executed as of the date of this Agreement and effective as of the Closing Date. "Losses" means any and all losses, costs, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, damages, expenses, deficiencies or other charges. "Marketing Information" means the following information relating to the Products Business and support of the Products and Work-in-Progress, in any form whatsoever, in Symantec's possession or control: all customer and marketing information and materials relating to the Products Business and support of the Products and Work-in-Progress, including without limitation (a) advertisements, advertising schedules, press releases, brochures and other promotional materials; (b) strategic data, including marketing and development plans, forecasts and forecast assumptions and volumes, and future plans and potential strategies of Symantec which have been or are being discussed; (c) financial data, including price and cost objectives, price lists, pricing and quoting policies and procedures; and (d) customer data, including customer lists, names of customers and their representatives, data provided by or about prospective, existing or past customers, customer service materials, and the type, quantity and specifications of products and services purchased, leased or licensed by customers of Symantec. "NAN" has the meaning described in Recital A above. "NDA" has the meaning described in Recital A above. "NSMD" has the meaning specified in Section 2.6 below. "New HP Regular Personnel" means Regular Personnel who will become HP's regular personnel on the first business day after the Closing Date. "OSHA" means the Occupational Safety and Health Act, 29 U.S.C. Section Section 651 et seq., any amendment thereto, any successor statute, and any regulations promulgated thereunder. "pcANYWHERE OEM" means the Second Amendment to Software License Agreement between Symantec and HP in the form of Exhibit B hereto executed as of the date of this Agreement and effective as of the Closing Date. "Permitted Encumbrances" means (a) liens for taxes and other governmental charges and assessments which are not yet due and payable, (b) liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other like liens arising in the ordinary course of business for sums not yet due and payable and (c) other liens or imperfections on property which are not material in amount or do not materially detract from the value of or materially impair the existing use of the property affected by such lien or imperfection. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Body. 4 5 "Premises Lease" means the leases or subleases relating to the Leased Premises. "Products" means all past and current versions of NAN, NDA and Expose. "Purchase Price" has the meaning specified in Section 2.6 below. "Regular Personnel" means all employees of the Symantec engaged in the Products Business on a full-time basis with the exception of (i) employees who are currently on leave of absence without a job guarantee, (ii) employees who are no longer physically able to perform the full range of essential requirements of their position, (iii) employees who are on probation, and (iv) employees who have indicated their intention not to become New HP Regular Personnel. Part-time employees and independent contractors engaged in the Business are not Regular Personnel for the purposes of this Agreement. "Requirement of Laws" means any foreign, federal, state and local laws, statutes, regulations, rules, guidelines, codes, ordinances, judgments, injunctions, decrees, orders, permits, approvals, treaties or protocols now or hereafter enacted, adopted, issued or promulgated by any Governmental Body (including, without limitation, those pertaining to electrical, building, zoning, environmental and occupational safety and health requirements) or common law. "Sublease" means the Sublease Agreement among Symantec, HP and the landlord of the Leased Premises attached hereto as Exhibit F, executed as of the date of this Agreement and effective as of the Closing Date. "Sublease Letter Agreement" means the letter agreement between HP and Symantec relating to certain post-closing matters relating to the Sublease. "Symantec" has the meaning specified in the first paragraph of this Agreement. "Symantec Ancillary Agreements" means all agreements, instruments and documents being or to be executed and delivered by Symantec under this Agreement or in connection herewith pursuant to Section 3.4 below. "Symantec Group Member" means Symantec and its Affiliates and their respective successors and assigns. "Symantec Property" means any real or personal property, plant, building, facility, structure, underground storage tank, equipment or unit, or other asset owned, leased or operated by Symantec and used in the Business. "Tax" means any federal, state, local or foreign net income, alternative or add-on minimum, gross income, gross receipts, property, sales, use, transfer, gains, license, excise, employment, payroll, withholding or minimum tax, or any other tax custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Body. "Tax Return" means any return, report or similar statement required to be filed with respect to any Taxes (including any attached schedules), including, without limitation, any information return, claim for 5 6 refund, amended return and declaration of estimated Tax. "Technical Support People" has the meaning specified in Section 7.8 below. "Transfer Taxes" has the meaning specified in Section 2.6 below. "Transferred Agreements" has the meaning specified in Section 4.10 below. "Transition Agreement" means the Transition Agreement between Symantec and HP attached hereto as Exhibit G, executed as of the date of this Agreement and effective as of the Closing Date. "Transition OEM" means the Software License Agreement between Symantec and HP attached hereto as Exhibit E, executed as of the date of this Agreement and effective as of the Closing Date. "Transition Period" has the meaning specified in Section 7.8 below. "Work-in-Progress" means work-in-progress for the "Big Bang" release. ARTICLE 2 PURCHASE AND CONSIDERATION Section 2.1 Purchase and Sale. Subject to the terms and conditions of this Agreement, Symantec agrees to transfer, convey, assign and deliver to HP on the Closing Date (as hereinafter defined), and HP agrees to buy from Symantec, free and clear of all Encumbrances, all the assets and properties, tangible and intangible, real, personal or mixed, owned, leased or used by Symantec described in this Section 2.1 (the "Assets"): (a) All Intellectual Property for the products, components, build system projects and Marketing Information in Exhibit A-1 hereto; (b) The Transferred Agreements listed on Exhibit A-2 hereto; (c) All Intellectual Property owned by Symantec and necessary for, used in or associated with the Products Business, except the Intellectual Property licensed under Section 2.2; (d) The Books and Records; (e) Capital Equipment and Hard Assets. All capital equipment and other hard assets listed on Schedule 2.1(e) hereto; (f) All planning and management models and tools used in the Products Business; and (g) Pursuant to the Sublease, the Leased Premises. Section 2.2 Licenses. As described in the License Agreement, (a) Symantec will license to HP certain products, technologies and intellectual property, and (b) HP will license to Symantec certain 6 7 products, technologies and intellectual property. Section 2.3 Assets and Business Not to be Transferred. Symantec shall retain and HP shall not acquire the following assets, properties and business of Symantec, which together shall constitute the Excluded Assets: (a) All cash, bank deposits and cash equivalents; (b) All promissory notes and accounts receivable; (c) All owned real property and options to acquire real property; (d) Symantec's interest in and to all telephone, telex and telephone facsimile numbers and other directory listings currently used or owned by Symantec; (e) All contracts of insurance; (f) All rights, title and interest in the names "Norton" and "Symantec" and the trademarks "Norton" and "Symantec;" (g) All contracts of distribution including, without limitation, any exclusive distribution agreement; and (h) All other assets of Symantec other than the Assets. Section 2.4 Assumption of Liabilities and Obligations. Subject to the terms and conditions contained herein, on the Closing Date HP shall assume and agree thereafter to pay, perform and discharge only the obligations and liabilities of Symantec under the Transferred Agreements, but HP shall not assume or pay, perform or discharge any such obligations or liabilities arising out of any breach or default by Symantec under the Transferred Agreements prior to the Closing Date. The foregoing are hereinafter referred to collectively as the "Assumed Liabilities." HP's assumption of the Assumed Liabilities is intended to inure solely to the benefit of Symantec, and, not withstanding anything herein to the contrary, such assumption is not intended and shall not be construed to give any third parties any greater or additional benefits than they would have but for HP's assumption. Section 2.5 Liabilities and Obligations Not Assumed. Notwithstanding anything in this Agreement to the contrary, except as set forth in Section 2.4 above or as set forth below in this Section 2.5, HP shall not assume or have any responsibility for any liability, obligation or commitment of any nature of Symantec, whether now or hereafter existing, and Symantec covenants that it shall retain all such liabilities, obligations or commitments, including without limitation: (a) Any liabilities, obligations, commitments made by Symantec to any customer, including without limitation for service, support or maintenance of any kind; (b) Any liabilities for any Taxes, including without limitation Transfer Taxes, of any kind relating to or attributable to any previous period (or any portion of any period) ending on or prior to the Closing Date levied or imposed upon the Assets, or in connection with this Agreement 7 8 or the transactions contemplated hereby; and (c) Except as set forth in Section 7.5 below or in the offer letters from HP referred to therein any liabilities, obligations or commitments of Symantec to New HP Regular Personnel incurred or made in connection with the Business. Section 2.6 Consideration. The consideration for the transfer of the Assets shall be a stream of cash payments not to exceed an aggregate of $30,000,000 net present value as follows (collectively, the "Purchase Price"): (a) $2,000,000 payable at closing as reimbursement of Symantec's development expenses on "Big Bang" between February 19, 1997 and the Closing Date; (b) Nonrefundable royalties paid as follows: (i) $1,000,000 paid at Closing, and (ii) as set forth on Schedule 2.6(b) to this Agreement, a royalty payable within 45 days after the end of each of HP's fiscal quarters commencing with the quarter ending April 30, 1997 and ending with the quarter ending October 31, 1998, in an amount equal to a percentage of HP's Network and System Management Division's ("NSMD") net revenue, as defined and tracked by NSMD's controller for each such quarter, provided that such amounts will not aggregate more than $27,000,000 net present value. Symantec agrees that neither it nor its auditors will have audit rights or the right to see any financial statements of NSMD or any other HP organization, other than those publicly available. Section 2.7 Allocation of Purchase Price. (a) The royalties paid to Symantec, as set forth in Section 2.6(b) above, will be allocated as follows: (i) $2,071,000 will be allocated to tangible property including fixed assets, diskettes and manuals, and (ii) the remainder will be allocated to intangible property. (b) Symantec and HP will treat, account and report this transaction in accordance with the above allocation for internal accounting purposes and with respect to any returns filed with federal, state or local tax authorities. Section 2.8 Transfer Taxes. Symantec shall pay and promptly discharge when due the entire amount of any and all excise, sales, value-added, use, registration, stamp, transfer and other like Taxes (the "Transfer Taxes") imposed or levied by reason of, in connection with or attributable to this Agreement and the transactions contemplated hereby. The parties shall cooperate with each other to the extent reasonably requested and legally permitted to minimize any Transfer Taxes. ARTICLE 3 CLOSING Section 3.1 The Closing. The transactions contemplated by this Agreement shall be consummated (the "Closing") at the offices of HP, 3000 Hanover Street, Palo Alto, CA 94304, at 10 a.m. local time, on, Wednesday, April 16, 1997, or such other place, time and date as the parties shall agree in writing. The time and date on which the Closing is actually held is sometimes referred to herein as the 8 9 "Closing Date." Section 3.2 Payment. Subject to fulfillment or waiver of the conditions set forth in Article 8 below, at Closing HP shall pay Symantec the first $3,000,000 of the Purchase Price (net of any amounts payable to HP at the Closing under any HP Ancillary Agreements or this Agreement) by delivery of a wire transfer in the amount thereof to Bank of America, 1850 Gateway Boulevard, Concord, CA 94520, FedWire (ABA) 121-000-358, account number 12338-10287, in the name of Symantec Corporation. Section 3.3 HP's Additional Deliveries. Subject to fulfillment or waiver of the conditions set forth in Article 8, at Closing HP shall deliver to Symantec all of the following: (a) The Instrument of Assignment and Assumption duly executed by HP; (b) The certificate contemplated by Sections 7.17, 8.1, 8.2 and 8.3 below, duly executed by an authorized representative of HP; (c) The License Agreement duly executed by HP; (d) The pcANYWHERE OEM Agreement duly executed by HP; (e) The Transition OEM Agreement duly executed by HP; (f) The Transition Agreement duly executed by HP; and (g) The Sublease and the Sublease Letter Agreement duly executed by HP. Section 3.4 Symantec's Deliveries. Subject to fulfillment or waiver of the conditions set forth in Article 9, at Closing Symantec shall deliver to HP all of the following: (a) Copies of the Articles of Incorporation of Symantec certified as of a recent date by the Secretary of State of the State of Delaware; (b) Certificate of Good Standing of Symantec issued as of a recent date by the Secretary of State of the State of Delaware; (c) Certificate of the secretary or an assistant secretary of Symantec, dated the Closing Date, in form and substance reasonably satisfactory to HP, as to (i) no amendments to the Certificate of Incorporation of Symantec since a specified date; (ii) the by-laws of Symantec; (iii) the resolutions of the Board of Directors of Symantec authorizing the execution and performance of this Agreement, the Symantec Ancillary Agreements and the contemplated transactions; (d) The Instrument of Assignment and Assumption duly executed by Symantec; (e) All consents, waivers or approvals required to be obtained by Symantec with respect to the Assets or the consummation of the transactions contemplated by this Agreement; (f) The certificates contemplated by Sections 8.1 through 8.3 below, duly executed by an authorized officer of Symantec; 9 10 (g) (i) A copyright registration and assignment for each Product and each Work-in-Progress; (ii) a worldwide trademark assignment for each mark; and (iii) a patent assignment for each patent included in the Assets; (h) The License Agreement duly executed by Symantec; (i) The pcANYWHERE OEM Agreement duly executed by Symantec; (j) The Transition OEM Agreement duly executed by Symantec; (k) The Transition Agreement duly executed by Symantec; and (l) The Sublease duly executed by Symantec and the landlord of the Leased Premises; and the Sublease Letter Agreement duly executed by Symantec. