-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T1t+AzFKeEGUZcamnI3B3hudruoGpUrfoSPhNxha8GaM72uFtJ1RQ0MO7NCAeRFv 5khyPzV3+XWOr5w6LRRJtQ== 0000799089-97-000002.txt : 19970401 0000799089-97-000002.hdr.sgml : 19970401 ACCESSION NUMBER: 0000799089-97-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMIX CORP CENTRAL INDEX KEY: 0000799089 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943011736 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15325 FILM NUMBER: 97568338 BUSINESS ADDRESS: STREET 1: 4100 BOHANNON DR CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 4159266300 MAIL ADDRESS: STREET 1: 4100 BOHANNON DRIVE CITY: MENLOW PARK STATE: CA ZIP: 94025 10-K 1 1996 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [ X ] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 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 number 0-15325 INFORMIX CORPORATION (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 94-3011736 (I.R.S. Employer Identification No.) 4100 Bohannon Drive, Menlo Park, CA 94025 (Address of principal executive office) 415-926-6300 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value (Title of each class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of the 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of February 28, 1997 was approximately $2,616,000,000. Shares of Common Stock held by each officer and director have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of February 28, 1997, Registrant had outstanding 151,163,317 shares of Common Stock. DOCUMENTS INCORPORATED BY REFERENCE (to be deemed filed only to the extent specifically incorporated herein by reference and not otherwise excluded by law): PART III: Parts of the Proxy Statement to be used in conjunction with Registrant's Annual Stockholders Meeting to be held May 22, 1997. _______________________________________________________________________ INFORMIX CORPORATION 1996 ANNUAL REPORT ON FORM 10-K Table of Contents PART I Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III Item 10. Directors and Executive Officers of Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K Signatures _______________________________________________________________________ FORWARD LOOKING STATEMENTS This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those projected in the forward- looking statements as a result of certain factors described herein and in other documents. Readers should pay particular attention to the risk factors described in the section of this Report entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." Readers should also carefully review the risk factors described in the other documents the Company files from time to time with the Securities and Exchange Commission, specifically the Quarterly Reports on Form 10-Q to be filed by the Company in 1997 and any Current Reports on Form 8-K filed by the Company. _______________________________________________________________________ PART I ITEM 1. BUSINESS BACKGROUND The Company is a multinational supplier of high-performance, parallel processing database technology for open systems. The Company's products also include applications development tools for creating client/server production applications, decision-support systems, ad-hoc query interfaces, and software that allows information to be shared from personal computers to mainframes within the corporate computing environment. In addition to software products, the Company offers training, consulting, and post-contract support to its customers. The principal geographic markets for the Company's products are in North America, Europe, Asia/Pacific, Japan, and Latin America. Customers include large-, medium- and small-sized corporations in the manufacturing, financial services, telecommunications, retail/wholesale, hospitality and government services sectors. The Company was initially incorporated in California in 1980 and was reincorporated in Delaware in August 1986. Unless the context requires otherwise, the terms "Company" and "Informix" refer to Informix Corporation and its subsidiaries. The Company maintains its executive offices at 4100 Bohannon Drive, Menlo Park, California 94025. Its telephone number is (415) 926-6300. All of the Company's database products developed since 1983 support Structured Query Language ("SQL"), an industry standard created by IBM. The Company's core database management software runs on the UNIX(R) , Windows(TM) and Windows/NT(TM) operating systems, and certain networks composed of computers running these operating systems. The Company's customers consist primarily of end-users, application vendors, original computer equipment manufacturers ("OEMs") and distributors. The Company markets its products directly to end-users through its sales force and indirectly to end-users through application vendors, OEMs and distributors. The Company markets its products worldwide and has operating subsidiaries in 37 foreign countries. In February 1996, the Company acquired Illustra Information Technologies, Inc. ("Illustra"), a United States based provider of object-relational database systems and tools for managing complex data, such as audio, video, text and images. Approximately 12,700,000 shares of the Company's common stock were issued to acquire all of the outstanding shares of Illustra stock. An additional 2,300,000 shares were reserved by the Company for future issuance in connection with the assumption of Illustra's outstanding stock options and warrants. The transaction was accounted for as a pooling of interests. In December 1996, the Company announced the availability of a new product based on the Illustra technology named INFORMIX(R) -Universal Server. INFORMIX- Universal Server combines the object relational technology developed by Illustra with the core database technology based on Informix's Dynamic Scalable Architecture(TM) giving customers the ability to manage all kinds of data throughout their enterprises. PRODUCTS Database Servers and Connectivity Products Database Servers The Company offers a full line of relational database servers. The Company's principal servers include: INFORMIX-Universal Server, a new, enterprise capable, fully- extensible object relational database server based on Informix's Dynamic Scalable Architecture. This product became available in December 1996. INFORMIX-Universal Server allows customers to intelligently manage traditional datatypes alongside new kinds of data, such as audio, video, text and images. This extensibility is obtained through the use of DataBlade(R) modules - reusable, plug-in object extensions - which expand the general purpose capabilities of INFORMIX-Universal Server to provide data storage and management functionality for non-traditional datatypes. Customers can select prebuilt DataBlade modules (available from the Company and many other companies) or design their own DataBlade modules with the INFORMIX-DataBlade Developer's Kit to accommodate their unique data management requirements. DataBlade modules available from the Company include: INFORMIX-Spatial, INFORMIX-TimeSeries, INFORMIX-Video Foundation and INFORMIX-Web. INFORMIX-OnLine Dynamic Server(TM) , a high performance, enterprise capable online transaction processing database server. This product is based on the Company's Dynamic Scalable Architecture and features parallel data processing capability, replication and connectivity options built into its core. INFORMIX-OnLine Workgroup Server, a database management system designed specifically for workgroups. This product is based on the Company's Dynamic Scalable Architecture and comes bundled with Netscape FastTrack Server. This product became available in the third quarter of 1996. INFORMIX-OnLine Extended Parallel Server, a high-performance, scalable database server which extends the Company's Dynamic Scalable Architecture to loosely coupled, "shared nothing" computing architectures, including clusters of symmetric multiprocessing systems and massively parallel processing systems. Connectivity Products The Company's principal connectivity products include: INFORMIX-Enterprise Gateway(TM) Manager, a connectivity tool allowing applications running on UNIX, Microsoft Windows or Windows 95 to access data sources via loadable gateway drivers. The Company offers gateway drivers for Oracle and Sybase databases. Drivers for additional data sources are available from various third parties. INFORMIX-Enterprise Gateway with DRDA, a UNIX-based connectivity tool allowing interoperability to IBM databases such as DB2, DB2/VM and DB2/400 from Windows and UNIX clients. INFORMIX-Gateway with DRDA allows applications built with Informix application development tools to access and modify information in Distributed Relational Database Architecture(TM) -compliant database management systems. INFORMIX-ESQL for C and COBOL, embedded SQL products which permit developers to take advantage of SQL technology while building applications in C or COBOL. INFORMIX-CLI, a library of low level functions that provide high performance direct access to Informix databases from applications built in C or other third generation languages. INFORMIX-CLI is compliant with Microsoft's ODBC specifications. INFORMIX-Universal Web Connect(TM) , a tool that provides high performance connectivity between Web servers and databases. INFORMIX- Universal Web Connect enables Web developers to create "intelligent" web applications that dynamically deliver multimedia rich, tailored Web pages to users. Database Tools The Company offers a variety of database application development tools designed to allow users to build applications. The Company's principal database tools include: INFORMIX-NewEra(TM) , a graphical, object-oriented development environment designed for creating enterprise-wide multi-tier client/server database applications. INFORMIX-NewEra features a fourth- generation object-oriented programming language, reusable class libraries, application partitioning, and flexible application deployment, and supports open connectivity to Informix and non-Informix databases. INFORMIX-NewEra is currently available for Microsoft(R) Windows(TM) and OSF Motif(TM). INFORMIX-4GL, a character-based development environment, which includes a fourth-generation programming language with full screen- building, report entry and SQL database input/output capabilities. The INFORMIX-4GL product family is comprised of three core products: INFORMIX-4GL Compiled, INFORMIX-4GL Rapid Development System and INFORMIX-4GL Interactive Debugger. INFORMIX-SQL, a package of five interactive tools for creating character-based applications. INFORMIX-SQL consists of a forms package, a report writer, an interactive SQL editor, a menu builder and an interactive schema editor. INFORMIX-MetaCube(TM) , a high-performance on-line analytical processing engine that automatically preconsolidates data and provides a multidimensional view of data without the constraints of a two dimensional (row and table) data model. The INFORMIX-MetaCube product family also includes MetaCube Explorer, an adhoc decision support tool for end users, MetaCube Warehouse Manager, a graphical tool for administering the "metadata" describing a database in a logical, user- friendly view, MetaCube Scheduler for batch processing, MetaCube Queryback for running queries in the background, MetaCube Aggregator for creating and maintaining aggregates in a data warehouse, MetaCube for Excel which enables data warehouse analysis in an Excel spreadsheet environment, and MetaCube for the Web which brings MetaCube analysis capabilities to intranets. Maintenance, Consulting and Services The Company maintains field-based and centralized corporate technical staffs to provide a comprehensive range of assistance to its customers. These services include pre- and post- sales technical assistance, consulting, product and sales training and technical support services. Consultants and trainers provide services to customers to assist them in the use of the Company's products and the design and development of applications that utilize the Company's products. The Company provides post-sales support to its customers on an optional basis for annual fees which generally range from 10% to 18% of the license fees paid by the customer. These support services usually include product updates. The Company also has several Information Superstores. These Superstores provide customers with a dedicated environment in which they can plan, prototype and test information technology investments using the expertise of Company specialists and partners. The typical customer spends approximately one week on-site. The SuperStores provide customers with the real world information they need to make informed business decisions and mitigate the risk associated with making a significant technology purchase. The Company now has SuperStores located in Ashford UK; Denver, Mexico City, Munich, Paris, Sydney and Tokyo. MARKETING AND CUSTOMERS The Company distributes its products through the channels of direct end-user licensing, OEMs, application vendors addressing specific markets and distributors. The Company has chosen a multiple channel distribution strategy to maintain broad market coverage and product availability. The Company, therefore, has generally avoided exclusive relationships with its licensees and other resellers of its products. Discount policies and reseller licensing programs are intended to support each distribution channel with a minimum of channel conflict. The Company also provides a financing option to customers in connection with the license of software. At December 31, 1996, the Company's sales, marketing and support staff totaled 1,427 regular employees in the North America region; 122 regular employees in the Latin America region, 947 regular employees in the Europe, Middle East and Africa regions, 344 regular employees in the Asia/Pacific region and 99 regular employees in Japan. LICENSING End-User Licensing The Company licenses its products to large companies and government entities through its direct sales force, and to certain of these companies, as well as smaller end-users, through its telemarketing sales force. The Company believes that the common core technology of its database management system products, based on standard operating systems and the SQL database language, helps it sell into major corporations and government agencies that wish to standardize their diverse computing environments. As a result, certain of these end-user organizations have entered into general purchasing agreements with the Company which offer volume discounts. Application Vendor Licensing Since its inception, the Company has licensed application vendors to distribute its products. A typical application vendor develops an application product (e.g., an insurance agency management system) using one of the Company's products and then licenses the resultant application software to its customers in the target market. The application vendor customer purchases a license for use of the Company's product to develop an applications program. Depending on the application program developed, it may include a run-only license, a full version license or even multiple product licenses. Application vendors develop applications using a wide array of application development tools, including products from the Company, such as INFORMIX-NewEra, INFORMIX-4GL and INFORMIX-SQL, as well as products offered by third parties. Applications developed using the Company's products are generally portable across various brands of computers and different operating systems. The Company has specialized programs to support the application vendor distribution channel. Under these programs, the Company provides to selected application vendors a combination of marketing development services, consulting and technical marketing support and discounts. OEM Licensing The Company's products are also marketed with the assistance of the sales forces of its OEM customers who have concluded that "solution selling" of a combination of software and hardware to their respective customers enhances the sales of their computer equipment. The Company believes that the compatibility and range of applications for its products is significant to this distribution channel. Distributor Licensing The Company has established a network of full service international distributors who provide local service and support, as well as the Company's products, to their respective national markets. Distributors are used to supplement the Company's direct sales force and enable the Company to sell its products and services in countries where the Company has not established a direct sales force. PRODUCT DEVELOPMENT The computer software industry is highly competitive and rapidly changing. Consequently, the Company dedicates considerable resources to research and development efforts to enhance its existing product lines and to develop new products to meet new market opportunities. Most of the Company's current software products and accompanying documentation have been developed internally; however, the Company has acquired certain software products from others and plans to do so again in the future. Major product releases resulting from research and development projects in 1996 included the release of INFORMIX-Universal Server, the release of INFORMIX-OnLine WorkGroup Server and new releases of INFORMIX-OnLine Dynamic Server and INFORMIX-OnLine Extended Parallel Server. Current product development is focused toward: Improvement and enhancement of current products and new products, with particular emphasis on parallel computer architecture, user-defined database extensions, Web technology integration, graphical desk top and system administration. Improvements to the Company's products to provide greater speed and support for larger numbers of concurrent users. Adaptation of new products to the broad range of computer brands and operating systems the Company currently supports and adaptation of current products to new brands of computers and operating systems which represent attractive market opportunities for the Company's products. There can be no assurance that the Company's product development efforts will be successful or that any new products will achieve significant market acceptance. As of December 31, 1996, the Company had 967 regular employees engaged in research and development. During fiscal 1994, 1995 and 1996, the Company expended $77.9 