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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 3, 1996
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 No. 1-7819
Analog Devices, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2348234
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Technology Way, Norwood, MA 02062-9106
(Address of principal executive offices) (Zip Code)
(617) 329-4700
(Registrant's telephone number, including area code)
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
The number of shares outstanding of each of the issuer's classes of Common
Stock as of March 1, 1996 was 115,249,442 shares of Common Stock.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands except per share amounts)
Three Months Ended
------------------
February 3, 1996 January 28, 1995
---------------- ----------------
Net sales $280,769 $208,005
Cost of sales 138,219 103,145
-------- --------
Gross margin 142,550 104,860
Operating expenses:
Research and development 40,857 30,250
Selling, marketing, general and
administrative 48,803 43,671
-------- --------
89,660 73,921
-------- --------
Operating income 52,890 30,939
Nonoperating expenses (income):
Interest expense 1,828 1,282
Interest income (3,899) (2,191)
Other 783 732
-------- --------
(1,288) (177)
-------- --------
Income before income taxes 54,178 31,116
Provision for income taxes 14,086 7,468
-------- --------
Net income $ 40,092 $ 23,648
======== ========
Shares used to compute earnings per share 124,185 117,647
======== ========
Earnings per share of common stock $0.33 $0.20
======== ========
See accompanying notes.
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ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(thousands except share amounts)
Assets February 3, 1996 October 28, 1995 January 28, 1995
---------------- ---------------- ----------------
Cash and cash equivalents $ 195,549 $ 69,303 $101,133
Short-term investments 174,355 81,810 57,548
Accounts receivable, net 190,400 181,327 169,752
Inventories:
Finished goods 48,839 44,109 40,448
Work in process 84,398 77,526 68,055
Raw materials 24,531 22,327 18,184
---------- ---------- --------
157,768 143,962 126,687
Prepaid income taxes 41,700 39,650 25,000
Prepaid expenses 12,926 9,966 6,424
---------- ---------- --------
Total current assets 772,698 526,018 486,544
---------- ---------- --------
Property, plant and equipment,
at cost:
Land and buildings 139,658 139,718 122,040
Machinery and equipment 686,776 633,124 510,608
Office equipment 43,855 41,260 34,040
Leasehold improvements 45,164 42,165 37,620
---------- ---------- --------
915,453 856,267 704,308
Less accumulated depreciation
and amortization 438,930 424,305 382,567
---------- ---------- --------
Net property, plant and
equipment 476,523 431,962 321,741
---------- ---------- --------
Intangible assets, net 16,722 17,230 18,754
Deferred charges and other
assets 43,434 26,438 9,381
---------- ---------- --------
Total other assets 60,156 43,668 28,135
---------- ---------- --------
$1,309,377 $1,001,648 $836,420
========== ========== ========
See accompanying notes.
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ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(thousands except share amounts)
Liabilities and Stockholders'
Equity February 3, 1996 October 28, 1995 January 28, 1995
---------------- ---------------- ----------------
Short-term borrowings and current
portion of long-term debt $ 2,193 $ 2,299 $ 3,938
Obligations under capital leases 7,024 60 191
Accounts payable 96,243 100,217 86,655
Deferred income on shipments to
domestic distributors 34,182 27,588 21,450
Income taxes payable 35,717 50,086 32,171
Accrued liabilities 82,101 74,138 57,072
---------- ---------- --------
Total current liabilities 257,460 254,388 201,477
---------- ---------- --------
Long-term debt 310,000 80,000 80,000
Noncurrent obligations under
capital leases 26,248 - 24
Deferred income taxes 6,000 5,039 3,250
Other noncurrent liabilities 8,516 6,255 4,746
---------- ---------- --------
Total noncurrent liabilities 350,764 91,294 88,020
---------- ---------- --------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $1.00 par value,
500,000 shares authorized,
none outstanding - - -
Common stock, $.16 2/3 par value,
450,000,000 shares authorized,
114,990,492 shares issued
(114,583,932 in October 1995,
75,438,343 in January 1995) 19,165 19,098 12,573
Capital in excess of par value 155,173 149,775 142,621
Retained earnings 521,556 481,464 385,842
Cumulative translation adjustment 5,574 5,870 5,964
--------- ---------- --------
701,468 656,207 547,000
Less 50,713 shares in treasury,
at cost (51,876 in October 1995,
and 3,433 in January 1995) 315 241 77
---------- ---------- --------
Total stockholders' equity 701,153 655,966 546,923
---------- ---------- --------
$1,309,377 $1,001,648 $836,420
========== ========== ========
See accompanying notes.
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ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(thousands) Three Months Ended
------------------
February 3, 1996 January 28, 1995
---------------- ----------------
OPERATIONS
Cash flows from operations:
Net income $ 40,092 $ 23,648
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 17,263 15,023
Deferred income taxes 992 43
Other noncash expenses 25 402
Changes in operating assets and liabilities (25,143) 10,953
-------- --------
Total adjustments (6,863) 26,421
-------- --------
Net cash provided by operations 33,229 50,069
-------- --------
INVESTMENTS
Cash flows from investments:
Additions to property, plant and equipment, net (62,059) (54,764)
Purchase of short-term investments available
for sale (139,627) (35,088)
Maturities of short-term investments
available for sale 47,082 50,192
Increase in other assets (11,797) (85)
-------- ---------
Net cash used for investments (166,401) (39,745)
-------- --------
FINANCING ACTIVITIES
Cash flows from financing activities:
Net proceeds from issuance of long-term debt 224,385 -
Proceeds from equipment financing 35,000 -
Net increase in variable rate borrowings 12 1,035
Payments on capital lease obligations (1,788) (82)
Proceeds from employee stock plans 684 685
Payments on long-term debt - (20,000)
-------- --------
Net cash provided by (used for) financing
activities 258,293 (18,362)
-------- --------
Effect of exchange rate changes on cash 1,125 58
-------- --------
Net increase (decrease) in cash and cash
equivalents 126,246 (7,980)
Cash and cash equivalents at beginning of period 69,303 109,113
-------- --------
Cash and cash equivalents at end of period $195,549 $101,133
======== ========
SUPPLEMENTAL INFORMATION
Cash paid during the period for:
Income taxes $ 24,122 $ 2,954
======== ========
Interest $ 170 $ 135
======== ========
See accompanying notes.
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Analog Devices, Inc.
Notes to Condensed Consolidated Financial Statements
February 3, 1996
Note 1 - In the opinion of management, the information furnished in the
accompanying financial statements reflects all adjustments, consisting only of
normal recurring adjustments, which are necessary to a fair statement of the
results for this interim period and should be read in conjunction with the most
recent Annual Report to Stockholders.
Note 2 - Certain amounts reported in the previous year have been reclassified to
conform to the 1996 presentation.
Note 3 - Debt
On December 18, 1995 the Company completed a public offering of $230,000,000 of
five-year 3 1/2% Convertible Subordinated Notes due December 1, 2000 with
semiannual interest payments on June 1 and December 1 of each year, commencing
June 1, 1996. The Notes are convertible, at the option of the holder, into the
Company's common stock at any time after 60 days following the date of original
issuance, unless previously redeemed, at a conversion price of $27.917 per
share, subject to adjustment in certain events. The net proceeds of the offering
were approximately $224 million after payment of the underwriting discount and
expenses of the offering which will be amortized over the term of the Notes. As
of February 3, 1996, the Company's total long-term debt was $310,000,000,
comprised of the $230,000,000 of 3 1/2% Convertible Subordinated Notes and
$80,000,000 of 6 5/8% Notes.
Note 4 - Commitments and Contingencies
As previously reported in the Company's Annual Report on Form 10-K for the
fiscal year ended October 28, 1995, the Company is engaged in an enforcement
proceeding brought by the International Trade Commission related to patent
infringement litigation with Texas Instruments, Inc., and antitrust litigation
with Maxim Integrated Products, Inc.
Although the Company believes it should prevail in these matters, the Company is
unable to determine their ultimate outcome or estimate the ultimate amount of
liability, if any, at this time. An adverse resolution of these matters could
have a material adverse effect on the Company's consolidated financial position
or on its consolidated results of operations or cash flows in the period in
which the matters are resolved.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
First Quarter of Fiscal 1996 Compared to the First Quarter of Fiscal 1995
Net sales for the 14-week first quarter of 1996 increased 35% to $280.8 million,
as compared to net sales of $208.0 million for the 13-week first quarter of
fiscal 1995. The sales increase was principally attributable to significant
increases in sales volumes of both standard linear IC and system-level IC
products as the Company continued to benefit from strong worldwide demand for
its IC products. Sales of the Company's standard linear IC products, the largest
and most profitable part of the Company's business, increased approximately 32%
from last year's first quarter. Excluding sales of hard disk drive products,
revenues from system level IC products, including both general-purpose digital
signal processing and mixed signal ICs, grew approximately 71% year over year.
Revenues from disk drive manufacturers declined $3.1 million from the prior
year. Assembled product sales remained relatively flat in comparison to the
first quarter of fiscal 1995.
Demand for standard linear IC products was particularly strong in the industrial
and instrumentation markets and in high-growth applications in the
communications market. Sales of system-level IC products were strongest in
wireless communications, pin electronics for automatic test equipment, and both
fixed-point and floating-point general-purpose DSPs. The distributor channel
continued to have a very positive effect on sales growth, as worldwide sales
through distribution increased approximately 47% from the same period last year
to comprise approximately 41% of total sales in the first quarter of fiscal
1996. Geographically the largest year over year sales gains were registered in
North American distribution, Europe and Japan.
The Company's manufacturing capacity continued to be constrained throughout the
first quarter of fiscal 1996. See "Liquidity and Capital Resources" below for a
discussion of the Company's efforts to address its capacity issues.
Gross margin improved slightly to 50.8% of sales from 50.4% in the first quarter
of 1995, despite a continuing mix shift to higher volume, lower-margin
system-level products.
Research and development expense for the first quarter of 1996 grew 35% over
the same quarter last year to 14.6% of sales as the Company continued to
increase its R&D investment in opportunities in communications, computers,
digital signal processing, accelerometer and linear ICs. Selling, marketing,
general and administrative (SMG&A) expense grew only 11.8%, a rate
significantly below the sales growth rate. As a result, SMG&A as a percentage
of sales decreased for the first quarter to 17.4% from 21.0% for the year ago
period.
The operating income ratio rose to 18.8% of sales compared to 14.9% for the
first quarter of fiscal 1995. This performance gain resulted primarily from
maintaining the gross margin ratio on increased sales while lowering the SMG&A
expense-to-sales ratio.
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Nonoperating income increased $1.1 million, benefiting from increased interest
income on a higher level of cash, cash equivalents and short-term investments.
Interest income increased from $2.2 million in the first quarter of fiscal 1995
to $3.9 million in the first quarter of fiscal 1996. The increase in interest
income was partly offset by an increase in interest expense of $0.5 million,
both resulting from the sale of $230,000,000 of 3 1/2% Convertible Subordinated
Notes during the first quarter of 1996.
The effective income tax rate increased from 24.0% of sales for the year ago
quarter to 26.0% for the first quarter of fiscal 1996 due to a shift in the mix
of worldwide profits.
The growth in sales, improved operating performance and lower nonoperating
expenses led to a 70% increase in net income to $40.1 million for the first
quarter of fiscal 1996. Earnings per share increased to $.33 from $.20 for last
year's first quarter.
First Quarter of Fiscal 1996 Compared to the Fourth Quarter of Fiscal 1995
Continued strength in orders coupled with a strong backlog led to an increase in
net sales from $257.2 million for the previous 13-week quarter to $280.8 million
for the 14-week first quarter, an increase of 9%. The first quarter sales
increase resulted largely from greater sales volumes of both standard linear IC
and system-level IC products. Sales growth was particularly strong for
communications and digital signal processing products, along with continued
strong sales of high-speed standard linear ICs. The largest sales increases
occurred in Europe and Japan.
The gross margin-to-sales ratio remained flat compared to the fourth quarter's
50.8%. R&D expenses increased $5.1 million over the preceding quarter as the
funding of new product development continued. As a percentage of sales, R&D
expenses increased to 14.6% compared to 13.9% for the fourth quarter. SMG&A
expenses were relatively flat compared to the prior quarter in dollars and as a
percentage of sales decreased from 18.8% to 17.4%.
The higher sales and tight control over operating expenses generated a
sequential gain in operating income of 13.5% with operating income reaching
18.8% of sales compared to 18.1% in the previous quarter.
Nonoperating income increased slightly from $1.0 million in the fourth quarter
to $1.3 million in the first quarter of fiscal 1996 as increased interest income
was only partially offset by increased interest expense. The sale of
$230,000,000 of 3 1/2% Convertible Subordinated Notes during December 1995
created both additional interest income from the investment of the proceeds and
additional interest expense. The effective income tax rate for the first quarter
was approximately 26%, the same as for the prior quarter.
Net income grew 14.1%, increasing from $35.1 million or $.29 per share for the
fourth quarter of fiscal 1995 to $40.1 million or $.33 per share for the first
quarter of fiscal 1996. As a percentage of sales, net income improved to 14.3%
from 13.7% for the fourth quarter.
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Liquidity and Capital Resources
At February 3, 1996, cash, cash equivalents and short-term investments totaled
$369.9 million, an increase of $218.8 million from the fourth quarter of fiscal
1995 and an increase of $211.2 million from the first quarter of fiscal 1995.
The increase in cash, cash equivalents and short-term investments from the first
and fourth quarters of fiscal 1995 was a result of the sale of $230,000,000 of
3 1/2% Convertible Subordinated Notes during the first quarter of 1996. The net
proceeds from the offering were approximately $224 million.
Cash provided by operating activities was $33.2 million or 11.8% of sales in the
first quarter of 1996 compared to $50.1 million or 24.1% of sales in the first
quarter of 1995. The decrease in operating cash flows from the year earlier
period was principally due to an increase in working capital requirements.
Accounts receivable of $190.4 million at the end of the first quarter of fiscal
1996 increased $9.1 million or 5% and $20.6 million or 12.2% from the end of
the fourth and first quarters of fiscal 1995, respectively. These increases
reflected the higher sales levels. As a percentage of annualized quarterly
sales, accounts receivable was reduced to 17.0% from 17.6% and 20.4% for the
previous quarter and the first quarter of fiscal 1995, respectively.
Inventories rose $13.8 million or 9.6% to $157.8 million as compared to the
fourth quarter of fiscal 1995, and $31.1 million or 24.5% compared to the first
quarter of fiscal 1995. This growth resulted primarily from a build in inventory
levels to service increasing sales volumes. Inventories as a percentage of
annualized quarterly sales remained flat compared to the fourth quarter of
fiscal 1995 at 14.0% and decreased from 15.2% for the first quarter of fiscal
1995. As additional manufacturing capacity becomes available, the Company
intends to further increase inventory levels in order to improve customer
response times.
As previously discussed above and in the Company's "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in its Form
10-K for the fiscal year ended October 28, 1995, the Company's revenue and order
growth has been capacity constrained. The Company has several capacity expansion
programs underway that should provide substantially greater capacity during the
remainder of fiscal 1996.
Net additions to property, plant and equipment of $62.1 million for the first
quarter of fiscal 1996 were funded with a combination of internally generated
cash flow from operations and cash on hand. A large portion of these
expenditures in the first quarter related to adding six-inch capacity to the
Company's existing wafer fabrication facilities in Wilmington, Massachusetts and
Limerick, Ireland. The additional capacity from these projects is expected to
become available during fiscal 1996. During fiscal 1995 the Company also
purchased an existing six-inch wafer fabrication module located close to its
Santa Clara, California site. This facility is still in the process of being
upgraded and modernized to produce advanced linear technology ICs, and is
expected to go into production during the latter half of fiscal 1996.
In January 1996, in accordance with a previous agreement, the Company made an
additional $7.0 million equity investment in Chartered Semiconductor
Manufacturing Pte., Ltd. ("CSM") for a total equity investment of $21.0 million,
in exchange for a less than 5% ownership interest. This investment is structured
to provide access to CSM's new eight-inch 0.5 micron wafer fabrication facility
through wafer supply and
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pricing commitments beginning in 1996. The investment in CSM is classified in
the balance sheet line item, "Deferred Charges and Other Assets."
The Company entered into an additional agreement with CSM during January 1996,
whereby the Company will provide a total deposit of approximately $20.0 million
to be paid in several installments in 1996 and 1997. Under the terms of this
agreement, the deposit will guarantee access to certain quantities of sub-micron
wafers through fiscal 2000.
During the first quarter of fiscal 1996 the Company entered into a five year
operating lease agreement for additional manufacturing space in Cambridge,
Massachusetts. The Company intends to use this additional capacity for the
manufacture of its accelerometer products.
The Company currently plans to make capital expenditures of approximately $275
million during fiscal 1996, primarily in connection with the continued expansion
of its manufacturing facilities. In addition, the Company is continuing to
explore various options for increasing its manufacturing capacity, including
joint ventures, acquisitions, equity investments in, or loans to, wafer
suppliers and construction of additional facilities.
On December 18, 1995 the Company completed a public offering of $230,000,000 of
five-year 3 1/2% Convertible Subordinated Notes due December 1, 2000 with
semiannual interest payments on June 1 and December 1 of each year, commencing
June 1, 1996. The Notes are convertible, at the option of the holder, into the
Company's common stock at any time after 60 days following the date of original
issuance, unless previously redeemed, at a conversion price of $27.917 per
share, subject to adjustment in certain events. The net proceeds of the offering
were approximately $224 million after payment of the underwriting discount and
expenses of the offering which will be amortized over the term of the Notes. As
of February 3, 1996, the Company's total long-term debt was $310,000,000,
comprised of the $230,000,000 of 3 1/2% Convertible Subordinated Notes and
$80,000,000 of 6 5/8% Notes.
At February 3, 1996, substantially all of the Company's lines of credit were
unused, including its $60 million credit facility which expires in 1998.
The Company believes that its existing sources of liquidity and cash expected to
be generated from future operations, together with current and anticipated
available long-term financing, will be sufficient to fund operations, capital
expenditures and research and development efforts for the foreseeable future.