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SYMANTEC As an inducement to HP to enter into this Agreement and to consummate the transactions contemplated hereby, except as set forth in Schedule 4 (the "Disclosure Letter") (which Disclosure Letter shall specifically reference the Sections of this Agreement to which the disclosure therein applies and shall be executed by an authorized officer of Symantec), Symantec represents and warrants to HP as follows: Section 4.1 Organization of Symantec. Symantec is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Symantec is duly qualified to transact business as a foreign corporation and is in good standing in each of the 50 states of the United States in which the ownership or leasing of the Assets or the conduct of the Products Business requires such qualification. Symantec has full power and authority to own or lease and to operate and use the Assets and to carry on the Products Business as now conducted and as now proposed to be conducted pursuant to this Agreement. Symantec has no subsidiaries or affiliated companies, and does not otherwise own or control, directly or indirectly, any equity interest in any corporation, association or business entity, that has any interest in the Assets or the Products Business. Symantec has delivered to HP complete and correct copies of the Certificate of Incorporation and Bylaws of Symantec, in each case as amended to the date hereof, and has delivered or made available minutes of all of directors', directors' committees' and shareholders' meetings that directly discuss the Products Business or the Assets. Section 4.2 Authorization. (a) Symantec has full power and authority to execute, deliver and perform this Agreement and all of the Symantec Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Symantec Ancillary Agreements by Symantec have been duly and validly authorized and approved by all required corporate proceedings on the part of Symantec. This Agreement has been duly authorized, executed and delivered by Symantec and is the legal, valid and binding obligation of Symantec enforceable in accordance with its terms, except (a) as such enforcement may be 10 11 subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights, and (b) as the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, and each of the Symantec Ancillary Agreements has been duly authorized by Symantec and upon execution and delivery by Symantec will be a legal, valid and binding obligation of Symantec enforceable in accordance with its terms. (b) Except as set forth in Section 4.2 of the Disclosure Letter, neither the execution and delivery of this Agreement or any of the Symantec Ancillary Agreements or the consummation of any of the transactions contemplated hereby or thereby nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will: (i) violate, conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance upon any of the Assets under, (1) the Certificate of Incorporation or Bylaws of Symantec, (2) any Transferred Agreement (as defined in Section 4.10), (3) any other note, instrument, agreement, mortgage, lease, license, franchise, permit or other authorization, right, restriction or obligation to which Symantec is a party or any of its properties is subject or by which Symantec is bound, (4) any Court Order to which Symantec is a party or any of its properties is subject or by which Symantec or any of its properties is bound, or (5) any Requirements of Laws affecting Symantec or its property; or (ii) require the approval, consent, authorization or act of, or the making by Symantec of any declaration, filing or registration with any Person. (c) Except for the HSR Filing, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Body is required by or with respect to Symantec in connection with the execution and delivery of this Agreement and the Symantec Ancillary Agreements by Symantec or the consummation by Symantec of the transactions contemplated hereby or thereby. Section 4.3 Taxes. Symantec has filed all Tax Returns which it is required to file and has paid all Taxes which it is required to pay or which have become payable pursuant to any assessment. There are (and as of immediately following the Closing there will be) no Encumbrances on the Assets relating to or attributable to Taxes other than Permitted Encumbrances. Symantec has no knowledge of any basis for the assertion of any such claims which, if adversely determined, would result in an Encumbrance on the Assets, other than Permitted Encumbrances, or otherwise adversely affect HP or HP's use of the Assets. None of the Assets are treated as "tax-exempt use property" within the meaning of Section 168(h) of the Code. Section 4.4 Availability of Assets and Legality of Use. Symantec does not own any real property for the operations of the Products Business. Except (i) as set forth in Section 4.4 of the Disclosure Letter, (ii) for the Excluded Assets, and (iii) the rights granted under the License Agreement, the Assets, in conjunction with the rights granted under the License Agreement, constitute all the rights and intangible assets primarily used for and necessary to operate the Products Business and constitute all the tangible assets primarily used for the Products Business (including, but not limited to, all books, records, computers and computer programs and data processing systems) and are in good condition (subject to normal wear and tear) and serviceable condition and are suitable for the uses for which they are intended. Section 4.5 Governmental Permits. 11 12 (a) Symantec owns, holds or possesses all licenses, franchises, permits, privileges, immunities, approvals and other authorizations from a Governmental Body which are necessary to entitle it to own or lease, operate and use the Assets and to carry on and conduct the Products Business substantially as currently conducted (herein collectively called "Governmental Permits"). Section 4.5 of the Disclosure Letter sets forth a list and brief description of each Governmental Permit, except for such incidental licenses, permits and other authorizations which would be readily obtainable by any qualified applicant without undue burden in the event of any lapse, termination, cancellation or forfeiture thereof. The Governmental Permits to be transferred to HP in connection with the transactions contemplated hereby as indicated in Section 4.5 of the Disclosure Letter are collectively referred to herein as the "Transferred Permits." Complete and correct copies of all of the Transferred Permits have heretofore been delivered to HP by Symantec. (b) (i) Symantec has fulfilled and performed its obligations under each of the Governmental Permits, and no event has occurred or condition or state of facts exists which constitutes or, after notice or lapse of time or both, would constitute a breach or default under any such Governmental Permit or which permits or, after notice or lapse of time or both, would permit revocation or termination of any such Governmental Permit, or which might adversely affect in any material respect the rights of Symantec under any such Governmental Permit; (ii) no notice of cancellation, of default or of any material dispute concerning any Governmental Permit, or of any event, condition or state of facts described in the preceding clause, has been received by, or is known to, Symantec; and (iii) each of the Governmental Permits is valid, subsisting and in full force and effect and may be assigned and transferred to HP in accordance with this Agreement and will continue in full force and effect thereafter, in each case without (x) the occurrence of any breach, default or forfeiture of rights thereunder, or (y) the consent, approval, or act of, or the making of any filing with, any Governmental Body. Section 4.6 Personal Property. Schedule 2.1(e) contains a detailed list of all capital equipment and hard assets used in the Products Business. Schedule 2.1(e) contains a brief description of each lease or other agreement or right, whether written or oral (including in each case the annual rental amount, the expiration date thereof and a brief description of the property covered) under which Symantec is lessee of, or holds or operates, any machinery, equipment, vehicle or other tangible personal property owned by a third Person transferred under this Agreement. Section 4.7 Title to Property. Symantec has good and marketable title to all of the Assets, free and clear of all Encumbrances, except for Permitted Encumbrances. Except as disclosed in Section 4.7 of the Disclosure Letter, the Assets constitute all of the intangible assets which are primarily used for and necessary for the continued conduct of the Products Business as now conducted and all of the tangible assets which are primarily used for the continued conduct of the Products Business as now conducted. Upon delivery to HP on the Closing Date of the instruments of transfer contemplated by Section 3.4 above, Symantec will thereby transfer to HP good and marketable title to the Assets, subject to no Encumbrances, except for Permitted Encumbrances. Section 4.8 Intellectual Property. (a) Symantec owns, or is licensed or otherwise entitled to exercise, without restriction, all rights to the Intellectual Property of the Assets. 12 13 (b) The Disclosure Letter lists (i) all patents, registered copyrights, trade dress, trade names, trademarks, service marks and other company, product or service identifiers and mask work rights, and any applications or registrations therefor, included in the Intellectual Property of the Assets, and specifies the jurisdictions in which each such right has been issued or registered or in which an application for such issuance or registration has been filed, including the respective registration or application numbers, together with a list of all of Symantec's currently marketed products within the Products Business and an indication as to which, if any, of such products have been registered for copyright protection with the United States Copyright Office and any foreign offices; (ii) all licenses, sublicenses and other agreements as to which Symantec is a party and pursuant to which Symantec or any other person is authorized to use any Intellectual Property of the Assets, other than (A) standard object code end user license agreements, (B) standard upgrade insurance agreements, (C) standard support agreements and (D) any other end user upgrade or support agreement that only materially deviates from the standard form agreement by providing that the governing law is other than California law, the product is warranted to comply with the "Year 2000," or Symantec has provided patent indemnification to the other party to the agreement. The Disclosure Letter shall include the full name of such agreements, the full names of all parties thereto, and the effective date thereof. The Disclosure Letter shall also list all parties to whom Symantec has delivered copies of Symantec source code, whether pursuant to an escrow arrangement or otherwise, or parties who have the right to receive such source code. Symantec's standard form(s) of (A) object code end use license agreements, (B) standard upgrade insurance agreements, and (C) standard support agreements are labeled and appended to the Disclosure Letter. Copies of all non-standard licenses, sublicenses, and other agreements identified pursuant to clause (ii) above have been delivered by Symantec to HP. (c) Symantec is not, nor as a result of the execution and delivery of this Agreement or the performance of Symantec's obligations hereunder will be, in violation of, or lose any rights pursuant to any license, sublicense or agreement described in the Disclosure Letter. (d) Symantec is the owner or licensee of, with all necessary right, title and interest in and to (free and clear of any liens, encumbrances or security interests), the Intellectual Property of the Assets and has rights (and except as set forth in the Disclosure Letter is not contractually obligated to pay any compensation to any third party in respect thereof) to the use thereof or the material covered thereby in connection with the services or products in respect of which such rights are being used. (e) No claims with respect to the Intellectual Property of the Assets have been asserted or, are threatened by any person and Symantec does not know of any claims (i) to the effect that the manufacture, sale or use of any product as now used or offered or proposed for use or sale by Symantec infringes any copyright, patent, trade secret, or other Intellectual Property right of any third party, (ii) against the use by Symantec of any Intellectual Property of the Assets, or (iii) challenging the ownership, validity or effectiveness of any such rights. (f) All patents and registered trademarks, service marks, and other company, product or service identifiers and registered copyrights for the Intellectual Property of the Assets held by Symantec are valid and in effect. (g) There has not been and there is not now any material unauthorized use, 13 14 infringement or, misappropriation of any of the Intellectual Property of the Assets by any third party, including without limitation any employee or former employee of Symantec. Symantec has not been sued or charged in writing as a defendant in any claim, suit, action or proceeding which involves a claim of infringement of any patents, trademarks, service marks, copyrights or other Intellectual Property of the Assets and which has not been finally terminated prior to the date hereof. There are no such charges or claims outstanding. (h) (i) Symantec does not have any liability with respect to the Intellectual Property of the Assets arising from the infringement or misappropriation of any patent, known to Symantec and issued or published prior to closing, any trademark, any service mark, any copyright or other Intellectual Property right of another. (ii) Symantec does not have any liability with respect to the Intellectual Property of the Assets arising from the infringement or misappropriation of any patent not known to Symantec and issued or published prior to closing. (i) No Intellectual Property of the Assets is subject to any outstanding order, judgment, decree, stipulation or agreement restricting in any manner the licensing thereof by Symantec. Symantec has not entered into any agreement to indemnify any other person against any charge of infringement of any Intellectual Property of the Assets. Symantec has not entered into any agreement granting any third party the right to bring infringement actions with respect to, or otherwise to enforce rights with respect to, any Intellectual Property of the Assets. Symantec has the exclusive right to file, prosecute and maintain all applications and registrations with respect to the Intellectual Property of the Assets. Section 4.9 Employees. (a) HP will not have, as a consequence of the transactions contemplated hereby, any liability or obligation with respect to or under any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) or any other plan, program or arrangement, whether written or oral, providing for compensation or benefits in connection with the performance of services to Symantec maintained by Symantec with respect to employees of the Business or any other Symantec employees. Symantec has complied with the health care continuation requirements of Section 601 et seq. of ERISA with respect to employees of the Business and their spouses, former spouses and dependents. (b) Schedule 7.5 contains: (i) a list as of March 24, 1997 of all Regular Personnel and all other employees or contractors of Symantec providing support to the Products and the Work-in-Progress; and (ii) the then current annual compensation provided by Symantec to any such employees. None of such employees has indicated a present intention to resign or retire. (c) No New HP Regular Personnel are currently affected by a formal Symantec salary reduction program. (d) Insofar as it pertains to the Products Business, Symantec is not a party to or bound by any union contract and has not experienced any strike, grievance or any arbitration proceeding, claim of unfair labor practices filed or threatened to be filed or any other material labor difficulty. No organizational effort is being or has been made or threatened by or on behalf of any labor union with respect to any employees of the Symantec. 