million, $103.1 million and $148.6 million, respectively, on research and development, representing approximately 17%, 14% and 16% of revenues for such periods. Also during fiscal 1994, 1995 and 1996, the Company capitalized costs in accordance with Statement of Financial Accounting Standards No. 86 of $13.6 million, $17.5 million and $28.4 million, respectively. See Item 7 of this Annual Report entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - - Research and Development Expenses." COMPETITION The Company faces intense competition in the market for relational database management system software products. Companies in this market compete primarily on the basis of price/performance characteristics, name recognition, and technical support, training and consulting services. With respect to product performance, the Company believes that the principal competitive factors include: Application development productivity (the speed with which applications can be built). Database performance (the speed at which database storage and retrieval functions are executed). The ability to support large warehouses of information. Reliability, availability and serviceability. The distribution of software applications and data across networks of computers from multiple suppliers. Increasingly, the ability to manage complex data and solve more complex business problems based on such data. The Company believes that the technical advantages of its products, its approach to sales and marketing, its relations with application vendors, OEMs and distributors and its customer service and support contribute to its ability to compete in this market. The chief competition faced by the Company is currently provided by Oracle Corporation, Sybase, Inc., IBM Corporation and Microsoft Corporation. Several of the Company's current competitors have greater financial, technical and marketing resources than the Company. To the extent that market acceptance for personal computer oriented technologies increases at the expense of UNIX or other non-PC platforms, this could result in greater price pressure on certain of the Company's database products and services. The availability and market acceptance of Microsoft Corporation's Windows NT operating system may increase the competition faced by the principal operating system platforms on which the Company's products operate and may result in greater price pressure on certain of the Company's database products and services. Also, new or enhanced products introduced by existing or future competitors could have an adverse effect on the Company's business. Existing and future competition or changes in the Company's product or service pricing structure or product or service offerings could result in an immediate reduction in the prices of the Company's products or services. If this were to result in significant price declines, the effects of which were not offset by any resulting increases in sales volume of the Company's products or services, the Company's business, results of operations and financial condition would be adversely affected. PRODUCT PROTECTION The Company relies on a combination of trade secret, copyright and trademark laws, license agreements and technical measures to protect its rights in its software products. Like many software companies, the Company has no patents to date, although it has several applications pending. The Company maintains trademark and service mark registrations in the United States and numerous other foreign jurisdictions. The Company's products are generally licensed to end-users on a "right-to-use" basis pursuant to a license that restricts the use of the products for the customer's internal business purposes. The Company also relies on "shrink-wrap" licenses. The Company's "shrink-wrap" license includes a prominently displayed notice informing the end-user that, by opening the product packaging, the end-user agrees to be bound by the Company's license agreement printed on the package. Copyright and trade secret protection for source and object code version of software products may be unavailable in certain foreign countries. In addition, "shrink-wrap" licenses may be wholly or partially unenforceable under the laws of certain jurisdictions. The Company protects the human readable, source code version of its products as a trade secret and an unpublished copyrighted work. The Company has licensed the source code of its products to certain customers under certain circumstances, and for restricted uses. In addition, the Company has entered into source code escrow agreements with a number of its customers that generally require release of source code to the customer in the event there is a bankruptcy or similar proceeding by or against the Company, the Company ceases to do business or the Company ceases to support the product. In the event of a release of the source code to a customer, the customer is required to maintain its confidentiality and, in general, to use the source code solely for internal business purposes or for the purpose of providing maintenance and support to its customers, and, in certain circumstances, to embedding it in customer products. The Company believes that, because of the rapid pace of technological change in the computer software industry, patent, trade secret and copyright protection are less significant than factors such as the knowledge, ability and experience of the Company's personnel, new product introduction, frequent product enhancement, name recognition and ongoing product maintenance. EMPLOYEES As of December 31, 1996, the Company and its subsidiaries had 4,491 regular employees worldwide, including 2,939 in sales, marketing and support; 967 in research and development; 89 in operations and 496 in administration and finance. Competition in recruiting personnel in the database software industry is intense. The Company believes that its future success will depend on its continued ability to attract and retain highly skilled sales, consulting, technical, marketing and management personnel. None of the Company's U.S. employees are represented by a labor union. A small number of employees located outside of the United States are represented by labor unions. The degree of this representation varies from country to country. The Company has experienced no work stoppages. EXECUTIVE OFFICERS Set forth below in alphabetical order are biographical summaries of the current executive officers of the Company. Ronald M. Alvarez, 47, joined the Company in December 1991 as Director of Latin America Operations. He was promoted to Executive Director, Latin America Operations in March 1993, and to Vice President, Latin America in May 1995. He was appointed to his current position of Vice President, Americas Sales in January 1996. Karen Blasing, 40, joined the Company in November 1992 as Director of Financial Planning and Analysis and became Controller in June 1996. From January 1989 to October 1992, Ms. Blasing was a Senior Financial Manager at Oracle Corporation, a provider of information management software and services. Margaret R. Brauns, 42, became Vice President and Treasurer of the Company in November 1992. Ms. Brauns joined the Company as Treasurer in May 1990. D. Kenneth Coulter, 52, joined the Company in February 1988 as Managing Director, UK. From January 1990 to April 1992, Mr. Coulter was Vice President, Europe. He became Senior Vice President, Europe, Middle East and Africa, in April 1992 and was named Senior Vice President, International in January 1996. Mr. Coulter became Executive Vice President, Worldwide Field Operations in November 1996. Ira H. Dorf, 56, joined the Company as Vice President, Human Resources in October 1989. Bruce Golden, 37, joined the Company in February 1996 as Vice President of Business Units and became General Manager, Data Warehouse Business Development Unit in September 1996. From June 1993 to February 1996, he was Vice President of Marketing of Illustra Information Technologies, Inc., a supplier of object-relational database management systems. Prior to Illustra, Mr. Golden was employed by Sun Microsystems, Inc., a computer hardware and software company, for eight years in a variety of positions, his last being Director of Commercial Market Development. James F. Hendrickson, Jr., 57, joined the Company as Vice President, Customer Services in July 1992. In February 1995, Mr. Hendrickson assumed the additional responsibility of Lenexa Site Manager. From 1991 until the time he joined the Company, Mr. Hendrickson was Senior Vice President of Marketing at Image Business Systems. Alan S. Henricks, 46, joined the Company as Executive Vice President and Chief Financial Officer in January 1997. From May 1994 to December 1996, Mr. Henricks was Vice President, Finance and Operations, and Chief Financial Officer of Documentum, Inc., a provider of document management software and services, where he was responsible for all financial functions, as well as MIS, legal and operations. From February 1988 to April 1994, Mr. Henricks was Senior Vice President, Finance and Operations, and Chief Financial Officer, of Borland International, a provider of software development tools. Stephen E. Hill, 38, joined the Company in December 1985, and has served the Company in a variety of strategic planning, development and marketing positions. Mr. Hill currently serves as Vice President, Advanced Technology. Jeffrey V. Hudson, 44, joined the Company in June 1995 as Vice President, Business Development and became Vice President, Business Development and Product Marketing in May 1996. From December 1993 to January 1995, Mr. Hudson was President and Chief Executive Officer of Visioneer Communications, Inc. From June 1989 to December 1993, he was Vice President, Sales, Marketing and Service for Netframe Systems, Inc. Mike Saranga, 59, joined the Company as Senior Vice President, Product Management and Development in May 1993. Prior to joining the Company, Mr. Saranga was employed by IBM for 30 years, most recently as Assistant General Manager of Programming Systems, where Mr. Saranga developed IBM's technical and business strategies for key technologies including client/server, distributed systems and multimedia. David H. Stanley, 50, joined the Company as Vice President, Legal, General Counsel and Assistant Secretary in July 1988. In August 1990, Mr. Stanley was elected to the additional office of Secretary. In March 1995, Mr. Stanley assumed the additional responsibility for corporate services and became Vice President, Legal and Corporate Services, General Counsel and Secretary. Michael R. Stonebraker, 53, joined the Company as Vice President and Chief Technology Officer in February 1996. Dr. Stonebraker cofounded Illustra Information Technologies, Inc., a supplier of object- relational database management systems, in July 1992, and served in a consulting capacity with Illustra as Chief Technology Officer until February 1996. Dr. Stonebraker is professor emeritus of Electrical Engineering and Computer Sciences at the University of California, Berkeley, where he joined the faculty in 1971. Phillip E. White, 54, has been the Company's Chief Executive Officer and a director since January 1989. He has held the additional office of President since August 1990 and of Chairman since December 1992. Mr. White also serves as a director of Adaptec, Inc., a computer input/output technology company, and of Legato Systems, a manufacturer and developer of network storage management software products. Edwin C. Winder, 47, joined the Company in February 1990. Since joining the Company, Mr. Winder has held a variety of executive positions in sales, marketing and customer service. He is currently the Company's Senior Vice President, Japan Operations. ______________ Distributed Relational Database Architecture, Microsoft, Motif, UNIX, Windows and Windows/NT are trademarks of their respective owners. All other names indicated by (R) or (TM) are trademarks of the Company. ITEM 2. PROPERTIES The Company's headquarters and its marketing, finance, Americas sales, administration, customer service and research and development operations are located in five modern buildings in a seven building office park in Menlo Park, California, approximately 30 miles south of San Francisco. The Company leases approximately 214,000 square feet of space in these buildings. The leases for spaces in three of the buildings expire in March 1998. The Company has options to renew each lease for up to two additional five year terms at 95% of the then fair rental value. The leases for space in the other two buildings expire in September 2001. The Company plans on relocating its corporate headquarters to a site in Santa Clara, California approximately 15 miles south of the Company's current headquarters. In November 1996, the Company leased approximately 200,000 square feet of space in a high-rise office building located in Santa Clara. This building is scheduled to be available for occupancy by the Company in April 1998. The lease is for a term of 15 years. Additionally, in January 1997, the Company leased approximately 27 acres of undeveloped commercial real estate adjacent to this leased building for the phased construction of additional office buildings. The term of this lease is two years. At the expiration of the lease the Company is required to either purchase the land for $61,500,000 or find a buyer for the land and, if the net sales proceeds are less than $61,500,000, pay the lessor the difference between the net sales proceeds and $61,500,000. Facility construction on the Santa Clara site will be phased over time based on the Company's utilization needs. The Company intends to fund construction costs through outside financing, the availability of which has not yet been determined. Some of the research and development for the Company's tools products, a portion of the Company's customer service organization, the Company's principal domestic manufacturing facility and the Company's telemarketing organization are located in two modern buildings aggregating approximately 135,000 square feet in Lenexa, Kansas, a suburb of Kansas City. The buildings are owned by a partnership, of which the Company is a 50% partner, and leased by the partnership to the Company under a lease with an initial ten-year term that expires in March 1998. There are two five-year renewal options. Rental under this lease remains fixed through 1998, and then adjusts to prevailing rates for the renewal terms. The Company also leases office space in approximately 56 facilities in the United States and Canada and approximately 60 facilities internationally. The Company believes that its facilities are adequate for its current needs and that suitable additional or substitute space will be available as needed to accommodate the expansion of the Company's operations. ITEM 3. LEGAL PROCEEDINGS The Company is not involved in any legal proceedings, other than ordinary routine litigation incidental to the business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company did not submit any matters to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 1996. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Market Information The Company's common stock has been traded on the over-the-counter market under the NASDAQ symbol IFMX since the Company's initial public offering on September 24, 1986. The following table sets forth the range of high and low closing prices as reported on the NASDAQ National Market System for the periods indicated. High Low Fiscal 1995* First Quarter $19.63 $14.63 Second Quarter 25.94 17.06 Third Quarter 34.00 25.25 Fourth Quarter 33.00 24.13 Fiscal 1996 First Quarter 35.88 26.38 Second Quarter 26.88 18.38 Third Quarter 30.25 20.31 Fourth Quarter 28.63 17.63 * The prices shown reflect a two-for-one stock split effected in the form of a stock dividend in June 1995. Common Stockholders of Record and Dividends At December 31, 1996, there were approximately 3,400 stockholders of record of the Company's common stock, as shown in the records of the Company's transfer agent. The Company has never paid dividends on its common stock and its present policy is to retain its earnings to finance anticipated future growth. ITEM 6. SELECTED FINANCIAL DATA FINANCIAL OVERVIEW
Five-Year Summary (1) (in thousands, except per share data) 1996 1995 1994 1993 1992 (2) Net Revenues $939,311 $714,219 $470,112 $353,115 $283,594 Net Income 97,818 97,644 61,948 54,989 47,782 Net Income per Share (3) 0.63 0.65 0.43 0.40 0.38 Total Assets 903,842 691,146 449,545 328,001 231,459 Long-Term Obligations 2,359 2,846 892 451 1,797
The Company has not paid and does not anticipate paying cash dividends on its common stock. (1) The above information have been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. from its inception date of July 31,1992 through the merger date of February 16, 1996, as a pooling of interests. (2) In 1991, the Company was selected to provide the database component of a decision-support system for the Army National Guard and Army Reserves. In 1992, the Company received $26.8 million for license fees and support as part of this Reserve Component Automation System (RCAS) contract and recorded $21.8 million as license revenue and incurred $3.2 million in operating expenses in 1992. The remaining $5.0 million of service revenue was recognized over the support period. (3) Per-share information applicable to prior periods has been restated to reflect a two-for-one stock split (effected in the form of a stock dividend) which was effective June 26, 1995. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations The Management's Discussion and Analysis of Financial Condition and Results of Operation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those projected in the forward- looking statements as a result of certain factors described herein and in other documents. Readers should carefully review the risk factors described in the documents the Company files from time to time with the Securities and Exchange Commission, specifically the Quarterly Reports on Form 10-Q to be filed by the Company in 1997 and any Current Reports on Form 8-K filed by the Company. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto. All information is based on the Company's fiscal calendar. Selected elements of Informix's financial statements are shown below for the last three years as a percentage of revenue and as a percentage change from year to year.