Litigation
As set forth in Note 4 to the Condensed Consolidated Financial Statements
contained in this Form 10-Q for the fiscal quarter ended February 3, 1996, the
Company is engaged in an enforcement proceeding brought by the International
Trade Commission related to patent infringement litigation with Texas
Instruments, Inc., and antitrust litigation with Maxim Integrated Products, Inc.
Although the Company believes it should prevail in these matters, the Company is
unable to determine their ultimate outcome or estimate the ultimate amount of
liability, if any, at this time. An adverse resolution of these matters could
have a material adverse effect on the Company's consolidated financial position
or on its consolidated results of operations or cash flows in the period in
which the matters are resolved.
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Factors Affecting Future Results
The Company's future operating results are difficult to predict and may be
affected by a number of factors including the timing of new product
announcements or introductions by the Company and its competitors, competitive
pricing pressures, fluctuations in manufacturing yields, adequate availability
of wafers and manufacturing capacity, changes in product mix and economic
conditions in the United States and international markets. In addition, the
semiconductor market has historically been cyclical and subject to significant
economic downturns at various times. While the Company and other semiconductor
companies in recent periods have experienced increased demand and production
capacity constraints, it is uncertain how long these conditions will continue.
As a result of these and other factors, there can be no assurance that the
Company will not experience material fluctuations in future operating results on
a quarterly or annual basis.
The Company's success depends in part on its continued ability to develop and
market new products. There can be no assurance that the Company will be able to
develop and introduce new products in a timely manner or that such products, if
developed, will achieve market acceptance. In addition, the Company's growth is
dependent on its continued ability to penetrate new markets such as the
communications, computer and automotive segments of the electronics market,
where the Company has limited experience and competition is intense. There can
be no assurance that the markets being served by the Company will continue to
grow; that the Company's existing and new products will meet the requirements of
such markets; that the Company's products will achieve customer acceptance in
such markets; that competitors will not force prices to an unacceptably low
level or take market share from the Company; or that the Company can achieve or
maintain profits in these markets. Also, some of the customers in these markets
are less well established which could subject the Company to increased credit
risk.
The semiconductor industry is intensely competitive. Certain of the Company's
competitors have greater technical, marketing, manufacturing and financial
resources than the Company. The Company's competitors also include emerging
companies attempting to sell products to specialized markets such as those
served by the Company. Competitors of the Company have, in some cases, developed
and marketed products having similar design and functionality as the Company's
products. There can be no assurance that the Company will be able to compete
successfully in the future against existing or new competitors or that the
Company's operating results will not be adversely affected by increased price
competition.
The Company's manufacturing facilities are operating at full capacity, and
therefore the Company's business is currently constrained. While the Company is
planning in fiscal 1996 to increase substantially its manufacturing capacity
through both expansion of its production facilities and increased access to
third-party foundries; there can be no assurance that the Company will complete
the expansion of its production facilities or secure increased access to third
party foundries in a timely manner; that the Company will not encounter
unanticipated production problems at either its own facilities or at third-party
foundries; or that the increased capacity will be sufficient to satisfy demand
for its products. The Company relies, and plans to continue to rely, on
third-party wafer fabricators to supply most of its wafers that can be
manufactured using industry-standard digital processes, and such reliance
involves several risks, including the absence of adequate guaranteed capacity
and reduced control over delivery schedules, manufacturing yields and costs.
Continued manufacturing capacity constraints could adversely affect the business
of the
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Company's customers and cause them to seek alternative sources for the products
currently obtained from the Company. In addition, the Company's capacity
additions will result in a significant increase in operating expenses, and if
revenue levels do not increase to offset these additional expense levels, the
Company's future operating results could be adversely affected. The Company also
believes that other semiconductor manufacturers are also expanding or planning
to expand their production capacity over the next several years, and there can
be no assurance that the expansion by the Company and its competitors will not
lead to overcapacity in the Company's target markets, which could lead to price
erosion that would adversely affect the Company's operating results.
For the first quarter of fiscal 1996, 57% of the Company's revenues were derived
from customers in international markets. The Company has manufacturing
facilities in Ireland, the Philippines and Taiwan. The Company is therefore
subject to the economic and political risks inherent in international
operations, including expropriation, air transportation disruptions, currency
controls and changes in currency exchange rates, tax and tariff rates and
freight rates. Although the Company engages in certain hedging transactions to
reduce its exposure to currency exchange rate fluctuations, there can be no
assurance that the Company's competitive position will not be adversely affected
by changes in the exchange rate of the U.S. dollar against other currencies.
The semiconductor industry is characterized by frequent claims and litigation
involving patent and other intellectual property rights. The Company has from
time to time received, and may in the future receive, claims from third parties
asserting that the Company's products or processes infringe their patents or
other intellectual property rights. In the event a third party makes a valid
intellectual property claim and a license is not available on commercially
reasonable terms, the Company's operating results could be materially and
adversely affected. Litigation may be necessary to enforce patents or other
intellectual property rights of the Company or to defend the Company against
claims of infringement, and such litigation can be costly and divert the
attention of key personnel. See Item 3 - "Legal Proceedings" for information
concerning pending litigation involving the Company. An adverse resolution of
such litigation, may, in certain cases, have a material adverse effect on the
Company's consolidated financial position or on its consolidated results of
operations or cash flows in the period in which the litigation is resolved.
Because of these and other factors, past financial performance should not be
considered an indicator of future performance. Investors should not use
historical trends to anticipate future results and should be aware that the
trading price of the Company's common stock may be subject to wide fluctuations
in response to quarter-to-quarter variations in operating results, general
conditions in the semiconductor industry, changes in earnings estimates and
recommendations by analysts or other events.
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PART II - OTHER INFORMATION
ANALOG DEVICES, INC.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on March 12, 1996, the stockholders
of the Company elected Messers. John L. Doyle, Samuel H. Fuller and Ray Stata to
serve as Class III Directors for a term of three years by the following votes:
Nominee Votes for Votes Withheld Broker Non Votes
- ------- --------- -------------- ----------------
John L. Doyle 103,414,548 1,262,126 -0-
Samuel H. Fuller 103,370,756 1,305,918 -0-
Ray Stata 103,313,270 1,363,404 -0-
The terms of office of Messrs. Jerald G. Fishman, Philip L. Lowe, Gordon C.
McKeague, Joel Moses and Lester C. Thurow continued after the meeting.
At the same meeting, the stockholders approved an amendment to the Company's
Articles of Organization increasing the number of authorized shares of Common
Stock from 300,000,000 shares to 450,000,000 shares, by a vote of 100,526,641 in
favor, 3,697,912 opposed and 452,121 abstaining.
In addition, the stockholders ratified and approved an amendment to the
Company's 1988 Stock Option Plan to increase the number of shares available for
issuance under the plan from 15,525,000 to 22,425,000, by a vote of 70,936,839
in favor, 24,257,957 opposing and 544,111 abstaining. There were 8,937,767
broker non votes on the proposal.
The stockholders also ratified and approved an amendment to the Company's 1991
Restricted Stock Plan to increase the number of shares available for issuance
under the plan from 1,575,000 to 2,025,000, by a vote of 69,903,955 in favor,
25,285,474 opposing and 549,479 abstaining. There were 8,937,767 broker non
votes on the proposal.
Item 6. Exhibits and reports on Form 8-K
(a) See Exhibit Index
(b) There were no reports on Form 8-K filed for the three months ended
February 3, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Analog Devices, Inc.
--------------------
(Registrant)
Date: March 18, 1996 By:/s/ Ray Stata
----------------------
Ray Stata
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: March 18, 1996 By:/s/ Joseph E. McDonough
----------------------
Joseph E. McDonough
Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
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15
EXHIBIT INDEX
Analog Devices, Inc.
Item
*10-1 Manufacturing Agreement dated as of March 17, 1995 between Chartered
Semiconductor Manufacturing Pte. Ltd. and Analog Devices B.V.
*10-2 Deposit Agreement dated January 30, 1996 between Chartered Semiconductor
Manufacturing Pte. Ltd. and Analog Devices B.V.
10-3 Lease Agreement dated February 8, 1996 between Analog Devices, Inc. and
Massachusetts Institute of Technology, relating to premises located at
21 Osborn Street, Cambridge, Massachusetts.
11-1 Computation of Earnings per share
27 Financial Data Schedule
* Confidential treatment has been requested as to certain portions of these
exhibits.
15
1
Exhibit 10-1
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
THIS AGREEMENT is made effective the 17th day of March 1995 BETWEEN:
(1) Chartered Semiconductor Manufacturing Pte Ltd ("CSM"), a company
incorporated in Singapore with its registered office at 2 Science
Park Drive, Singapore Science Park, Singapore 0511; and
(2) Analog Devices B.V. ("Customer"), a Netherlands corporation
with its principal place of business at Beneluxweg 27,
4904 SJ Oosterhout, The Netherlands.
WHEREAS
(A) CSM has invited subscriptions for shares in its share capital to
fund the establishment of a second wafer manufacturing facility in
Singapore ("FABII").
(B) Customer has pursuant to the Analog Devices Subscription and
Participation Agreement of even date hereof ("Analog Devices
Subscription Agreement") agreed to subscribe for shares in the
capital of CSM.
(C) It is a term of the Analog Devices Subscription Agreement that the
parties herein enter into this Agreement for the provision of
wafer manufacturing capacity in FABII to Customer upon the terms
herein.
NOW THEREFORE IT IS HEREBY AGREED as follows:
1. DEFINITIONS
-----------
1.1 In this Agreement, unless otherwise defined herein or the context
otherwise requires, the following words and expressions shall bear
the following meanings:
"Minimum Threshold Level" means an aggregate investment of a
minimum of ******************************************************
*****in the capital of the Company;
"Parties" means CSM and Customer;
"Wafer" means a completed eight-inch silicon wafer;
"Wafer Capacity Allocation" means Wafer manufacturing capacity to
be made available to Customer pursuant to Clause 2;
"S$" means the lawful currency of Singapore;
-1-
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
"US$" means the lawful currency of the United States of
America.
1.2 References to Recitals and Clauses are references to
recitals and clauses of this Agreement.
1.3 The headings in this Agreement are inserted for convenience only
and shall be ignored in construing this Agreement.
1.4 Unless the context otherwise requires, words denoting the singular
number shall include the plural and vice versa, words importing
the masculine gender shall include the feminine gender and words
importing a person shall include a company or corporation and vice
versa.
2. WAFER MANUFACTURING CAPACITY
----------------------------
2.1 WAFER CAPACITY ALLOCATION
-------------------------
Subject to the provisions herein, CSM will provide Wafer
processing services to Customer at FABII for the fabrication of
Wafers. Customer's Wafer Capacity Allocation will be determined by
the aggregate amount of share capital to be subscribed by Customer
in the capital of CSM pursuant to the Analog Devices Subscription
Agreement. A commitment to subscribe for an aggregate of no less
than the Minimum Threshold Level will entitle Customer to ***
Wafers per month. The Wafer Capacity Allocation for a greater
subscription commitment will be pro-rated at the rate of ***
Wafers per month to ********* 'B' Ordinary Shares for every
Subscription Share as defined in the Analog Devices Subscription
Agreement beyond the Minimum Threshold Level. Such Wafer Capacity
Allocation is subject to change in accordance with Clauses 2.2,
3.1.4 and 3.1.5 hereof and to Clauses 4.2 (Effect on Wafer
Manufacturing Capacity) and 10.4 (Effect on ADI's Wafer
Manufacturing Rights Upon Transfer) of the Analog Devices
Subscription Agreement.
2.2 CAPACITY ALLOCATION DURING RAMP-UP PERIOD
-----------------------------------------
2.2.1 Customer acknowledges that the total Wafer
Capacity Allocation made available to it is ****
Wafers per month.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
2.2.2 Customer hereby agrees that it will have first
priority on available capacity up to an aggregate of
**** wafers per month and that during FABII's ramp-up
period, Customer's Wafer Capacity Allocation will be
pro-rated in accordance with its shareholding in CSM
relative to the shareholdings of other
shareholder-customers of CSM who have entered into
manufacturing agreements with CSM.
2.3 ADDITIONAL FABII CAPACITY
-------------------------
2.3.1 In addition to the Wafer Capacity Allocation,
Customer together with other shareholder-customers of
CSM who have entered into manufacturing agreements with
CSM shall have a first right of refusal on additional
available FABII capacity at the price set forth in
Clause 6.2 and on terms which the Parties agree to
negotiate in good faith save that if such additional
capacity falls short of the demand from all
shareholder-customers, such capacity shall be allocated
to Customer and the other shareholder-customers pro-rata
to their equity holding in CSM.
2.3.2 Any supply and purchase of additional available
capacity pursuant to Clause 2.3.1 shall be subject to
the conclusion of a wafer supply agreement embodying the
terms agreed between the Parties. The terms of such
wafer supply agreement shall include, inter alia, (a)
Customer's purchase commitment, and (b) a provision
that where Customer's actual orders fall below the
purchase commitment and CSM is unable to sell the excess
capacity to third parties, then Customer shall reimburse
CSM for the unsold capacity *************************
**************************.
2.4 MANUFACTURING AGREEMENT
-----------------------
Notwithstanding any other provisions of this Agreement or the
Analog Devices Subscription Agreement, Customer may, provided that
there are no outstanding breaches by it of the Manufacturing
Agreement and the Analog Devices Subscription Agreement, by prior
written notice assign the right to purchase Wafers to an Affiliate
(as defined in the Analog Devices Subscription Agreement), but
this shall not in any way relieve such Customer from any
obligations hereunder.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
3. FORECASTS
---------
3.1 ******* ROLLING FORECAST
------------------------
3.1.1 Customer shall provide to CSM on a monthly basis,
its rolling ********* forecast of its monthly volume
requirements. The first ********* of each *********
forecast shall be firm and shall be backed by purchase
orders. The initial ******* forecast shall be
accompanied by firm orders for the first ********.
Notwithstanding the foregoing, forecasts during such
first ********* shall be subject to adjustments
(consistent with CSM's cycle time) as determined by
mutual agreement to be negotiated between Customer and
CSM subsequent to this Agreement. Every subsequent
monthly forecast shall be accompanied by a firm order
for the month immediately following the last month in
respect of which a firm order was given.
3.1.2 Best Estimate
-------------
Customer's forecasts shall represent Customer's good
faith estimate of Wafer requirements.
3.1.3 Forecast Below Allocation
-------------------------
Subject to Clause 2 hereof, CSM shall make available
manufacturing capacity for the Wafers included in the
current forecast. If Customer's forecast indicates that
it does not expect to use the maximum capacity that is
available to it during a particular period, CSM may
allocate the available capacity to other customers for
such period and in such manner as it deems fit.
3.1.4 Shortfall of Actual Orders to Forecast
--------------------------------------
Where for any consecutive ******* period, Customer's actual
monthly orders fall below the firm monthly forecast by more
than ***, CSM reserves the right to re-allocate the
Customer's unused Wafer Capacity Allocation as it deems fit
to other customers.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
3.1.5 Reinstatement of Capacity
-------------------------
Customer may request a reinstatement of its Wafer Capacity
Allocation lost pursuant to Clause 3.1.4 by giving CSM at
least ********* written notice. CSM will use its reasonable
efforts to agree such reinstatement taking into consideration
the forecast demands of its other customers but in no case
will such reinstatement be made more than ******** after
receipt of said notice.
3.1.6 Quantity
--------
CSM shall use its best efforts to deliver the exact quantity
of Wafers ordered with each purchase order. However, if for
each purchase order the aggregate quantity of Wafers
delivered by CSM is within ******* **************** of the
quantity ordered, such quantity shall constitute compliance
with Customer's purchase order. In the event CSM fails to
deliver at ********* of Customer's purchase order within the
agreed delivery period, at Customer's request CSM shall make
up the shortfall by shipments over the next ******* period or
such other period as may be mutually agreed in writing.
4. LICENSE
-------
The Parties agree that any license for the use of Customer's
proprietary technology required for the manufacture of Wafers for
Customer shall be on terms to be agreed between CSM and Customer
and the subject of a separate agreement.
5. ACCEPTANCE, QUALITY AND RELIABILITY CRITERIA
--------------------------------------------
As soon as practicable following the execution of this Agreement,
the Parties shall negotiate in good faith mutually agreed upon
specifications for Wafer acceptance, quality and reliability
criteria.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
6. PRICING AND PAYMENT
-------------------
6.1 PRICING FOR WAFER CAPACITY ALLOCATION
-------------------------------------
The price to be paid by Customer for Wafers purchased
pursuant to Clause 2.1 shall be ********************************
*****************************************************************
*****************************************************************
*************************************************** for equivalent
processes contracted or subsequently contracted for delivery to
any party (including, without limitation, any other shareholder
-customer) at any time during the period Wafers are to be
delivered to Customer and only for Wafers delivered during the
period Wafers are being delivered to such third party.
6.2 PRICING FOR ADDITIONAL CAPACITY
-------------------------------
The price payable for Wafers purchased by Customer pursuant to
Clause 2.3 hereof shall be **************** on mutually agreed
commercial terms.
6.3 INVOICE AND PAYMENT
-------------------
CSM will invoice Customer for Wafers purchased by Customer upon
notification by CSM to Customer that the Wafers are available for
collection at CSM's premises in Singapore. Payment in full in
United States dollars for the invoice will be due within ** days
of receipt of such invoice. CSM reserves the right to impose late
payment charges at ** percent per month (or if such rate is not
allowed by law at the highest rate permissible by applicable law)
on amounts remaining unpaid on due date till the date of actual
payment.
6.4 LETTER OF CREDIT
----------------
In the event Customer fails or neglects to pay within the
stipulated time, CSM reserves the right to require Customer to
provide an irrevocable, confirmed letter of credit from a bank
licensed to carry on banking business in Singapore in favour of
CSM for any subsequent purchase orders. Such letter of credit to
be established within 14 days of the receipt of a Customer's
purchase order by CSM. The letter of credit must be payable at the
issuing bank by sight draft to CSM's order.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
7. DELIVERY OF PRODUCTS
--------------------
The Wafers will be made available for collection from CSM's
premises in Singapore. CSM will notify Customer or its designated
agent in Singapore confirming that the acceptance criteria has
been fulfilled and the date of availability of collection.