14 15 Section 4.10 Transferred Agreements. Complete and correct copies of each of the leases, contracts and other agreements to be transferred to HP in connection with the transactions contemplated hereby as indicated in Exhibit A-2 (collectively referred to herein as the "Transferred Agreements") have been delivered to HP by Symantec. Section 4.11 Status of Transferred Agreements. (a) Each of the Transferred Agreements constitutes a valid and binding obligation of the parties thereto and is in full force and effect. All of such Transferred Agreements may be transferred to HP pursuant to this Agreement and will continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder and without the consent, approval or act of, or the making of any filing with, any other party. (b) Symantec has fulfilled and performed in all material respects its obligations under each of the Transferred Agreements, and Symantec is not in, or alleged to be in, breach or default under, nor is there or is there alleged to be any basis for termination of, any of the Transferred Agreements and no other party to any of the Transferred Agreements has materially breached or defaulted thereunder, and no event has occurred and no condition or state of facts exists which, with the passage of time or the giving of notice or both, would constitute such a default or breach by Symantec or by any such other party. Symantec is not currently renegotiating any of the Transferred Agreements or paying liquidated damages in lieu of performance thereunder. Section 4.12 No Violation, Litigation or Regulatory Action. Except as set forth in Section 4.12 of the Disclosure Letter, (i) the Assets and their uses comply in all material respects with all applicable Requirements of Laws and Court Orders; (ii) Symantec has complied in all material respects with all Requirements of Laws and Court Orders which are applicable to the Assets or the Products Business; (iii) there are no lawsuits, claims, suits, proceedings or investigations pending or threatened against or affecting Symantec in respect of the Assets or the Products Business nor is there any known basis for any of the same, and there are no lawsuits, suits or proceedings pending in which Symantec is the plaintiff or claimant and which relate to the Assets or the Products Business; and (iv) there is no action, suit or proceeding pending or threatened which questions the legality of the transactions contemplated by this Agreement. Section 4.13 Environmental Matters: (a) Condition Of The Company's Property: (i) To Symantec's knowledge, no Hazardous Materials are or are will be present in the soil or groundwater of the Symantec Property and (ii) no Hazardous Material is present in building materials, indoor air or outdoor air of the Symantec Property in violation of applicable Law. (b) Compliance With Environmental Laws: To Symantec's knowledge, prior to the Closing, all Hazardous Materials Activities conducted on or about the Symantec Property by Symantec or its agent, employees, contractors or subsidiaries have been conducted in accordance with all applicable Environmental Laws and Environmental Permits and all Hazardous Material waste generated at the Symantec Property or as a consequence of the Products Business has been transferred to Disposal Facilities where it has been recycled, destroyed or disposed of in accordance with applicable Law. No claim has been or is pending or threatened against Symantec or any such 15 16 Disposal Site in connection with such transferred Hazardous Material waste. (c) Permits: There are no Environmental Permits which are a Requirement of Laws for the conduct of the Products Business as presently conducted. (d) Environmental Claims: Symantec has not received any notice from governmental authority or other Person (i) ordering an investigation or remediation of any Hazardous Material presently on or about the Symantec Property, (ii) imposing any new covenant, requirement, or condition pursuant to any Environmental Law or Environmental Permit with respect to the Products, (iii) making any claim for Loss or Expense based on an exposure of any person to a Hazardous Material as a consequence of a Hazardous Material Activity on or about the Symantec Property or a Hazardous Material Activity conducted in the course of the Products Business, (iv) except to the extent remedied to the satisfaction of applicable Governmental Bodies, asserting that any Hazardous Material Activity of the Products Business has violated or failed to fulfill the requirements of any Environmental Law or Environmental Permit or has damaged the environment, or (v) asserting that Symantec is liable with respect to any Disposal Site to which Hazardous Materials generated by the Products Business or from the Symantec Property have been transported. (e) Environmental Liabilities: Symantec has provided HP with copies of all material records of the Hazardous Materials Activities of the Products Business required by HP for the conduct of the Products Business after the Closing and all environmental assessments of the Symantec Property. To Symantec's knowledge, there is no fact or circumstance affecting the Symantec Property or the Products Business which is likely to involve HP or the Products Business in any environmental litigation or impose any material environmental liability upon HP with respect to the Products Business after the Closing. Section 4.14 Financial Statements and Records. (a) True and correct copies of the following have been delivered by Symantec to HP, with respect to the Products Business: (i) the budgets for capital expenditure, payroll and other expenditures of Symantec with respect to the Products Business for the fiscal years ending March 1997 and 1998 (if available), (ii) books and records of the Products Business, including but not limited to management and operational reports used in accounting and reporting for the Products Business and the Assets, and (iii) any cost information specifically related to the Products Business. (b) With respect to Section 4.14(a)(ii) above, carrying values for Assets have been stated in accordance with Generally Accepted Accounting Principles, including without limitation any necessary reserves for depreciation, amortization and write downs for impairment, damage or obsolescence. Section 4.15 No Undisclosed Liabilities. There are no obligations or liabilities (whether absolute, accrued, contingent or otherwise), other than the Assumed Liabilities, of Symantec relating to any of the Assets or the Products Business, except obligations, liabilities or contingencies which are set forth in the Disclosure Letter. Section 4.16 Employee Agreements. To Seller's knowledge, no employee of Symantec engaged in the Products Business is in violation of any term of any employment contract (whether written or verbal), 16 17 patent disclosure agreement, invention assignment agreement, confidentiality agreement or any other contract or agreement relating to the relationship of any such employee with Symantec or any other party (including prior employers) because of the nature of the Products Business now conducted or now proposed to be conducted by Symantec. Each current and former employee, consultant or other contracting party who contributed or is contributing to the Intellectual Property of the Assets has executed an Invention Assignment, Trade Secrets and Non- Disclosure Agreement with Symantec in the form then being used by Symantec, all of which forms have been previously delivered to HP by Symantec. Section 4.17 Interests of Employees. None of Symantec's officers, directors or employees has any interest in any property, real or personal, tangible or intangible, used in or pertaining to the Products Business, including any interest in the Intellectual Property of the Assets. Section 4.18 No Finder. Neither Symantec nor any Person acting on its behalf has paid or become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement. Section 4.19 Government Contracts. None of the Transferred Agreements is a Government Contract. Section 4.20 Assets. (a) Exhibit A-1 contains a complete and accurate description of all products, components, build system projects, Marketing Information for the Products and the Work-in-Progress. (b) The currently shipping versions of the Assets have undergone and passed Symantec's standard checking procedures for known software viruses and the currently shipping versions of the Assets do not contain any known viruses, or any viruses created by Symantec employees, which would disrupt, damage, or interfere with the use of such versions. (c) Symantec has not disclosed the source code for any of the Assets or other confidential or proprietary information constituting embodied in or pertaining to the Assets to any Person and has used diligent efforts to prevent such disclosure, other than disclosure of such source code to employees or independent contractors of Symantec, or third parties solely for evaluation purposes, in each case pursuant to valid and binding nondisclosure agreements with such Persons which are in full force and effect. (d) The Assets and the rights granted under the License Agreement are all the rights and intangible assets primarily used for and necessary to operate the Products Business and are all the tangible assets primarily used for the Products Business. Section 4.21 Disclosure. None of the representations or warranties of Symantec contained herein and none of the information contained in the Schedules hereto or the Disclosure Letter is false or misleading in any material respect or omits to state a fact herein or therein necessary to make the statements herein or therein not misleading in any material respect in light of the circumstances in which they were made. 17 18 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF HP As an inducement to Symantec to enter into this Agreement and to consummate the transactions contemplated hereby, HP hereby represents and warrants to Symantec and agrees as follows: Section 5.1 Organization of HP. HP is a corporation duly organized, validly existing and in good standing under the laws of the State of California, is duly qualified to transact business in each of the jurisdictions in which the ownership or leasing of the Assets or the conduct of the Products Business pursuant to this Agreement requires such qualification, and has full corporate power and authority to own or lease and to operate and use its properties and assets and to carry on its business as now conducted and as now proposed to be conducted pursuant to this Agreement. HP has delivered to Symantec complete and correct copies of the Articles of Incorporation and Bylaws of HP, in each case as amended to the date of this Agreement. Section 5.2 Authority of HP. (a) HP has full power and authority to execute, deliver and perform this Agreement and all of the HP Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the HP Ancillary Agreements by HP have been duly and validly authorized and approved by the Executive Committee of the Board of Directors of HP, and do not require any further authorization or consent of HP or its shareholders. This Agreement has been duly authorized, executed and delivered by HP and is the legal, valid and binding agreement of HP enforceable in accordance with its terms, except (a) as such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights, and (b) as the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, and each of the HP Ancillary Agreements has been duly authorized by HP and upon execution and delivery by HP will be a legal, valid and binding obligation of HP enforceable in accordance with its terms. (b) Neither the execution and delivery of this Agreement or any of the HP Ancillary Agreements or the consummation of any of the transactions contemplated hereby or thereby nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will: (i) violate, conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under (A) the Articles of Incorporation or Bylaws of HP, (B) any material note, instrument, agreement, mortgage, lease, license, franchise, permit or other authorization, right, restriction or obligation to which HP is a party or any of its properties is subject or by which HP is bound, (C) any Court Order to which HP is a party or by which it is bound or (D) any Requirements of Laws affecting HP; or (ii) except for the HSR Filing, require the approval, consent, authorization or act of, or the making by HP of any declaration, filing or registration with, any Person, including without limitation, obtaining any Governmental Permit other than those Governmental Permits listed in Section 4.5 of the Disclosure Letter. Section 5.3 No Finder. Neither HP nor any Person acting on its behalf has paid or become 18 19 obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement. Section 5.4 Intention of HP to Market and Distribute. It is the intention of HP to market and distribute the Products within the United States as well as outside of the United States. ARTICLE 6 [INTENTIONALLY OMITTED] ARTICLE 7 ADDITIONAL AGREEMENTS Section 7.1 Covenants of Symantec Relating to Conduct Prior to the Closing. During the period from the date of this Agreement and continuing until the Closing, Symantec agrees (except as expressly provided in this Agreement or to the extent that HP shall otherwise consent in writing) that Symantec shall: (a) not sell, lease, otherwise dispose of or create any Encumbrance on, or permit to be sold, leased, otherwise disposed of or created any Encumbrance (except Permitted Encumbrances) on, all or any part of the Assets; (b) conduct the Products Business in the ordinary course consistent with past practice; (c) use the Assets in the usual, regular and ordinary course and in substantially the same manner as heretofore used; (d) not sell or license NAN, NDA or Expose unless the terms of such sale or license are in all material respects the same as sales or licenses heretofore granted by Symantec to its customers or are in the ordinary course of the Products Business consistent with past practice; (e) make payments incurred or owed in connection with the Products Business when due in the ordinary course, and perform its obligations under the leases, contracts, commitments and other agreements of the Products Business, including under the Transferred Agreements; (f) maintain insurance against loss or damage to the Assets and such other insurance with respect to the Assets as has heretofore been maintained; (g) not enter into any employment or consulting contract with any employee of the Products Business, increase any such employee's compensation inconsistent with past practice, or create or modify any benefit plan to which any such employee is a beneficiary; (h) use commercially reasonable efforts to keep available the services of the present employees of the Products Business; (i) not enter into any agreement material to the Assets; 19 20 (j) not waive any material claims or rights of the Products Business; and (k) not grant any options to purchase or sell any options to purchase or sell any capital stock of Symantec to any New HP Regular Personnel. Section 7.2 Access; Due Diligence Completion. Between the date of this Agreement and the Closing Date, Symantec, subject to the CDA, shall (a) give HP and its authorized representatives reasonable access during normal working hours and, if reasonably requested, on weekends to the Assets and to such of Symantec's facilities and properties and its books and records as relate to the Business, (b) permit HP to make inspections thereof, and (c) cause its officers, employees and advisors to furnish HP with such financial and operating data and other information with respect to the Business and to discuss the Business with HP and its authorized representatives, all as HP may from time to time reasonably request. Section 7.3 Satisfaction of Legal Conditions to Closing. Each of Symantec and HP will take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on it with respect to the Closing and will promptly cooperate with and furnish information to each other in connection with any such legal requirements. Each of Symantec and HP will take all reasonable actions necessary to obtain (and will cooperate with each other in obtaining) any consent, authorization, permit, order or approval of, or any exemption by, any Person, required to be obtained in connection with any of the transactions contemplated by this Agreement. Section 7.4 [INTENTIONALLY LEFT BLANK] Section 7.5 Employment Matters. (a) Prior to Closing, HP will offer employment to all individuals who are Regular Personnel and who are identified on Schedule 7.5hereto with such employment to become effective (the "New Employment Start Time") on the first business day after the Closing Date, and to be contingent upon the consummation of the transactions contemplated by this Agreement. Symantec and HP agree to select a mutually agreeable payroll and benefit coverage transition date. (b) Symantec shall terminate each Regular Personnel, other than the seven employees listed in Section 7.5(f) below, who has accepted (which acceptance has not been withdrawn) an offer of employment extended pursuant to Section 7.5(a) above on and as of the Closing Date, such termination to be deemed effective as of 11:59 p.m. Pacific Daylight Time on the Closing Date. Symantec agrees that all such Regular Personnel will complete their workdays at the close of business on the Closing Date. HP will hire effective as of the New Employment Start Time, on an "at will" basis and subject to HP's terms, conditions and policies of employment, including without limitation those set forth in the offer letters from HP to each of the Regular Personnel, each of the Regular Personnel who are terminated by Symantec on the Closing Date pursuant to the foregoing sentence. HP reserves the right to redefine job content or position description of any employee. Nothing contained in this Section 7.5 is intended or shall be deemed to (i) require HP to employ such persons for any fixed or predetermined time after the Closing, or (ii) confer upon any employee of Symantec, past, present, or future, any rights of employment of any nature, it being understood and agreed that the provisions of this Section 7.5 are intended to set forth an agreement between HP and Symantec, and are not intended to benefit any persons not party to this