% Increase (Decrease) Percent of Net Revenue 1996 1995 Years Ended December 31, Compared Compared 1996 1995 1994 to 1995 to 1994 Licenses 75% 76% 78% 31% 48% Services 25 24 22 33 65 Net revenues 100 100 100 32 52 Cost and Expenses: Cost of software distribution 5 5 5 26 54 Cost of services 15 13 10 58 96 Sales and marketing 45 43 43 39 48 Research and development 13 12 14 40 33 General and administrative 6 7 8 26 45 Merger expenses 1 - - 100 - Total costs and expenses 85 80 80 41 52 Operating income 15 20 20 (6) 53 Net income 10% 14% 13% 0% 58%
Operating Results Informix's operating income was affected negatively in 1996 as a result of operating expenses growing more rapidly than revenues, primarily in the North America region as Informix continues to invest heavily in personnel in the areas of sales, marketing and customer service, and research and development and due to integration expenses and fees associated with the acquisition of Illustra Information Technologies, Inc. (Illustra) as a pooling-of-interests in February 1996. In December 1996, Informix began shipping the INFORMIX-Universal Server, based on Informix's proven Dynamic Scaleable Architecture(tm) (DSA) and providing extensibility to handle the broad range of datatypes not managed effectively by traditional relational databases. This product merges the technology of Illustra and Informix. Informix incurred significant marketing expenses in connection with the initial announcement and launch of the Universal Server in 1996. The Company expects selling and marketing expenses in 1997 to be at a level comparable to 1996 both in support of INFORMIX-Universal Server and as Informix continues developing specific market channels and specific products for such channels. These development, integration and marketing expenses and the relatively low operating margins of Illustra have adversely affected Informix's ability to achieve operating margins consistent with 1994 and 1995. In the near term, these development and marketing efforts will continue to negatively affect the Company's operating margins. Revenues The Company derives revenues principally from licensing its software and from providing technical product services to customers. License revenues may involve the shipment of product by the Company or the granting of a license to a customer to manufacture products. Service revenue consists of customer telephone or direct support, update rights for new product versions, consulting, and training fees. The Company's products are sold directly to end-user customers or through resellers, including original equipment manufacturers (OEMs), distributors, and value added resellers (VARs) including application vendors. Prior to 1996, the Company's customer mix had been decreasing in the distributor and hardware OEM channels in favor of the end user and application vendor channels. However, in 1996, this trend shifted towards a higher proportion of OEM sales as the Company has increased the focus on its partnerships with several hardware vendors in order to utilize their sales forces, obtain access to their installed bases in certain industries and benefit from their consulting and systems integration organizations. The increased focus on OEM sales coupled with increases in the other reseller channels resulted in total reseller sales representing half of the Company's 1996 license revenue . The Company estimates that almost half of the licenses sold to these resellers in 1996 were not resold to end users prior to December 31, 1996. If these resellers do not commit to licensing the same level of products for resale to end users in future periods, the Company's future revenues could be adversely affected. The Company sold approximately $55 million of software licenses to certain vendors during 1996 where the Company concurrently committed to acquire goods or services in approximately the same dollar amount. The Company's license sales transactions can be relatively large in size and difficult to forecast both in timing and dollar value. As a result, these transactions have caused fluctuations in net revenues and net income because of the relatively high gross margin on such revenues. As is common in the industry, a disproportional amount of the Company's license revenue is derived from transactions that close in the last few weeks of a quarter. The timing of closing large license agreements also increases the risk of quarter-to-quarter fluctuations. The Company expects that these sorts of transactions and the resulting fluctuations will continue. The overall revenue growth in 1996 compared to 1995 primarily reflects continued acceptance of the Company's server products. The Company's revenues, along with those of the relational database management system (RDBMS) industry as a whole, have shown substantial growth over the last several years. The industry has benefited from trends to downsize from large proprietary computer systems and market acceptance of UNIX(R), Windows(TM), Windows NT(TM) and other open operating environments. The quarterly revenue growth rates and the geographical growth trends rates slowed during the latter half of 1996 and there can be no assurances that growth rates in 1997 will be comparable with those achieved in 1996. Informix's current server product line debuted in the fall of 1994 with INFORMIX-OnLine Dynamic Server for Sequent (DSA) and was expanded to a wide array of Unix-based multi-processor systems in December 1994. This product is now available on Windows/NT operating systems and accounts for a majority of the Company's server sales. In the spring of 1996, the Company introduced a workgroup version of this product named INFORMIX-OnLine Workgroup Server. In fall 1996, the Company released INFORMIX-Online Extended Parallel Server 8.1, designed for very high end use in "loosely-coupled" computer architectures. In late 1996, the first version of INFORMIX-Universal Server was released which was the combination of the INFORMIX-OnLine Dynamic Server product with the Illustra server product. The license revenue growth in 1996 compared to 1995 reflects strong demand for the Company's server products, particularly the Company's flagship database server, INFORMIX-OnLine Dynamic Server(TM). In addition, many Informix partners, including OEM resellers, purchased high volumes of product to resell in anticipation of customer demand. The Company believes that the license revenues derived from its database tool products declined from 1995 to 1996 primarily as a result of competitive product offerings from other companies and an increase in the Company's sales to resellers, which traditionally have concentrated on purchases of database server products. The increase in service revenue was primarily attributable to the continued growth of the Company's installed customer base, and resulting renewal of maintenance contracts and increased consulting revenue. The Company continues to emphasize support services as a source of revenue. As the Company's products become more complex, more support services will be required. The Company intends to satisfy this requirement through internal support, third-party services and OEM support. The contribution margin on service revenue decreased from 48 percent in 1995 to 37 percent in 1996. The decrease resulted from increased costs incurred to expand the support function due to sales increases and the continuing complexity of the products. In addition, sales through the reseller channel where the product has not been resold to end users has not yet resulted in service revenue. Approximately 58 percent, 58 percent and 54 percent of Informix's net revenues were derived from sales to foreign customers in 1996, 1995, and 1994, respectively. The increase in foreign revenues in absolute dollars is primarily attributable to continued international acceptance for Informix's new and existing server products, and the establishment of new subsidiaries and sales offices in Europe, Asia/Pacific, Japan, and Latin America. Over the past few quarters, revenue continued to be stronger in Europe, but weaker in Japan. Informix expects that foreign revenues will continue to provide a significant portion of total revenues. However, changes in foreign currency exchange rates, the strength of local economies, and the general volatility of software markets may result in a higher or lower proportion of foreign revenues in the future. In Europe, Asia/Pacific, and Japan, most revenues and expenses are now denominated in local currencies. The U.S. dollar strengthened in the fourth quarter and for the year against the major European and Asia/Pacific currencies, which resulted in lower revenue and expenses recorded when translated into U.S. dollars, compared with the prior year periods. The Company has also increased its direct presence in Latin America, although a significant percentage of this region's revenue is still denominated in U.S. dollars. Although the effect was not significant in 1996, the Company has experienced significant currency fluctuations in Mexico, and to a lesser extent, other Latin American countries, and expects such fluctuations may occur in the future. The Company's operating and pricing strategies take into account changes in exchange rates over time; however, the Company's results of operations may be significantly affected in the short term by fluctuations in foreign currency exchange rates. The Company enters into forward foreign exchange contracts primarily to hedge the impact of fluctuations in exchange rates on accounts receivable or accounts payable denominated in foreign currencies until such receivables are collected or payables are disbursed. This program involves the use of forward foreign exchange contracts in the primary European and Asian currencies. The Company operates, on a limited basis, in certain countries in Latin America, Eastern Europe, and Asia Pacific where there are limited forward currency exchange markets and thus the Company has limited unhedged transaction exposures in these currencies. The Company does not attempt to hedge the translation to U.S. dollars of foreign denominated revenues and expenses not yet earned or incurred. Informix's distribution markets are organized into three general markets: North America; Europe, which includes the Middle East and Africa; and the Intercontinental Group, consisting of Latin America, Japan, and the Asia/Pacific region. The North America, Europe, and Intercontinental Group organizations contributed 42 percent, 39 percent and 19 percent of Informix's net revenues respectively, in 1996, compared to 42 percent, 38 percent and 20 percent, respectively, in 1995, and 46 percent, 38 percent and 16 percent, respectively, in 1994. In 1996, the American Institute of Certified Public Accountants issued an exposure draft on Software Revenue Recognition that is proposed to supersede the Statement of Position 91-1. The Company is evaluating the exposure draft in relation to its current revenue recognition policy. Certain provisions of the exposure draft differ from the Company's current policy. Adoption of the exposure draft in its final form may significantly affect the revenue recognition practices of Informix and could significantly alter, either favorably or unfavorably, the timing of revenue recorded under the Company's current policy. Cost of Software Distribution
(Dollars in Millions) 1996 Change 1995 Change 1994 Manufactured cost of software distribution $ 33.5 28% $ 26.2 54% $ 17.0 Percentage of license revenue 5% 5% 5% Amortization of capitalized software $ 14.6 22% $ 12.0 54% $ 7.8 Percentage of license revenue 2% 2% 2% Cost of software distribution $ 48.1 26% $ 38.2 54% $ 24.8 Percentage of license revenue 7% 7% 7%
Software distribution costs consist primarily of: 1) manufacturing and related costs such as media, documentation, product assembly and purchasing costs, freight, customs, and third-party royalties, and 2) amortization of previously capitalized software development costs and any write-offs of previously capitalized software costs that are no longer realizable. Excluding amortization of previously capitalized software development costs, cost of software distribution as a percentage of license revenue was 5 percent for both 1996 and 1995. In the future, the cost of software distribution as a percentage of revenue may vary depending upon whether the product is reproduced by the Company or by its customers. Amortization of capitalized software increased 22 percent in 1996 compared to 1995 due to the release of several products in the latter half of 1995 and 1996. Amortization expense will continue to rise in absolute dollars in 1997 due to 1996 product releases including INFORMIX-Universal Server. The absolute value of amortization of capitalized software will vary from quarter to quarter as new products are released and other product development costs become fully amortized. Cost of Services
(Dollars in Millions) 1996 Change 1995 Change 1994 Cost of services $144.9 58% $ 91.5 96% $ 46.8 Percentage of service revenue 63% 52% 44%
Cost of services consists primarily of maintenance, consulting and training expenses. The increase in cost of services in 1996 in absolute dollars and as a percentage of net revenues compared to the prior year is primarily due to the Company's expansion of consulting and support service capabilities as products have become more complex. The increase in cost of services as a percentage of net service revenue is due to increases in support personnel in anticipation of additional consulting revenue as more customers utilize the Company's products in more complex applications. The Company has also subcontracted certain service projects which reduces margins. Sales and Marketing Expenses
(Dollars in Millions) 1996 Change 1995 Change 1994 Sales and marketing $418.7 39% $301.9 48% $203.8 Percentage of net revenue 45% 43% 43%
The increase in sales and marketing expenses in 1996 in absolute dollars compared to 1995 was a result of the addition of new sales offices and sales personnel worldwide as the Company expanded its worldwide direct sales organizations, the opening of new subsidiaries, higher commission expense associated with the increase in revenues, and increased marketing programs associated with new product launches. As a percentage of net revenues, sales and marketing expenses increased from 43 percent in 1995 to 45 percent in 1996. With the expected continuing expansion in 1997 of worldwide operations, as well as increased sales and marketing expenditures aimed at positioning the Company and its new and existing products in the marketplace, the Company expects that sales and marketing expenses for 1997 will increase. The increase in sales and marketing expense will include depreciation of equipment, and facilities and manpower costs associated with operating the Company's Information SuperStores, which are more fully discussed in "Liquidity and Capital Resources". Research and Development Expenses Informix accounts for its software development expenses in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed." This statement requires that, once technological feasibility of a developing product has been established, all subsequent costs incurred in developing that product to a commercially acceptable level be capitalized and amortized ratably over the revenue life of the product. The following table summarizes research and development costs for the prior three years:
(Dollars in Millions) 1996 Change 1995 Change 1994 Incurred product development costs $148.6 44% $103.1 32% $ 77.9 Expenditures capitalized 28.4 62% 17.5 29% 13.6 Research and development expenses $120.2 40% $ 85.6 33% $ 64.3 Expenditures capitalized as percent of incurred 19% 17% 17%
The increase in research and development expenditures in absolute dollars from year to year is attributed to an increase in staff working on new products and product extensions, including the Company's latest product INFORMIX-Universal Server. The higher capitalization in absolute dollars of product development expenditures from year to year resulted from an increase in the work involved in projects reaching technological feasibility as they neared their release dates. Significant programs currently under development include improvements and enhancements of current products, with particular emphasis on parallel computer architecture, user-defined database extensions, web technology integration, and graphic desktop and systems administration. The Company believes that research and development expenditures are essential to maintaining its competitive position in its primary markets and expects the expenditure levels to continue to constitute a significant percentage of revenues. General and Administrative Expenses
(Dollars in Millions) 1996 Change 1995 Change 1994 General and administrative expenses $ 64.2 26% $ 51.1 44% $ 35.4 Percentage of net revenues 6% 7% 8%
General and administrative expenses increased in absolute dollars in 1996 compared to 1995 as a result of the continued expansion of the Company's international operations. General and administrative expenses in 1995 increased in absolute dollars compared to 1994 as a result of the continued expansion in international operations as well as the acquisition of several foreign distributors. Merger Expenses In the first quarter of 1996, the Company recorded expenses of approximately $5.9 million as a result of the acquisition of Illustra, which was accounted for as a pooling of interests. These costs consisted primarily of investment banking, legal and accounting fees. Interest Income
(Dollars in Millions) 1996 Change 1995 Change 1994 Interest income $ 9.9 22% $ 8.1 103% $ 4.0 Percentage of net revenues 1% 1% 1%
The increase in absolute dollars from 1994 to 1995 and 1995 to 1996 results from higher balances of cash and cash equivalents and short-term investments, offset by slightly lower interest rates. Provision for Income Taxes
(Dollars in Millions) 1996 Change 1995 Change 1994 Provision for income taxes $ 50.4 (9%) $ 55.2 62% $ 34.1 Effective tax rate 34% 36% 35%
Informix's effective tax rates for fiscal years 1996, 1995, and 1994 are less than the combined federal and state statutory rates primarily due to the permanent reinvestment of a portion of the offshore earnings of Informix's lower-taxed Irish operations and the reinstatement of the federal research and development credit. The amount considered permanently invested in the Irish operations may vary from year to year and may affect Informix's effective tax rate. Informix anticipates its fiscal 1997 effective tax rate to remain approximately the same as 1996; however, this rate could change based on a change in the geographic mix of Informix's financial results, the amount of permanent reinvestment of a portion of the 1997 offshore earnings of Informix's lower-taxed Irish operations, the reinstatement of the federal research and development tax credit which is scheduled to expire in 1997 and acquisitions by the Company. Impact of Inflation The effect of inflation on the Company's financial position has not been significant. Liquidity and Capital Resources
(Dollars in Millions) 1996 1995 1994 Cash, cash equivalents, and investments $267.7 $263.0 $198.6 Working capital 258.4 252.8 200.8 Cash provided by operations 178.3 158.2 104.1 Cash used in investment activities, excluding investments of excess cash 203.0 125.4 51.9 Cash provided by financing activities 21.5 27.5 0.3
Cash generated by operations provided sufficient resources to fund the Company's headcount growth and capital asset needs in all periods presented. In addition, sufficient cash was generated in 1996 to finance the Company's strong commitment to training and marketing efforts surrounding the acquisition of Illustra and the development and release of INFORMIX-Universal Server. The increases in cash and cash equivalents provided by operations in 1996 compared with 1995 and in 1995 compared with 1994, were primarily attributable to higher income before depreciation and amortization charges. Net accounts receivable increased by $68.6 million in 1996 as compared to December 1995. Days sales outstanding increased from approximately 76 days in December 1995 to 84 days in December 1996. The days sales outstanding ratio is dependent on many factors, including the mix of contract-based revenue with significant OEMs and large corporate and government end-users versus revenue recognized on shipments to application vendors and distributors and the success of the Company's third-party accounts receivable financing programs. The Company has programs whereby third-party financing institutions provide financing for extended credit terms instead of such financing being provided by the Company. The Company at times enhances its cash position through certain financing activities related to its account receivables. Excluding investments of excess cash, net cash and cash equivalents used for investing activities increased in 1996 compared with 1995; the decrease in corporate acquisition activity (the Company acquired 90 percent of the database division of ASCII Corporation in the first quarter of 1995) was offset by investments in property and equipment and in software development costs. In 1996, 1995 and 1994, the Company acquired $148.3 million, $56.5 million and $25.7 million, respectively, of capital equipment consisting primarily of computer equipment, computer software and office equipment. The increase of capital equipment purchases in 1996 resulted from the Company's investments in capital equipment used in sales and product demonstration activities and an effort to improve the level of consulting and support services provided to customers, and to provide technology infrastructure for the Company's growing employee headcount. Informix plans to continue to launch a series of Information SuperStores worldwide which demonstrate and offer the most recent Informix technology advances. Along with the core Informix product line, these locations have tools from leading third-party tools and application vendors installed on a wide variety of hardware platforms. Initial participants include Data General, Hewlett Packard, IBM, NCR, Pyramid, Sequent, Silicon Graphics, and Sun, among others. Engineers from both the Informix Professional Services and the Informix Advanced Technology Group are working with prospects and customers at the SuperStores to create information technology prototypes, such as pilot data warehouses, based on comprehensive, proven methodology. To date, the Company has spent approximately $63 million and has committed to spend approximately an additional $45 million in the acquisition of capital equipment to support the launch of the Information SuperStores The Company expects to make further capital equipment expenditures against these commitments in 1997. The Company's investments in software costs were previously discussed under "Results of Operations." In January 1995, the Company acquired a 90 percent interest in the database division of ASCII Corporation, a distributor of its products in Japan. The Company acquired the remaining 10 percent interest in January 1996. The acquisition was recorded as a purchase. The purchase price of ASCII's database division was approximately $46.0 million, of which approximately $35.4 million has been allocated to intangible assets acquired. In April 1995, the Company acquired an 80 percent interest in the database division of Daou Corporation, a distributor of its products in Korea. The Company acquired the remaining 20 percent in January 1997 for approximately $1 million. The acquisition was recorded as a purchase. The initial purchase price of this business was approximately $4.6 million, and was increased by approximately $3.0 million in January 1997 due to performance incentives outlined in the agreement; a total of approximately $7.0 million has been allocated to intangible assets acquired. The operating results of these distributors subsequent to the acquisition dates have been included in the consolidated results of operations. In February 1996, the Company acquired Illustra, a U.S.-based company that provides dynamic content management database software and tools for managing complex data in the Internet, multimedia/entertainment, financial services, earth sciences, and other markets. Approximately 12.7 million shares of Informix common stock were issued to acquire all outstanding shares of Illustra stock. An additional 2.3 million shares of Informix common stock were reserved for issuance in connection with the assumption of Illustra's outstanding stock options and warrants. The transaction has been accounted for as a pooling of interests and accordingly all of the accompanying financial statements have been restated to reflect the merger as of the beginning of the earliest period presented. Merger expenses of approximately $5.9 million were recorded in the first quarter of 1996. Net cash and cash equivalents provided by financing activities in 1996 and 1995 consisted primarily of proceeds from the sale of the Company's common stock to employees, partially offset by payments on capital leases. Net cash and cash equivalents used in financing activities in 1994 included payments on capital leases and repurchases of the Company's common stock, offset by proceeds from the sale of the Company's common stock to employees. In 1993 and 1994, the Board of Directors authorized the repurchase of up to 8 million shares of the Company's common stock in the open market. As of December 31, 1996, the Company had repurchased 3,580,000 shares with an aggregate cost of approximately $32.1 million on the open market. All repurchased shares were re-issued to partially satisfy requirements under Stock Option and Stock Purchase Plans. In 1996, the Company rescinded the stock repurchase authorization. The Company plans on relocating its corporate headquarters to Santa Clara, California approximately 15 miles to the south of the Company's current headquarters. To facilitate the move, in January 1997, the Company entered into a two year lease for twenty seven acres of undeveloped commercial real estate ("the Real Estate Lease"). Upon termination of the lease term, the Company will have the option to purchase the land, or if such purchase option is not exercised, arrange for the sale of the parcels to an unrelated third party. In the event the latter option is exercised, the Company is required to pay the lessor any difference between the net sales proceeds and the lessor's investment in the parcels, approximately $61.5 million. In order to secure performance of its obligation under the lease, the Company was required to pledge certain cash collateral to the lessor throughout the full term of the lease. Accordingly, in January 1997, the Company deposited $60 million in cash into a non-interest bearing collateral account controlled by an affiliate of the lessor. Interest on these deposits computed at market rates, otherwise due to the Company, have been assigned by the Company to the lessor in order to reduce the gross monthly lease payments due under the lease. The resulting net monthly lease payments will be recognized by the Company as rent expense over the lease term. The real estate lease also includes certain financial performance criteria which must be met by the Company during the lease term. Construction of buildings on the Santa Clara site will be phased over time based on the Company's utilization needs. The Company intends to fund construction costs through outside financing, the availability of which has not been determined. In addition, in November 1996, the Company leased approximately 200,000 square feet of office space in Santa Clara adjacent to the twenty seven acres described above. The lease term is for fifteen years and minimum lease payments amount to $96.0 million over the term. The minimum lease payments are scheduled to increase within a contractual range based on changes in the Consumer Price Index. After giving consideration to the Company's planned financing of construction costs in Santa Clara, the Company expects that current balances of cash, cash equivalents, and short-term investments will be sufficient to fund anticipated levels of operations at least through 1997 and may be used for investments and acquisitions to supplement internal revenue growth and for other corporate purposes. Business Risks Fluctuations in Quarterly Results. The Company's operating results can vary substantially from period to period. The timing and amount of the Company's license revenues are subject to a number of factors that make estimation of operating results prior to the end of a quarter extremely uncertain. The Company has operated historically with little or no backlog and, as a result, license revenues in any quarter are dependent on contracts entered into or orders booked and shipped in that quarter. The Company's operating margins have generally followed a historic pattern, with second half revenues and operating margins being higher than those of the preceding first half. The Company believes that this pattern has been primarily related to customers' capital spending cycles at the end of a calendar year as well as to the Company's selling efforts, influenced by annual sales incentive plans which culminate at the end of the calendar year, which is the end of the Company's fiscal year. Additionally, as is common in the industry, a disproportionate amount of the Company's license revenues are derived from transactions that close in the last few weeks of a quarter. The timing of closing large license agreements also increases the risks of quarter-to-quarter fluctuations and the uncertainty of estimating quarterly operating results. The Company's operating expenditures are guided by projected annual and quarterly revenue levels and are incurred approximately ratably throughout each quarter. As a result, if projected revenues are not realized in the expected period, the Company's operating results for that period would be adversely affected as the operating expenses are relatively fixed in the short term. The Company's revenue generation is also highly dependent on the economic conditions. If the economy were to slow down, existing and potential customers might delay the purchase of the Company's products, which would negatively affect the Company's revenue. Failure to achieve revenue, earnings and other operating and financial results as forecasted or anticipated by brokerage firm analysts or industry analysts could result in an immediate and adverse effect on the market price of the Company's common stock. Further, the Company may not learn of, or be able to confirm, revenue or earnings shortfall until the end of each quarter, which could result in an even more immediate and adverse effect on the trading price of the Company's common stock. Volatility of Informix Stock Prices. The market for the Company's common stock is highly volatile. The trading price of the Company's common