8. WARRANTY
--------
8.1 CSM warrants that Wafers delivered hereunder shall meet the
applicable agreed upon acceptance criteria and the quality and
reliability criteria and shall be free from defects in material
and workmanship under normal use and service for a period of
************ from the date of shipment from CSM's facility. If,
during such ************ period:
8.1.1 CSM is notified promptly in writing upon discovery of
any defect in the Wafers, including a detailed
description of such defect; and
8.1.2 such Wafer shall be returned F.O.B. to CSM's facility;
and
8.1.3 CSM's examination of such Wafer disclose that such Wafer
is defective and such defects are not caused by
defective design, accident, abuse, misuse, neglect,
improper installation, repair or alteration by someone
other than CSM or its authorised representative, or
improper testing or use, then within ** day's of receipt
of Wafers by CSM, CSM shall, at Customer's sole option,
either repair, replace, or credit customer for such
Wafers.
9. **********************
----------------------
9.1 ******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
9.2 ******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************.
9.3 ******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
*************************.
9.4 The Party seeking indemnity ("Party A") shall notify the other
Party ("Party B") of any claim of infringement or of commencement
of any suit, action, or proceedings alleging such infringement
forthwith after receiving notice thereof. Party B shall have the
right in its sole discretion and at its expense to participate in
and control the defence of any such claim, suit, action or
proceedings and in any and all negotiations with respect thereto,
and Party A shall not settle any such claim, suit, action or
proceedings without Party B's prior written approval which
approval shall not be unreasonably withheld. Notwithstanding the
aforesaid, Party B shall have the right, at its option and
expense, at any time to obtain a license to modify the process or
replace equipment or parts or components thereof to obviate or
cure any infringement.
10. NEW TECHNOLOGY
--------------
10.1 DEVELOPMENT
-----------
The Parties recognise that development of new technologies is
critical to the long term success of both Parties. *************
*****************************************************************
************************. The Parties will negotiate in good faith
whether to proceed with the development program taking into
consideration, inter alia, the business potential of the new
technologies. All technology developed separately by Customer
shall be solely owned by
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
Customer. All technology developed separately by CSM shall be
solely owned by CSM. The terms and conditions of any joint
development, including without limitation the right of ownership
shall be as agreed in writing between the Parties prior to such
joint development.
10.2 COST
----
The cost of any new technology development program shall be borne
as agreed by the Parties except for the standard technology that
CSM offers or, to the extent CSM offers the technology roadmap
referenced in Clause l5.1 of the Analog Devices Subscription
Agreement including such part so offered, and excluding customer
specific technology, which shall be borne by CSM.
11. TERM AND TERMINATION
--------------------
11.1 DURATION
--------
This Agreement will expire ** years commencing the earliest date
that CSM achieves an installed capacity of ***** Wafers, unless
extended by mutual agreement between the Parties hereto or earlier
terminated pursuant to this provisions of this Agreement.
11.2 MATERIAL DEFAULT
----------------
Either Party may, at its option, terminate this Agreement if the
other Party defaults in the performance of any material obligation
hereunder and such default has not been corrected within ** days
after receipt of written notice describing such default.
Termination pursuant to this sub-clause 11.2 shall become
effective upon the expiry of the said period of ** days.
11.3 INSOLVENCY
----------
Either Party may immediately terminate this Agreement by written
notice to the other (without prior advance notice) in the event of
the other Party or any company controlling it becoming bankrupt or
insolvent or having made an assignment for the benefit of its
creditors or having filed a petition or having a petition filed
against it under any bankruptcy, corporate reorganisation or other
law for the relief of debtors and not discharged within 60 days or
having commenced or having had commenced against it dissolution or
winding-up proceedings and not discharged within 60 days.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
11.4 CSM'S RIGHT TO TERMINATE
------------------------
In addition to the foregoing, CSM may immediately terminate this
Agreement by written notice to the Customer (without prior advance
notice):
11.4.1 **********************************************
**********************************************
**********************************************
**********************************************
**********************************************
**********************************************
***************.
11.4.2 If during the term of this Agreement and in the event
where CSM has not obtained a listing on a recognised
stock exchange, Customer transfers or otherwise disposes
of or loses title to its shares in CSM such that it
holds less than the Minimum Threshold Level.
11.5 PAYMENT UPON TERMINATION
------------------------
In the event of termination of the Agreement by CSM pursuant to
this Clause 11, CSM shall have the right to receive payment for
all wafers-in-process proportional to the degree of finish and
such payment together with all other amounts due from Customer
shall become immediately due and payable by Customer to CSM.
Customer may request and CSM may at its sole discretion agree to
complete the wafers-in-process provided that Customer makes full
payment in advance for such wafers-in-process.
11.6 OTHER REMEDIES
--------------
The remedies referred to in this Clause shall be in addition to
and not in lieu of any other remedies, including damages, which
each Party may be entitled to hereunder at law or in equity as a
result of a breach of this Agreement by the other Party.
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12. TAXES
-----
The amounts payable by Customer under or in connection with this
Agreement shall be exclusive of any goods and services tax
(hereinafter called "tax") chargeable by any government, statutory
or tax authority calculated by reference to the amounts received
or receivable by CSM from Customer and which tax is payable by
Customer. Customer shall pay the tax and CSM acting as the
collecting agent for the government, statutory or tax authority
shall be entitled to collect the tax from Customer in the manner
and within the period prescribed in accordance with the applicable
laws and regulations.
13. ARBITRATION AND GOVERNING LAW
-----------------------------
13.1 ARBITRATION
-----------
Except as otherwise expressly provided hereunder any dispute or
controversy arising in connection with this Agreement which cannot
be settled by mutual or amicable agreement shall be finally
settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by one or more arbitrators
appointed in accordance with those Rules. The place of arbitration
shall be London. The arbitration shall be conducted in English.
13.2 GOVERNING LAW
-------------
This Agreement shall be governed by the substantive laws of
Singapore.
14. GENERAL
-------
14.1 MODIFICATIONS
-------------
This Agreement may be modified only by a written document signed
by the authorized representatives of the Parties.
14.2 NO ASSIGNMENT
-------------
Subject to Clause 2.4 and unless otherwise agreed in writing, this
Agreement may not be assigned or subcontracted to any third party
without the prior written consent of the other Party.
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14.3 FORCE MAJEURE
-------------
Neither Party shall be liable for any delay or default in the
performance of its obligations under this Agreement caused by
circumstances beyond the control and without the fault or
negligence of such Party, including but not restricted to acts of
God, acts of the public enemy, perils of navigation, fire,
hostilities, war (declared or undeclared), blockade, labour
disturbances, strikes, riots, insurrections, civil commotion,
earthquakes, accidents or other cause(s) beyond the Party's
control.
14.4 COUNTERPARTS
------------
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
14.5 WAIVER
------
Should either of the Parties fail to exercise or enforce any
provision of this Agreement, or to waive any right in respect
thereto, such failure or waiver shall not be construed as
constituting a waiver or a continuing waiver of its rights to
enforce such provision or right or any other provision or right.
14.6 SEVERABILITY
------------
If any provision of this Agreement or the application thereof to
any situation or circumstance shall be invalid or unenforceable,
the remainder of this Agreement shall not be affected, and each
remaining provision shall be valid and enforceable to the fullest
extent.
14.7 NOTICES
-------
14.7.1 All notices, demands or other communications required
or permitted to be given or made under or in connection
with this Agreement shall be in writing and shall be
sufficiently given or made (a) if delivered by hand or
commercial courier, (b) sent by first class prepaid
registered post or (c) sent by legible facsimile
transmission (provided that a copy thereof is sent
immediately thereafter by first class pre-paid
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registered post) addressed to the intended recipient at
its address or facsimile number set out hereunder or to
such other address or facsimile number as any Party may
from time to time notify the other.
For CSM:
--------
2 Science Park Drive
Singapore Science Park
Singapore 0511
Facsimile number: (65) 777 3981
Attn: President
For Customer:
-------------
Bay F-1
Raheen Ind. Estate
Limerick, Ireland
Facsimile number: (353) 613 08448
With Copy to:
Analog Devices Inc.
One Technology Way
P.O. Box 9105
Norwood, MA 02062-9106
United States of America
Facsimile number: (617) 461 4100
Attn: Vice President & General Manager
With Copy to:
Dr. Kenneth Lisiak
804 Woburn Street
Wilmington, MA 01887-34462
United States of America
14.7.2 Any such notice, demand or communication shall be deemed
to have been duly served (a) if delivered by hand or
commercial courier, at the time of delivery; or (b) if
made by successfully transmitted facsimile transmission,
at the time of despatch (provided that immediately after
such despatch, a copy thereof is sent by first
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class pre-paid registered post); or (c) if given or made
by local mail within Singapore two (2) days after
posting and if given or made by airmail, seven (7) days
after posting (and in proving the same it shall be
sufficient to show that the envelope containing the same
was duly addressed, stamped and posted).
14.8 DUE EXECUTION
-------------
Each Party represents and warrants to the other that this
Agreement has been duly authorized and executed and that this
Agreement constitutes a valid and binding obligation of such
Party.
IN WITNESS WHEREOF the Parties hereto have entered into this Agreement
as of the day and year first above written.
Signed by TAN BOCK SENG )
for and on behalf of CHARTERED )
SEMICONDUCTOR ) /S/ TAN BOCK SENG
MANUFACTURING PTE LTD )
in the presence of: )
/S/ LINDA CHANG
------------------------------
Signature of witness
Name of witness: Linda Chang
Designation: Counsel
Signed by JOSEPH E. MCDONOUGH )
for and on behalf of )
ANALOG DEVICES, INC. ) /S/ JOSEPH E. MCDONOUGH
in the presence of: )
/S/ WILLIAM A. WISE, JR.
------------------------------
Signature of witness
Name of witness: William A. Wise, Jr.
Designation: Corp. Counsel
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Exhibit 10-2
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
Dated this 30th day of January 1996
Between
CHARTERED SEMICONDUCTOR MANUFACTURING LTD
And
ANALOG DEVICES B.V.
-----------------------------------------
DEPOSIT AGREEMENT
-----------------------------------------
2
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
DEPOSIT AGREEMENT
THIS AGREEMENT is made the 30th day of January 1996 by and between-:
(1) CHARTERED SEMICONDUCTOR MANUFACTURING LTD, a company
incorporated in Singapore with its registered office at 60
Woodlands Industrial Park D Street 2, Singapore 738406
(hereinafter referred to as "CSM"); and
(2) ANALOG DEVICES B.V., a Netherlands corporation with its
principal place of business at Beneluxweg 27, 4904 SJ
Oosterhout, The Netherlands (hereinafter referred to as
"Customer").
WHEREAS:
(A) CSM is engaged primarily in the business of the development,
manufacturing, assembly, marketing and selling of
semiconductors, with its 2 wafer fabrication facilities
situated in Singapore. CSM intends to establish a third wafer
fabrication facility in Singapore.
(B) Customer desires to deposit certain funds with CSM to enable
CSM to procure increased wafer fabrication capacity and to make
available to Customer certain wafer manufacturing capacity, on
the terms and conditions of this Agreement.
IT IS HEREBY AGREED as follows:-
1. THE DEPOSIT
1.1 In consideration of CSM agreeing to make available to Customer
certain wafer manufacturing capacity, Customer will deposit
with CSM the sum of US$20,000,000 (the "Deposit") on such dates
and in such amounts as specified in Annex A.
1.2 The Deposit shall be paid by telegraphic transfer to an account
designated by CSM and such Deposit shall be maintained by
Customer to the full amount required in accordance with Annex
A, up to a maximum amount of US$20,000,000 during the term of
this Agreement.
1.3 Immediately upon the expiry of the term of this Agreement or
the earlier termination thereof in accordance with Clause 6 or
Clause 7.2, CSM will return to Customer the Deposit, without
interest and subject
2
3
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
to any deductions made by CSM pursuant to the terms of this
Agreement.
2. CSM SUPPLY COMMITMENT
2.1 In consideration of the payment of the Deposit by Customer and
Customer's maintenance of the full deposit amount required in
accordance with Annex A with CSM, CSM will make available to
Customer, wafer manufacturing capacity for 8-inch wafers ******
************** in each calendar quarter commencing from the
********************* until the expiry or the earlier
termination of the term of this Agreement, in such quantities
as set out in Annex B (the "CSM Supply Commitment").
2.2 The Parties agree that the technology mix of the CSM Supply
Commitment for each calendar month will be in direct proportion
to the technology mix of CSM's total wafer output to customers
in such months.
Example
-------
If CSM's total wafer output in a month is ****** wafers and the
CSM Supply Commitment to Customer constitutes *** of CSM's
total wafer output, then the wafer capacity committed by CSM to
Customer shall be in the following mix:-
****************** ***********************
************* ***
************** ***
************** ***
************* ****
2.3 Unless otherwise expressly provided in this Agreement, the sale
of wafers by CSM to Customer, the capacity of which is made
available to Customer under this Agreement, shall be governed
by the terms and conditions of CSM's foundry agreement entered
into by CSM and Customer (the "Foundry Agreement").
2.4 CSM reserves the right to adjust the pricing of wafers to be
supplied by CSM from time to time depending on ****************
***************************************, Provided however that
CSM shall give Customer not less than ********* prior written
notice of such adjustment. In any event, the price of wafers
supplied to Customer shall be no more than ** above CSM's
pricing for similar
3
4
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
products and processes and similar quantities available to
CSM's equity investors.
3. CUSTOMER LOADING COMMITMENT
3.1 Customer agrees to place purchase orders with CSM for such
quantity of 8-inch wafers *******************************) for
delivery during the calendar quarters set out in Annex B (the
"Customer Loading Commitment"). The quantity of wafers for
which orders are placed by Customer is hereinafter referred to
as the "Customer Actual Loading."
3.2 The Customer Actual Loading for each calendar quarter during
the term of the Agreement shall be equal to the Customer
Loading Commitment. In addition, the month to month variation
in the Customer Actual Loading shall not exceed *** without the
prior written approval of CSM.
3.3 Notwithstanding the provisions of Clause 3.2, CSM agrees to
waive payment of liquidated damages under Clause 4 if the
Customer Actual Loading for any calendar quarter is in
aggregate not less than *** of the Customer Loading Commitment
for that quarter.
4. LIQUIDATED DAMAGES
4.1 The Parties acknowledge that in the initial period, CSM and
Customer would work together to qualify Customer's products at
CSM's wafer fabrication facility. Accordingly, the provisions
of Clause 4 for the payment of liquidated damages shall be
effective in respect of the CSM Supply Commitment and the
Customer Loading Commitment from the *************************.
In addition, CSM shall not be liable for any losses or damages
whatsoever incurred by Customer in the event that CSM fails to
deliver the Customer Actual Loading for the period prior to the
******************************.
4.2 In the event that the Customer Actual Loading for any calendar
quarter is less than *** of the Customer Loading Commitment for
that quarter, Customer shall pay to CSM liquidated damages
calculated based on the shortfall from **** of the Customer
Loading Commitment for that quarter, **************************
****************. The formula for calculation of such
liquidated damages shall be as follows:-
**************************************
******************************************
4
5
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
4.3 In the event that CSM fails to deliver at least **** of the
Customer Actual Loading for any calendar quarter, CSM shall pay
to Customer liquidated damages calculated based on the
shortfall from **** of the Customer Actual Loading,
**************************************************************.
The formula for calculation of such liquidated damages shall be
as follows:-
******************************************
******************************************
4.4 CSM and Customer agree and acknowledge that the amount payable
as liquidated damages pursuant to Clauses 4.2 and 4.3 is a
genuine preestimate of the loss which would be suffered by the
non-defaulting Party as a consequence of the failure of the
defaulting Party to fulfill its respective obligations under
Clauses 2 and 3 of this Agreement.
4.5 CSM and Customer each agrees that their respective liability,
in CSM's case to fulfill the CSM Supply Commitment under Clause
2 and in Customer's case to fulfill the Customer Loading
Commitment under Clause 3, ***********************************
***********************************************************,
and that neither Party shall be liable for any indirect,
special or consequential damages even if such Party had or
should have had any knowledge, actual or constructive, of the
possibility of such damages.
5. SET OFF AND MAINTENANCE OF DEPOSIT
5.1 CSM shall be entitled to deduct from and set-off against the
Deposit, the following sums due from Customer:-
(a) the amount of liquidated damages as they fall due pursuant
to Clause 4; and
(b) any payment falling due and remaining unpaid under
the Foundry Agreement.
5.2 At the end of each calendar quarter, CSM shall issue a written
notice to Customer stating the amount of the liquidated damages
and/or overdue payments and Customer shall pay the relevant sum
to CSM so as to maintain the Deposit at the amount required in
accordance with Annex A, within 30 days of the date of such
notice.
5.3 CSM's right of deduction and set-off pursuant to Clause 5.2
shall be in addition to CSM's right to claim the aforesaid
liquidated damages and overdue payments separately as a debt
due from Customer and shall not in any way prejudice such right
or any other rights or remedies which CSM may have at law or in
equity.
5
6
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
6. TERM AND TERMINATION
6.1 The term of this Agreement shall expire on **************** and
may be earlier terminated in the following events:-
(a) At the option of CSM, ***********************************
*********************** of the amount required in
accordance with Annex A and Customer fails to make payment
of the shortfall up to the amount required in accordance
with Annex A to CSM within the period set out in Clause
5.2;
(b) At the option of CSM, in the event that the Customer
Actual Loading is in aggregate less than *** of the
Customer Loading Commitment for ** consecutive calendar
months;
(c) At the option of Customer, in the event that CSM fails to
deliver to Customer in aggregate at least *** of the
Customer Actual Loading for ** consecutive calendar
months;
(d) At the option of either Party, in any of the following
events:-
(i) the inability of the other Party to pay its debts in
the normal course of business; or
(ii) the other Party ceasing or threatening to cease
wholly or substantially to carry on its business,
otherwise than for the purpose of a reconstruction
or amalgamation without insolvency; or
(iii) any encumbrancer taking possession of or a receiver,
manager, trustee or judicial manager being appointed
over the whole or any substantial part of the
undertaking, property or assets of the other Party;
or
(iv) the making of an order by a court of competent
jurisdiction or the passing of a resolution for the
winding-up of the other Party or any company
controlling the other Party, otherwise than for the
purpose of a reconstruction or amalgamation without
insolvency.