Agreement, including 20 21 such employees. Regardless of the date of the Closing, Symantec will pay (i) any bonuses due to each of the New HP Regular Personnel and the Technical Support People for Symantec's fiscal 1997 fourth quarter and fiscal 1998 first quarter (any bonus pertaining to the fiscal 1998 first quarter shall be prorated for the employee's actual period of employment with Symantec during such quarter) on the same date that Symantec pays its other employees not engaged in the Business their bonuses for such quarters, and (ii) on the Closing Date, all vacation pay accrued and other earned benefits as of the Closing Date due to each of the New HP Regular Personnel. (c) With respect to those employees of the Business to whom HP chooses not to extend offers of employment, as more fully described in the Transition Agreement, either (i) if Symantec chooses to keep those employees on its payroll, Symantec shall provide the services of those employees as set forth in the Transition Agreement, or (ii) if Symantec terminates those employees at the Closing, HP may attempt to engage the services, on a contract basis, of those individuals, in either case for a period of two to six months after the Closing Date until HP's release of "Big Bang" products. (d) Symantec will not solicit any of the (i) New HP Regular Personnel for a period of two years after the Closing Date, and (ii) HP contractors that were Symantec employees or contractors prior to the Closing, if any, for their respective periods of service after the Closing, but in any event no more than two years; provided, that this restriction shall not apply if HP were to terminate any of the New HP Regular Personnel or contractors after the Closing. (e) HP acknowledges that under the CDA, HP may use Symantec confidential information disclosed under the CDA only for the purpose of evaluating a potential acquisition of certain assets of the Business during the confidentiality period of the CDA. HP acknowledges that, under the CDA, disclosed Symantec confidential information includes confidential information about Symantec employees that remain Symantec employees after the Transition Period, even if known by the Symantec employees that become HP employees during the Transition Period. HP further acknowledges that, under the CDA, use of such confidential information by HP for the purpose of direct solicitation of any of the remaining Symantec employees would be outside the scope of the rights granted under the CDA. (f) The following Symantec employees are affected by visa issues that may delay the commencement of their employment with HP should new visas reflecting their proposed new employment status not issue by the Closing Date: Huey Ly, Rosely Ng, Swee Ying Yap, Nikhil Dhami, Nivedita Ghosh, Raymond Siu and Sanjay Mehta. These seven individuals shall remain employees of Symantec for a period of time after the Closing Date, anticipated to be approximately 30- 60 days, necessary for issuance of new visas reflecting their proposed new employment status. Upon resolution of such matters, their employment with HP shall commence as promptly as practicable for HP. HP shall be responsible by direct payment for the reasonable fees and costs associated with the issuance of new visas. HP will reimburse Symantec for the (i) base pay, and (ii) pro rata benefits cost calculated at the rate of 34% of base pay, for such employees for the period, if any, beginning the day after the Closing Date, through and including the day prior to the date of their commencement of employment at HP, in an aggregate daily amount not to exceed $2,000 per individual. On the same date in August 1997 that Symantec pays any bonuses for its first quarter of fiscal 1998 to its standard, full-time employees, Symantec shall pay directly to each of these seven individuals the appropriate pro rata portion of any bonuses due to them for such fiscal quarter. On 21 22 their respective termination dates, Symantec will also pay all vacation pay accrued and other earned benefits as of their respective termination dates to each of these seven individuals. Section 7.6 Taxes. Symantec shall be responsible for and pay when due (i) all Taxes attributable, levied or imposed upon or incurred in connection with the Assets or the Business (pertaining to the period (or that portion of any period) ending on or prior to the Closing Date). Symantec agrees to continue to timely file within the time period for filing, or any extension granted with respect thereto, all Tax Returns it is required to file in connection with the Assets or the Business, and such Tax Returns shall be true and correct and completed in accordance with applicable laws. Section 7.7 Discharge of Symantec's Liabilities. Symantec covenants and agrees that it will pay and discharge, and hold HP harmless from, each and every liability and obligation of Symantec in respect of the Business or the Assets arising from events occurring on or prior to the Closing Date, it being understood and agreed that HP is assuming no liabilities or obligations of Symantec other than the "Assumed Liabilities." Section 7.8 Support. HP shall provide support to the Products' Business support contract customers and will, as more fully described in the Transition Agreement, provide such support by contracting with Symantec for the services of the appropriate Symantec technical support people in Eugene, Oregon, Leiden, Holland and Melbourne, Australia (collectively, the "Technical Support People") during a Transition Period (as defined in the Transition Agreement). HP may directly solicit the Technical Support People in North America during the Transition Period for possible employment to commence at the end of the Transition Period. At the end of the Transition Period, HP shall provide to Symantec an amount equal to the retention benefit agreed upon by HP and Symantec for some of the Technical Support People, as stated in letters from Symantec to those people. After the Transition Period, HP will provide comparable support for any remaining term of the Products Business' outstanding support contracts between Symantec and its customers. Section 7.9 Upgrade Insurance. For Symantec's customers with upgrade insurance agreements in effect as of the Closing Date, HP will provide, at no charge, any major release of "Big Bang" from the Closing Date through the coverage lapse date (not to exceed one year from the Closing Date) of the relevant upgrade insurance agreement. Thereafter, HP shall provide any upgrades and updates to all of the Products Business' customers pursuant to HP's terms and conditions. Section 7.10 Sublease. HP agrees to enter into a written sublease agreement with Symantec and the landlord of the Leased Premises in the form of Exhibit F hereto to become effective at the Closing Date. Section 7.11 License Agreement. Symantec and HP agree to enter into the License Agreement in the form of Exhibit D hereto to become effective at the Closing Date. Section 7.12 pcANYWHERE OEM Agreement. Symantec and HP agree to enter into the PcANYWHERE OEM Agreement in the form of Exhibit B hereto to become effective at the Closing Date, relating to the product known as "pcANYWHERE." Section 7.13 Transition OEM Agreement. Symantec and HP agree to enter into the Transition OEM Agreement in the form of Exhibit E hereto to become effective at the Closing Date. Section 7.14 HSR Filings. Each of Symantec and HP agree to use commercially reasonable 22 23 efforts to cooperate with each other in preparing and filing a Premerger Notification and Report Form with the Premerger Notification Office of the Federal Trade Commission and the Antitrust Division of the United States Department of Justice (the "HSR Filing") and in obtaining all required regulatory approvals, clearances and expirations of waiting periods. Section 7.15 Consent to Use of Certain Marks. Symantec will not object to or attack HP's adoption, use or registration of the following marks or combination of marks: "Administrator for Networks," "Desktop Administrator," "Expose," "NAN" or "NDA." Symantec agrees to furnish HP with a letter of consent for any mark permitted above, if so requested by HP, in any country in which Symantec is the senior party. HP agrees it receives no right under this Agreement to register as marks the names "Norton" or "Symantec." Section 7.16 Termination of Certain Agreements. The Software License Agreement dated August 23, 1996 and the OEM Agreement effective June 1, 1994, as amended by the First Amendment to OEM Agreement effective February 1, 1996, each by and among Symantec, Symantec Limited and HP, shall be terminated automatically on the Closing Date. Section 7.17 Certificate. Symantec shall deliver to HP a certificate or certificates, dated the Closing Date and signed on behalf of Symantec by an authorized officer of Symantec, stating that each of the representations and warranties of Symantec contained or referred to herein and in the Symantec Ancillary Agreements shall be true and correct in all material respects on the Closing Date as though made on the Closing Date, except for changes therein specifically permitted by this Agreement or resulting from any transaction expressly consented to in writing by HP or any transaction contemplated by this Agreement. Section 7.18 I-9s. On or prior to the Closing Date, Symantec shall deliver to HP a correct and complete original U.S. Department of Justice Form I-9, Employment Eligibility Verification, for each HP New Regular Personnel for whom such a form is required by U.S. law. ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS OF HP The obligations of HP under this Agreement shall, at the option of HP, be subject to the satisfaction, on or prior to the Closing Date, of the following conditions. Section 8.1 No Misrepresentation or Breach of Covenants and Warranties. None of the representations and warranties of Symantec contained or referred to herein and in the Symantec Ancillary Agreements shall be untrue or incorrect in any material respect on the Closing Date so that, either individually or in the aggregate, any such breach or inaccuracy results in a material adverse effect on the Products Business or the Assets, except for changes therein specifically permitted by this Agreement or resulting from any transaction expressly consented to in writing by HP or any transaction contemplated by this agreement; and there shall have been delivered to HP a certificate or certificates to such effect, dated the Closing Date, signed on behalf of Symantec by an authorized officer of Symantec. Section 8.2 No Restraint or Litigation. No action, suit, investigation or proceeding shall have been instituted or threatened to restrain or prohibit or otherwise challenge the legality or validity of the transactions contemplated hereby and there shall have been delivered to HP a certificate or certificates to 23 24 such effect, dated the Closing Date, signed on behalf of Symantec by an authorized officer of Symantec. Section 8.3 Necessary Governmental Approvals. The parties shall have received all approvals and actions of or by all Governmental Bodies which are necessary to consummate the transactions contemplated hereby, which are either specified in Section 4.2 of the Disclosure Letter or otherwise required to be obtained prior to the Closing by applicable Requirements of Law; and there shall have been delivered to HP a certificate or certificates to such effect, dated the Closing Date, signed on behalf of Symantec by an authorized officer of Symantec. Section 8.4 Necessary Consents. Symantec shall have received consents, in form and substance reasonably satisfactory to HP, to the transactions contemplated hereby from the other parties to all contracts, leases, agreements and permits to which Symantec is a party or by which Symantec or any of the Assets is affected and which are specified in Section 4.2 of the Disclosure Letter, and there shall have been delivered to HP a certificate or certificates to such effect, dated the Closing Date, signed on behalf of Symantec by an authorized officer of Symantec. Section 8.5 Employees. At least 80% of Category A employees and 60% of Category B employees listed in Schedule 7.5 shall have accepted (which acceptances shall not have been withdrawn) offers of employment by HP extended as contemplated by Section 7.5 above. Section 8.6 No Material Adverse Change. There shall have been no material adverse change in the Products Business or the Assets from the date hereof through the Closing Date. Section 8.7 Execution of Symantec Ancillary Agreements. Symantec shall have executed and delivered to HP all of the Symantec Ancillary Agreements. Section 8.8 Opinion of Symantec's Counsel. HP shall have received an opinion of Symantec's counsel, dated the Closing Date, in substantially the form of Exhibit H hereto. Section 8.9 Trio. Symantec shall have received a full and complete release and an assignable license from Trio Systems LLC ("Trio"), each in form and substance satisfactory to HP. ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF SYMANTEC The obligations of Symantec under this Agreement shall at the option of Symantec, be subject to the satisfaction, on or prior to the Closing Date, of the following conditions: Section 9.1 No Misrepresentation or Breach of Covenants and Warranties. Each of the representations and warranties of HP contained or referred to in this Agreement and the HP Ancillary Agreements shall be true and correct in all material respects on the Closing Date as though made on the Closing Date, except for changes therein specifically permitted by this Agreement or resulting from any transaction expressly consented to in writing by Symantec or any transaction contemplated by this Agreement; and there shall have been delivered to Symantec a certificate or certificates to such effect, dated the Closing Date and signed on behalf of HP by an authorized representative of HP. 24 25 Section 9.2 No Restraint or Litigation. No action, suit or proceeding by any Governmental Body shall have been instituted or threatened to restrain, prohibit or otherwise challenge the legality or validity of the transactions contemplated hereby; and there shall have been delivered to Symantec a certificate or certificates to such effect, dated the Closing Date and signed on behalf of HP by an authorized representative of HP. Section 9.3 Necessary Governmental Approvals. The parties shall have received all approvals and actions of or by all Governmental Bodies necessary to consummate the transactions contemplated hereby, which are required to be obtained prior to the Closing by applicable Requirements of Laws; and there shall have been delivered to Symantec a certificate or certificates to such effect, dated the Closing Date and signed on behalf of HP by an authorized representative of HP. Section 9.4 Execution of HP Ancillary Agreements. HP shall have executed and delivered to Symantec the HP Ancillary Agreements to which Symantec and HP are parties. ARTICLE 10 INDEMNIFICATION Section 10.1 Indemnification by Symantec. Symantec agrees to indemnify and hold harmless each HP Group Member from and against any and all Losses and Expenses incurred by such HP Group Member in connection with or arising from: (a) any breach by Symantec of any of its covenants in this Agreement, any Symantec Ancillary Agreement, Exhibit or Schedule; (b) any breach of any warranty or the inaccuracy of any representation of Symantec contained or referred to in this Agreement, any Symantec Ancillary Agreement (other than the pcANYWHERE OEM Agreement), Exhibit or Schedule or any document or certificate delivered by or on behalf of Symantec pursuant hereto, other than the representations set forth in Section 4.8(h)(ii) of this Agreement, Section 7.3 of the License Agreement and as the substance thereof may appear elsewhere in this Agreement or any Symantec Ancillary Agreement (other than the pcANYWHERE OEM Agreement), Exhibit or Schedule or any document or certificate delivered by or on behalf of Symantec pursuant hereto; (c) any failure of Symantec to obtain prior to the Closing any consent required under Section 4.2; (d) any liabilities, obligations or commitments of or any claims against Symantec, including without limitation arising from Symantec's operation of the Business; (e) any breach of any warranty or the inaccuracy of any representation of Symantec contained or referred to in Section 4.8(h)(ii) of this Agreement, Section 7.3 of the License Agreement and as the substance thereof may appear elsewhere in this Agreement or any Symantec Ancillary Agreement (other than the pcANYWHERE OEM Agreement), Exhibit or Schedule or any document or certificate delivered by or on behalf of Symantec pursuant hereto; or 25 26 (f) the Trio, Simba and Doug Neal matters disclosed in the Disclosure Letter. Section 10.2 Indemnification by HP. HP shall indemnify and hold harmless