stock could be subject to wide fluctuations in response to quarterly variations in operating and financial results, announcements of technological innovations or new products by the Company or its competitors, changes in prices of the Company's or its competitors' products and services, changes in product mix, change in the Company's revenue and revenue growth rates for the Company as a whole or for individual geographic areas, business units, products or product categories, as well as other events or factors. Statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to the market in which the Company does business or relating to the Company specifically have resulted, and could in the future result, in an immediate and adverse effect on the market price of the Company's common stock. In addition, the stock market has from time to time experienced extreme price and volume fluctuations which have particularly affected the market price for the securities of many high technology companies and which often have been unrelated to the operating performance of these companies. These broad market fluctuations may adversely affect the market price of the Company's common stock. Personnel changes. The Company's future performance will depend to a significant extent on its ability to attract and retain highly skilled sales, consulting, technical, marketing and management personnel. The competition for employees in the database software industry is intense, and the Company expects that such competition will continue for the foreseeable future. From time to time the Company has experienced difficulty in locating candidates with appropriate qualifications. The Company also believes stock options are a critical component for motivating and retaining its key employees. The recent decline in the price of the Company's Common Stock has made stock options previously granted with higher exercise prices less valuable to the Company's current employees and has consequently made it more difficult for the Company to retain its key employees. The failure of the Company to attract and retain key personnel could have an adverse effect on the Company's business, results of operations, financial position and cash flows. Competition. The market for the Company's software products and services is extremely competitive. Some of the Company's current competitors have greater financial, technical and marketing resources than the Company. The industry movement to new operating systems, like Windows NT, access through low-end desktop machines, and access to data through the Internet may cause downward pressure on prices of database and related products. If such downward pressure on prices were to occur, margins would be adversely affected. Also, new or enhanced products introduced by existing or future competitors could have an adverse effect on the Company's business, results of operations and financial condition. Existing and future competition or changes in the Company's product or service pricing structure or product or service offerings could result in an immediate reduction in the prices of the Company's products or services. If significant price reductions in the Company's products or services were to occur and not be offset by increases in sales volume, the Company's business, results of operations and financial condition would be adversely affected. There can be no assurance that the Company will continue to compete successfully with its existing competitors or will be able to compete successfully with new competitors. Technological Change and New Products. The market for the Company's products and services is characterized by rapidly changing technology and frequent new product introductions. The Company's success will depend upon its ability to enhance its existing products and to introduce new products on a timely and cost-effective basis and that meet dynamic customer requirements. There can be no assurance that the Company will be successful in developing new products or enhancing its existing products or that such new or enhanced products will receive market acceptance or be delivered timely to the market. The Company has experienced product delays in the past and may experience delays in the future. Delays in the scheduled availability or a lack of market acceptance of its products or failure to accurately anticipate customer demand and meet customer performance requirements could have a material adverse effect on the Company's business, results of operations and financial condition. In addition, products as complex as those offered by the Company may contain undetected errors or bugs when first introduced or as new versions are released. There can be no assurance that, despite testing, new products or new versions of existing products will not contain undetected errors or bugs that will delay the introduction or commercial acceptance of such products. A key factor in determining the success of the Company will continue to be the ability of the Company's products to interoperate and perform well with existing and future leading, industry-standard application software products intended to be used in connection with relational database management systems. Failure to meet existing or future interoperability and performance requirements of certain independent vendors marketing such applications in a timely manner could adversely affect the market for the Company's products. Commercial acceptance of the Company's products and services could also be adversely affected by critical or negative statements or reports by brokerage firms, industry and financial analysts and industry periodicals concerning the Company, its products, business or competitors or by the advertising or marketing efforts of competitors, or other factors that could affect consumer perception. International Operations. In 1995 and 1996, approximately 58 percent of the Company's net revenues were derived from its international operations. The Company's operations and financial results could be significantly affected by factors associated with international operations such as changes in foreign currency exchange rates and uncertainties relative to regional economic circumstances, as well as by other factors associated with international activities. Most of the Company's international revenue and expenses are denominated in local currencies. Although the Company takes into account changes in exchange rates over time in its pricing strategy, the Company's business, results of operations and financial condition could be materially and adversely affected by fluctuations in foreign currency exchange rates. Integration of Acquired Companies. The Company has completed several acquisitions during the last two years, including the database division of ASCII Corporation in Japan; distributors in Germany, Korea and Malaysia; Stanford Technology Group; and, most recently, Illustra in the United States. The Company may acquire other distributors, companies, products or technologies in the future. There can be no assurance that these acquisitions can be effectively integrated, that such acquisitions will not result in costs and liabilities that could adversely affect the Company's results of operations and financial condition, or that the Company will obtain the anticipated or desired benefits of such acquisitions. Infringement Claims. As the number of software products and software patents in the industry increases, the Company believes that software developers like the Company have and will become increasingly subject to infringement claims with respect to patents, trademarks and other proprietary rights. Such claims, with or without merit, can be time consuming and expensive to defend and could have an adverse effect on the Company's business, results of operations, financial position, and cash flows. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED BALANCE SHEETS
December 31, December 31, (in thousands, except share and per-share amounts) 1996 1995 (Note) ASSETS Current Assets: Cash and cash equivalents $ 226,508 $ 164,305 Short-term investments 34,512 88,904 Accounts receivable, less allowances for doubtful accounts of $21,429 in 1996 and $12,854 in 1995 254,096 185,452 Deferred taxes 13,329 21,504 Other current assets 29,479 25,924 Total current assets 557,924 486,089 Property and Equipment, at cost Computer equipment 225,336 103,650 Office equipment and leasehold improvements 67,982 49,292 293,318 152,942 Less accumulated depreciation and amortization (106,591) (71,310) 186,727 81,632 Software Costs, less accumulated amortization of $41,559 in 1996 and $18,980 in 1995 54,486 36,866 Deferred taxes 7,775 16,248 Long-term investments 6,639 9,781 Intangible assets 34,693 40,730 Other assets 55,598 19,800 Total Assets $ 903,842 $ 691,146 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 65,446 $ 29,655 Accrued expenses 52,347 34,919 Accrued employee compensation 57,626 49,911 Income tax payable 32,896 41,221 Deferred taxes 1,612 1,612 Deferred revenue 84,102 66,681 Current portion of capital lease obligations 866 769 Other current liabilities 4,671 8,479 Total current liabilities 299,566 233,247 Capital lease obligations, less current portion 1,462 890 Other noncurrent liabilities 897 1,956 Deferred taxes 31,203 24,488 Commitments and contingencies Stockholders' Equity: Preferred stock, par value $.01 per share- - - 5,000,000 shares authorized, none issued Common stock, par value $.01 per share- 350,000,000 shares authorized, issued 150,782,000 and 147,984,000 in 1996 and 1995, respectively 1,508 1,480 Additional paid-in capital 243,564 204,448 Retained earnings 322,805 226,797 Unrealized gain on available-for-sale securities, net of tax 11,690 4,064 Foreign currency translation adjustment (8,853) (6,224) Total stockholders' equity 570,714 430,565 Total Liabilities and Stockholders' Equity $ 903,842 $ 691,146
(Note) Balances at December 31, 1995 have been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of-interests. See Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, (in thousands, except per-share data) 1996 1995 1994 (Note) (Note) Net Revenues Licenses $ 708,035 $ 539,733 $ 364,661 Services 231,276 174,486 105,451 939,311 714,219 470,112 Costs and Expenses Cost of software distribution 48,058 38,165 24,773 Cost of services 144,850 91,540 46,799 Sales and marketing 418,695 301,932 203,816 Research and development 120,211 85,643 64,263 General and administrative 64,239 51,113 35,370 Expenses related to Illustra merger 5,914 - - 801,967 568,393 375,021 Operating income 137,344 145,826 95,091 Interest income 9,868 8,148 3,970 Interest expense (2,617) (1,154) (441) Other income (expense), net 3,614 (12) (2,598) Income before income taxes 148,209 152,808 96,022 Income Taxes 50,391 55,164 34,074 Net Income $ 97,818 $ 97,644 $ 61,948 Net Income Per Common Share $ 0.63 $ 0.65 $ 0.43 Weighted Average Number of Common and Common Equivalent Shares Outstanding: 155,573 150,627 142,782
(Note) Amounts presented above applicable to the prior periods have been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of-interests. See Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, (in thousands) 1996 1995 1994 (Note) (Note) Operating Activities Net income $ 97,818 $ 97,644 $ 61,948 Adjustments to reconcile net income to cash and cash equivalents provided by operating activities: Depreciation and amortization 47,207 28,949 16,581 Amortization of capitalized software 14,626 12,041 7,848 Deferred tax expense 15,188 (593) (624) Provisions for losses on accounts receivable 14,983 8,508 3,831 Foreign currency transaction gain (5,349) (4,609) (1,323) Gain on sales of strategic investments (3,856) - - Loss on disposal of property and equipment 2,393 605 - Changes in operating assets and liabilities: Accounts receivable (86,528) (65,683) (23,527) Other current assets 4,172 (6,659) (1,709) Accounts payable and accrued expenses 59,345 70,882 32,843 Deferred revenue 18,277 17,086 11,613 Net cash and cash equivalents provided by operating activities 178,276 158,171 107,481 Investing Activities Investments of excess cash: Purchases of held-to-maturity securities - (144,517) (124,102) Purchases of available-for-sale securities (152,179) (4,303) (111,923) Maturities of held-to-maturity securities - 83,159 106,513 Maturities of available-for-sale securities 126,137 6,104 - Sales of available-for-sale securities 83,696 27,261 140,866 Purchases of strategic investments (12,737) (1,000) (1,623) Proceeds from sales of strategic investments 7,299 - - Purchase of property and equipment (148,270) (56,500) (25,747) Proceeds from disposal of property and equipment 1,929 288 - Additions to software costs (32,381) (23,977) (15,048) Business combinations, net of cash acquired (4,340) (38,413) (8,799) Other (14,541) (5,757) (721) Net cash and cash equivalents used in investing activities (145,387) (157,655) (40,584) Financing Activities Proceeds from issuance of common stock, net 24,357 27,898 15,836 Principal payments on capital leases (1,025) (442) (1,342) Acquisition of common stock (2,388) - (22,141) Reissuance of treasury stock 578 - 7,915 Net cash and cash equivalents provided by financing activities 21,522 27,456 268 Effect of exchange rate changes on cash and cash equivalents 7,792 4,050 307 Increase in cash and cash equivalents 62,203 32,022 67,472 Cash and cash equivalents at beginning of year 164,305 132,283 64,811 Cash and cash equivalents at end of year $ 226,508 $ 164,305 $ 132,283
(Note) Amounts presented above applicable to the prior periods have been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of-interests. See Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Unrealized Foreign Additional Gain on Currency Common Stock Paid-in Treasury Stock Retained Available-for- Translation (in thousands) Shares Amount Capital Shares Amount Earnings Sale Securities Adjustment Totals Balances at December 31, 1993 133,286 $1,333 $127,176 (266) $ (2,431) $ 84,030 $ - $(2,527) $207,581 Exercise of stock options 1,170 11 3,557 3,568 Sale of stock to employees under employee stock purchase plan 90 1 1,052 1,053 Issuance of stock, net of costs 5,608 55 11,499 11,554 Tax benefits related to stock options 10,062 10,062 Foreign currency translation adjustment 929 929 Acquisition of treasury stock (3) (2,723) (22,139) (22,142) Reissuance of treasury stock 2,989 24,570 (16,655) 7,915 Unrealized gain on available-for-sale securities, net of tax 665 665 Net income 61,948 61,948 Balances at December 31, 1994 140,154 1,400 153,343 - - 129,323 665 (1,598) 283,133 Exercise of stock options 4,377 44 13,712 13,756 Sale of stock to employees under employee stock purchase plan 349 3 6,603 6,606 Issuance of stock, net of costs 2,571 28 7,508 7,536 Tax benefits related to stock options 21,291 21,291 Acquisition of STG 533 5 1,991 (170) 1,826 Foreign currency translation adjustment (4,626) (4,626) Unrealized gain on available-for-sale securities, net of tax 3,399 3,399 Net income 97,644 97,644 Balances at December 31, 1995 147,984 1,480 204,448 - - 226,797 4,064 (6,224) 430,565 Exercise of stock options 2,182 22 13,343 13,365 Sale of stock to employees under employee stock purchase plan 616 6 10,986 10,992 Acquisition of treasury stock - - - (100) (2,388) (2,388) Reissuance of treasury stock - - - 100 2,388 (1,810) 578 Tax benefits related to stock options 14,787 14,787 Foreign currency translation adjustment (2,629) (2,629) Unrealized gain on available-for-sale securities, net of tax 7,626 7,626 Net income 97,818 97,818 Balances at December 31, 1996 150,782 $1,508 $243,564 - $ - $322,805 $11,690 $(8,853) $570,714