6.2 Termination of the Agreement pursuant to Clause 6.1 shall take
effect immediately upon the issue of a written notice to that
effect by the Party terminating the Agreement to the other. The
termination of this Agreement howsoever caused shall be without
prejudice to any obligations or rights of either Party which
have accrued prior to such termination and shall not affect any
provision of this Agreement which
6
7
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
is expressly or by implication provided to come into effect on
or to continue in effect after such termination.
7. FORCE MAJEURE
7.1 CSM's obligation to provide the CSM Supply Commitment and
Customer's obligation to place purchase orders in accordance
with the terms of this Agreement shall be suspended upon the
occurrence of a force majeure event such as act of God, flood,
earthquake, fire, explosion, act of government, war, civil
commotion, insurrection, embargo, riots, lockouts, labour
disputes affecting CSM or Customer as the case may be, for such
period as such force majeure event may subsist. Upon the
occurrence of a force majeure event, the affected Party shall
notify the other Party in writing of the same and shall by
subsequent written notice after the cessation of such force
majeure event inform the other Party of the date on which that
Party's obligation under this Agreement shall be reinstated.
7.2 Notwithstanding anything in this Clause 7, upon the occurrence
of a force majeure event affecting either Party, and such force
majeure event continues for a period exceeding 6 consecutive
months without a prospect of a cure of such event, the other
Party shall have the option, in its sole discretion, to
terminate this Agreement. Such termination shall take effect
immediately upon the written notice to that effect from the
other Party to the Party affected by the force majeure event.
8. **********************
----------------------
8.1 ***************************************************************
***************************************************************
***************************************************************
***************************************************************
*****************.
8.2 ***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
*****************.
8.3 CSM shall notify Customer of any claim of infringement or of
commencement of any suit, action, or proceedings alleging
infringement of any intellectual property rights of any third
party
7
8
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
forthwith after receiving notice thereof. Customer shall have
the right in its sole discretion and at its expense to
participate in the defence of any such claim, suit, action or
proceedings and in any and all negotiations with respect
thereto. In addition, Customer shall be entitled to produce
written documentation evidencing the existence of a valid
cross-licensing agreement between Customer and such third party
claiming infringement.
8.4 ***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
*****************.
8.5 Customer shall notify CSM of any claim of infringement or of
commencement of any suit, action, or proceedings alleging
infringement of any intellectual property rights of any third
party forthwith after receiving notice thereof. CSM shall have
the right in its sole discretion and at its expense to
participate in the defence of any such claim, suit, action or
proceedings and in any and all negotiations with respect
thereto.
8.6 ***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
********************************.
9. CONFIDENTIALITY
9.1 All Confidential Information shall be kept confidential by the
recipient unless or until the recipient Party can reasonably
demonstrate that any such Confidential Information is, or part
of it is, in the public domain through no fault of its own,
whereupon to the extent that it is in the public domain or is
required to be disclosed by law this obligation shall cease.
For the purposes of this Agreement, "Confidential Information"
shall mean all communications between the Parties, and all
information and other materials supplied to or received by
either of them from the other (a) prior to or on the date of
this Agreement whether or not marked confidential; (b) after
the date of this Agreement which is
8
9
marked confidential with an appropriate legend, marking, stamp
or other obvious written identification by the disclosing
Party, and (c) all information concerning the business
transactions and the financial arrangements of the Parties with
any person with whom any of them is in a confidential
relationship with regard to the matter in question coming to
the knowledge of the recipient.
9.2 The Company and the Parties and shall take all reasonable steps
to minimise the risk of disclosure of Confidential Information,
by ensuring that only they themselves and such of their
employees and directors whose duties will require them to
possess any of such information shall have access thereto, and
will be instructed to treat the same as confidential.
9.3 The obligation contained in this Clause shall endure, even
after the termination of this Agreement, for a period of **
years from the date of receipt of the Confidential Information
except and until such Confidential Information enters the
public domain as set out above.
10. NOTICES
10.1 Addresses
---------
All notices, demands or other communications required or
permitted to be given or made under or in connection with this
Agreement shall be in writing and shall be sufficiently given
or made (a) if delivered by hand or commercial courier or (b)
sent by pre-paid registered post or (c) sent by legible
facsimile transmission (provided that the receipt of such
facsimile transmission is confirmed and a copy thereof is sent
immediately thereafter by pre-paid registered post) addressed
to the intended recipient at its address or facsimile number
set out below. A Party may from time to time notify the others
of its change of address or facsimile number in accordance with
this Clause.
CSM
---
60 Woodlands Industrial Park D
Street 2
Singapore 738406
Facsimile no: (65) 362 2908
Attn: The President
9
10
Customer
--------
Bay F-1
Raheen Ind. Estate
Limerick, Ireland
Telefax no: (353) 613 08448
Attn: Managing Director
With Copy to:-
Analog Devices Inc.
One Technology Way
P.O. Box 9105
Norwood
MA 02062 - 9106
United States of America
Telefax no: (617) 461 4100
Attn: Vice President & General Manager
10.2 Deemed Delivery
---------------
Any such notice, demand or communication shall be deemed to
have been duly served (a) if delivered by hand or commercial
courier, or sent by pre-paid registered post, at the time of
delivery; or (b) if made by successfully transmitted facsimile
transmission, at the time of dispatch (provided that the
receipt of such facsimile transmission is confirmed and that
immediately after such dispatch, a copy thereof is sent by
pre-paid registered post).
11. WAIVER AND REMEDIES
11.1 No delay or neglect on the part of either Party in enforcing
against the other Party any term or condition of this Agreement
or in exercising any right or remedy under this Agreement shall
either be or be deemed to be a waiver or in any way prejudice
any right or remedy of that Party under this Agreement.
11.2 No remedy conferred by any of the provisions of this Agreement
is intended to be exclusive of any other remedy which is
otherwise available at law, in equity, by statute or otherwise
and each and every other remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or
hereafter existing at law, in equity, by statute or otherwise.
The election of any one or more of such remedies by either of
the Parties hereto shall not constitute a waiver by such Party
of the right to pursue any other available remedy.
10
11
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
12. SEVERANCE
If any provision or part of this Agreement is rendered void,
illegal or unenforceable in any respect under any enactment or
rule of law, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or
impaired thereby.
13. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between CSM and
Customer and shall supersede all previous agreements and
undertakings between Parties with respect to the subject matter
hereof, Provided however that the *****************************
***************************************************************
*********** shall remain in full force and effect in accordance
with the terms therein.
14. ARBITRATION AND GOVERNING LAW
14.1 Except as otherwise expressly provided hereunder any dispute or
controversy arising in connection with this Agreement which
cannot be settled by mutual or amicable agreement shall be
finally settled under the rules of Conciliation and Arbitration
of the International Chamber of Commerce by one or more
arbitrators appointed in accordance with those rules. The place
of arbitration shall be London. The arbitration shall be
conducted in English.
14.2 This Agreement shall be governed by the substantive laws of
Singapore
11
12
IN WITNESS WHEREOF the Parties have hereunto entered into this
Agreement the date first above written.
Signed by TAN BOCK SENG )
CHARTERED SEMICONDUCTOR )
MANUFACTURING LTD )
in the presence of :- ) /S/ TAN BOCK SENG
-----------------
/S/ CHOONG CHAR YNG LING (sp?)
------------------------------
Name
Signed by JOSEPH E. MCDONOUGH )
ANALOG DEVICES B.V. )
in the presence of :- ) /S/ JOSEPH E.MCDONOUGH
----------------------
Managing Director
/S/ WILLIAM A. WISE, JR.
-----------------------
Name
12
13
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
ANNEX A
Payment Schedule
----------------
************* *****************
************* *****************
************* *****************
************* *****************
************* *****************
ANALOG DEVICES B.V.
13
14
Confidential Materials omitted and filed separately with
the Securities and Exchange Commission.
Asterisks denote omissions.
ANNEX B
CSM SUPPLY COMMITMENT
---------------------
CUSTOMER LOADING COMMITMENT
---------------------------
Number of ****************
------------------------------------------------------------------------------------
**** **** **** **** **** **** **** **** ************
******
*** ***** ***** ***** ***** ***** ***** ***** *****
------------------------------------------------------------------------------------
ANALOG DEVICES B.V.
1
Exhibit 10-3
LEASE
DATED: FEBRUARY 8, 1996
MASSACHUSETTS INSTITUTE OF TECHNOLOGY, LESSOR
ANALOG DEVICES, INC., LESSEE
21 OSBORN STREET, CAMBRIDGE, MASSACHUSETTS
TABLE OF CONTENTS
-----------------
1.0 Parties and Premises................................... 1
--------------------
1.1 Parties and Premises.............................. 1
--------------------
1.2 Common Areas...................................... 1
------------
1.3 Lessee's Option to Lease Additional Space......... 2
-----------------------------------------
1.4 Lessee's Right of First Refusal................... 2
-------------------------------
1.5 Signs............................................. 2
-----
2.0 Term .................................................. 3
----
2.1 Term; Commencement Date........................... 3
-----------------------
2.2 Extension Option.................................. 3
----------------
3.0 Rent .................................................. 3
----
3.1 Payment of Rent................................... 3
---------------
3.2 Computation of Basic Rent......................... 4
-------------------------
4.0 Permitted Uses......................................... 5
--------------
5.0 Taxes; Operating Expenses.............................. 6
-------------------------
5.1 Taxes............................................. 6
-----
5.2 Operating Expenses................................ 7
------------------
5.3 Payment of Taxes and Operating Expenses........... 8
---------------------------------------
5.4 Abatement of Taxes................................ 9
------------------
6.0 Meters for Utilities................................... 10
--------------------
7.0 Insurance.............................................. 10
---------
7.1 Public Liability Insurance........................ 10
--------------------------
7.2 Casualty Insurance................................ 10
------------------
7.3 Certificate of Insurance.......................... 10
------------------------
7.4 Lessor's Insurance................................ 11
------------------
7.5 Waiver of Subrogation............................. 11
---------------------
7.6 Waiver of Rights.................................. 12
----------------
8.0 Assignment and Subletting.............................. 12
-------------------------
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9.0 Parking................................................ 15
-------
10.0 Late Payment of Rent................................... 15
--------------------
11.0 Lessee's Covenants..................................... 15
------------------
12.0 Casualty and Eminent Domain............................ 21
---------------------------
12.1 Substantial Taking................................ 21
------------------
12.2 Partial Taking.................................... 21
--------------
12.4 Substantial Casualty.............................. 22
--------------------
12.5 Repair and Restoration............................ 23
----------------------
13.0 Defaults; Events of Default; Remedies.................. 23
-------------------------------------
13.1 Defaults; Events of Default....................... 23
---------------------------
13.2 Termination....................................... 24
-----------
13.3 Survival of Covenants............................. 25
---------------------
13.4 Damages........................................... 25
-------
13.5 Right to Relet.................................... 26
--------------
13.6 Right to Equitable Relief......................... 27
-------------------------
13.7 Right to Self Help................................ 27
------------------
13.8 Further Remedies.................................. 27
----------------
14.0 Construction........................................... 28
------------
15.0 Lessor's Right of Entry................................ 28
-----------------------
16.0 Real Estate Broker..................................... 28
------------------
17.0 Notices................................................ 28
-------
18.0 No Waivers............................................. 29
----------
19.0 Ground Leases; Mortgages............................... 29
------------------------
19.1 Rights of Ground Lessors and Mortgagees........... 29
---------------------------------------
19.2 Lease Subordinate................................. 30
-----------------
20.0 Notice of Lease; Estoppel Certificates................. 31
--------------------------------------
21.0 Holding Over........................................... 31
------------
22.0 Force Majeure.......................................... 31
-------------
23.0 Entire Agreement....................................... 31
---------------
24.0 Successors and Assigns................................. 32
----------------------
25.0 Applicable Law, Severability and Construction.......... 32
---------------------------------------------
26.0 Authority.............................................. 32
---------
27.0 Work to be Performed by Polaroid Corporation........... 32
--------------------------------------------
-ii-
3
EXHIBIT A - PREMISES........................................ 34
EXHIBIT B - WORK LETTER..................................... 35
-iii-
4
LEASE
Dated: February 8, 1996
1.0 Parties and Premises.
--------------------
1.1 PARTIES AND PREMISES. MASSACHUSETTS INSTITUTE OF
TECHNOLOGY ("Lessor") hereby LEASES unto ANALOG DEVICES,
INC. ("Lessee"), the following premises:
The entire basement, first and second floors, containing
68,135 square feet of rentable area (the "Premises") of
the building known as and numbered 21 Osborn Street,
Cambridge, Massachusetts, containing a total of 117,130
rentable square feet (the "Building"), which is located
on the parcel of land described on EXHIBIT A attached
hereto (the "Land"),
together with the benefit of, and subject to (as the case may
be) all rights, easements, covenants, conditions,
encumbrances, encroachments and restrictions of record as of
the date of this Lease. Lessor shall have the right, without
the necessity of obtaining Lessee's consent thereto or
joinder therein, to grant, permit, or enter into during the
term of this Lease such additional rights, easements,
covenants, conditions, encumbrances, encroachments and
restrictions with respect to the Land as Lessor may deem
appropriate, PROVIDED THAT no such rights, easements,
covenants, conditions, encumbrances, encroachments or
restrictions shall materially affect Lessee's use of the
Premises for the "Permitted Uses" (as defined in Section 4.0
below).
Lessor hereby reserves the right to use the first floor lobby
and service and freight elevators in the Building in common
with the Lessee and the right to pass through the Premises as
reasonably necessary for access to such elevators in
accordance with Section 15 below.
Lessor hereby further reserves the right to maintain, use,
repair and replace pipes, ducts, wires, meters and any other
equipment, machinery, apparatus and fixtures located within
the Premises and serving other parts of the Building. Lessee,
its employees and invitees shall have access to the Premises
at all times, subject to Lessor's reasonable security
procedures.
1.2 COMMON AREAS. Lessor also grants to Lessee, and
Lessee's invitees, the right, in common with others
-1-
5
entitled thereto, to use for the purposes for which they were
designed, the common facilities of the Building, including
but not limited to, all entrances, elevator foyers, air
shafts, elevator shafts and elevators, stairwells and stairs,
passenger elevators, freight elevator, loading bays, and the
"Parking Area" (as defined in Section 9.0 below)
(collectively, the "Common Areas"). Lessee shall also have
the right to maintain gas storage tanks and associated piping
outside the Building on the Land for gas to be delivered to
the Premises, in compliance with the terms and conditions set
forth in this Lease.
1.3 LESSEE'S OPTION TO LEASE ADDITIONAL SPACE. Provided that both
(i) an "Event of Default" (as defined in Section 13.1 below)
has not occurred prior to the day on which Lessee purports to
exercise the Expansion Option or prior to the first date on
which the Expansion Space will be occupied, and (ii) the
Lessee named herein is actually occupying substantially the
entire Premises as of each of such dates, Lessee shall have
the right and option ("Expansion Option") to lease either the
entire third floor or the entire third and fourth floors of
the Building ("Expansion Space"); PROVIDED THAT Lessee's
occupancy and obligation to pay Rent therefor must commence,
if at all, during the first year of the Initial Term. This
option may be exercised by the Lessee by notice thereof to
Lessor, dispatched not less than sixty (60) days prior to the
date on which Lessee will take occupancy of the additional
space, and upon the exercise of this option, the Premises
shall include such space. Except for the change in Basic Rent
as described in Section 3.2 below, all of the terms and
conditions of this agreement shall apply in respect to the
additional space. The parties agree that the third floor
contains 24,030 square feet of rentable space and that the
fourth floor contains 24,965 square feet of rentable space.
1.4 LESSEE'S RIGHT OF FIRST REFUSAL. Notwithstanding the failure
of the Lessee to exercise its option under Section 1.3, if,
during the Term, Lessor decides to occupy the third and/or
fourth floors of the Building or to offer the space to a
third party, Lessee shall have a right of first refusal to
lease either the entire third floor or the entire third and
fourth floors of the Building for the Rent per Lease Year or
portion thereof which would have been due and payable for
such space and subject to the same conditions and on the same
terms and conditions as if the option had been exercised.
1.5 SIGNS. Lessee shall have the right to maintain one or
more signs on the Premises; PROVIDED THAT all signs
-2-
6
shall comply with applicable Legal Requirements (as defined
below) and shall have been approved by Lessor in advance
which approval shall not be unreasonably withheld or delayed.
2.0 Term; Commencement Date; Extension Options.
------------------------------------------
2.1 TERM; COMMENCEMENT DATE. The initial term of this Lease (the
"Initial Term") shall commence on February 13, 1996, the
"Commencement Date," and expire on the day immediately
preceding the fifth anniversary thereof, unless sooner
terminated as hereinafter provided. For purposes of this
Lease, the phrase "Term" shall mean collectively (a) the
Initial Term, and (b) if Lessee duly exercises one or more
"Extension Option(s)", the "Extension Term" (as these phrases
are defined in Section 2.2 below).
2.2 EXTENSION OPTIONS. Provided that both (i) an "Event of
Default" (as defined in Section 13.1 below) has not occurred
prior to the day on which Lessee purports to exercise the
Extension Option or prior to the first day of the Extension
Term, and (ii) the Lessee named herein is actually occupying
substantially the entire Premises as of each of said dates,
Lessee shall have the option ("Extension Option") to extend
the Lease Term of this Lease for two additional periods of
five (5) years each (the "Extension Term(s)"), unless sooner
terminated as hereinafter provided, subject to all the terms
of this Lease except for the change in Basic Rent as provided
in Section 3.2 of this Lease.
Lessee shall exercise an Extension Option, if at all, by
giving written notice of exercise to Lessor not earlier than
twelve (12) months prior to, nor later than six (6) months
prior to, the last day of the Initial Lease Term or the first
Extension Term as applicable. If Lessee fails to give such
notice to Lessor within such time, Lessee shall be deemed to
have waived the right to exercise the applicable Extension
Option.