Symantec from and against any and all Losses and Expenses incurred by it in connection with, arising from, relating to or resulting from: (a) any breach by HP of any of its covenants in this Agreement, any HP Ancillary Agreement, Exhibit or Schedule; or (b) any breach of any warranty or the inaccuracy of any representation of HP contained or referred to in this Agreement, any HP Ancillary Agreement, Exhibit, Schedule or any document or certificate delivered by or on behalf of HP pursuant hereto. Section 10.3 Limitation of Indemnification. (a) Except for any Losses related to Trio, the liabilities and obligations of Symantec arising under this Article 10 shall commence only following the incidence of Losses aggregating $150,000, following which all claims starting from the first dollar shall be recoverable as provided in this Agreement. The aggregate amount of the liabilities and obligations of Symantec with respect to any indemnification claim made pursuant to Section 10.1(a), (b), (c), (d) or (f) above shall not exceed the Purchase Price, except that with respect to Section 10.1(e) above, the aggregate amount shall not exceed $5,000,000. Any claim must be made against Symantec pursuant to this Article 10 on or prior to the date which is three years after the date of the last payment constituting part of the Purchase Price, except that (i) with respect to the breach of any warranty contained in Section 4.3, the period of time during which such a claim may be made shall terminate at the end of the relevant statutory time period, and (ii) with respect to claims made with respect to the breach of any warranty contained in Section 4.8 or 4.20, there shall be no time limit. (b) The liabilities and obligations of HP and any HP Group Member arising under this Article 10 shall commence only following the incidence of Losses (incurred by any and all Indemnified Parties) aggregating $150,000, following which all claims starting from the first dollar shall be recoverable as provided in this Agreement. The aggregate amount of the obligations of HP and any HP Group Member with respect to any indemnification claim made pursuant to Section 10.2 shall not exceed $3 million. A claim must be made against HP or any HP Group Member pursuant to this Article 10 on or prior to the date which is one year after the date of the last payment constituting part of the Purchase Price. Section 10.4 Notice of Claims. Symantec or any HP Group Member (the "Indemnified Party") seeking indemnification hereunder shall give to HP or Symantec, as appropriate (or its successors and assigns) (the "Indemnitor"), a notice (a "Claim Notice") describing in reasonable detail the facts giving rise to any claim for indemnification hereunder and shall include in such Claim Notice the amount of such claim, and a reference to the provision of this Agreement or any other agreement, document or instrument executed hereunder or in connection herewith upon which such claim is based; provided, that a Claim Notice in respect of any action at law or suit in equity by or against a third Person as to which indemnification will be sought shall be given promptly after the action or suit is commenced; provided further that failure to give such notice shall not relieve the Indemnitor of its obligations hereunder except to the extent it shall have been materially prejudiced by such failure. 26 27 Section 10.5 Third Person Claims. (a) If any third Person claim, action or suit is made against an Indemnified Party, the Indemnified Party will be entitled to control the defense thereof. The Indemnitors will (i) reasonably cooperate in connection with the defense of a third Person claim, and (ii) not admit any liability with respect to, or settle, compromise or discharge any third Person claim without the Indemnified Party's prior written consent. The Indemnitors shall be entitled to participate in, but not control, such defense with their own counsel at their own expense. (b) Reimbursement of Losses or Expenses in connection with a settlement shall be in accordance with Sections 10.5(c) and 10.6 below. (c) The Indemnified Party will not settle, compromise or discharge any third Person claim without the consent of the Indemnitors, which consent shall not be unreasonably withheld. In the event the Indemnitors and the Indemnified Party cannot agree on a settlement, compromise or discharge of any third Person claim, the Indemnified Party may settle, compromise or discharge the third Person claim without such consent; provided, however, that, if the Indemnitors dispute the Indemnified Party's claim for indemnification of the settled claim, such dispute shall be resolved in accordance with Section 10.6 below. Section 10.6 Dispute Resolution. In the event the Indemnitors dispute the Indemnified Party's claim for indemnification of a third Person claim that the Indemnified Party settles without the consent of the Indemnitors, prior to filing any claims in a court of law or to submitting the dispute to binding arbitration, the parties shall in good faith first negotiate a written resolution of such dispute or claim for a period not to exceed fifteen days from the date of receipt of a party's request for such negotiation. Such negotiation shall be conducted between Symantec and managers of HP who have authorization to resolve any such dispute or claim. In the event the parties cannot negotiate a written resolution to such dispute or claim during this fifteen-day negotiation period, and prior to filing any claim in a court of law or submitting the dispute to binding arbitration, the parties shall then submit such dispute or claim to nonbinding mediation with Judicial Arbitration & Mediation Services ("JAMS"). The mediation may be initiated by the written request of either party to the other party, shall commence within fifteen (15) days of receipt of such notice and shall be conducted in accordance with the standard mediation procedures established by JAMS, unless otherwise agreed by the parties. The mediation shall not exceed a period of thirty (30) days. In the event the parties do not resolve such dispute or claim as a result of such mediation or in the event such dispute or claim is not resolved within three months, either party may seek to resolve the dispute or claim in a court of competent jurisdiction or seek other legal or equitable resolution. The judgment or decree of a court shall be deemed final when the time for appeal, if any, shall have expired and no appeal shall have been taken or when all appeals taken shall have been finally determined. The costs of resolving the dispute, including reasonable attorneys' fees and expenses, shall be borne by the losing parties. Section 10.7 Setoff. HP shall be entitled to set-off the amount of any claim reasonably submitted in good faith under Section 10.1 as damages or by way of indemnification against any other amounts payable by HP to Symantec whether under this Agreement or otherwise as HP's sole monetary remedy. Where the claim by HP relates to amounts paid or payable currently by HP, HP may set off such amounts against the amounts next due and payable in respect of the Purchase Price. 27 28 ARTICLE 11 TERMINATION Section 11.1 Termination. Anything contained in this Agreement to the contrary notwithstanding, this Agreement may be terminated at any time prior to the Closing Date: (a) by the mutual consent of HP and Symantec; (b) by HP or Symantec if the Closing shall not have occurred on or before May 31, 1997 (or such later date as may be mutually agreed to by HP and Symantec); (c) by HP in the event of (i) any material breach by Symantec of any of the representations, warranties, covenants or agreements of Symantec contained herein, (ii) the failure of Symantec to cure such breach within fourteen (14) days after receipt of notice from HP requesting such breach to be cured, and (iii) the breach resulting in a material adverse effect on the Products Business or the Assets; or (d) by Symantec in the event of any material breach by HP of any of HP's representations, warranties, covenants or agreements contained herein and the failure of HP to cure such breach within fourteen (14) days after receipt of notice from Symantec requesting such breach to be cured. Section 11.2 Notice of Termination. Any party desiring to terminate this Agreement pursuant to Section 11.1 above shall give notice of such termination to the other parties to this Agreement. Section 11.3 Effect of Termination. In the event that this Agreement shall be terminated pursuant to this Article 11, all further obligations of the parties under this Agreement (other than Sections 12.2, 12.3 and 12.10) shall be terminated without further liability of any party to the other, provided that nothing herein shall relieve any party from liability for its willful breach of this Agreement. ARTICLE 12 GENERAL PROVISIONS Section 12.1 Survival of Obligations. All representations, warranties, covenants and obligations contained in this Agreement shall survive the consummation of the transactions contemplated by this Agreement for the relevant indemnification periods set forth in Article 10 above. The respective representations and warranties of each party hereto contained herein shall not be deemed waived or otherwise affected by any investigation made by the other party hereto and shall survive the Closing. Section 12.2 Confidential Information. Symantec agrees that it will protect HP confidential information acquired from Symantec under this Asset Purchase Agreement for a period of five years from the Closing Date by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized use, dissemination, or publication of the HP confidential information as Symantec uses to protect its own confidential information of a like nature. 28 29 Section 12.3 No Public Announcements. Except as heretofore made and subject to the CDA, neither HP nor Symantec shall, without the approval of the other, make any press release or other public announcement concerning the transactions contemplated by this Agreement, except as and to the extent that any such party shall be so obligated by law, in which case the other party shall be advised and the parties shall use their reasonable efforts to cause a mutually agreeable release or announcement to be issued; provided that the foregoing shall not preclude communications or disclosures necessary to implement the provisions of this Agreement or to comply with accounting and Securities and Exchange Commission disclosure obligations. Section 12.4 Notices. Any notice given hereunder shall be in writing and shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of facsimile transmission, on the date on which the sender receives confirmation by facsimile transmission that such notice was received by the addressee, provided that a copy of such transmission is additionally sent by mail as set forth below; (iii) in the case of overnight air courier, on the second business day following the day sent, with receipt confirmed by the courier; and (iv) in the case of mailing by first class certified or registered mail, postage prepaid, return receipt requested, on the fifth business day following such mailing and should be addressed as follows: If to HP, to: Hewlett-Packard Company 3000 Hanover St. M/S 20BT Palo Alto, CA 94304-0890 Attention: Director, Corporate Development Facsimile: 415-852-8342 with a copy to: Hewlett-Packard Company 3000 Hanover Street, MS: 20BQ Palo Alto, California 94304 Attention: General Counsel Facsimile: 415-857-4392 If to Symantec, to Symantec Symantec Corporation 10201 Torre Avenue Cupertino, CA 94014 Attention: Senior Vice President, Corporate Development Facsimile: 408-446-8849 with a copy to: 29 30 Symantec Corporation 10201 Torre Avenue Cupertino, CA 94014 Attention: Vice President and General Counsel Facsimile: 408-252-5101 or to such other address as such party may indicate by a notice delivered to the other parties hereto. Section 12.5 Successors and Assigns. (a) The rights of either party under this Agreement shall not be assignable by such party hereto prior to the Closing without the written consent of the other, except that the rights of HP hereunder may be assigned prior to the Closing, without the consent of Symantec, to any corporation all of the outstanding capital stock of which is owned or controlled by HP, provided, that the assignee shall assume in writing all of HP's obligations to Symantec hereunder; provided, further, that HP shall be obligated to pay the balance of any portion of the Purchase Price that Symantec is entitled to receive pursuant to the terms of this Agreement and which the assignee fails to pay. Following the Closing, either party may assign any of its rights hereunder, but no such assignment shall relieve it of its obligations hereunder. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns. The successors and permitted assigns hereunder shall include without limitation, in the case of HP, any permitted assignee as well as the successors in interest to such permitted assignee (whether by merger, liquidation (including successive mergers or liquidations) or otherwise. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any Person other than the parties and successors and assigns permitted by this Section 12.5 any right, remedy or claim under or by reason of this Agreement. Section 12.6 Access to Records After Closing. (a) For a period of three (3) years after the Closing Date, HP and its representatives shall have reasonable access to all of the books and records relating to the Business which Symantec or any of its Affiliates may retain after the Closing Date. Such access shall be afforded by Symantec and its Affiliates upon receipt of reasonable advance notice and during normal business hours. HP shall be solely responsible for any costs and expenses incurred by it pursuant to this Section 12.6. If Symantec or any of its Affiliates shall desire to dispose of any of such books and records prior to the expiration of such three (3) year period, Symantec shall prior to such disposition, give HP a reasonable opportunity, at HP's expense, to segregate and remove such books and records as HP may select. (b) For a period of one (1) year after the Closing Date, in the event that Symantec has a reasonable need for a copy of any of the Books and Records delivered by Symantec to HP under this Agreement, Symantec will notify HP of its request. HP may make such copy available to Symantec, at Symantec's sole expense, in HP's reasonable discretion. Section 12.7 Entire Agreements, Amendments. With the exception of the CDA, this Agreement and the Exhibits and Schedules referred to herein and the documents delivered pursuant hereto contain the 30 31 entire understanding of the parties hereto with regard to the subject matter contained herein or therein, and supersede all prior agreements, understandings or letters of intent between or among any of the parties hereto, including without limitation the Letter of Intent. This Agreement shall not be amended, modified or supplemented except by a written instrument signed by an authorized representative of each of the parties hereto. Section 12.8 Interpretation. Article titles and headings to sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. Section 12.9 Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if, as to any party, it is authorized in writing by an authorized representative of such party. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach. Section 12.10 Expenses. Each party hereto will pay all costs and expenses incident to its negotiation and preparation of this Agreement and to its performance and compliance with all agreements and conditions contained herein on its part to be performed or complied with, including the fees, expenses and disbursements of its counsel, accountants and other advisors. Section 12.11 Partial Invalidity. Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable. Section 12.12 Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by each of the parties hereto and delivered to each of Symantec and HP. Section 12.13 Further Assurances. On the Closing Date, Symantec shall (i) deliver to HP such other bills of sale, deeds, endorsements, assignments and other good and sufficient instruments of conveyance and transfer, in form reasonably satisfactory to HP and its counsel, as HP may reasonably request or as may be otherwise reasonably necessary to vest in HP all the right, title and interest of Symantec in, to or under any or all of the Assets, and (ii) take all steps as may be reasonably necessary to put HP in actual possession and control of all the Assets. From time to time following the Closing, Symantec shall execute and deliver, or cause to be executed and delivered, to HP such other instruments of conveyance and transfer as HP may reasonably request or as otherwise may be reasonably necessary to more effectively convey and transfer to, and vest in, HP and put HP in possession of, any part of the Assets, and, in the case of licenses, certificates, approvals, authorizations, agreements, contracts, leases, easements and other commitments included in the Assets (a) which cannot be transferred or assigned effectively without the 31 32 consent of third parties which consent has not been obtained prior to the Closing, to cooperate with HP at its request in endeavoring to obtain such consent promptly, and if any such consent is unobtainable, to use its reasonable efforts to secure to HP the benefits thereof in some other manner, or (b) reasonable efforts jointly with HP to secure to HP the benefits thereof in some other manner (including the exercise of the rights of Symantec thereunder). Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any license, certificate, approval, authorization, agreement, contract, lease, easement or other commitment included in the Assets if an attempted assignment thereof without the consent of a third party thereto would constitute a breach thereof. Section 12.14 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of law provisions) of the State of California. 32 33 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first above written. "HP" HEWLETT-PACKARD COMPANY, a California corporation By: ----------------------------- Name: Title: "Symantec" SYMANTEC CORPORATION, a Delaware corporation By: ----------------------------- Name: Title: 33 34 ASSET PURCHASE AGREEMENT INDEX TO SCHEDULES SCHEDULE DESCRIPTION 2.1(e) Capital Equipment and Other Hard Assets 2.6(b) Payment of Purchase Price 4 Disclosure Letter 7.5 Employees i 35 INDEX TO EXHIBITS EXHIBIT DESCRIPTION A-1 Transferred Products & Technology A-2 Transferred Agreements B pcANYWHERE OEM Agreement C Instrument of Assignment and Assumption D License Agreement E Transition OEM Agreement F Sublease and Sublease Letter Agreement G Transition Agreement H Opinion of Symantec's Counsel ii 36 ASSET PURCHASE AGREEMENT Schedule 2.6(b) Payment of Purchase Price