(Note) Data presented above applicable to the prior periods has been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of-interests. See Notes to Consolidated Financial Statements. Note 1 - Summary of Significant Accounting Policies Organization and Operations. Informix Corporation ("the Company") is a multinational supplier of high-performance, parallel processing database technology for open systems. The Company's products also include application development tools for creating client/server production applications, decision-support systems, ad-hoc query interfaces, and software that allows information to be shared transparently from personal computers to mainframes within the corporate computing environment. In addition to software products, the Company offers training, consulting, and post-contract support to its customers. The principal geographic markets for the Company's products are North America, Europe, Asia/Pacific, Japan, and Latin America. Customers include large-, medium- and small-sized corporations in the manufacturing, financial services, telecommunications, retail/wholesale, hospitality, and government services sectors. Use of Estimates. The preparation of financial statements in conformity with general accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Principles of Consolidation. The consolidated financial statements include the accounts of Informix Corporation and its wholly owned subsidiaries. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. Restatement of Prior Year Data. As more fully described in Note 9, in February 1996, Informix merged with Illustra Information Technologies, Inc. (Illustra). The merger has been accounted for as a pooling of interests and the historical consolidated financial statements of Informix for all periods prior to the merger have been restated to include the financial position, results of operations, and cash flows of Illustra. Costs of the merger are included in the consolidated results of operations in 1996. Foreign Currency Translation. For foreign operations with the local currency as the functional currency, assets and liabilities are translated at year-end exchange rates, and statements of income are translated at the average exchange rates during the year. Exchange gains or losses arising from translation of foreign currency denominated assets and liabilities are included as a component of stockholders' equity. For foreign operations with the U.S. dollar as the functional currency, certain assets and liabilities are remeasured at the year-end exchange rates. Statements of income are remeasured at the average exchange rates during the year. Gains and losses resulting from foreign currency remeasurement and realized gains and losses are included in other expense, net. The Company enters into forward foreign exchange contracts primarily to hedge the value of accounts receivable or accounts payable denominated in foreign currencies (mainly European and Asian foreign currencies) against fluctuations in exchange rates until such receivables are collected or such payables are disbursed. The Company operates, on a limited basis, in certain countries in Latin America, Eastern Europe, and Asia Pacific where there are limited forward currency exchange markets and thus the Company has limited unhedged transaction exposures in these currencies. Gains and losses associated with exchange rate fluctuations on forward foreign exchange contracts are recorded currently as income or loss as they offset corresponding gains and losses on the foreign currency denominated assets and liabilities being hedged. The costs of the forward foreign exchange contracts are recorded as other expense, net. See Note 3 of Notes to Consolidated Financial Statements. Revenue Recognition. The Company generally recognizes license revenue from sales of software licenses upon delivery of the software product to a customer. However, for certain computer hardware manufacturers and end-user licensees with amounts payable within twelve months, the Company will recognize revenue at the time the customer makes a contractual commitment for a minimum non-refundable license fee, if such computer hardware manufacturers and end-user licensees meet certain criteria established by the Company. License revenue from resellers (such as distributors and application vendors) and from other computer hardware manufacturers and end users may be recognized at the earlier of either payment of the license fee or the shipment of the software media on a per-unit basis. However, in no case is revenue recognized unless a master or first copy is delivered to the customer. Maintenance contracts generally call for the Company to provide technical support and software updates to customers. Maintenance contract revenue is recognized ratably over the term of the maintenance contract, generally on a straight-line basis. Where maintenance revenue is not separately invoiced, it is unbundled from license fees and deferred for revenue recognition purposes. Other service revenue, primarily training and consulting, is generally recognized at the time the service is performed. The Company's revenue recognition policy is in compliance with the provisions of the American Institute of Certified Public Accountants' Statement of Position 91-1, "Software Revenue Recognition." The Company sold approximately $55 million of software licenses to certain vendors during 1996 where the Company concurrently committed to acquire goods or services in approximately the same dollar amount. These transactions have been accounted for at their fair market value. No single customer accounted for 10 percent or more of consolidated revenues in 1996, 1995 or 1994. Income Taxes. The Company accounts for income taxes in accordance with the provisions of the Financial Accounting Standards Board Statement No. 109 (FAS 109) "Accounting for Income Taxes." Under FAS 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and income tax bases of assets and liabilities, and are measured by applying enacted tax rates and laws to the taxable years in which such differences are expected to reverse. Inventories. Inventories, which consist primarily of software product components, finished software products, and marketing and promotional materials, are carried at the lower of cost (first in, first out) or market value, and are included in other current assets. Software Costs. The Company capitalizes software development costs incurred in developing a product once technological feasibility of the product has been determined. Software costs also include amounts paid for purchased software and outside development on products which have reached technological feasibility. All software costs are amortized as a cost of software distribution either on a straight-line basis over the remaining estimated economic life of the product or on the basis of each product's projected revenues, whichever results in greater amortization. The Company recorded amortization of $14.6 million, $12.0 million, and $7.8 million of software costs in 1996, 1995, and 1994, respectively, in cost of software distribution. Property and Equipment. Depreciation of property and equipment is calculated using the straight-line method over its estimated useful life, generally the shorter of the applicable lease term or three-to- seven years for financial reporting purposes. Businesses Acquired. The purchase price of businesses acquired, accounted for as purchased business combinations, is allocated to the tangible and specifically identifiable intangible assets acquired based on their fair values with any amount in excess of such allocations being designated as goodwill. Intangible assets are amortized over their estimated useful lives, which to date have been five to seven years. The carrying values of goodwill and specified intangible assets are reviewed if the facts and circumstances suggest that they may be impaired. If this review indicates that the asset will not be recoverable, as determined based on the undiscounted cash flows of the acquired business over the remaining amortization period, the Company's carrying value is reduced to net realizable value. There were no writedowns of intangible assets in 1996, 1995 or 1994. As of December 31, 1996 and 1995, the Company had $50.6 million and $48.4 million of intangible assets, with accumulated amortization of $15.9 million and $7.7 million, respectively, as a result of these acquisitions. Net Income per Common Share. Net income per common share is based on the weighted average number of common and dilutive common equivalent shares outstanding during each year. All stock options are considered common stock equivalents and are included in the weighted average computations when the effect is dilutive. Concentration of Credit Risk. The Company designs, develops, manufactures, markets, and supports computer software systems to customers in diversified industries and in diversified geographic locations. The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral. Other Concentrations. In 1996, the Company derived half of its revenue from software license agreements with resellers including original computer equipment manufacturers (OEMs), distributors and value added resellers (VARs) including application vendors. The Company estimates that slightly less than half of the licenses sold to these resellers in 1996 were not resold to end users prior to December 31, 1996. If these resellers do not commit to licensing the same level of products for resale to end users in 1997, the Company's revenues in future periods could be adversely affected. Cash, Cash Equivalents, Short-Term Investments, and Long-Term Investments. The Company considers liquid investments purchased with a maturity of three months or less to be cash equivalents. The Company considers investments with a maturity of more than three months but less than one year to be short-term investments. Investments with an original maturity of more than one year are considered long-term investments. Short-term and long-term investments are classified as available-for-sale and are carried at fair value. Cash equivalents are carried at amortized cost. The Company invests its excess cash in accordance with its short- term and long-term investments policy, which is approved by the Board of Directors. The policy authorizes the investment of excess cash in government securities, municipal bonds, time deposits, certificates of deposit with approved financial institutions, commercial paper rated A- 1/P-1 (a small portion of the portfolio may consist of commercial paper rated A-2/P-2), and other specific money market instruments of similar liquidity and credit quality. The Company has not experienced any significant losses related to these investments. Securities Held-to-Maturity and Available-for-Sale. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and the ability to hold the securities until maturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization, as well as any interest on the securities, is included in interest income. Marketable equity securities and debt securities not classified as held-to-maturity are classified as available-for-sale. Available-for- sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in a separate component of stockholders' equity. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in other expense, net. The cost of securities sold is based on the specific identification method. Interest on securities classified as available-for-sale are included in interest income. There were no material gross realized gains or losses from sales of securities during the year. Fair Value of Financial Instruments. Fair values of cash, cash equivalents, short and long term investments, other assets, and currency forward contracts are based on quoted market price. Reclassifications. Certain previously reported amounts have been reclassified to conform to the current presentation format. Note 2 -Financial Instruments The following is a summary of available-for-sale debt and equity securities:
December 31, 1996 Available-for-sale securities (In thousands) Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value U.S. Treasury Securities $ 61,308 $ - $ (20) $ 61,288 Commercial Paper 15,872 14 (2) 15,884 Municipal Bonds 27,317 10 (48) 27,279 Auctioned Preferred Stock 4,504 - (4) 4,500 Total Debt Securities 109,001 24 (74) 108,951 U.S. Equity Securities 15,404 18,490 - 33,894 $124,405 $18,514 $ (74) $142,845 Amounts included in cash and cash equivalents $ 67,806 $ - $ (6) $ 67,800 Amounts included in short-term investments 34,548 19 (55) 34,512 Amounts included in long-term investments 6,647 5 (13) 6,639 Amounts included in other assets 15,404 18,490 - 33,894 $124,405 $18,514 $ (74) $142,845
The maturity dates of the financial instruments included in long-term investments vary from 1998 to 2026.
December 31, 1995 Available-for-sale securities (In thousands) Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value U.S. Treasury Securities $ 5,608 $ - $ - $ 5,608 Commercial Paper 51,288 146 (88) 51,346 Municipal Bonds 82,096 71 (213) 81,954 Auctioned Preferred Stock 2,506 - (5) 2,501 Total Debt Securities 141,498 217 (306) 141,409 U.S. Equity Securities 6,110 7,500 (831) 12,779 $147,608 $ 7,717 $(1,137) $154,188 Amounts included in cash and cash equivalents $ 42,724 $ - $ - $ 42,724 Amounts included in short-term investments 89,072 137 (305) 88,904 Amounts included in long-term investments 9,702 80 (1) 9,781 Amounts included in other assets 6,110 7,500 (831) 12,779 $147,608 $ 7,717 $(1,137) $154,188
In the fourth quarter of 1995, the Company re-evaluated the initial designation of certain of its investments in debt securities as held-to- maturity based on the Company's current ability and intent to hold such securities to their contractual maturity. As a result, in December 1995, these securities were transferred from held-to-maturity to available- for-sale at their estimated fair value of $125.7 million. The difference between amortized cost of $125.8 million and estimated fair value of these securities at the date of transfer, $0.1 million, was charged to a separate component of stockholders' equity. Note 3 - Derivative Financial Instruments The Company enters into forward foreign exchange contracts primarily to hedge the value of accounts receivable or accounts payable denominated in foreign currencies against fluctuations in exchange rates until such receivables are collected or payables are disbursed. The purpose of the Company's foreign exchange exposure management policy and practices is to attempt to minimize the impact of exchange rate fluctuations on the value of the foreign currency denominated assets and liabilities being hedged. Substantially all forward foreign exchange contracts entered into by the Company have maturities of 360 days or less. The Company's practice is to settle all foreign exchange contracts within ten calendar days of year end and thus there is no material difference between the contract value and the fair value of the contracts at December 31, 1996 and 1995. At December 31, 1996 and 1995, the Company had approximately $168.6 million and $77.2 million of forward foreign exchange contracts outstanding, respectively. The table below summarizes by currency the contractual amounts of the Company's forward foreign exchange contracts at December 31, 1996 and December 31, 1995.