3.0 Rent.
----
3.1 PAYMENT OF RENT. Lessee shall pay Lessor, without offset or
deduction and without previous demand therefor, as items
constituting rent (collectively, "Rent"):
(a) Basic rent ("Basic Rent") at the rate hereinafter set
forth, in equal monthly installments, in advance,
commencing three months after the Commencement Date (the
"Rent Commencement Date") and continuing thereafter on
the first day of each
-3-
7
calendar month or portion thereof during the Term. Basic
Rent shall be PRO-RATED for partial months occurring at
the beginning or the end of the Term, and, with respect
to the Additional Space, for any partial Lease Year at
the beginning of the Term; and
(b) All other costs, charges, or expenses which Lessee
in this Lease agrees to pay, or which Lessor pays
or incurs as the result of a default by Lessee
hereunder, including any penalty or interest which
may be added for nonpayment or late payment thereof
as provided in this Lease (collectively,
"Additional Rent"). All recurring payments of
Additional Rent, such as payment on account of
"Operating Expenses" (as such term is hereinafter
defined), shall be due and payable on the same day
on which Basic Rent is due, except that "Taxes" (as
such term is hereinafter defined) shall be due and
payable in installments not later than ten (10)
days before Lessor is obliged to make installment
payments to the City of Cambridge without incurring
interest and penalties but not sooner than ten (10)
days after receipt by Lessee of written demand
therefor from Lessor accompanied by a copy of the
current tax bill. Unless otherwise specifically
provided in this Lease, all non-recurring items
constituting Additional Rent shall be due and
payable within thirty (30) days after demand
therefor by Lessor.
All payments shall be made to Lessor or such agent, and at
such place, as Lessor shall, from time to time, in writing
designate, the following being now so designated:
Meredith & Grew Inc. as agent for
Massachusetts Institute of Technology
160 Federal Street
Boston, MA 02110-1710
3.2 COMPUTATION OF BASIC RENT. Basic Rent shall be due and
payable hereunder during the Initial Term and any Extension
Term in the amount of $1,000,008 per Lease Year, in
installments of $83,334 per month, except that Basic Rent for
the first Lease Year shall be $750,006 because of the three
month rent free period at the beginning of the Initial Term;
PROVIDED THAT, if Lessee exercises its option to lease
additional space (the "Additional Space") under Section 1.3
or its right of first refusal therefor under Section 1.4,
Basic Rent shall be increased by $240,300 per Lease Year if
exercised with respect to the third floor only or by
-4-
8
$489,950 per Lease Year if exercised with respect to both the
third and fourth floors, commencing on the date of occupancy
and subject to adjustment during any Extension Term as
follows:
for each Extension Term annual Basic Rent applicable to
the Additional Space shall be adjusted at the
commencement date as follows:
(i) The index used for calculation of any adjustment
shall be the official Consumer's Price Index, Boston
Area, all items, (1982-1984 = 100) published by the
Bureau of Labor Statistics, U.S. Department of Labor, or
its successor index should the Department of Labor cease
publishing the CPI.
(ii) Annual Basic Rent applicable to the Additional
Space for each Extension Term shall be the annual Basic
Rent therefor for the preceding five years of the Term
plus an additional amount as determined in paragraph
(iii).
(iii) The index for the month of November immediately
preceding the termination of the Initial Term or the
First Commencement Term as applicable shall be compared
to the index for the same month immediately preceding
the commencement of such five year term. The numerator
shall be the index for the later year and the
denominator shall be the index for the earlier year. The
result shall be multiplied by the current annual Basic
Rent for the Additional Space to determine the new
annual Basic Rent therefor.
As used in this Lease, "Lease Year" means the twelve (12)
month period commencing on the Commencement Date, or a
successive twelve (12) month period included in the Term
commencing on an anniversary of that day, but if the
expiration of the Term or the earlier termination of the
Lease does not coincide with the termination of such a twelve
(12) month period, the term "Lease Year" shall mean the
portion of such twelve (12) month period before such
expiration or termination.
4.0 PERMITTED USES. The Premises shall be used for the following
purposes (the "Permitted Uses") only and for no other:
light manufacturing (including, without limitation,
manufacturing, processing, assembly and packaging of
electronic components), research and development and
-5-
9
office uses; in each case to the extent permitted as a matter
of right under the zoning ordinance of the City of Cambridge,
Massachusetts.
5.0 Taxes; Operating Expenses.
-------------------------
5.1 TAXES. Lessee shall pay as Additional Rent its pro rata share
of all taxes, special or general assessments and other
impositions and charges imposed by governmental authorities
of every kind and nature whatsoever, extraordinary as well as
ordinary and each and every installment thereof which shall
or may during the Term be charged, levied, laid, assessed,
imposed, become due and payable or become liens upon or for
or with respect to the Land or any part thereof and the
Building or the Premises, or appurtenances or equipment owned
by Lessor thereon or therein or any part thereof, or on this
Lease, and any tax based on a percentage, fraction or
capitalized value of the Rent (whether in lieu of or in
addition to the taxes hereinbefore described) (collectively,
"Taxes"); provided however that:
(a) if, by law, any Taxes may at the option of the
taxpayer be paid in installments, Lessee may pay
the same in such installments over such period as
the law allows, and Lessee shall only be liable for
such installments as shall become due during the
Term of this Lease, PROVIDED THAT the full amount
of all Taxes attributable to the Term shall be paid
by Lessee in the event of an earlier termination of
this Lease due to a default of Lessee; and
(b) all Taxes for the municipal fiscal years in which the
Term of this Lease shall begin and end shall be
apportioned so that Lessee shall pay only those portions
thereof which correspond with the portion of said year
as is within the Term hereby demised.
Taxes shall not include inheritance, estate, excise,
succession, transfer, gift, franchise, income, gross receipt,
or profit taxes except to the extent such are in lieu of or
in substitution for Taxes as now imposed on the Building, the
Land, the Premises or this Lease. Lessee's share of Taxes
shall be computed as follows: (i) with respect to the
Building and the land under the Building, a percentage equal
to the ratio of the number of rentable square feet occupied
by the Tenant in the Building to the number of rentable
square feet in the Building; and (ii) with respect to the
remainder of the Land, a percentage equal to the ratio of the
number of parking spaces allocated to the Premises under
Section 9 to the aggregate number of parking spaces on the
Premises. The parties hereby agree that rentable square
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feet for the Premises, the Building and the third and fourth
floors of the Building are as set forth in Sections 1.1 and
1.3 above. If Lessee takes occupancy of Additional Space
under its option or right of first refusal set forth in
Section 1.3 and Section 1.4 during the course of any year of
the Term, Taxes for such year shall be determined separately
for each partial year before and after the date of occupancy.
5.2 OPERATING EXPENSES. Lessee shall pay as Additional Rent
Lessee's share as reasonably determined by the Lessor of all
expenses, costs, and disbursements of every kind and nature
(collectively, "Operating Expenses") which Lessor shall pay
or become obligated to pay in connection with the ownership,
operation and maintenance of the Building or the Land,
including all facilities in operation on the Commencement
Date and such additional facilities in subsequent years as
may be determined by Lessor to be necessary or beneficial for
the operation of the Building or the Land or the provision of
services to lessees, including, but not limited to:
(a) all salaries, wages, fringe benefits, payroll taxes
and workmen's compensation insurance premiums
related thereto of and for employees engaged in the
operation of the Building and the Land (with
respect to employees who are engaged in the
operation of other properties as well as the
Building and the Land, these amounts shall be
pro-rated on the basis of the relative amount of
time spent by such employees on the various
properties);
(b) painting, repairs, maintenance and cleaning of all
Common Areas;
(c) utilities (including, without limitation, electricity,
steam, water, sewer and gas) for all interior Common
Areas and lighting of exterior areas and the "Parking
Area" (as defined in Section 9.0 below);
(d) maintenance and repair of the Building heating and
cooling systems, the plumbing systems, the fire
detection and suppression systems, the electrical system
and the elevators;
(e) all maintenance, janitorial, and service
agreements;
(f) all insurance, including the cost of casualty and
liability insurance applicable to the Parking Area,
the Land, the Building and Lessor's personal
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property used in connection therewith, including the
amount of any reasonable deductible payable by Lessor in
making repairs and restoration after a casualty;
(g) maintenance of landscaped areas and paved areas,
and snow removal;
(h) maintenance of the Building security system;
(i) management fees, PROVIDED THAT such fees are paid at
rates which are competitive with those commonly charged
for the management of comparable properties in
Cambridge, Massachusetts;
(j) capital items which are for the purpose of reducing
Operating Expenses or upgrading services or which
are at any time required by a governmental
authority or the provisions of any insurance policy
which is first adopted or first becomes applicable
to the Premises, the Building or the Land after the
date of this Lease, amortized over the reasonable
life of the capital items on a straight line basis
with the reasonable life being determined by Lessor
in accordance with generally accepted accounting
principles;
(k) reasonable expenses incurred in pursuing an application
for an abatement of Taxes pursuant to Section 5.4 below
to the extent not deducted from the abatement, if any,
received; and
(l) legal (excluding legal fees with respect to lease
negotiations and enforcement of lease terms against
other lessees), accounting and other professional fees
and disbursements (excluding leasing commissions).
For so long as Lessee is the sole occupant of the Building,
Lessee shall be responsible for one hundred percent (100%) of
Operating Expenses.
5.3 PAYMENT OF TAXES AND OPERATING EXPENSES. Within a reasonable
time after the Commencement Date, and thereafter within a
reasonable time after the end of each fiscal year of the
Lessor (or portion thereof) included in the Term, Lessor
shall deliver to Lessee (i) a statement of actual Operating
Expenses and Taxes for the fiscal year just ended, together
with reasonable supporting documentation therefor, and (ii) a
budget of Operating Expenses and Taxes for the then-current
fiscal year based on the actual Operating Expenses and Taxes
for the preceding year and projected increases or
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decreases reasonably anticipated by Lessor. Commencing on the
first day of the first calendar month after the delivery to
Lessee of such budget, Lessee shall pay to Lessor, as
Additional Rent, on account of its share of anticipated
Operating Expenses for the then-current year, 1/12th of the
total annualized amount of Lessee's share of Operating
Expenses and shall pay to Lessor, as and when set forth in
Section 3.1, the appropriate percentage of Taxes. Lessor
reserves the right to revise the budget during any fiscal
year to cause it to more accurately reflect the actual Taxes
or Operating Expenses being paid or incurred by Lessor, and
upon any such revision the parties shall make adjustments in
the same time and manner as hereinafter provided for fiscal
year-end adjustments. Upon delivery to Lessee of the
statement of actual Operating Expenses and Taxes for the
preceding fiscal year, Lessor shall adjust Lessee's account
accordingly. If the total amount paid by Lessee on account of
the preceding fiscal year is less than the amount due
hereunder, Lessee shall pay the balance due within twenty
(20) days after delivery by Lessor of such statement. If the
total amount paid by Lessee on account of the preceding
fiscal year exceeds the amount due hereunder, such excess
shall be credited by Lessor against the monthly installments
of Additional Rent next falling due or refunded to Lessee
upon the expiration or termination of this Lease (unless such
expiration or termination is the result of an "Event of
Default" (as defined in Section 13.1 below)). Lessor's
current fiscal year is July 1 - June 30, but Lessor reserves
the right to change the fiscal year at any time during the
Term.
5.4 ABATEMENT OF TAXES. Lessor or Lessee may at any time and from
time to time make application to the appropriate governmental
authority for an abatement of Taxes. If such an application
is successful, Lessor shall (a) deduct from the amount of the
abatement all expenses incurred by it in connection with the
application, (b) pay to Lessee Lessee's pro rata share of the
abatement, with interest, if any, paid by the governmental
authority on such share, and (c) retain the balance, if any;
PROVIDED THAT, if Lessee made the application for such
abatement, Lessor shall pay to Lessee out of the proceeds
thereof Lessee's reasonable expenses incurred in connection
with the application before making the payment to Lessee
described in clause (b) of this Section or before Lessor
retains the amount described in clause (c) of this Section.
Lessor agrees to cooperate with Lessee in connection with an
application for an abatement of Taxes hereunder by Lessee at
no expense to the Lessor.
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6.0 METERS FOR UTILITIES. Lessor reserves the right to install meters
for all utilities provided to the Premises, at its own expense,
and charge Lessee for Lessee's actual use of metered services as
Additional Rent.
7.0 Insurance
---------
7.1 PUBLIC LIABILITY INSURANCE. Lessee shall take out and
maintain in force throughout the Term (and for so long
thereafter as Lessee remains in occupancy) comprehensive
public liability insurance naming Lessor and persons claiming
by, through or under Lessor as additional insureds, against
all claims and demands for any injury to persons or property
which may be claimed to have occurred on the Premises, the
Building, the Land or on the ways adjoining the Land, in an
amount which at the beginning of the Term shall not be less
than $1,000,000 for personal injury or death or property
damage per occurrence, and $3,000,000 in the aggregate for
personal injury or death or property damage, or such higher
amounts as Lessor thereafter determines to be consistent with
sound commercial practice in Cambridge. Such policy shall
also include contractual liability coverage covering Lessee's
liability assumed under this Lease.
7.2 CASUALTY INSURANCE. (a) Lessee shall be responsible to
provide its own coverage during the Lease Term for fire,
vandalism, malicious mischief, extended coverage and
so-called all risk coverage insurance insuring (i) all items
or components of "Alterations" (as defined in Section 11.0(f)
below) which Lessee is by this Lease either entitled to or
required to remove upon the expiration or earlier termination
of this Lease, and (ii) "Lessee's Property" (as defined in
Section 11.0(h) below). Lessor shall not carry any insurance
concurrent in coverage and contributing in the event of loss
with any insurance required to be furnished by Lessee
hereunder if the effect of such separate insurance would be
to reduce the protection or the payment to be made under
Lessee's insurance.
(b) During any construction or alteration of the Building by
the Lessee, Lessee shall keep in full force and effect all
risk builder's risk insurance against loss or damage on a
completed value non-reporting basis from such hazards and in
such amounts as Lessor may reasonably require.
7.3 CERTIFICATE OF INSURANCE. The insurance required by
Sections 7.1 and 7.2 above shall be placed with insurers
reasonably satisfactory to Lessor and authorized to do
business in Massachusetts. Such insurance shall provide
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that it shall not be amended or canceled with respect to the
additional insureds or certificate holders without twenty
(20) days' prior written notice to each of them. Lessee shall
furnish to Lessor certificates of insurance for all insurance
required to be maintained by Lessee under this Lease,
together with evidence satisfactory to Lessor of the payment
of all premiums for such policies. Lessee, at Lessor's
request, shall also deliver such certificates and evidence of
payment of premiums to the holder of any mortgage affecting
the Land and Building.
7.4 LESSOR'S INSURANCE. Lessor shall take out and maintain in
force throughout the Term, in a company or companies
authorized to do business in Massachusetts, casualty
insurance on the Building (exclusive of "Lessee's Property"
(as defined in Section 11.0(h) below) and all "Alterations"
(as defined in Section 11.0(f) below) which Lessee is by this
Lease either entitled to or required to remove upon the
expiration or earlier termination of this Lease, as to which
Lessee is required to maintain insurance pursuant to Section
7.2 above) in an amount equal to the full replacement value
of the Building (exclusive of foundations and those items set
forth in the preceding parenthetical in this sentence),
covering all risks of direct physical loss or damage and
so-called "extended coverage" risks. This insurance may be
maintained in the form of a blanket policy covering the
Building as well as other properties owned by Lessor.
Notwithstanding the foregoing provisions of this Section 7.4,
Lessor shall have the right, at any time during the Term, to
self-insure all or any portion of the coverages required by
this Section.
7.5 WAIVER OF SUBROGATION. To the extent to which a waiver of
subrogation clause is available, Lessor and Lessee shall
obtain a provision in all insurance policies carried by such
party covering the Premises, including but not limited to
contents, fire and casualty insurance, expressly waiving any
right on the part of the insurer against the other party. If
extra cost is chargeable for such provision, then Lessee
shall pay such extra charge. Notwithstanding the foregoing,
with respect to such portion of the Term during which Lessor
elects to self-insure under Section 7.4 above, then for
purposes of this Section 7.5, Lessor shall be deemed to have
maintained fire and all-risk coverage in an amount equal to
one hundred (100%) percent of the insurable value of the
Building (subject to the exceptions and exclusions set forth
in Section 7.4 above) with a waiver of subrogation clause
contained therein.
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7.6 WAIVER OF RIGHTS. All claims, causes of action and rights of
recovery for any damage to or destruction of persons,
property or business which shall occur on or about the
Premises, the Building or the Land, which result from any of
the perils insured under any and all policies of insurance
maintained by Lessor or Lessee, are waived by each party as
against the other party, and the officers, directors,
employees, contractors, servants and agents thereof,
regardless of cause, including the negligence of the other
party and its respective officers, directors, employees,
contractors, servants and agents, but only to the extent of
recovery, if any, under such policy or policies of insurance;
PROVIDED, HOWEVER, that (i) this waiver shall be null and
void to the extent that any such insurance shall be
invalidated by reason of this waiver, and (ii) with respect
to such portion of the Term during which Lessor elects to
self-insure under Section 7.4 above, then for purposes of
this Section 7.6, Lessor shall be deemed to have maintained
fire and all-risk coverage in an amount equal to one hundred
(100%) percent of the insurable value of the Building
(subject to the exceptions and exclusions set forth in
Section 7.4 above).
8.0 ASSIGNMENT AND SUBLETTING. (a) Lessee shall not mortgage, pledge,
hypothecate, grant a security interest in, or otherwise encumber
this Lease or any sublease hereinafter entered into by Lessee, or
assign this Lease, or sublease the Premises or any portion thereof
(the term "sublease" shall be deemed to include any arrangement
pursuant to which a third party is permitted by Lessee to occupy
all or any portion of the Premises), without obtaining, on each
occasion, the prior written consent of Lessor. Lessor agrees not
to unreasonably withhold or delay its consent to any request to
assign or sublet the Lessee interest hereunder.
(b) If Lessee wishes to assign this Lease or sublease all or any
portion of the Premises, Lessee shall so notify Lessor in writing
and request Lessor's consent thereto. Such notice shall include
(i) the name of the proposed assignee or sublessee, (ii) a general
description of the types of business conducted by the proposed
assignee or sublessee and a reasonably detailed description of the
business operations proposed to be conducted in the Premises by
such person or entity, (iii) such financial information concerning
the proposed assignee or sublessee as Lessor may reasonably
require, and (iv) all terms and provisions upon which such
assignment or sublease is proposed to be made. Lessor shall have
thirty (30) days from the day on which it receives Lessee's notice
and such required information to give notice to Lessee that either
(i) Lessor consents to such assignment or sublease, or (ii) Lessor
withholds its consent to such assignment or sublease, or (iii)
where applicable, Lessor is
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exercising its right of recapture pursuant to paragraph (e)
below.