(Dollars in millions, USD) Maximum Percent of HP's Amount of NSMD Revenue Royalty HP Quarter Ending: - ----------------- April 30, 1997 $ 5.3 30% July 31, 1997 $ 5.0 30% October 31, 1997 $ 5.5 30% January 31, 1998 $ 5.5 30% April 30, 1998 $ 4.0 30% July 31, 1998 $ 1.5 30% October 31, 1998 $ 1.3 30% $ 28.1
Payment stream has been modeled to yield no more than $27,000,000 NPV (at a discount rate of 6%) over eight quarters beginning with HP's quarter ending April 30, 1997. iii 37 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 LICENSE AGREEMENT This license agreement (the "License Agreement") is entered into and is effective as of the Closing Date specified in the Asset Purchase Agreement by and between Hewlett-Packard Company, a California corporation ("HP") and Symantec Corporation, a Delaware corporation ("Symantec"). 1. RECITALS: 1.1 Symantec has been operating a business to design, develop, enhance, test, manufacture, distribute and support the products, technologies and intellectual property known to Symantec and its customers as all versions of Norton Administrator for Networks ("NAN"), Norton Desktop Administrator ("NDA"), Expose ("Expose") and work-in-progress and developments intended for the upcoming "Big Bang" release (collectively, the "Business"). 1.2 Symantec's business of (i) designing, developing, enhancing and testing the Products and Work-in-Progress, (ii) manufacturing and distributing specifically for the Products, and (iii) and supporting primarily the Products and Work-in-Progress constitutes the "Products Business." 1.3 Pursuant to the Asset Purchase Agreement between HP and Symantec dated March 27, 1997 ("Asset Purchase Agreement"), Symantec is selling and HP is buying the Assets; 1.4 In conjunction with execution of the Asset Purchase Agreement, HP wishes to license from Symantec certain intellectual property (described in Schedules 1, 2, 3, 4, 5 and 6 to this Agreement) primarily related to other Symantec businesses but also related to the Products. Symantec wishes to license back from HP certain intellectual property (described in Schedules 7, 8 and 9 to this Agreement) contained in the Assets but also related to other Symantec business. The parties agree as follows: 2. DEFINITIONS 2.1 Definitions. In this Agreement, the following terms have the meanings specified or referred to in this Section 2 and shall be equally applicable to both the singular and plural forms. Any agreement referred to below shall mean such agreement as amended, supplemented and modified from time to time to the extent permitted by the applicable provisions thereof and by this Agreement. 38 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 2.1.1 "Affiliate" means any entity which controls, is controlled by, or is under common control with, Symantec or HP, as the case may be. An entity shall be deemed to be in control of another entity only if, and for so long as, it owns or controls more than fifty percent (50%) of the shares of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority). 2.1.2 "HP" has the meaning specified in the first paragraph of this Agreement. 2.1.3 "Expose" has the meaning described in Recital 1.1 above. 2.1.4 "Intellectual Property" means worldwide patents, patent applications, patent rights, trademarks, trademark registrations, trademark applications, licenses, service marks, products marks, trade names, all other names embodying products or product goodwill (or both) copyright registrations, mask works, copyrights (including those in computer programs, software, including all source code and object code, programming tools, drawings, specifications and data), designs, trade secrets, technology, inventions, discoveries and improvements, know-how; proprietary rights, formulae, processes, technical information, confidential and proprietary information, whether tangible or intangible, and all other intellectual property rights, whether or not subject to statutory registration or protection. 2.1.5 "License Agreement" means this Agreement. 2.1.6 "NAN" has the meaning described in Recital 1.1 above. 2.1.7 "NDA" has the meaning described in Recital 1.1 above. 2.1.8 "Products" means all past and current versions of NAN, NDA and Expose. 2.1.9 "Assets" has the meaning specified in the Asset Purchase Agreement. 2.1.10 "Symantec" has the meaning specified in the first paragraph of this Agreement. 2.1.11 "Work-in-Progress" means work-in-progress for the "Big Bang" release. 3. DELIVERY 2 39 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 3.1 Symantec will create and own a source code copy of a TAOSKRNL library for the Quake component and a TAOSKRNL library for the Core component upon signing this License Agreement that conform to the following requirements: 3.1.1 Symantec will use only minimal engineering resources currently dedicated to the Big Bang release; 3.1.2 the TAOSKRNL libraries will contain a subset of the functions provided by the corresponding SYMKRNL libraries including all string handling functions, all file/directory functions and all utility functions; 3.1.3 the TAOSKRNL libraries will contain at least the disk access functions required by the Big Bang release and all supported versions of NAN and NDA; and 3.1.4 the TAOSKRNL libraries will meet all quality, testing and localization standards currently defined by the Symantec product release requirements. 3.2 Symantec will provide HP a copy of the software listed in Schedules 1, 2, 3, 4, 5 and 6 upon signing this License Agreement in accordance with the licenses granted in Section 4. HP will provide Symantec a copy of the software listed in Schedule 9 upon release. 4. LICENSE GRANT 4.1 Symantec grants to HP and its Affiliates a non-exclusive, perpetual, transferrable, worldwide, paid-up, irrevocable license under all Symantec Intellectual Property rights, whether currently owned or later acquired, to make, have made, copy, use, sell, offer for sale, distribute, import, disclose and create derivative works for the Schedule 1 Licensed Software for source code, object code and associated documentation, together with the right to sublicense others to do the same. 4.2 Symantec grants to HP and its Affiliates a non-exclusive, perpetual, transferrable, worldwide, paid-up, irrevocable license under all Symantec Intellectual Property rights, whether currently owned or later acquired, to make, have made, copy, use, sell, offer for sale, distribute, import, disclose and create derivative works for the Schedule 2 Licensed Software for source code, object code and associated documentation, together with the right to sublicense others to do the same, except that: 4.2.1 this Section 4.2 license is limited only to the development, development, distribution and support of NAN metering products and derivative 3 40 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 metering products during a period ending 18 months after closing; 4.2.2 HP will not provide the Schedule 2 Licensed Software in source code format to any third party except to escrow agents for escrow relationships during a period ending 18 months after closing; 4.2.3 HP will not sell or distribute any disk utility products or anti-virus products containing Schedule 2 Licensed Software during a period ending 36 months after closing; and 4.2.4 HP will not provide either directly or indirectly any source code license or any license with distribution rights for the Schedule 2 Licensed Software to McAfee, Cyber Media, Trend Micro Inc. or their successors in interest during a period ending 36 months after closing. 4.3 Symantec grants to HP and its Affiliates a non-exclusive, perpetual, transferrable, worldwide, paid-up, irrevocable license under all Symantec Intellectual Property rights, whether currently owned or later acquired, to make, have made, copy, use, sell, offer for sale, distribute, import, disclose and create derivative works for the Schedule 3 Licensed Software for source code, object code and associated documentation, together with the right to sublicense others to do the same, except that: 4.3.1 HP will not provide either directly or indirectly any source code license or any license with distribution rights for the Schedule 3 Licensed Software to McAfee, Cyber Media, Trend Micro Inc. or their successors during a period ending 6 months after closing. 4.4 Symantec grants to HP and its Affiliates a non-exclusive, perpetual, transferrable, worldwide, paid-up, irrevocable license under all Symantec Intellectual Property rights, whether currently owned or later acquired, to make, have made, copy, use, sell, offer for sale, distribute, import, disclose and create derivative works for the Schedule 4 Licensed Software for source code, object code and associated documentation, together with the right to sublicense others to do the same, except that: 4.4.1 HP will not provide either directly or indirectly any source code license or any license with distribution rights for the Schedule 3 Licensed Software to McAfee, Cyber Media, Trend Micro Inc. or their successors during a period ending 18 months after closing. 4.5 Symantec grants to HP and its Affiliates a non-exclusive, perpetual, transferrable, 4 41 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 worldwide, paid-up, irrevocable license under all Symantec Intellectual Property rights, whether currently owned or later acquired, to make, have made, copy, use, import, disclose and create derivative works for the Schedule 5 Licensed Software for source code, object code and associated documentation, together with the right to sublicense others to do the same except that HP will not sublicense the Schedule 5 Licensed Software as a stand-alone product with no additional functionality and will only sublicense the Schedule 5 Licensed Software for use in conjunction with a source code license to NAN, NDA, Expose or any derivative product. 4.6 Symantec grants to HP and its Affiliates a non-exclusive, perpetual, transferrable, worldwide, paid-up, irrevocable license under all Symantec Intellectual Property rights, whether currently owned or later acquired, to make, have made, copy, use and import up to a total of 50 copies for each of the three programs contained in the Schedule 6 Licensed Software for object code and associated documentation, together with the right to sublicense others to do the same. 4.7 HP grants to Symantec and its Affiliates a non-exclusive, perpetual, irrevocable, non-transferrable, worldwide, paid-up license under all HP Intellectual Property rights acquired from Symantec in the Asset Purchase Agreement or under this License Agreement, whether currently held or later acquired, to make, have made, copy, use, import and create derivative works for the Schedule 7 Licensed Software only for use in the Schedule 7 Licensed Products and only for the Schedule 7 Associated Limited Purpose. HP grants to Symantec and its Affiliates a non-exclusive, non-transferrable, worldwide, perpetual, irrevocable, paid-up license under all HP Intellectual Property rights acquired from Symantec in the Asset Purchase Agreement or under this License Agreement, whether currently held or later acquired, to sell, offer for sale, distribute the object code and associated documentation for the Schedule 7 Licensed Software only for use in the Schedule 7 Licensed Products and only for the Schedule 7 Associated Limited Purpose. Schedule 7 Licensed Products means the Schedule 7 Associated Products and any later versions or derivative products primarily based on the Schedule 7 Associated Products. Schedule 7 Licensed Software means the source code, object code and associated documentation for the Schedule 7 Listed Software and any modified Schedule 7 Listed Software. 4.8 HP grants to Symantec and its Affiliates a non-exclusive, perpetual, irrevocable, non-transferrable, worldwide, paid-up license under all HP Intellectual Property rights acquired from Symantec in the Asset Purchase Agreement or under this License Agreement, whether currently held or later acquired, to use, sell, offer for sale, distribute, import the Schedule 8 Licensed Software only for use in the Schedule 8 Associated Products and only for the Schedule 8 Associated Limited Purpose. Schedule 8 Licensed Software means the object code and associated 5 42 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 documentation for the Schedule 8 Listed Software. 4.9 HP grants to Symantec a non-exclusive, perpetual, non-transferrable, worldwide, paid-up license under all HP Intellectual Property rights, whether currently held or later acquired, to make, have made, copy, use internally, use externally only to embed for distribution to external test sites for Symantec and import the object code and associated documentation for the Schedule 9 Licensed Software. HP may revoke this license upon material breach by Symantec of this Section 4.9 License if the breach is not cured within 30 days of notice. 5. OWNERSHIP 5.1 HP receives no right, title or interest to any Symantec technology or Intellectual Property therein under this License Agreement except for the specific licenses granted in Section 4. HP retains ownership of any modifications or additions made by HP to any software licensed under and in accordance with this License Agreement. 5.2 Symantec receives no right, title or interest to any HP technology under this License Agreement except for the specific licenses granted in Section 4. Symantec retains ownership of any modifications or additions made by Symantec to any software licensed under and in accordance with this License Agreement. 6. PAYMENT 6.1 All licenses granted under this License Agreement are non-royalty-bearing, fully paid-up licenses. Consideration for the licenses granted under this License Agreement is found within the Asset Purchase Agreement. 7. WARRANTY 7.1 Symantec represents and warrants that it either has title or sufficient rights in the copyrights, trade secrets and patents of any software and documentation licensed under this License Agreement to grant the licenses granted by Symantec under this License Agreement. 7.2 Symantec represents and warrants that Symantec does not have any liability with respect to the software and documentation licensed under this License Agreement arising from the infringement or misappropriation of any patent, known to Symantec and issued or published prior to closing, any trademark, any service mark, any copyright or other Intellectual Property right of another. 6 43 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 7.3 Symantec represents and warrants that Symantec does not have any liability with respect to the software and documentation licensed under this License Agreement arising from the infringement or misappropriation of any patent not known to Symantec and issued or published prior to closing. 7.4 THE WARRANTIES SPECIFICALLY SET FORTH IN THIS AGREEMENT ARE EXCLUSIVE AND NO OTHER WARRANTY, WHETHER WRITTEN OR ORAL, IS EXPRESSED OR IMPLIED. BOTH PARTIES SPECIFICALLY DISCLAIM THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 8. INDEMNIFICATION 8.1 Symantec will indemnify HP for a breach of the foregoing warranties in accordance with Article 10 of the Asset Purchase Agreement. 9. DISPUTE RESOLUTION 9.1 The parties will negotiate in good faith to resolve any dispute between them regarding this Agreement. If such negotiations do not resolve the dispute to the satisfaction of both parties then the Agreement Coordinators from each party will meet and will attempt to reach a mutually agreeable resolution of the dispute. 9.2 If such negotiations and meetings do not resolve the dispute to the satisfaction of both parties then each party will nominate one senior officer of the rank of Vice President for Symantec and Division General Manager for HP or higher as its representative. These representatives will meet in person and alone (except for one interpreter, if necessary, and one other assistant allowed for each party) and will attempt in good faith to resolve the dispute. This meeting will be a required prerequisite before either party may seek judicial or governmental resolution of the dispute, except for claims seeking injunctive or other equitable relief. The parties may agree to pursue any other additional mutually acceptable dispute resolution method but such pursuit will not modify the above-stated prerequisite. 10. TERMINATION 10.1 Termination. This Agreement may be terminated by the mutual consent of HP and Symantec; 10.2 Notice of Termination. Any party desiring to terminate this Agreement pursuant to this Section 10 above shall give notice of such desire to the other party to this Agreement. 7 44 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 10.3 Effect of Termination. All representations, warranties, covenants, licenses granted and obligations contained in this Agreement shall survive the termination of this Agreement. 11. GENERAL PROVISIONS 11.1 Exhibits In This Agreement. The following exhibits form a part of this Agreement and are incorporated by reference into this Agreement: Schedule 1 - Product technology unlimited source license to HP Schedule 2 - SYMEVNT limited source license to HP Schedule 3 - TAOSKRNL limited source license to HP Schedule 4 - SYMKRNL limited source license to HP Schedule 5 - Symantec tools limited source license to HP Schedule 6 - Symantec tools limited object license to HP Schedule 7 - Distribution technology limited source license to Symantec Schedule 8 - Product technology limited object license to Symantec Schedule 9 - Product technology limited end user license to Symantec 11.2 Copyright Notices. Unless stated otherwise in this Agreement, each party will ensure that all copyright notices that are marked on or included in any portion of software or documentation, in any form, that is furnished to that party under this Agreement will be marked on or included at least once in each copy made by or for that party. 11.3 Notices. Any notice given hereunder shall be in writing and shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of facsimile transmission, on the date on which the sender receives confirmation by facsimile transmission that such notice was received by the addressee, provided that a copy of such transmission is additionally sent by mail as set forth in (iv) below; (iii) in the case of overnight air courier, on the second business day following the day sent, with receipt confirmed by the courier; and (iv) in the case of mailing by first class certified or registered mail, postage prepaid, return receipt requested, on the fifth business day following such mailing and should be addressed as follows: If to HP, to: Hewlett-Packard Company 3000 Hanover St. P.O. Box 10302, M/S 20BQ 8 45 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 Palo Alto, CA 94303-0890 Attention: Director, Corporate Development Facsimile: 415-852-8342 with a copy to: Hewlett-Packard Company 3000 Hanover Street, MS: 20BQ Palo Alto, California 94305 Attention: General Counsel Facsimile: 415-857-4392 If to Symantec, to Symantec Corporation 10201 Torre Avenue Cupertino, California 95014 Attention: Senior Vice President, Corporate Development Facsimile: 408-446-8849 with a copy to: Symantec Corporation 10201 Torre Avenue Cupertino, California 95014 Attention: Vice President and General Counsel Facsimile: 408-446-8849 or to such other address as such party may indicate by a notice delivered to the other parties hereto. 11.4 Export Control. HP and Symantec agree to comply with all applicable United States laws and regulations that may govern the export of products subject to this Agreement, including the Export Administration Act of 1979, as amended, any successor legislation, and the Export Administration Regulations issued by the Department of Commerce. 11.5 No Waiver. The waiver of any term, condition, or provision of this Agreement must be in writing and signed by an authorized representative of the waiving party. No such waiver shall be construed as a waiver of any other term, condition, or provision except as provided in writing, nor as a waiver of any subsequent breach of the same term, condition, or provision. 9 46 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 11.6 Severability. If any provision in this Agreement is held invalid or unenforceable by a body of competent jurisdiction, such provision shall be construed, limited or, if necessary, severed to the extent necessary to eliminate such invalidity or unenforceability. The parties agree to negotiate in good faith a valid, enforceable substitute provision that most nearly effects the parties' original intent in entering into this Agreement or to provide an equitable adjustment in the event no such provision can be added. The other provisions of this Agreement shall remain in full force and effect. 11.7 Entire Agreement. This Agreement comprises the entire understanding between the parties with respect to its subject matters and supersedes any previous communications, representations, or agreements, whether oral or written. For purposes of construction, this Agreement shall be deemed to have been drafted by both parties. No modification of this Agreement shall be binding on either party unless in writing and signed by an authorized representative of each party. 11.8 Governing Law. This Agreement will be governed by the laws of the State of California without reference to any choice of laws provisions. The parties have read and agreed to this License Agreement. HEWLETT-PACKARD COMPANY SYMANTEC CORPORATION By: By: ------------------------ ------------------------------- Name: Name: ---------------------- ---------------------------- Title: Title: -------------------- ---------------------------- 10 47 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 Schedule 1 Product technology unlimited source license to HP Schedule 1 Licensed Software: Components and Related Projects 1. System Detection Library (SDL) 2. Symantec Basic Extensions, Symantec Installer, Symantec Basic Recorder and Enhanced Menuing System (EMS-the menuing system used in the NEF console) 2.1 Components from Symantec shared technology that are used by NAN 2.55 and NDA 1.02
PROJECT DESCRIPTION TARGETS EBEXT Network, mail, and other extensions SYMWNET7.SBL, SYMWEXT7.SBL, SYMCNST7.SBL, to Summit Basic. SYMWNET7.LIB, SYMWEXT7.LIB, SYMPUB7.LIB, SYMCNST7.LIB, SYMWNET7.SBH, SYMWEXT7.SBH, SYMCNST7.SBH Symantec Files that are in the Symantec INSTALL.EXE, INSTBIN.EXE, SIW3ZIP.DLL, SIWDLL.DLL, Installer Installer. SIWDLL32.DLL, SIWUNZIP.DLL, SIWVWR.EXE, SIWZIP.DLL, TKSIW16.DLL, TKSIW32.DLL
11 48 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 2.2 Components from Symantec shared technology that are used by NAS EE 1.0
PROJECT DESCRIPTION TARGETS EBEXT Network, mail, and other extensions to SYMWNET7.SBL, SYMWEXT7.SBL, SYMCNST7.SBL, Summit Basic. SYMWNET7.LIB, SYMWEXT7.LIB, SYMPUB7.LIB, SYMCNST7.LIB, SYMWNET7.SBH, SYMWEXT7.SBH, SYMCNST7.SBH Symantec Files that are in the Symantec INSTALL.EXE, INSTALL.EXE, INSTBIN.EXE, Installer Installer set. INSTBIN.EXE, MAILBUSI.CTL, N16UTILS.LIB, PIPELINE.DLL, PIPELINE.INI, SETUP.EXE, SIW3ZIP.DLL, SIW3ZIP.DLL, SIWDLL.DLL, SIWDLL.DLL, SIWDLL.LIB, SIWDLL32.DLL, SIWDLL32.DLL, SIWFMOD.EXE, SIWGT16.DLL, SIWGT32.DLL, SIWPIPL.EXE, SIWUNZIP.DLL, SIWUNZIP.DLL, SIWVWR.EXE, SIWVWR.EXE, SIWWIZ16.LIB, SIWZIP.DLL, SIWZIP.DLL, SUNZIP16.DLL, SYMNAV7.LIB, TKSIW16.DLL, TKSIW16.DLL, TKSIW32.DLL, TKSIW32.DLL, _SYMINST.EXE, _SYMINST.PIF, _SYMSHEL.EXE
12 49 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 2.3 Components from Symantec shared technology that are used by NAS PE 3.0
PROJECT DESCRIPTION TARGETS EBEXT Network, mail, and other extensions to SYMWNET7.SBL, SYMWEXT7.SBL, SYMCNST7.SBL, Summit Basic. SYMWNET7.LIB, SYMWEXT7.LIB, SYMPUB7.LIB, SYMCNST7.LIB, SYMWNET7.SBH, SYMWEXT7.SBH, SYMCNST7.SBH Symantec Files that are in the Symantec INSTALL.EXE, INSTALL.EXE, INSTBIN.EXE, Installer Installer set. INSTBIN.EXE, MAILBUSI.CTL, N16UTILS.LIB, SETUP.EXE, SIW3ZIP.DLL, SIW3ZIP.DLL, SIWDLL.DLL, SIWDLL.DLL, SIWDLL.LIB, SIWDLL32.DLL, SIWDLL32.DLL, SIWFMOD.EXE, SIWGT16.DLL, SIWGT32.DLL, SIWPIPL.EXE, SIWUNZIP.DLL, SIWUNZIP.DLL, SIWVWR.EXE, SIWVWR.EXE, SIWWIZ16.LIB, SIWZIP.DLL, SIWZIP.DLL, SUNZIP16.DLL, SYMNAV7.LIB, TKSIW16.DLL, TKSIW16.DLL, TKSIW32.DLL, TKSIW32.DLL, _SYMINST.EXE, _SYMINST.PIF, _SYMSHEL.EXE
13 50 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 2.4 Components from Symantec shared technology that are used by Big Bang
PROJECT DESCRIPTION TARGETS EBEXT Network, mail, and other extensions to SYMWNET7.SBL, SYMWEXT7.SBL, SYMCNST7.SBL, Summit Basic. SYMWNET7.LIB, SYMWEXT7.LIB, SYMPUB7.LIB, SYMCNST7.LIB, SYMWNET7.SBH, SYMWEXT7.SBH, SYMCNST7.SBH EMS Enhanced Menuing System SYMEMS40.DLL, SYMEMS4D.DLL Symantec Basic The macro recorder used with Symantec SBRECORD.EXE Recorder Basic. Symantec Files that are in the Symantec SETUP.EXE, SFTTR32.DLL, SIWDLL32.DLL, Installer Installer set. SIWFMOD.EXE, SIWGT16.DLL, SIWGT32.DLL, SIWPIPL.EXE, SIWPIPL.EXE, SUNZIP32.DLL, , TKKNF160.DLL, TKKNF320.DLL, _SYMSHEL.EXE
14 51 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 3. Selected projects from Quake library, selected projects from Core library 3.1 Quake projects that are used by NAN 2.55 and NDA 1.02
PROJECT DESCRIPTION TARGETS [ROOT] Files necessary to do development builds. None DESKEDIT Symantec basic editor SBEDIT.EXE DOCS System documentation. None DOSCRT0 DOS C-runtime interface. DOSCRT0.LIB DOSDLG DOS dialog library. DOSDLG.LIB DOSDRVWN DOS drive window library. DOSDRVWN.LIB DOSIO DOS I/O routines. DOSIO.LIB DOSNET DOS network library. DOSNET.LIB DOSTOOL DOS utility library. DOSTOOL.LIB DOSUI DOS UI library. DOSUI.LIB DOSVMM DOS memory management library. DOSVMM.LIB DRAGDROP Drag and drop interface DLL. DRAGDRP7.DLL GEOLGIST Documentation for Quake None INC Project wide include files. None INCLUDE Project wide include files. None LOADER Memory swapping DOS loader. LOADER.LIB NOBUILDS Various files that are included in the project that don't get built. NPT Print library. NPT7.DLL OS2VMM OS/2 memory manager library. OS2VMM.LIB PARSWAP DOS Memory swapping loader. SWAPPER.EXE STRINGS Localizable resources. STRINGS.LIB SYMCHART Wrapped up Quinn-Curtis charting code. SYMCHRT7.DLL SYMCRC CRC routines. SYMCRC7.LIB SYMDB Database without Trio C-Index. SYMDB7.DLL SYMGUI GUI routines. SYMGUI7.DLL SYMMAIL Mail system interface routines. SYMMAIL7.DLL SYMNET Network routines. SYMNET7.DLL, NDS.DLL, SYMBV47.DLL, SYMLM27.DLL, SYMNDS7.DLL, SYMNSM7.DLL,
15 52 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 SYMUTIL Utility routines. SYMNW37.DLL SYMNW47.DLL, SYMNW37O.DLL, SYMLM27O.DLL, SYMNSM7.DLL SYMUTIL7.DLL SYMVWR Viewer (database and other). NVIEWER.EXE SYMVWR7.DLL, SYMSCAL7.PRS, SYMPROG7.PRS, SYMNDB7.PRS, SYMHEX7.PRS, SYMDOC7.PRS, SYMBMP7.PRS, SYMBM7.DSP, SYMHXD7.DSP, SYMSS7.DSP, SYMTXT7.DSP TREASURE Utility routines used by other parts of TREASURE.LIB Quake.
16 53 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 3.2 Core projects that are used by Big Bang
PROJECT DESCRIPTION TARGETS [ROOT] Files necessary to do development builds None DEVNODE Device node library DEVNODE.LIB DOCS Core system documents None DOSCRT0 DOS C-runtime interface. DOSCRT0.LIB DOSIO DOS I/O routines. DOSIO.LIB DOSTOOL DOS utility library. DOSTOOL.LIB DOSUI DOS UI library. DOSUI.LIB DOSVMM DOS memory management library. DOSVMM.LIB DRAGDROP Drag and drop interface DLL. S32DGDPJ.DLL EDITAPI Registry editing routines. S32EDAPJ.DLL EDITPAGE Registry editing routines. S32EDPGJ.DLL GEOLGIST Core system documents None INC Project include files. None INC.DEV Project include files. None INCLUDE Project include files. None INFODESK.DLL Help system. INFODESK.DLL INFODESK.HLP Help files for help system. HLP files. NOBUILDS Various files that are included in the project that don't get built. NPT Printing library. S32NPTJ.DLL OS2VMM OS/2 memory manager. OS2VMM.LIB PARSWAP DOS memory swapping loader. PARSWAP.EXE SDL System detection library. SLD32.DLL, SDLTHK32.DLL, SDL16.DLL, SDLTK16.DLL SDLBENCH System detection library benchmark code. SDLBM32.DLL, SDLBMMB.VXD, SDLBM16.DLL, SDLDUMP System detection library test framework. SDLDMP16.EXE, SDLDMP32.EXE SDLVXD System detection library. SDLVXD.VXD STRINGS Localizable resources. STRINGS.LIB SYMCRC CRC routines. SYMCRCJ.LIB SYMDB Database without Trio C-Index. S32DBJ.LIB
17 54 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 SYMEVNT.QA Event notification test routines. None SYMGUI GUI routines. S32GUIJ.DLL SYMKRLIB SYMKRNL as a static library. S32KRLIB.LIB SYMLEAN Subset of MFC classes (i.e. Cstring). IRALEAN.LIB SYMNET Networking libraries. LOCALGRP.EXE, NETTST32.EXE, S32NETJ.DLL, S32NSMJ.DLL S32XPCJ.DLL, NETTST16.EXE, SYMXPCJ.EXE SYMBV4J.DLL, SYMLM2J.DLL, SYMNETJ.DLL, SYMNSMJ.DLL SYMNW3J.DLL, SYMNW4J.DLL SYMNETQA.W16 Networking library test application. SYMNETQA.EXE SYMNETQA.W32 Networking library test application. SYMNETQA.EXE SYMNSO Network object display routines. S32NSOJ.DLL SYMUTIL Utility library. S32UTILJ.DLL SYMVWR Viewers (database and other). NVIEW32.EXE, S32VWRJ.DLL, S32BMJ.DSP, S32NXDJ.DSP, S32SSJ.DSP, S32TXTJ.DSP, S32BMPJ.PRS, S32DOCJ.PRS, S32GIFJ.PRS, S32HEXJ.PRS, S32PROGJ.PRS
18 55 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 Schedule2 SYMEVNT limited source license to HP Schedule 2 Licensed Software 4. Limited use Core projects used by Big Bang
PROJECTS DESCRIPTION TARGETS SYMEVNT for the NT Event notification for the NT platform. N32EVENT.DLL, NANEVENT.DLL, platform NANEVENT.SYS NANEVNT NANEVNT is the SYMEVNT project for the Windows N32EVENT.DLL, N32EVENT.VXD, 95 platform customized to remove only the file NANEVENT.DLL system and device management events.
19 56 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 Schedule 3 TAOSKRNL limited source license to HP Schedule 3 Licensed Software 1. Limited use Quake projects used by NAN 2.55 and NDA 1.02
PROJECT DESCRIPTION TARGETS TAOSKRNL Substitute kernel routines for SYMKRNL. SYMKRNL7.DLL
2. Limited use Core projects used by Big Bang
PROJECTS DESCRIPTION TARGETS TAOSKRNL Substitute kernel routines for SYMKRNL. S32KRNLI.DLL, SYMKRNL.DLL
20 57 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 Schedule 4 SYMKRNL limited source license to HP Schedule 4 Licensed Software 1. Limited use Quake projects used by NAN 2.55 and NDA 1.02
PROJECT DESCRIPTION TARGETS SYMKRNL Kernel routines. SYMKRNL7.DLL
2. Limited use Core projects used by Big Bang
PROJECTS DESCRIPTION TARGETS SYMKRNL Kernel routines. S32KRNLJ.DLL
21 58 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 Schedule 5 Symantec tools limited source license to HP Schedule 5 Licensed Software 1. STS (Software Tracking System) 2. SBS (The Build system) 3. Enterprise Lab Test Tools 4. Build system projects as follows:
PROJECT DESCRIPTION TARGET NETNAME.DOS Lab utilities None NETNAME.W16 Lab utilities None
22 59 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 Schedule 6 Symantec tools limited object license to HP Schedule 6 Licensed Software 1. Symantec Cafe 2. Symantec C++ 3. Think Pascal 23 60 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 Schedule 7 Distribution technology limited source license to Symantec For current products
LISTED SOFTWARE ASSOCIATED PRODUCTS ASSOCIATED LIMITED PURPOSE # NAN 2.5 Console and NEF Your Eyes Only Administrator # distributing and administering YEOA 2.5 framework. (YEOA) (PC version) and PCA clients PC Anywhere (PCA) (PC version) LISTED SOFTWARE ASSOCIATED PRODUCTS ASSOCIATED LIMITED PURPOSE # NAN 2.5 software Your Eyes Only Administrator # distributing and administering YEOA distribution, limited to (YEOA) (PC version) and PCA clients prevent end-user direct PC Anywhere (PCA) (PC creation of new version) distribution jobs and end-user direct modification of existing distribution jobs other than that allowed by the current version (known as "NAN-Lite").