(c) If Lessor consents to an assignment or sublease: (i) Lessee
shall promptly deliver to Lessor a fully executed copy of said
assignment or sublease; (ii) after any such assignment or
sublease, Lessee shall remain primarily liable to Lessor hereunder
(which liability shall be joint and several with the assignee or
sublessee); and (iii) if the aggregate rent and other amounts
payable to Lessee under or in connection with such assignment or
sublease, after deduction of the costs reasonably incurred by
Lessee in entering into such assignment or sublease (including,
without limitation, reasonable attorneys' fees and expenses,
brokerage commissions, and alteration costs amortized on a
straight-line basis over the term of such sublease or, in the case
of an assignment, over the remaining Term of this Lease), exceeds
the Rent payable hereunder with respect to the portion of the
Premises subject to such sublease (or, in the case of an
assignment, the entire Premises), Lessee shall pay to Lessor, as
Additional Rent, one-half (1/2) of such excess immediately upon
receipt thereof by Lessee.
(d) If Lessor withholds its consent to such assignment or
sublease, Lessee shall not enter into the proposed assignment or
sublease with such person or entity.
(e) If Lessor elects, it shall have the right to consider Lessee's
request for Lessor's consent to any assignment of the Lease, or a
request for Lessor's consent to a sublease which either (i) has a
proposed term (including extension options) of two years or more,
or (ii) would cover twenty-five (25%) percent of the rentable area
of the Premises or more, as an offer to Lessor to release from
this Lease that portion of the Premises which is proposed to be
the subject of such sublease for the term of such proposed
sublease or, in the case of a proposed assignment of this Lease,
the entire Premises for the entire Lease Term. If Lessor accepts
such offer, then (i) in the case of a proposed sublease, this
Lease shall be deemed to be amended as of the proposed effective
date of such sublease so as to delete the portion of the Premises
which would have been subject thereto from the Premises for
purposes of this Lease (with a commensurate adjustment in Rent and
Lessee's share of Taxes and Operating Expenses) for the time
period of what would have been the term of such sublease, or (ii)
in the case of a proposed assignment, this Lease shall terminate
as of the proposed effective date of such assignment as if such
date was the last day of the Term.
(f) Regardless of whether Lessor grants such consent, Lessee
shall reimburse Lessor on demand, as Additional Rent, for all
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out of pocket costs and expenses (including, without limitation,
attorneys' fees) reasonably incurred by Lessor in responding to a
request for such consent.
(g) Lessee shall not be entitled to enter into any assignment or
sublease, or to request Lessor's consent thereto, during the
continuance of a default hereunder by Lessee.
(h) Any assignment or sublease entered into pursuant to this
Section 8.0 shall be subject to all of the terms and provisions of
this Lease, including without limitation this Section 8.0. If
Lessee enters into any such assignment or sublease, Lessor may, at
any time and from time to time after the occurrence of a default
hereunder, collect rent from such assignee or sublessee, and apply
the net amount collected against Lessee's obligations hereunder,
but no such assignment or sublease or collection shall be deemed
an acceptance by Lessor of such assignee or sublessee as a lessee
hereunder or as a release of the original named Lessee hereunder.
(i) Notwithstanding anything contained in this Lease, Lessee shall
not enter into any assignment or sublease with any person or
entity if the identity of the assignee or sublessee is
inconsistent with the investment policies of Lessor as set forth
in writing by the Executive Committee of Lessor prior to its
receipt of Lessee's notice of such proposed assignment or
sublease, and any such transaction shall be void AB INITIO.
(j) In the event that Lessee desires to assign this Lease or to
sublease the Premises (or any portion thereof) to any corporation,
partnership, association or other business organization directly
or indirectly controlling or controlled by Lessee or under common
control with Lessee, or to any successor by merger, consolidation
or purchase of all or substantially all of the assets of Lessee,
Lessee shall give at least twenty (20) days' prior written notice
thereof to Lessor (unless Lessee is prohibited by applicable laws,
codes, rules or regulations, or by the terms of the operative
merger agreement or purchase and sale agreement from providing
notice to Lessor at such time, in which event such notice shall be
provided to Lessor as soon as Lessee is no longer subject to such
prohibition). No consent of Lessor shall be required for any such
assignment or sublease EXCEPT that Lessor shall have the right to
withhold its consent if the identity of the assignee or sublessee
is inconsistent with the investment policies identified in the
foregoing paragraph (i) of this Section. Any assignee or sublessee
which claims an interest in this Lease pursuant to a transfer of
the type described in this paragraph (j) shall be bound by all of
the terms and conditions of this Lease including, without
limitation, those of the foregoing paragraph (i) of
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this Section, and if the identity of such assignee or successor is
inconsistent with such investment policies, Lessor shall have the
right to terminate this Lease and to exercise against such
assignee or sublessee the remedies available to Lessor under this
Lease, at law or in equity for a breach of the provisions hereof
by Lessee. For the purpose of this Lease, the sale of Lessee's
capital stock through any public exchange shall not be deemed an
assignment or sublease of the Lease or of the Premises.
(k) Notwithstanding anything contained in this Lease, Lessee shall
not, either voluntarily or by operation of law, make any transfer
of this Lease or the Premises (or any portion thereof) which
results in Lessee (or anyone claiming by, through or under Lessee)
collecting in connection with the Premises any rental or other
charge based on the net income or on the profits of any person so
as to render any part of the Rent due hereunder "unrelated
business taxable income" of Lessor as described in Section 512 of
the Internal Revenue Code of 1986, as amended, and any such
transfer shall be void AB INITIO.
9.0 PARKING. Lessee shall have the right to use 100 parking spaces in
the parking area on the Land (the "Parking Area") to serve the
Premises. The remaining parking spaces on the Land shall be
divided equally to serve the third and fourth floors of the
Building. If Lessee exercises its option or right of first refusal
with respect to one or both of the third and fourth floors under
Sections 1.3 or 1.4, Lessee will thereby acquire the right to use
the corresponding number of additional parking spaces. While
Lessee is constructing its initial build out, Lessor will, if
necessary, make additional spaces available to Lessee to
accommodate construction personnel and their vehicles.
10.0 LATE PAYMENT OF RENT. Lessee agrees that in the event that any
payment of Basic Rent or Additional Rent shall remain unpaid at
the close of business on the tenth business day after the same is
due and payable hereunder (without reliance on any applicable
grace period), such payment shall bear interest from the date the
same was due at a rate equal to the "Prime Rate" as published from
time to time in THE WALL STREET JOURNAL while such payment is
overdue PLUS four (4%) percent, which shall be due and payable by
Lessee as Additional Rent as compensation for Lessor's extra
administrative costs in investigating the circumstances of late
Rent. The assessment or collection of such a charge shall not be
deemed to be a waiver by Lessor of any default by Lessee arising
out of such failure to pay Rent when due.
11.0 LESSEE'S COVENANTS. Lessee covenants, at its sole cost and
expense, during the Term and such further time as Lessee
occupies any part of the Premises:
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(a) to pay when due the Basic Rent and all Additional Rent, and,
if separately metered at any time during the Term, all
charges for electricity and other utilities;
(b) damage by fire or casualty and reasonable wear and tear only
excepted, to keep the Premises (including window glass) in as
good order, repair and condition as the same are in at the
commencement of the Term, or may be put in thereafter;
(c) not to injure, overload or deface the Premises or the
Building, nor to suffer or commit any waste therein, nor
to place a load upon any floor which exceeds the floor
load which the floor was designed to carry, nor to
connect any equipment or apparatus to any Building
system (e.g., electrical, plumbing, mechanical) which
exceeds the capacity of such system, nor to permit on
the Premises any auction sale or any nuisance or the
emission therefrom of any objectionable vibration,
noise, or odor, nor to permit the use of the Premises
for any purpose other than the Permitted Uses, nor any
use thereof which is improper, offensive, or contrary to
any laws, ordinances, codes, rules and regulations, or
the provisions of any license, permit or other
governmental consent or approval required for or
applicable now or at any time during the Term to the
Land, the Building or the Premises or Lessee's use
thereof (collectively, "Legal Requirements"), or which
is liable to invalidate or increase the premiums for any
insurance on the Building or its contents, or liable to
render necessary any alterations or additions to the
Building;
(d) not to obstruct in any manner any portion of the Building not
hereby leased, or the sidewalks or approaches to the
Building, or the Parking Area, or any hallways or Common
Areas, and to conform to all reasonable rules now or
hereafter made by Lessor for the care and use of the
Building, its facilities and approaches;
(e) to comply with all Legal Requirements and all
recommendations of Lessor's fire insurance rating
organization now or hereafter in effect, to keep the
Premises equipped with all safety appliances, and to
procure (and maintain in full force and effect) all
licenses, permits and other governmental consents and
approvals required by any Legal Requirement or by the
provisions of any applicable insurance policy because of
the use made of the Premises by Lessee (without hereby
intending to vary the provisions of Section 4.0 above),
and, if requested by Lessor, to make all repairs,
alterations, replacements or additions so required in
and to the Premises;
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(f) except as set forth in Section 1.5, Section 14 or this
Section 11.0(f), not, without on each occasion obtaining
the prior written consent of Lessor which will not be
unreasonably withheld or delayed, to make any
alterations, renovations, improvements and/or additions
to the Premises (collectively, "Alterations"), or to
permit the making of any holes in any part of the
Building or the painting or placing of any signs,
awnings, or the like, visible from outside of the
Premises; PROVIDED THAT Lessee may, without such
approval, make Alterations which will neither (i)
materially affect the structure of the Premises or its
building service systems or (ii) cost more than $25,000
to construct ("Minor Alterations"). Prior to commencing
any Alterations, Lessee shall: secure all necessary
licenses, permits and other governmental consents and
approvals; except for Minor Alterations, obtain the
written approval of Lessor as to the plans and
specifications for such work; except for Minor
Alterations, obtain the written approval of Lessor as to
the general contractor (or as to each trade contractor
if there is no general contractor); cause each
contractor and subcontractor to carry workmen's
compensation insurance in statutory amounts covering all
of the contractor's and subcontractor's employees; and
cause each general contractor (or each trade contractor
if there is no general contractor) and subcontractor to
carry comprehensive public liability insurance in
amounts reasonably satisfactory to Lessor (such
insurance to be written by companies reasonably
satisfactory to Lessor and insuring Lessee and Lessor as
well as the contractors and subcontractors). All
Alterations shall be performed in a good and workmanlike
manner consistent with existing conditions within the
Building and shall be of a quality equal to or better
than existing conditions. Lessor and Lessee hereby
agree that Lessee's Work as described in Exhibit B shall
remain part of the Premises upon the expiration or
earlier termination of the Term. All other Alterations
(other than Lessee's removable personal property and
trade fixtures) shall remain part of the Premises and
shall not be removed upon the expiration or earlier
termination of the Term EXCEPT for those items which
Lessor designates for removal in a notice given to
Lessee at the time that Lessee requests Lessor's
approval of such Alteration. Lessee shall pay promptly
when due the entire cost of all work. Lessee shall not
cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach
to the Land or the Building, and shall discharge or bond
any such liens which may be filed or recorded against
the Premises within fifteen (15) days after the filing
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or recording thereof. All such work shall be performed in
compliance with all Legal Requirements and the provisions of
all applicable insurance policies. Promptly after the
completion of any Alterations, Lessee shall provide a
complete set of as-built plans thereof to Lessor showing all
work performed, including, without limitation, plans for all
partitions, plumbing, electric service equipment and wiring,
HVAC equipment and piping, sprinkler systems and other
services installed or modified. Lessee shall indemnify and
hold Lessor harmless from and against any and all suits,
demands, causes of action, claims, losses, debts,
liabilities, damages, penalties or judgments, including,
without limitation, reasonable attorneys' fees, arising from
injury to any person or property occasioned by or growing out
of such work, which indemnity shall survive the expiration or
termination of this Lease;
(g) to save Lessor harmless and indemnified from any loss,
cost and expense (including, without limitation,
reasonable attorneys' fees) arising out of or relating
to (i) a claim of injury to any person or damage to any
property while on the Premises, if not due to the
negligence or willful misconduct of Lessor or its
officers, agents, employees, servants or contractors, or
the breach of Lessor's obligations under this Lease; or
to (ii) a claim of injury to any person or damage to any
property anywhere alleged to be occasioned by any
omission, neglect or default of Lessee or of anyone
claiming by, through, or under Lessee, or any officer,
agent, employee, servant, contractor or invitee of any
of the foregoing. Lessor agrees to indemnify and hold
harmless Lessee from and against all loss, cost and
expense (including, without limitation, reasonable
attorneys' fees) arising out of or relating to a claim
for personal injury or property damage resulting from
the negligence or willful misconduct of Lessor or its
officers, agents, employees, servants or contractors,
including claims of injury to any person or damage to
any property while on the common areas on the property,
if due to the negligence or willful misconduct of Lessor
or its officers, agents, employees, servants or
contractors, or from the breach of Lessor's obligations
or representations under this Lease. The provisions of
this clause (g) shall survive the expiration or
termination of this Lease;
(h) that all furniture, furnishings, fixtures and property of
every kind of Lessee and of all persons claiming by, through
or under Lessee which may be on the Premises from time to
time (collectively, "Lessee's Property") shall be at the sole
risk of Lessee, and Lessor shall
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not be liable if the whole or any part thereof shall be
destroyed or damaged by fire, water or otherwise, or by the
leakage or bursting of water pipes, steam pipes, or other
pipes, or by theft or from any other cause unless caused by
the negligence or willful misconduct of Lessor, or its
officers, agents, employees, servants or contractors;
(i) to pay promptly when due, all taxes of any kind levied,
imposed or assessed on Lessee's Property, which taxes shall
be the sole obligation of Lessee, whether the same is
assessed to Lessee or to any other person and whether the
property on which such tax is levied, imposed or assessed
shall be considered part of the Premises or personal
property;
(j) by the end of business on the last day of the Term (or
the effective date of any earlier termination of this
Lease as herein provided), to remove (1) all of Lessee's
Property and (2) the items or components of Alterations
designated for removal as provided in paragraph (f)
above, in each case whether the same be permanently
affixed to the Premises or not, and to repair any damage
caused by any such removal to Lessor's reasonable
satisfaction; and peaceably to yield up the Premises
clean and in good order, repair and condition
(reasonable wear and tear, and damage by fire or other
casualty or taking which Lessee is not otherwise
required by the terms of this Lease to repair or replace
only excepted); and to deliver the keys to the Premises
to Lessor. Any of Lessee's Property or those
Alterations designated for removal as provided in
paragraph (f) above which are not removed by such date
shall be deemed abandoned and may be removed and
disposed of by Lessor in such manner as Lessor may
determine, and Lessee shall pay to Lessor on demand, as
Additional Rent, the entire cost of such removal and
disposition, together with the costs and expenses
incurred by Lessor in making any incidental repairs and
replacements to the Premises necessitated by Lessee's
failure to remove Lessee's Property or those Alterations
designated for removal as provided in paragraph (f)
above, as required herein or by any other failure of
Lessee to comply with the terms of this Lease, and for
use and occupancy during the period after the expiration
of the Term and prior to Lessee's performance of its
obligations under this paragraph (k). Lessee shall
further indemnify and hold Lessor harmless from and
against any and all suits, demands, causes of action,
claims, losses, debts, liabilities, damages, penalties
or judgments, including, without limitation, reasonable
attorneys' fees, resulting from Lessee's failure or
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delay in surrendering the Premises as above provided
(such indemnity to survive the expiration or termination
of this Lease);
(k) to pay Lessor's reasonable expenses, including reasonable
attorneys' fees, incurred in enforcing any obligations of
Lessee under this Lease;
(l) not to generate, store or use any "Hazardous Materials"
(as hereinafter defined) in or on the Premises or
elsewhere in the Building or on the Land except those
identified in writing to Lessor from time to time, and
then only in compliance with any and all applicable
Legal Requirements, or dispose of Hazardous Materials
from the Premises to any other location except a
properly approved disposal facility and then only in
compliance with any and all Legal Requirements
regulating such activity, nor permit any occupant of the
Premises to do so. As used in this Lease, "Hazardous
Materials" means and includes any chemical, substance,
waste, material, gas or emission which is radioactive or
deemed hazardous, toxic, a pollutant, or a contaminant
under any statute, ordinance, by-law, rule, regulation,
executive order or other administrative order, judgment,
decree, injunction or other judicial order of or by any
governmental authority, now or hereafter in effect,
relating to pollution or protection of human health or
the environment. By way of illustration and not
limitation, "Hazardous Materials" includes "oil",
"hazardous materials", "hazardous waste", and "hazardous
substance" as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 ET SEQ., as amended, the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section
6902 ET SEQ., as amended, and the Toxic Substances
Control Act, 15 U.S.C. 8601 ET SEQ., as amended, the
regulations promulgated thereunder, and Massachusetts
General Laws, Chapter 21C and Chapter 21E and the
regulations promulgated thereunder. If, at any time
during the Term, any governmental authority requires
testing to determine whether there has been any release
of Hazardous Materials by Lessee or anyone claiming by,
through or under Lessee, then Lessee shall reimburse
Lessor upon demand, as Additional Rent, for the
reasonable costs thereof. Lessee shall execute
affidavits, certifications and the like, as may be
reasonably requested by Lessor from time to time
concerning Lessee's best knowledge and belief concerning
the presence of Hazardous Materials in or on the
Premises, the Building or the Land. Lessor reserves the
right to enter the Premises at reasonable times
(provided twenty-four (24) hours' notice is given to
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Lessee, except in case of emergency) to inspect the same for
Hazardous Materials. Lessee's obligations under this
paragraph (l) shall include, if at any time during the Term
Lessee or anyone claiming by, through or under Lessee uses or
stores radioactive materials on the Premises, compliance with
all so-called "close-out" procedures of the Nuclear
Regulatory Commission or other federal, state or local
governmental authorities having jurisdiction over radioactive
materials, regardless of whether or not such procedures are
completed prior to the expiration or earlier termination of
the Term. Lessee shall indemnify, defend, and hold harmless
Lessor, and the holder of any mortgage on the Building or the
Land, from and against any claim, cost, expense, liability,
obligation or damage, including, without limitation,
attorneys' fees and the cost of litigation, arising from or
relating to the breach by Lessee or anyone claiming by,
through or under Lessee of the provisions of this paragraph
(l), and shall immediately discharge or cause to be
discharged any lien imposed upon the Building or the Land in
connection with any such claim. The provisions of this
paragraph (l) shall survive the expiration or termination of
this Lease;
(m) in case Lessee takes possession of the Premises prior to the
Commencement Date, to perform and observe all of Lessee's
covenants from and after the date upon which Lessee takes
possession except that no Rent shall accrue prior to the Rent
Commencement Date;
(n) to comply with all rules and regulations adopted and
amended from time to time by Lessor for the operation of
the Land and the Building; and
(o) not to permit any officer, agent, employee, servant,
contractor or visitor of Lessee, or of anyone claiming by,
through or under Lessee, to violate any covenant or
obligation of Lessee hereunder.