LISTED SOFTWARE ASSOCIATED PRODUCTS ASSOCIATED LIMITED PURPOSE # SNIM (Symantec Network Your Eyes Only Administrator # distribution of YEOA (Macintosh) and Installer for Macintosh). (YEOA) (Macintosh version) SAM (Macintosh) clients. Symantec Anti-Virus (SAM) (Macintosh version)
For future products
LISTED SOFTWARE ASSOCIATED PRODUCTS ASSOCIATED LIMITED PURPOSE build system project Any security, anti-virus or Any. NALERT32 cost-of-ownership product.
24 61 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 source files APAGER.C AIOCOMM.C NPAGER.C Associated include files.
25 62 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 Schedule 8 Product technology limited object license to Symantec
LISTED SOFTWARE ASSOCIATED PRODUCTS ASSOCIATED LIMITED PURPOSE # NAN 1.0 Console #Norton Utilities # allowing Symantec resellers to sell remaining and NEF 1.0 Administrator copies of NUA (current inventory only). framework.
26 63 HP AND SYMANTEC CONFIDENTIAL ASSET PURCHASE AGREEMENT - EXHIBIT D MARCH 26, 1997 Schedule 9 Product technology limited end user license to Symantec Schedule 9 Licensed Software 1. Expose (version 3.52) 2. Expose (version 4.0) 3. NAN (version 2.55) 4. NAN (Big Bang release version) 5. NDA (version 1.02) 6. NDA (Big Bang release version) 27 64 ASSET PURCHASE AGREEMENT AMENDMENT NO. 1 This Amendment No. 1 (the "Amendment") to the Asset Purchase Agreement dated March 27, 1997 (the "Agreement") is entered into and made effective this 24th day of April, 1997 by and between Hewlett-Packard Company, a California corporation ("HP"), and Symantec Corporation, a Delaware corporation ("Symantec"). Terms not defined herein shall have the meanings ascribed to them in the Agreement. RECITAL WHEREAS, HP and Symantec executed and delivered the Agreement and now desire to amend the Agreement to clarify certain of its terms and to add certain additional matters not previously provided for in the Agreement. NOW THEREFORE, intending to be bound, in consideration for good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged, HP and Symantec agree as follows: 1. AMENDMENT TO SECTION 7.4. Section 7.4 Is hereby amended and restated in its entirety as follows: *Section 7.4 Special License Grant. (a) From time to time and at HP's sole discretion, HP shall sell at a price of $0.01 per build a portion of the NAN and NDA Products (the "Source") to Symantec for the purpose of incorporating in the Source an appropriate database with the same or superior functionality to C-Index/II. As soon as reasonably practicable, Symantec shall, using its computers and related equipment, complete the incorporation of such database into the Source (the "Completed Builds") and shall sell at a price of $0.01 per build such Completed Builds to HP. Thereafter, HP may dispose of such Completed Builds at its sole discretion. HP acknowledges that Symantec may need certain software tools and compilers which are currently owned or licensed by HP in order to produce the Completed Builds. HP will pay Symantec $1,000 as a fully-paid up license for the final Completed Build. In that regard, upon reasonable requests by Symantec and pursuant to any rights that HP may have, HP agrees to license such tools to Symantec. In addition, HP agrees to license to Symantec all necessary equipment for Symantec to produce the Completed Builds at a fee to be negotiated in good faith following the Closing. (b) HP and Symantec will mutually agree on the appointment of one or more persons, who shall not be employees of HP, to perform consulting services to produce the Completed Builds. (c) HP will develop and release software containing all or any part of the Products in which C-Index/II has been replaced with another database (the "New Database Software") as quickly as is 65 commercially reasonable. HP acknowledges that it would have replaced this database in any event, but would not have engaged in such development prior to the release of the next release of NAS (the "Next Release"), but for the commitment hereunder. (d) HP may set-off that portion of its expenses (which are directly attributed to the parallel development of the New Database Software prior to the initial release of the Next Release) for the development of the New Database Software (the "Development Expenses"), that HP would not have otherwise incurred, but for its obligations to accelerate development under subsection 7.4(c) above, against the Purchase Price pursuant to Section 10.7 hereof. Notwithstanding the foregoing, HP's right to set-off the Development Expenses will terminate at such time as (i) Symantec has developed and delivered to HP a version of the Next Release that does not contain C-Index/II or (ii) Symantec has provided to HP a license to use C-Index/II in substantially the form attached hereto as Exhibit A (the "New C-Index License"). Such development expenses may include charges on or after May 5, 1997 of up to $100,000 for the cost of a new database. (e) Symantec, hereby grants to HP any and all rights that Symantec may obtain at a future date under the New C-Index License with respect to the Products. Each of HP and Symantec agree to use its reasonable best efforts to incorporate and expand upon the provisions set forth above in a mutually satisfactory agreement to be executed within four weeks following the Closing Date; provided, that, in the event that, for whatever reason, the parties are unable to timely or otherwise execute such a definitive agreement, paragraphs (a) through (e) above shall be enforced in accordance with their terms. Notwithstanding anything herein to the contrary, HP may, at any time and in its sole discretion, terminate the provisions set forth in Sections 7.4(a) and (b). 2. AMENDMENT TO SECTION 10.3. (a) The first sentence of Section 10.3(a) is hereby amended and replaced in its entirety as follows: "Except for Losses and Expenses related to Trio, the liabilities and obligations of Symantec arising under this Article 10 shall commence only following the incidence of Losses and Expenses aggregating $150,000, following which all claims starting from the first dollar shall be recoverable as provided in this Agreement." (b) The first sentence of Section 10.3(b) is hereby amended and replaced in its entirety as follows: "The liabilities and obligations of HP and any HP Group Member arising under this Article 10 shall commence only following the incidence of Losses and Expenses (incurred by any and all Indemnified Parties) aggregating $150,000, following which all claims starting from the first dollar shall be recoverable as provided in this Agreement." 66 3. AMENDMENT TO SECTION 10.7. The first sentence of Section 10.7 of the Agreement is hereby amended and replaced in its entirety with the following: "HP shall be entitled to set-off the amount of any claim reasonably submitted in good faith under Section 10.1 as a Loss and/or Expense or by way of indemnification against any other amounts payable by HP to Symantec whether under this Agreement or otherwise as HP's sole monetary remedy." 4. AMENDMENT TO EXHIBIT A-2. Any and all agreements among Trio Systems, LLC and Symantec are hereby removed from the list of "Transferred Agreements" under Exhibit A-2 of the Agreement. 5. GENERAL. The General Provisions of Article 12 of the Agreement are hereby incorporated into and deemed applicable to this Amendment. Subject to the foregoing amendments and restatements, the Agreement remains in full force and effect. Each of HP and Symantec hereby agree that the terms and conditions of this Amendment shall remain confidential and shall not be disclosed to any third party, whether a governmental entity, pursuant to a legal proceeding or otherwise, without the written consent of the other party, unless such disclosure is required by law. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on the date first written above. "HP" HEWLETT-PACKARD COMPANY, a California corporation By: /s/ JOHN EATON --------------------------------- Name: JOHN EATON -------------------------------- Title: BUSINESS DEV. MGR. -------------------------------- "Symantec" SYMANTEC CORPORATION, a Delaware corporation By: /s/ DEREK WITTE --------------------------------- Name: DEREK WITTE --------------------------------- Title: --------------------------------- EX-11.01 12 COMPUTATION OF NET INCOME (LOSS) PER SHARE 1 EXHIBIT 11.01 SYMANTEC CORPORATION COMPUTATION OF NET INCOME (LOSS) PER SHARE
Year Ended March 31, ------------------------------------ (In thousands, except per share data) 1997 1996 1995 - ----------------------------------------------- ------- -------- -------- PRIMARY NET INCOME (LOSS) PER SHARE Net income (loss) $26,038 $(39,783) $ 33,409 Interest on assumed repayment of short-term and long-term borrowings and investment in U.S. government securities, net of income tax effect -- -- 468 ------- -------- -------- Net income (loss), as adjusted $26,038 $(39,783) $ 33,877 ======= ======== ======== Weighted average number of common shares outstanding during the period 54,705 52,664 49,338 Shares issuable from assumed exercise of options 702 -- 9,606 Shares assumed repurchased with proceeds, limited to 20% of total shares outstanding -- -- (6,763) ------- -------- -------- Common and common stock equivalent shares outstanding for purpose of calculating primary net income (loss) per share 55,407 52,664 52,181 ======= ======== ======== Primary net income (loss) per share $ 0.47 $ (0.76) $ 0.65 ======= ======== ======== FULLY DILUTED NET INCOME (LOSS) PER SHARE Net income (loss) $26,038 $(39,783) $ 33,409 Interest on assumed conversion of convertible subordinated debentures, and assumed repayment of short-term and long-term borrowings and investment in U.S. government securities, net of income tax effect -- -- 1,246 ------- -------- -------- Net income (loss), as adjusted $26,038 $(39,783) $ 34,655 ======= ======== ======== Weighted average number of common shares outstanding during the period 54,705 52,664 49,338 Shares issuable from assumed exercise of options 1,136 -- 10,031 Shares issuable from assumed conversion of convertible subordinated debentures -- -- 2,083 Shares assumed repurchased with proceeds, limited to 20% of total shares outstanding -- -- (4,961) ------- -------- -------- Total shares for purpose of calculating fully diluted net income (loss) per share 55,841 52,664 56,491 ======= ======== ======== Fully diluted net income (loss) per share $ 0.47 $ (0.76) $ 0.61 ======= ======== ========
EX-21.01 13 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.01 SYMANTEC CORPORATION SUBSIDIARIES OF SYMANTEC
Name of Subsidiary State or Country of Incorporation - ------------------ --------------------------------- AntiVirus Update (AVU) GmbH Germany Central Point Software, Inc. ("Central Point") Delaware, USA Delrina Corporation (Canada) Canada Delrina (Boston) Corporation Massachusetts, USA Delrina (Canada) Corporation Canada Delrina (Delaware) Corporation Delaware, USA Delrina (Germany) GmbH Germany Delrina (Seattle) Corporation Washington, USA Delrina (UK) Corporation Limited United Kingdom Delrina (US) Corporation Delaware, USA Delrina (Washington) Corporation Washington, USA Delrina (Wyoming) Limited Liability Company Wyoming, USA Delrina International Corporation (Barbados) Barbados Fifth Generation Systems GmbH Germany Fifth Generation Systems PTE Ltd. (Singapore) Singapore 1087013 Ontario Limited Canada Sym (UK) Holding, Ltd. United Kingdom Symantec (Deutschland) GmbH Germany Symantec (Japan) KK (formerly Fifth Generation Systems KK) Japan Symantec (UK) Ltd. ("Symantec UK") United Kingdom Symantec Australia Pty. Ltd. Australia Symantec EURL (France) France Symantec Financing B.V. (Netherlands) Netherlands Symantec Foreign Sales Corporation (Barbados) Barbados Symantec Hong Kong Ltd. (formerly FGS Hong Kong Ltd.) Hong Kong Symantec Korea Ltd. Korea Symantec Limited (Ireland) Ireland Symantec SRL (Italy) Italy Zortech (UK) Ltd. United Kingdom Zortech Limited ("Zortech") United Kingdom
EX-23.01 14 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS 1 EXHIBIT 23.01 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 33-31444, 33-32065, 33-33654, 33-37066, 33-42440, 33-44203, 33-46927, 33-51612, 33-54396, 33-55300, 33-64290, 33-70558, 33-80360, 33-88694, 33-60141, 33-64507, 333-07223, 333-18353, 333-18355 and Form S-3 Nos. 33-82012 and 33-63513) of our report dated April 25, 1997 (except for paragraph 6 of Note 11, as to which the date is May 13, 1997), with respect to the consolidated financial statements and schedule of Symantec Corporation included in this Annual Report (Form 10-K) for the year ended March 31, 1997. ERNST & YOUNG LLP San Jose, California June 20, 1997 EX-23.02 15 CONSENT OF PRICE WATERHOUSE, INDEPENDENT AUDITORS 1 EXHIBIT 23.02 CONSENT OF PRICE WATERHOUSE, INDEPENDENT AUDITORS June 20, 1996 The Board of Directors Symantec Corporation: We consent to incorporation by reference in the registration statements (No. 33-31444, No. 33-32065, No. 33-33654, No. 33-37066, No. 33-42440, No. 33-44203, No. 33-46927, No. 33-51612, No. 33-54396, No. 33-55300, No. 33-64290, No. 33-70558, No. 33-80360, No. 33-88694, No. 33-60141, No. 33-64507, No. 333-07223, No. 333-18353 and No. 333-18355) on Form S-8 and the registration statements on Form S-3 (No. 33-82012 and No. 33-63513) filed by Symantec Corporation of our report dated August 8, 1995, relating to the balance sheet of Delrina Corporation as of June 30, 1995, and the related consolidated statements of operations, retained earnings (deficit) and changes in financial position for the years ended June 30, 1995 and 1994 which appears in the Fiscal 1997 Form 10-K of Symantec Corporation and the Form S-8 of Symantec Corporation filed on or about June 26, 1997. PRICE WATERHOUSE Chartered Accountants EX-27.01 16 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 12-MOS MAR-28-1997 MAR-30-1996 MAR-28-1997 1 95,758 64,324 51,950 (4,300) 4,476 238,197 136,936 (85,326) 341,673 108,628 15,066 0 0 554 217,425 341,673 472,183 472,183 93,544 93,544 352,350 1,599 1,402 30,378 4,340 26,038 0 0 0 26,038 0.47 0.47
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