12.0 Casualty and Eminent Domain.
---------------------------
12.1 SUBSTANTIAL TAKING. In the event that the entire Building, or
more than fifty percent (50%) percent of the rentable area of
the Premises or of the parking spaces which the Lessee is
entitled to use under Section 9.0, shall be taken by any
exercise of the right of eminent domain or other lawful power
in pursuance of any public or other authority during the
Term, then this Lease shall terminate as of the time that
possession is taken by the taking authority.
12.2 PARTIAL TAKING. In the event that a taking occurs and
this Lease is not terminated as provided in Section 12.1
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above, then from and after the date possession is taken by
the taking authority Rent shall be abated by an amount
representing that part of the Rent properly allocable to the
portion of the Premises so taken, but this Lease shall
otherwise continue in full force and effect.
12.3 AWARDS. Lessor reserves and excepts all rights to damage to
the Premises, the Building, the Land and the leasehold hereby
created, now accrued or hereafter accruing by reason of any
exercise of eminent domain, or by reason of anything lawfully
done in pursuance of any public or other authority and by way
of confirmation, Lessee grants to Lessor all of Lessee's
rights to such damages and covenants to execute and deliver
such further instruments of assignment thereof as Lessor may
from time to time request. Lessor agrees, during the Initial
Term only, to pay to Lessee out of the damages received, the
Unamortized Value of Lessee's Work. The Unamortized Value of
Lessee's Work shall mean the Value of Lessee's Work reduced
annually at the end of each year of the Initial Term by one
fifth of the initial amount thereof. The Value of Lessee's
Work shall mean the cost to Lessee of constructing Lessee's
Work reduced by soft costs.
12.4 SUBSTANTIAL CASUALTY. If the Premises are damaged by fire or
other casualty, Lessee shall promptly notify Lessor thereof.
If the Building or any part thereof shall be damaged by fire
or other casualty to the extent that substantial alteration
or reconstruction of the Building shall, in Lessor's sole
opinion, be required (whether or not the Premises shall have
been damaged), or if such casualty renders more than fifty
(50%) percent of the rentable area of the Premises unusable
by Lessee for the operation of its business in the Premises,
or if as a result of such casualty any mortgagee of the
Building requires that insurance proceeds payable in
connection with such casualty be used to retire the mortgage
debt, then, except as set forth in Section 12.5, Lessor may,
at its option, terminate this Lease by notifying Lessee in
writing of such termination within sixty (60) days after the
date of such damage, in which event this Lease shall
terminate on the date set forth in such notice. If such
casualty renders more than fifty (50%) percent of the
rentable area of the Premises unusable by Lessee for the
operation of its business in the Premises, in the reasonable
determination of Lessee, then Lessee may terminate this Lease
by written notice thereof to Lessor within sixty (60) days
after the date of such damage, or if, after such casualty,
Lessor is excused from restoring the Premises under Section
12.5 and notifies
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Lessee that it will not restore the Premises, then Lessee may
terminate this Lease by written notice thereof to Lessor
within thirty (30) days after receipt of such notice by the
Lessee. In the event that this Lease is terminated pursuant
to this Section 12.4, Rent shall be abated, to the extent the
Premises are unusable for the Permitted Uses, from and after
the date of such damage to the date of such termination of
this Lease, and no further Rent shall accrue or be payable
after the date of such termination.
12.5 REPAIR AND RESTORATION. In the event of a taking which does
not result in the termination of this Lease pursuant to
Section 12.1 above, or a casualty which does not result in
the termination of this Lease pursuant to Section 12.4 above,
or if, notwithstanding the occurrence of a substantial
casualty described in Section 12.4, Lessor decides not to
demolish the Building, the Premises shall be repaired and
restored in the manner provided in this Section. Lessor shall
diligently act to restore the Building and the Premises
(exclusive of all items or components of Alterations which
Lessee is by this Lease either entitled to or required to
remove upon the expiration or earlier termination of this
Lease, and Lessee's Property) or, in case of taking, what
remains thereof, to substantially the condition in which they
existed prior to the occurrence of such taking or casualty,
PROVIDED, HOWEVER, that: (i) in no event shall Lessor be
required to spend in connection with restoring the Premises
more than the amount of insurance proceeds or taking award
actually received and allocable thereto (except that this
limitation with respect to insurance proceeds shall not apply
to casualties occurring during such time as Lessor
self-insures pursuant to Section 7.4 above); (ii) Lessor
shall not be required to restore or replace any Alterations
which Lessee is by this Lease either entitled to or required
to remove upon the expiration or earlier termination of this
Lease; and (iii) Lessor shall not be required to restore or
replace any of Lessee's Property. Lessor shall not be liable
for any inconvenience or annoyance to Lessee or injury to the
business of Lessee resulting in any way from such taking or
damage or the repair thereof. Rent shall be abated from and
after the date of such taking or damage to the date on which
Lessor substantially completes the restoration described
above, to the extent the Premises are unusable for the
Permitted Uses.
13.0 Defaults; Events of Default; Remedies.
-------------------------------------
13.1 DEFAULTS; EVENTS OF DEFAULT. The following shall, if
any requirement for notice or lapse of time or both has
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not been met, constitute defaults hereunder, and, if such
requirements have been met, constitute "Events of Default"
hereunder:
(a) The failure of Lessee to perform or observe any of
Lessee's covenants or agreements hereunder
concerning the payment of money for a period of ten
(10) days after written notice thereof, PROVIDED,
HOWEVER, that Lessee shall not be entitled to such
notice if Lessor has given notice to Lessee of two
or more previous such failures within a
twelve-month period, in which event such failure
shall constitute an Event of Default hereunder upon
the expiration of ten (10) days after such payment
was due;
(b) The failure of Lessee to maintain the insurance
required hereunder in full force and effect;
(c) The execution by Lessee of any assignment or
sublease without the prior written consent of
Lessor;
(d) The failure of Lessee to perform or observe any of
Lessee's other covenants or agreements hereunder
for a period of thirty (30) days after written
notice thereof (PROVIDED THAT, in the case of
defaults not reasonably curable in thirty (30) days
through the exercise of reasonable diligence, such
30-day period shall be extended for so long as
Lessee commences cure within such period and
thereafter prosecutes such cure to completion
continuously and with reasonable diligence; or
(e) If the leasehold hereby created shall be taken on
execution, or by other process of law; or if any
assignment shall be made of Lessee's property for
the benefit of creditors; or if a receiver,
guardian, conservator, trustee in bankruptcy or
similar officer shall be appointed to take charge
of all or any part of Lessee's assets by a court of
competent jurisdiction; or if a petition is filed
by Lessee under any bankruptcy or insolvency law;
or if a petition is filed against Lessee under any
bankruptcy or insolvency law and the same shall not
be dismissed within sixty (60) days from the date
upon which it is filed; or a lien or other
involuntary encumbrance is filed against Lessee's
leasehold (or against the Premises, the Building or
the Land based on a claim against Lessee) and is
not discharged or bonded within thirty (30) days
after the filing thereof.
13.2 TERMINATION. If an Event of Default shall occur, Lessor
may, at its option, immediately or any time thereafter
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and without demand or notice, enter upon the Premises or any
part thereof in the name of the whole and repossess the same
as of Lessor's former estate and dispossess Lessee and those
claiming through or under Lessee and remove their effects,
forcibly if necessary, without being deemed guilty of any
manner of trespass and without prejudice to any remedies
which might otherwise be used for arrears of rent or
preceding breach of covenant, and upon such entry this Lease
shall terminate. In lieu of making such entry, Lessor may
terminate this Lease upon three (3) business days' prior
written notice to Lessee. Upon any termination of this Lease
as the result of an Event of Default, Lessee shall quit and
peacefully surrender the Premises to Lessor.
13.3 SURVIVAL OF COVENANTS. No such termination of this Lease
shall relieve Lessee of its liability and obligations under
this Lease and such liability and obligations shall survive
any such termination. Lessee shall indemnify and hold Lessor
harmless from all loss, cost, expense, damage or liability
arising out of or in connection with such termination.
13.4 DAMAGES. In the event of any such termination, Lessee shall
pay to Lessor the Rent up to the time of such termination.
Lessee shall remain liable for, and shall pay on the days
originally fixed for such payment hereunder, the full amount
of all Basic Rent and Additional Rent as if this Lease had
not been terminated; PROVIDED, HOWEVER, if Lessor relets the
Premises, there shall be credited against such obligation the
amount actually received by Lessor each month from such
lessee after first deducting all costs and expenses incurred
by Lessor in connection with reletting the Premises and, if
Lessor has previously received a payment under the succeeding
paragraph of this Section 13.4, there shall be credited
against such obligation the amount actually received by
Lessor.
Lessee further agrees to pay to Lessor, on demand, as and for
liquidated and agreed damages for Lessee's default, the
amount by which:
(a) the aggregate Rent which would have been payable
under this Lease by Lessee from the date of such
termination until what would have been the last day
of the Term but for such termination, EXCEEDS
(b) the greater of (i) the fair and reasonable rental
value of the Premises for the same period, less
Lessor's reasonable estimate of expenses to be
incurred in connection with
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reletting the Premises, including, without
limitation, all repossession costs, brokerage
commissions, legal expenses, reasonable attorneys'
fees, alteration costs, and expenses of preparation
for such reletting, or (ii) the sum of (A) the
amount actually received by Lessor from reletting
the Premises (if any) after payment of such
expenses, and (B) the amount actually received by
Lessor from Lessee pursuant to the preceding
paragraph of this Section (if any).
If the Premises or any part thereof are relet by Lessor for
the period prior to what would have been the last day of the
Term but for such termination, or any portion thereof, the
amount of rent reserved upon such reletting shall be, PRIMA
FACIE, the fair and reasonable rental value for the part or
the whole of the Premises so relet during the term of the
reletting.
In lieu of any other damages hereunder, Lessor may by written
notice to Lessee, at any time after this Lease is so
terminated, elect to recover, and Lessee shall pay as full
and final liquidated damages, an amount equal to (i) the
Basic Rent and Additional Rent accrued under Section 5.0
hereof in the twelve (12) months ending on the effective date
of such termination, PLUS (ii) all Basic Rent and Additional
Rent which was unpaid as of the effective date of such
termination, LESS (iii) the amount received by Lessor
pursuant to the foregoing provisions of this Section 13.4
prior to the time of payment by Lessee of such liquidated
damages.
Nothing herein contained shall limit or prejudice the right
of Lessor to prove and obtain as liquidated damages by reason
of such termination, an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.
13.5 RIGHT TO RELET. At any time or from time to time after any
such termination, Lessor may relet the Premises or any part
thereof for such a term (which may be greater or less than
the period which would otherwise have constituted the balance
of the Term) and on such conditions (which may include
concessions or free rent) as Lessor, in its reasonable
discretion, may determine, and may collect and receive the
rents therefor. Lessor shall in no way be responsible or
liable for any failure
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to relet the Premises or any part thereof, or for any failure
to collect any rent due upon any such reletting.
13.6 RIGHT TO EQUITABLE RELIEF. In the event there shall occur a
default hereunder, Lessor shall be entitled to seek to enjoin
such default and shall have the right to invoke any right and
remedy allowed at law or in equity or by statute or otherwise
as though re-entry and other remedies were not provided for
in this Lease.
13.7 RIGHT TO SELF HELP. In the event of a default by Lessee
hereunder which continues beyond the expiration of the
applicable grace period, Lessor shall have the right to
perform such defaulted obligation of Lessee, including the
right to enter upon the Premises to do so. Lessor shall, as a
courtesy only, notify Lessee of its intention to perform such
obligation. In the event of a default by Lessee hereunder
which has not yet continued beyond the expiration of the
applicable grace period but which Lessor determines
constitutes an emergency threatening imminent injury to
persons or damage to property, Lessor shall have the right to
perform such defaulted obligation of Lessee (including the
right to enter upon the Premises to do so) after giving
Lessee such notice (if any) as is reasonable under the
circumstances. In either event, the aggregate of (i) all sums
so paid by Lessor, (ii) interest (at the rate of 1-1/2% per
month or the highest rate permitted by law, whichever is
less) on such sum, and (iii) all necessary incidental costs
and expenses in connection with the performance of any such
act by Lessor, shall be deemed to be Additional Rent under
this Lease and shall be payable to Lessor immediately upon
demand. Lessor may exercise its rights under this Section
13.7 without waiving any other of its rights or releasing
Lessee from any of its obligations under this Lease. If
Lessor defaults on its obligations hereunder after thirty
(30) days notice thereof or, in the event of an emergency,
such notice as is reasonable under the circumstances, and, as
a result, Lessee is compelled to pay, or reasonably elects to
pay any sum of money or do any act which will require the
payment of a sum of money, or incurs any reasonable expense
to cure such default by Lessor, any reasonable amounts so
paid shall be due from Lessor to Lessee, and Lessor shall pay
such amount promptly to Lessee upon receipt of a bill
therefor. The right granted to Lessee in this Section 13.7 is
in addition to any other rights and remedies Lessee may have
at law or in equity.
13.8 FURTHER REMEDIES. Nothing in this Lease contained shall
require Lessor to elect any remedy for a default or
Event of Default by Lessee hereunder, and all rights
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herein provided shall be cumulative with one another and with
any other rights and remedies which Lessor may have at law or
in equity in the case of such a default or Event of Default.
14.0 CONSTRUCTION. Lessee shall have the right to make improvements to
the Premises in order to make them suitable for use as a
semi-conductor wafer manufacturing facility in accordance with the
provisions of the Work Letter attached hereto as EXHIBIT B.
15.0 LESSOR'S RIGHT OF ENTRY. Lessor reserves the right to enter the
Premises on reasonable advance notice to the Lessee for the
purpose of installing one or two elevators and installing or
modifying the existing service systems in the Building in order to
render tenantable the third and fourth floors of the Building;
PROVIDED THAT Lessor shall cooperate with Lessee in order to
minimize interference with Lessee's business operations. Lessor
agrees that all work to install elevator(s) shall be commenced as
soon as reasonably possible after the Commencement Date, and
Lessor shall use reasonable efforts to complete the installation
as soon as possible. Lessor and Lessor's agents shall have the
right to enter the Premises at reasonable times (provided 24
hours' notice is given to Lessee, except in case of emergency),
and if Lessor shall so elect (without hereby imposing any
obligation on Lessor to do so), to permit Lessor to make any
repairs or additions Lessor may deem necessary; and at Lessee's
expense to remove any Alterations, signs, awnings, aerials,
flagpoles or the like not consented to in writing or permitted
hereunder; and to permit Lessor to show the Premises to
prospective purchasers and lessees (at reasonable times on
reasonable advance notice to Lessee) and to keep affixed to any
suitable part of the Premises, during the nine (9) months
preceding the expiration of the Term, appropriate notices for
letting or selling.
16.0 REAL ESTATE BROKER. Lessor and Lessee each represent to the other
that they have dealt with no broker in connection with this Lease.
Lessee agrees to indemnify and hold Lessor harmless from and
against any claims for commissions or fees by reason of any act of
Lessee or its representatives. Lessor agrees to indemnify and hold
Lessee harmless from and against any claims for commissions or
fees by any person by reason of any act of Lessor or its
representatives.
17.0 NOTICES. Whenever by the terms of this Lease notice, demand, or
other communication shall or may be given either to Lessor or to
Lessee, the same shall be in writing and shall be sent by hand
delivery, or by registered or certified mail, postage prepaid, or
by Federal Express or other similar overnight delivery service,
to:
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Lessor: Massachusetts Institute of
Technology
238 Main Street - Suite 200
Cambridge, Massachusetts 02142
Attention: Philip A. Trussell,
Director of Real Estate
with a copy to: Stuart T. Freeland, Esq.
Rackemann, Sawyer & Brewster
One Financial Center
Boston, Massachusetts 02111
Lessee: Analog Devices, Inc.
One Technology Way
P.O. Box 9106
Norwood, MA 02062-9106
Attention: Chief Financial
Officer
with a copy to: Philip D. Stevenson, Esq.
Hale and Dorr
60 State Street
Boston, MA 02109-1816
Any notice, demand or other communication shall be effective upon
receipt by or tender for delivery to the intended recipient
thereof.
18.0 NO WAIVERS. Failure of a party to complain of any act or omission
on the part of the other party no matter how long the same may
continue, shall not be deemed to be a waiver by such party of any
of its rights hereunder. No waiver by a party at any time,
expressed or implied, of any breach of any provision of this Lease
shall be deemed a waiver of a breach of any other provision of
this Lease or a consent to any subsequent breach of the same or
any other provision. No acceptance by a party of any partial
payment shall constitute an accord or satisfaction but shall only
be deemed a partial payment on account; nor shall any endorsement
or statement on any check or any letter accompanying any check or
payment be deemed an accord and satisfaction, and the receiving
party may accept such check or payment without prejudice to that
party's right to recover the balance of such installment or pursue
any other remedy available to such party in this Lease or at law
or in equity.
19.0 Ground Leases; Mortgages.
------------------------
19.1 RIGHTS OF GROUND LESSORS AND MORTGAGEES. No act or
failure to act on the part of Lessor which would entitle
Lessee under the terms of this Lease, or by law, to be
relieved of Lessee's obligations hereunder or to
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terminate this Lease, shall result in a release or
termination of such obligations or a termination of this
Lease unless (i) Lessee shall have first given written notice
to Lessor's ground lessors and mortgagees of the act or
failure to act on the part of Lessor which Lessee claims as
the basis of Lessee's rights; and (ii) such ground lessors
and mortgagees, after receipt of such notice, have failed or
refused to correct or cure the condition within a reasonable
time thereafter, but nothing in this Lease shall be deemed to
impose any obligation on any such ground lessor or mortgagee
to correct or cure any such condition. The foregoing sentence
shall apply only for the benefit of ground lessors and
mortgagees who have been identified to Lessee by a notice
given in accordance with Section 17. No ground lessor shall
be liable for the failure to perform any of the obligations
of Lessor hereunder unless and until such ground lessor
terminates its ground lease and takes possession of the
Premises, nor shall any mortgagee be liable for the failure
to perform any of the obligations of Lessor hereunder unless
and until such mortgagee enters upon and takes possession of
the Premises for purposes of foreclosure.
19.2 LEASE SUBORDINATE. This Lease is and shall be subject and
subordinate to any ground lease or mortgage now or hereafter
on the Premises, and to all advances under any such mortgage
and to all renewals, amendments, extensions and
consolidations thereof, PROVIDED THAT the holder of such
ground lessor's interest or mortgagee's interest enters into
a non-disturbance and attornment agreement with Lessee which
provides that in the event that such ground lessor or
mortgagee succeeds to Lessor's interest hereunder, then,
PROVIDED THAT Lessee is not in default hereunder beyond the
cure period provided in this Lease, such party shall
recognize and be bound by the terms of this Lease. In the
event that any ground lessor or the holder of any mortgage
succeeds to Lessor's interest in the Premises or any portion
thereof, Lessee hereby agrees to attorn to such ground lessor
or mortgagee. In confirmation of such subordination, Lessee
shall execute and deliver promptly any certificate in
recordable form that Lessor or any ground lessor or any
mortgagee may reasonably request. Notwithstanding the
foregoing provisions of this Section, the holder of any
mortgage on the Premises may at any time subordinate its
mortgage to this Lease by written notice to Lessee.
Lessor hereby represents to Lessee that as of the date of
this Lease, there are no mortgages or ground leases
encumbering the Premises or any portion thereof.
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20.0 NOTICE OF LEASE; ESTOPPEL CERTIFICATES. Lessor and Lessee agree
that this Lease shall not be recorded. However, upon the request
of either party, Lessor and Lessee shall execute and acknowledge a
Notice of Lease in mutually acceptable and recordable form.
From time to time during the Lease Term, and without charge,
either party shall, within fifteen (15) business days of request
by the other, certify by written instrument duly executed and
acknowledged, to the requesting party or to any person reasonably
specified by the requesting party, regarding (a) the existence of
any amendments or supplements to this Lease; (b) the validity and
force and effect of this Lease; (c) the existence of any known
default or Event of Default; (d) the existence of any offsets,
counterclaims or defenses; (e) the Commencement Date and the
expiration date of the Lease Term; (f) the amount of Rent due and
payable and the date to which Rent has been paid; and (g) such
other matters as may be reasonably requested.
21.0 HOLDING OVER. If Lessee occupies the Premises after the day on
which the Lease Term expires (or the effective date of any earlier
termination as herein provided) without having entered into a new
lease thereof with Lessor, Lessee shall be a tenant-at-sufferance
only, subject to all of the terms and provisions of this Lease;
PROVIDED THAT Basic Rent shall be payable for the first sixty (60)
days after such expiration or termination at one and one-half
(1.5) times the then-effective Basic Rent stated in Section 3.2
and thereafter shall be payable at three (3) times the
then-effective Basic Rent there stated. Such a holding over, even
if with the consent of Lessor, shall not constitute an extension
or renewal of this Lease. For purposes of this Section, the
failure of Lessee to complete by the last day of the Lease Term or
the effective date of any earlier termination as herein provided
the "close-out" procedures required by the Nuclear Regulatory
Commission or any other federal, state or local governmental
agency having jurisdiction over the use of radioactive materials
within the Premises shall constitute a holding over and subject
Lessee to the provisions of this Section.
22.0 FORCE MAJEURE. Neither Lessor nor Lessee shall be deemed to be in
default hereunder and the time for performance of any of their
respective obligations hereunder other than the payment of money
shall be postponed for so long as the performance of such
obligation is prevented by strike, lock-out, act of God, absence
of materials or any other matter not reasonably within the control
of the party which must perform the obligation (collectively,
"Force Majeure").
23.0 ENTIRE AGREEMENT. No oral statement or prior written matter
shall have any force or effect. This Agreement shall not be
-31-
35
modified or canceled except by writing subscribed to by all
parties.
24.0 SUCCESSORS AND ASSIGNS. The terms, covenants and conditions of
this Lease shall run with the Land, and be binding upon and inure
to the benefit of Lessor and Lessee and their respective
successors and permitted assigns.
25.0 APPLICABLE LAW, SEVERABILITY AND CONSTRUCTION. This Lease shall be
governed by and construed in accordance with the laws of
Massachusetts and, if any provisions of this Lease shall to any
extent be invalid, the remainder of this Lease, and the
application of such provisions in other circumstances, shall not
be affected thereby. The titles of the several Sections contained
herein are for convenience only and shall not be considered in
construing this Lease. Whenever the singular is used and when
required by the context it shall include the plural, and the
neuter gender shall include the masculine and feminine. The
Exhibits attached to this Lease are incorporated into this Lease
by reference. This Lease may be executed in several counterparts,
each of which shall be an original, but all of which shall
constitute one and the same instrument. The term "Lessor" whenever
used herein, shall mean only the owner at the time of Lessor's
interest herein, and no covenant or agreement of Lessor, express
or implied, shall be binding upon any person except for defaults
occurring during such person's period of ownership nor binding
individually upon any fiduciary, any shareholder, officer or
director, or any beneficiary under any trust, and the liability of
Lessor, in any event, shall be limited to Lessor's interest in the
Building. If Lessee is several persons or a partnership, Lessee's
obligations are joint or partnership and also several. Unless
repugnant to the context, "Lessor" and "Lessee" mean the person or
persons, natural or corporate, named above as Lessor and as Lessee
respectively, and their respective heirs, executors,
administrators, successors and assigns.
26.0 AUTHORITY. Contemporaneously with the signing of this Lease,
Lessee shall furnish to Lessor a certified copy of the resolution
of the Board of Directors of Lessee authorizing Lessee to enter
into this Lease, and Lessor shall furnish appropriate evidence of
the authority of Lessor to enter into this Lease.
27.0 WORK TO BE PERFORMED BY POLAROID CORPORATION. Lessor will purchase
the Land and the Building from Polaroid Corporation ("Polaroid")
contemporaneously with the execution and delivery of this
Agreement. Under the purchase and sale agreement between Lessor
and Polaroid (the "Purchase Agreement"), a copy of which has been
provided to the Lessee,
-32-
36
Polaroid has agreed to install a new steam line to serve the
Building and to provide steam to the Building while the new line
is being installed. Polaroid has also agreed: (i) to allow Lessor
and Lessee to perform wipe tests in the clean room on the first
floor of the Building, and (ii) at Polaroid's expense, to perform
any cleanup needed to eliminate Hazardous Materials therein.
Lessor agrees to use reasonable efforts to ensure that Polaroid
fulfills such obligations.
WITNESS the execution hereof under seal as of the day and year
first above written.
LESSOR: MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
Date: February 8, 1996, 1996 By:/S/ Philip A. Trussell
---------------- -----------------------------
Philip A. Trussell
Director of Real Estate
Hereunto duly authorized
LESSEE: ANALOG DEVICES, INC.
Date: February 8, 1996, 1996 By:/S/ Joseph E. McDonough
---------------- -----------------------------
Name: Joseph E. McDonough
Title: V.P. Finance and CFO
Hereunto duly authorized
-33-
37
EXHIBIT A - PREMISES
--------------------
DESCRIPTION
-----------
The land with the buildings thereon in Cambridge, Massachusetts,
bounded and described as follows:
Northerly: by State Street;
Easterly: by Osborn Street;
Southeasterly: by Albany Street;
Southwesterly: by Massachusetts Avenue; and
Westerly: by Smart Street.
Said premises contain 120,847 square feet of land more or less.
Subject to a notice of variance granted to Blanchard Machine
Company dated October 27, 1964, recorded with the Middlesex County
South District Registry of Deeds at Book 10676, Page 366 and filed for
registration with the Middlesex County South Registry District of the
Land Court as Document No. 412081.
For title see the following three deeds to the Seller: (1) deed of
PneumoDynamics Corporation dated June 12, 1972, recorded with said
Deeds at Book 12224, Page 402 and filed for registration with the
Middlesex County South Registry District of the Land Court as Document
No. 498460; (2) deed of Massachusetts Institute of Technology dated
September 9, 1977 and recorded with said Deeds at Book 13282, Page 401;
and (3) deed of Edith Levine dated November 30, 1989 and recorded with
said Deeds at Book 20232, Page 320. See also Certificate of Title No.
137943.
38
EXHIBIT B - WORK LETTER
-----------------------
This Work Letter is incorporated by reference into the Lease dated
February 8, 1996 by and between Massachusetts Institute of Technology,
as Lessor, and Analog Devices, Inc. as Lessee. Terms defined in or by
reference in the Lease not otherwise defined herein shall have the same
meaning herein as therein.
1. ADDITIONAL DEFINITIONS. Each of the following terms shall
have the meaning stated immediately after it:
CONSTRUCTION AUTHORIZATIONS. Collectively, all permits,
licenses and other consents and approvals required from any
governmental authority for the construction of Lessee's Work.
LESSEE'S GENERAL CONTRACTOR. A general contractor selected
by Lessee and approved in writing by Lessor, who will be
engaged by Lessee to construct Lessee's Work.
LESSEE'S WORK. All improvements, alterations and additions which
Lessee wishes to make to the Premises as part of the initial
preparation thereof for Lessee's occupancy. All Lessee's Work
shall be performed in a good and workmanlike manner consistent
with existing conditions within the Building and shall be of a
quality equal to or better than existing conditions.
WORKING DRAWINGS. The working drawings and specifications for
Lessee's Work, to be prepared by Lessee and Lessee's architect in
accordance with this Work Letter. The Working Drawings shall be
prepared in compliance with all applicable Legal Requirements and
stamped by registered Massachusetts professionals, and shall
consist of all architectural and engineering plans and
specifications which are required to finish the Premises or to
obtain any Construction Authorization required therefor.
2. PREPARATION OF THE PREMISES. Lessee shall perform Lessee's
Work at Lessee's sole cost and expense.
3. INSURANCE. Prior to the commencement of any design work on
Lessee's Work, Lessee shall provide to Lessor an original
certificate of insurance, in customary form, for each
architect and engineer retained by Lessee in connection with
the design and/or construction of Lessee's Work, which
certificate shall evidence a current "errors and omissions"
insurance policy as in effect, in an amount reasonably
acceptable to Lessor. Prior to the commencement of the
construction of Lessee's Work, Lessee shall provide to Lessor
an original certificate of insurance for the general
-1-
39
construction of Lessee's Work, which certificate shall evidence a
current general liability insurance policy as in effect, in an
amount reasonably acceptable to Lessor, naming Lessor as an
additional insured.
4. WORKING DRAWINGS. Lessee shall be solely responsible for the
preparation and completion of all preliminary and final
Working Drawings. Lessee shall retain its own architects and
engineers to prepare Working Drawings, PROVIDED THAT Lessor
first approves such engineers and architects so selected by
Lessee, which approval shall not be unreasonably withheld or
delayed. Lessee shall provide copies of the preliminary
Working Drawings to Lessor, and Lessor shall provide to
Lessee within one (i) business day thereafter a list of
corrections and modifications which Lessor requires to be
made to the Working Drawings.
Lessee shall revise the preliminary Working Drawings to
incorporate the corrections and modifications requested by Lessor
and shall submit final Working Drawings to Lessor for its
approval. Lessor shall review the final Working Drawings and,
within one (1) business day after receipt thereof, Lessor shall
either (a) notify Lessee that Lessor has approved the final
Working Drawings, or (b) provide to Lessee a list of corrections
and modifications which Lessor requires to be made to the Working
Drawings. In the event Lessor returns the Working Drawings to
Lessee for correction or modification, Lessee shall diligently
correct the Working Drawings and re-submit them to Lessor for
approval pursuant to the preceding provisions of this paragraph.
No work shall be performed until final Working Drawings have been
approved in writing by Lessor.
The review and/or approval by Lessor or its architect or engineers
of any plans, sketches or Working Drawings submitted by Lessee
relating to Lessee's Improvements shall not (i) constitute an
opinion or representation by Lessor that the same are in
compliance with all applicable Legal Requirements and the
provisions of all applicable insurance policies or as to the
feasibility of constructing the work shown thereon, or (ii) impose
on Lessor any responsibility for a design defect, it being agreed
that all such responsibility shall remain solely with Lessee.
Lessee shall reimburse Lessor, promptly upon demand therefor, for
all costs and expenses reasonably incurred by Lessor in reviewing
any plans, drawings and specifications submitted by Lessee
pursuant to this Work Letter, which reimbursement shall be due and
payable as Additional Rent.
-2-
40
5. LESSEE'S GENERAL CONTRACTOR. Lessee shall obtain the prior
reasonable written approval of Lessor as to Lessee's General
Contractor.
6. LESSEE'S WORK. Lessee shall be solely responsible for
obtaining all Construction Authorizations required for
Lessee's Work. Lessee shall apply for and maintain in full
force and effect (or cause Lessee's General Contractor to
apply for and so maintain) all Construction Authorizations
required for the construction of Lessee's Work, and upon
completion of Lessee's Work shall obtain a certificate from
the appropriate governmental authority that Lessee's Work has
been completed in accordance with Legal Requirements. Lessee
shall deliver to Lessor a copy of said certificate promptly
after receiving the same.
Promptly after receiving all Construction Authorizations required
for Lessee's Work, Lessee shall cause Lessee's General Contractor
to commence construction and diligently to proceed to completion
thereof. All construction shall be performed in a good and
workmanlike manner, using new materials and in compliance with the
Working Drawings, the Construction Authorizations, all Legal
Requirements, and the provisions of all applicable insurance
policies.
Lessee shall pay promptly for all labor and materials supplied to
Lessee in connection with Lessee's Work, shall not cause or permit
any liens for such labor or materials to attach to the Premises,
and shall bond or discharge any such lien which may be filed or
recorded within fifteen (15) days after Lessee receives actual
notice of such filing or recording.
The construction of Lessee's Work shall be subject to the
requirements set forth in Section 11.0(f) of the Lease. Lessor may
inspect such work at any time or times and shall promptly give
notice to Lessee of any observed defects. Lessee shall indemnify,
defend and hold harmless Lessor from and against any and all
liability, damage, penalties or judgments and from and against any
claims, actions, proceedings and expenses and costs in connection
therewith, including reasonable attorneys' fees, arising out of or
resulting from the design or construction of Lessee's Work.
Lessee shall obtain from Lessee's General Contractor a guaranty
against construction defects for a period of not less than one (1)
year.
7. DELAYS. No delay by Lessee, Lessee's architects or
engineers, Lessee's General Contractor, or any subcontractor
or supplier thereof shall affect the Rent Commencement Date.
-3-
41
8. LESSOR'S AND LESSEE'S REPRESENTATIVES. Prior to the
commencement of any design work for the Premises, each party
hereto shall designate in writing to the other a person as
"Lessor's Representative" and "Lessee's Representative"
respectively, which person shall be available during ordinary
business hours to review the progress of the work and to
respond to issues which arise during construction. Each
party may rely on the other's Representative with respect to
all matters which pertain to this Work Letter, each party
having authorized its Representative to make decisions
binding upon such party with respect to such matters.
9. GENERAL. A breach by Lessee of any provision of this Work
Letter shall constitute a default under the Lease, for which
Lessor shall have all remedies therein provided.
-4-
1
Exhibit 11-1
Analog Devices, Inc.
Computation of Earnings Per Share (Unaudited)
(in thousands, except per share data)
Three Months Ended
------------------
February 3, 1996 January 28, 1995
---------------- ----------------
PRIMARY EARNINGS PER SHARE
Weighted average common and common equivalent shares:
Weighted average common shares outstanding 113,387 111,240
Assumed exercise of common stock equivalents (1) 6,847 6,407
Assumed conversion of subordinated notes 3,951 -
-------- --------
Weighted average common and common
equivalent shares 124,185 117,647
======== ========
Net income $ 40,092 $ 23,648
Interest related to convertible subordinated
notes, net of tax 719 -
-------- --------
Earnings Available for Common Stock $ 40,811 $ 23,648
======== ========
PRIMARY EARNINGS PER SHARE $ 0.33 $ 0.20
======== ========
FULLY DILUTED EARNINGS PER SHARE
Weighted average common and common equivalent shares:
Weighted average common shares outstanding 113,387 111,240
Assumed exercise of common stock equivalents (1) 6,984 6,426
Assumed conversion of subordinated notes 3,951 -
-------- --------
Weighted average common and common
equivalent shares 124,322 117,666
======== ========
Net income $ 40,092 $ 23,648
Interest related to convertible subordinated
notes, net of tax 719 -
-------- --------
Earnings Available for Common Stock $ 40,811 $ 23,648
======== ========
FULLY DILUTED EARNINGS PER SHARE $ 0.33 $ 0.20
======== ========
(1) Computed based on the treasury stock method.
16
5
1,000
U.S. DOLLARS
3-MOS
NOV-2-1996
OCT-29-1995
FEB-3-1996
1
195,549
174,355
190,400
0
157,768
772,698
915,453
438,930
1,309,377
257,460
310,000
19,157
0
0
681,996
1,309,377
280,769
280,769
138,219
138,219
89,660
0
1,828
54,178
14,086
40,092
0
0
0
40,092
.33
.33
Asset Value Represents Net Amount