FORWARD CONTRACTS At December 31, 1996 (In thousands) Face Value Unrealized Gain/(Loss) Forward currency contracts sold: Deutsche Mark $ 55,815 $ (24) Japanese Yen 41,384 (143) British Pound 16,051 (12) French Franc 8,252 - Malaysian Ringgit 5,914 1 Taiwanese NT 5,609 (2) Italian Lira 4,555 (9) Singapore Dollar 3,600 (8) Holland Guilder 3,558 1 Sweden Krona 2,246 1 Swiss Franc 1,622 1 Portuguese Escudo 1,574 - Other (under $1 million) 2,240 (1) Total $152,420 $ (195) Forward currency contracts purchased: British Pound $ 10,501 $ (192) Deutsche Mark 4,198 6 Other (under $1 million) 1,472 (7) Total $ 16,171 $ (193) Grand Total $168,591 $ (388)
FORWARD CONTRACTS At December 31, 1995 (In thousands) Face Value Unrealized Gain/(Loss) Forward currency contracts sold: Deutsche Mark $ 25,356 $ (14) Japanese Yen 21,817 (74) Spanish Peseta 6,178 (4) French Franc 4,807 (7) Singapore Dollars 4,326 6 Italian Lira 2,403 4 British Pound 2,329 22 Malaysian Ringgit 2,287 (2) Dutch Guilder 1,550 1 Portuguese Escudo 1,369 (1) Austrian Schilling 1,361 - Other 3,369 (1) Total $ 77,152 $ (70)
Other than the use of forward foreign exchange contracts as discussed immediately above, the Company does not currently invest in or hold any other financial instruments defined as derivative financial instruments by FAS 119. Note 4 - Stock-based Benefit Plans Option Plans Under the Company's 1986 Employee Stock Option Plan, options are granted at fair market value on the date of the grant. Options are generally exercisable in cumulative annual installments over three to five years. Payment for shares purchased upon exercise of options may be by cash or, with Board approval, by full recourse promissory note or by exchange of shares of the Company's common stock at fair market value on the exercise date. Options under the 1986 Plan expired on July 29, 1996, which was 10 years after the date of grant. Additionally, 1,600,000 shares were authorized for issuance under the 1989 Outside Directors Stock Option Plan, whereby non-employee directors are automatically granted non-qualified stock options upon election or re-election to the Board of Directors. At December 31, 1996, 675,000 shares were available for grant under this Plan. In April 1994, the Company adopted the 1994 Stock Option and Award Plan; 8,000,000 shares were authorized for grant under this Plan. Options can be granted to employees on terms substantially equivalent to those described above. The 1994 Stock Option and Award Plan also allows the Company to award performance shares of the Company's common stock to be paid to recipients on the achievement of certain performance goals set with respect to each recipient. At December 31, 1996, 788,783 shares were available for grant under this Plan. In February 1996, on acquisition of Illustra, all of Illustra's outstanding options were converted into options to purchase 2.4 million shares of Informix common stock. All stock options were restated to include Illustra's options under the pooling-of-interests method. There were 172,677 shares available for grant under this Plan at December 31, 1996. Following is a summary of activity for all stock option plans for the three years ended December 31, 1996:
Number Options of Shares Price per Share Outstanding at December 31, 1993 15,739,957 $ 0.06 to $13.13 Options granted 4,029,815 0.19 to 14.44 Options exercised (3,627,468) 0.06 to 12.75 Options canceled (1,128,532) 0.06 to 11.88 Outstanding at December 31, 1994 15,013,772 0.06 to 14.44 Options granted and assumed 5,456,927 0.19 to 34.00 Options exercised (3,852,697) 0.19 to 13.88 Options canceled (864,920) 0.06 to 32.75 Outstanding at December 31, 1995 15,753,082 0.06 to 34.00
Options granted and assumed 5,850,225 $ 24.3456 Options exercised (2,927,260) 4.6069 Options canceled (1,561,800) 17.1483 Outstanding at December 31, 1996 17,114,247 $ 13.4495
The following table summarizes information about options outstanding at December 31, 1996: Options Outstanding Options Exercisable ______________________________________________________ ____________________________________ Number Weighted-Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise Prices at December 31, 1996 Contractual Life Exercise Price at December 31, 1996 Exercise Price $ 0.0700 - $ 0.6719 2,304,968 6.63 $ 0.3911 2,304,968 $ 0.3911 $ 0.6875 - $ 0.7500 380,100 4.38 $ 0.7447 380,100 $ 0.7447 $ 0.7656 - $ 3.5938 1,731,085 5.08 $ 3.2936 1,730,236 $ 3.2943 $ 3.7188 - $ 7.5000 1,888,065 6.88 $ 6.7008 1,087,165 $ 6.1130 $ 7.5938 - $ 8.6250 1,871,601 6.26 $ 8.6012 1,286,801 $ 8.6017 $ 8.6875 - $10.7813 420,675 6.79 $10.0854 184,300 $10.1559 $10.8750 - $18.2500 2,761,139 8.24 $17.8675 723,415 $17.6530 $18.3750 - $23.1250 2,001,650 9.74 $22.1668 37,750 $20.9894 $23.2500 - $24.1250 2,766,288 9.33 $24.0838 59,116 $23.8057 $24.2500 - $34.7500 988,676 9.08 $30.3152 194,325 $28.4078 $ 0.0700 - $34.7500 17,114,247 7.61 $13.4495 7,988,176 $ 5.8788
In connection with all stock option plans, 18,750,708 shares of common stock were reserved for issuance as of December 31, 1996. At December 31, 1995, 4,898,537 options were exercisable. Employee Stock Purchase Plan The Company also has a qualified Employee Stock Purchase Plan (ESPP) under which 7,600,000 shares of common stock, in the aggregate, have been authorized for issuance. Under the terms of the Plan, employees may contribute, through payroll deductions, up to 10 percent of their base pay and purchase up to 500 shares per quarter (with the limitation of purchases of $25,000 annually in fair market value of the shares). Employees may elect to withdraw from the Plan during any quarter and have their contributions for the period returned to them. Also, employees may elect to reduce the rate of contribution one time in each quarter. The price at which employees may purchase shares is 85 percent of the lower of the fair market value of the stock at the beginning or end of the quarter. The Plan is qualified under Section 423 of the Internal Revenue Code of 1986, as amended. During 1996, 1995, and 1994 the Company issued 616,128 shares, 347,743 shares, and 484,756 shares, respectively, under this Plan. In connection with the Employee Stock Purchase Plan, 650,587 shares were reserved for issuance as of December 31, 1996. Stock Repurchase Authorization The Board of Directors had authorized the purchase of up to 8 million shares of the Company's common stock in the open market to satisfy requirements under Stock Option and Stock Purchase Plans under a stock repurchase plan. In 1996, the Company rescinded the stock repurchase authorization. Stock Based Compensation As permitted under FASB Statement No.123, "Accounting for Stock-Based Compensation" (FASB 123), the Company has elected to continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for stock-based awards to employees. Under APB 25, the Company generally recognizes no compensation expense with respect to such awards. Pro forma information regarding the net income and earnings per share is required by FASB 123 for awards granted or modified after December 31, 1994 as if the Company had accounted for its stock based awards to employees under the fair value method of FASB 123. The fair value of the Company's stock-based awards to employees was estimated using a Black-Scholes option pricing model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, the Black-Scholes model requires the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock-based awards to employee have characteristics significantly different from those of traded options, and because changes in the subjective assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reasonable single measure of the fair value of its stock-based awards to employees. The fair value of the Company's stock-based awards was estimated assuming no expected dividends and the following weighted-average assumptions:
Options ESPP 1996 1995 1996 1995 Expected life (years) 4.5 year 4.5 year .25 year .25 year Expected volatility (percent) .5822 - .6327 .5642 - .6239 .5765 - .9662 .4170 - .7295 Risk-free interest rate (percent) 5.20 - 6.09 5.82 - 7.72 5.01 - 5.85 5.49 - 6.07
For pro forma purposes, the estimated fair value of the Company's stock based awards is amortized over the award's vesting period (for options) and the three month purchase period (for stock purchases under the ESPP). The Company's pro forma information follows (in thousands except for net income per share information):
1996 1995 Net income As reported $ 97,818 $ 97,644 Pro forma $ 77,187 $ 87,696 Net income per share As reported $ 0.63 $ 0.65 Pro forma $ 0.50 $ 0.58
FASB 123 is applicable only to awards granted subsequent to December 31, 1994, therefore its pro forma effect will not be fully reflected until approximately 1998. Calculated under FASB 123, the weighted-average fair value of the options granted during 1996 and 1995 was $13.04 and $10.39 per share, respectively. The weighted average fair value of employee stock purchase rights granted under the ESPP during 1996 and 1995 were $7.47 and $5.27, respectively. Note 5 - 401(k) Plan The Company has a 401(k) plan covering substantially all of its U.S. employees. Under this plan, participating employees may defer up to 15 percent of their pre-tax earnings, subject to the Internal Revenue Service annual contribution limit ($9,500 for 1996). In 1996, the Company matched 50 percent of each employee's contribution up to a maximum of $2,000. The Company's matching contributions to this 401(k) plan for 1996, 1995 and 1994 were $3.8 million, $2.5 million and $1.4 million, respectively. Note 6 - Commitments The Company leases certain computer and office equipment under capital leases having terms of three-to-five years. Amounts capitalized for such leases are included on the consolidated balance sheets as follows:
(In thousands) December 31, 1996 December 31, 1995 Computer equipment $ 8,825 $ 7,924 Office equipment 2,474 1,636 11,299 9,560 Less: accumulated amortization 8,985 7,716 $ 2,314 $ 1,844
During 1996 and 1995, the Company financed approximately $1,800,000 and $1,677,000, respectively, of equipment purchases under capital lease arrangements. Amortization with respect to leased equipment is included in depreciation expense. The Company leases certain of its office facilities and equipment under non-cancelable operating leases and total rent expense was $42.4 million, $19.7 million and $17.3 million in 1996, 1995 and 1994, respectively. The Company plans on relocating its corporate headquarters to Santa Clara, California approximately 15 miles to the south of the Company's current headquarters. To facilitate the move, in January 1997, the Company entered into a two-year lease for twenty seven acres of undeveloped commercial real estate ("the Real Estate Lease"). Upon termination of the lease term, the Company will have the option to purchase the land, or if such purchase option is not exercised, arrange for the sale of the parcels to an unrelated third party. In the event the later option is exercised, the Company is required to pay the lessor any difference between the net sales proceeds and the lessor's investment in the parcels, approximately $61.5 million. In order to secure performance of its obligation under the lease, the Company was required to pledge certain cash collateral to the lessor throughout the full term of the lease. Accordingly, in January 1997, the Company deposited $60 million in cash into a non-interest bearing collateral account controlled by an affiliate of the lessor. Interest on these deposits computed at market rates, otherwise due to the Company, have been assigned by the Company to the lessor in order to reduce the gross monthly lease payments due under the lease. The resulting net monthly lease payments will be recognized by the Company as rent expense over the lease term. The real estate lease also includes certain financial performance criteria which must be met by the Company during the lease term. In addition, in November 1996, the Company leased approximately 200,000 square feet of office space in Santa Clara adjacent to the twenty seven acres described above. The lease term is for fifteen years and minimum lease payments amount to $96.0 million over the term. The minimum lease payments increase within a contractual range based on changes in the Consumer Price Index. As of December 31, 1996, the Company has spent approximately $63 million and is contractually obligated to additionally purchase approximately $45 million in various computer equipment related to its Superstores from certain vendors who have concurrently licensed the Company's software. These transactions are consummated at fair market value. Future minimum payments, by year and in the aggregate, under the capital and non-cancelable operating leases as of December 31, 1996, are as follows:
Year Ending December 31 Capital Non-Cancelable (In thousands) Leases Operating Leases 1997 $ 1,265 $ 45,941 1998 803 44,591 1999 386 41,244 2000 153 23,438 2001 - 16,396 Thereafter - 88,904 Total payments 2,607 $260,514 Less: amount representing interest 279 Present value of minimum lease payments 2,328 Less current portion 866 $ 1,462
Note 7 - Geographic Information Net revenues, operating income, and identifiable assets for the Company's U.S., European, Asia/Pacific and other foreign operations are summarized below by year:
(In thousands) United States Europe Asia/Pacific Other Eliminations Total 1996: Net revenues $471,559 $346,797 $119,757 $ 57,939 $ (56,741) $939,311 Operating income 43,169 72,754 10,554 11,876 (1,009) 137,344 Identifiable assets 699,285 250,773 116,160 45,182 (207,558) 903,842 1995: Net revenues $383,746 $241,009 $ 97,884 $ 44,619 $ (53,039) $714,219 Operating income 96,321 31,313 12,607 6,990 (1,405) 145,826 Identifiable assets 620,966 227,058 85,712 29,445 (272,035) 691,146 1994: Net revenues $261,336 $145,899 $ 50,008 $ 27,948 $ (15,079) $470,112 Operating income 38,708 15,969 31,045 10,322 (953) 95,091 Identifiable assets 387,785 109,939 19,394 16,658 (84,231) 449,545
Sales and transfers between geographic areas are accounted for at prices which the Company believes are arm's length prices, and which in general are in accordance with the rules and regulations of the respective governing tax authorities. Export revenues consisting of sales from the Company's U.S. operating subsidiary to non-affiliated customers were as follows:
(In thousands) 1996 1995 1994 Canada $ 7,521 $ 6,216 $ 5,600 Latin America 6,556 6,817 6,641 Asia/Pacific 3,391 7,887 32,820 Other 3,437 1,301 3,015 Total $ 20,905 $ 22,221 $ 48,076
Note 8 - Income Taxes The provision for income taxes applicable to income before income taxes consists of the following:
(In thousands) 1996 1995 1994 Currently payable: Federal $ 16,252 $ 43,286 $ 27,150 State 3,219 6,999 4,548 Foreign 11,511 13,181 6,160 30,982 63,466 37,858 Deferred: Federal 19,147 285 (16) State 3,082 523 386 Foreign (2,820) (9,110) (4,154) 19,409 (8,302) (3,784) $ 50,391 $ 55,164 $ 34,074
In 1996, 1995 and 1994, the Company recognized tax benefits related to stock option plans of $14.8 million, $21.3 million and $10.1 million, respectively. Such benefits were recorded as an increase to additional paid-in capital. Income before income taxes consists of the following:
Domestic $ 67,906 $119,136 $ 85,253 Foreign 80,303 33,672 10,769 $148,209 $152,808 $ 96,022
The provision for income taxes differs from the amount computed by applying the federal statutory income tax rate to income before income taxes. The sources and tax effects of the differences are as follows:
1996 1995 1994 (In thousands) Amount Percent Amount Percent Amount Percent Computed tax at federal statutory rate $ 51,873 35.0% $ 53,483 35.0% $ 33,608 35.0% Losses which resulted in no current tax benefit - - - - 908 0.9% Research and development credits (1,457) (1.0%) (1,435) (0.9%) (1,241) (1.3%) State income taxes, net of federal tax benefit 3,972 2.7% 4,846 3.2% 3,171 3.3% Benefit from net earnings of foreign subsidiaries considered to be permanently reinvested in non-U.S. operations (5,625) (3.8%) (3,000) (2.0%) (2,000) (2.1%) Other, net 1,628 1.1% 1,270 0.8% (372) (0.3%) $ 50,391 34.0% $ 55,164 36.1% $ 34,074 35.5%
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1996 and 1995 are as follows:
(In thousands) 1996 1995 Deferred Tax Assets: Reserves and accrued expenses $ 9,519 $ 8,600 Deferred revenue 2,717 3,432 Foreign net operating loss carryforwards 9,182 6,964 Domestic net operating loss carryforwards 7,984 7,984 Foreign taxes in excess of taxes at U.S. rate - 3,226 Other 555 646 Total deferred tax assets 29,957 30,852 Valuation allowance for deferred tax assets (908) (908) Net deferred tax assets 29,049 29,944 Deferred Tax Liabilities: Capitalized software 17,704 10,329 Revenue recognition 1,612 1,612 Taxes on unremitted foreign earnings 14,990 3,850 Valuation of investment portfolio 6,454 2,501 Total deferred tax liabilities 40,760 18,292 Net deferred tax assets (liabilities) $(11,711) $11,652
Cumulative undistributed earnings of the Company's Irish subsidiary for which no U.S. income taxes have been provided aggregated approximately $45.9 million at December 31, 1996. These earnings are considered to be permanently reinvested in non-U.S. operations. Additional taxes of approximately $11.5 million would have to be provided if these earnings were repatriated to the U.S. At December 31, 1996, the Company had approximately $23.7 million, $21.0 million and $10.5 million of foreign, federal and state net operating loss carryforwards. The foreign and state net operating loss carryovers expire at various dates beginning in 1998. The federal net operating loss carryovers expire at various dates beginning in 2008. Income taxes paid amounted to $22.7 million, $18.6 million and $22.5 million in 1996, 1995 and 1994, respectively. Note 9 - Business Combinations In January 1995, the Company acquired a 90 percent interest in the database division of ASCII Corporation, a distributor of its products in Japan. The Company acquired the remaining 10 percent interest in January 1996. The acquisition was recorded as a purchase. The purchase price of ASCII's database division was approximately $46.0 million, of which approximately $35.4 million has been allocated to intangible assets acquired. In April 1995, the Company acquired an 80 percent interest in the database division of Daou Corporation, a distributor of its products in Korea. The acquisition was recorded as a purchase. The Company has acquired the remaining 20 percent in January 1997 for approximately $1 million. The initial purchase price of this business was approximately $4.6 million, and was increased by approximately $3.0 million in January 1997 due to performance incentives outlined in the agreement, of which approximately $7.0 million has been allocated to intangible assets acquired. The operating results of these businesses have not been material in relation to those of the Company and are included in the Company's consolidated results of operations from the date of acquisition. In February 1996, the Company acquired Illustra Information Technologies, Inc. (Illustra), a company that provides dynamic content management database software and tools for managing complex data in the Internet, multimedia/entertainment, financial services, earth sciences and other markets. Approximately 12.7 million shares of Informix common stock were issued to acquire all outstanding shares of Illustra common stock. An additional 2.4 million shares of Informix common stock were reserved for issuance in connection the assumption of Illustra's outstanding stock options and warrants. The transaction has been accounted for as a pooling of interests, and accordingly, the consolidated financial statements for all prior periods presented have been restated to include the accounts and operations of Illustra as if the merger was consummated at the beginning of the earliest period presented. Merger fees of approximately $5.9 million were recorded in the first quarter of 1996. The following table presents the separate operating results for Informix Corporation and Illustra for the periods prior to the acquisition date (because the operating results of Illustra for the period January 1, 1996 to the effective date of the merger were immaterial to the combined Company, for the purposes of this table an acquisition date of January 1, 1996 is assumed).
Year Ended Year Ended December 31, 1995 December 31, 1994 Net revenues: Informix $708,985 $468,697 Illustra 5,234 1,415 Combined $714,219 $470,112 Net income (loss): Informix $105,333 $ 66,196 Illustra (7,689) (4,248) Combined $ 97,644 $ 61,948
Note 10 - Litigation In the ordinary course of business, various lawsuits and claims are filed against the Company. It is the Company's opinion that the resolution of such litigation will not have a material effect on the Company's financial position, results of operations, or cash flows. Note 11 - Selected Quarterly Financial Data (Unaudited)
First Second Third Fourth (In thousands, except per-share data) Quarter Quarter Quarter Quarter 1996: Net revenues $204,021 $226,282 $238,180 $270,828 Gross profit 160,584 178,474 189,003 218,342 Net income 15,891 21,628 26,181 34,118 Net income per share 0.10 0.14 0.17 0.22 1995: Net revenues $148,037 $164,068 $182,701 $219,413 Gross profit 121,893 134,042 150,183 178,396 Net income 17,646 20,184 23,896 35,918 Net income per share 0.12 0.14 0.16 0.23
INFORMIX CORPORATION SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands) Additions Balance at Charged to Charged to Balance at Beginning Costs and Other End of of Period Expenses Accounts Deductions Period (1) (2) Allowance For Doubtful Accounts Year ended December 31, 1996 $ 12,854 $ 15,329 $ - $ 6,754 $ 21,429 Year ended December 31, 1995 $ 6,049 $ 8,247 $ 261 $ 1,703 $ 12,854 Year ended December 31, 1994 $ 3,181 $ 1,937 $ 1,900 $ 969 $ 6,049
(1) Charged to net revenues (2) Uncollectible accounts written off, net of recoveries (Note) Data at December 31, 1995 and December 31, 1994 have been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of-interests. REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Board of Directors and Stockholders - Informix Corporation We have audited the accompanying consolidated balance sheets of Informix Corporation as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Informix Corporation at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/Ernst & Young LLP San Jose, California February 3, 1997 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding directors is incorporated herein by reference from the section entitled "Election of Directors" of the Company's proxy statement to be filed pursuant to Regulation 14A for its Annual Stockholders Meeting to be held on May 22, 1997. For information regarding executive officers of the Company, see the information appearing under the caption "Executive Officers" in Part I, Item 1 of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Information regarding executive compensation is incorporated herein by reference from the section entitled "Executive Compensation" of the Company's proxy statement to be filed pursuant to Regulation 14A for its Annual Stockholders Meeting to be held on May 22, 1997. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information regarding security ownership is incorporated herein by reference from the section entitled "Stock Ownership of Certain Beneficial Owners and Management" of the Company's proxy statement to be filed pursuant to Regulation 14A for its Annual Stockholders Meeting to be held on May 22, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions is incorporated herein by reference from the sections entitled "Stock Ownership of Certain Beneficial Owners and Management", "Executive Compensation" and "Transactions with Management" of the Company's proxy statement to be filed pursuant to Regulation 14A for its Annual Stockholders Meeting to be held on May 22, 1997. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)1. Financial Statements The following financial statements are filed as a part of this Annual Report: Financial Statements Covered by Report of Independent Auditors: Report of Ernst & Young LLP, Independent Auditors Consolidated Financial Statements: Balance Sheets at December 31, 1996 and 1995 Statements of Income for each of the three years in the period ended December 31, 1996 Statements of Stockholders' Equity for each of the three years in the period ended December 31, 1996 Statements of Cash Flows for each of the three years in the period ended December 31, 1996 Notes to Consolidated Financial Statements (except Note 11) Supplementary Financial Data Not Covered By Report of Independent Auditors: Note 11 of Notes to Consolidated Financial Statements (a)2. Financial Statement Schedule The following financial statement schedule is filed as a part of this Annual Report: Financial Statement Schedule Covered By Report of Independent Auditors: Schedule as of and for the three years in the period ended December 31, 1996, as applicable: Schedule II - Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are omitted because they are not required under the related instructions or are not applicable. (a)3. Exhibits
3.1 (1) Restated Certificate of Incorporation, as amended. 3.2 (1) By-Laws, as amended. 4.1 (2) Amended and Restated Preferred Share Rights Agreement. 10.1 (3) Form of Indemnity Agreement. 10.2 (4) Form of Amended Indemnity Agreement. 10.3 (5) 1989 Directors Stock Option Plan. 10.4 (6) Amendment to the 1989 Directors Stock Option Plan. 10.5 Purchase Agreement dated as of January 6, 1997 between the Company and BPN Leasing Corporation ("BPN"). 10.6 Lease Agreement dated as of January 6, 1997 between the Company and BPN. 10.7 Pledge Agreement dated as of January 6, 1997 between the Company, BPN and Banque Nationale de Paris. 11 Schedule re: Computation of Per Share Earnings. 21 Subsidiaries of the Registrant. 23 Consent of Independent Auditors. 24 Power of Attorney (set forth on signature page). 27 Financial Data Schedules. _______________ (1) Incorporated by reference to exhibits to the Form 10-Q of Informix Corporation for the fiscal quarter ended July 2, 1995 (2) Incorporated by reference to exhibits to the Form 8-A/A Registration Statement filed on August 11, 1995. (3) Incorporated by reference to exhibits to the Form S-1 Registration Statement No. 33-8006. (4) Incorporated by reference to exhibits to the Form 10-K of Informix Corporation for the fiscal year ended December 31, 1988. (5) Incorporated by reference to exhibits to the Form S-8 Registration Statement No. 33-31116. (6) Incorporated by reference to exhibits to the Form S-8 Registration Statement No. 33-50608.
(b) Reports on Form 8-K The Company filed no reports on Form 8-K during the fourth quarter of the fiscal year ended December 31, 1996. SIGNATURES Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant, Informix Corporation, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 28, 1997. INFORMIX CORPORATION By: /s/ PHILLIP E. WHITE Phillip E. White, Chairman POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David H. Stanley, Alan S. Henricks and Karen Blasing, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date /s/ Phillip E. White Chairman, President, March 28, 1997 (Phillip E. White) Chief Executive Officer and Director (Principal Executive Officer) /s/ Alan S. Henricks Executive Vice President, and March 28, 1997 (Alan S. Henricks) Chief Financial Officer (Principal Financial Officer) /s/ Albert F. Knorp, Jr. Director March 28, 1997 (Albert F. Knorp, Jr.) /s/ James L. Koch Director March 28, 1997 (James L. Koch) /s/ Thomas A. McDonnell Director March 28, 1997 (Thomas A. McDonnell) /s/ Cyril J. Yansouni Director March 28, 1997 (Cyril J. Yansouni) /s/ Karen Blasing Corporate Controller March 28, 1997 (Karen Blasing) (Principal Accounting Officer
EX-10.5 2 PURCHASE AGREEMENT BETWEEN BNP LEASING CORPORATION AND INFORMIX CORPORATION EFFECTIVE AS OF JANUARY 6, 1997 $61,500,000 PURCHASE AGREEMENT BETWEEN BNP LEASING CORPORATION, ("BNPLC") AND INFORMIX CORPORATION, ("Informix") EFFECTIVE AS OF JANUARY 6, 1997 (Freedom Circle Property) PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN PARAGRAPH 17 OF THIS AGREEMENT, THE LEASE REFERENCED HEREIN AND THIS PURCHASE AGREEMENT ARE TO CONSTITUTE, FOR INCOME TAX PURPOSES ONLY, A FINANCING ARRANGEMENT OR CONDITIONAL SALE. AS PROVIDED IN PARAGRAPH 17 OF THIS AGREEMENT, BNPLC AND INFORMIX EXPECT THAT INFORMIX (AND NOT BNPLC) SHALL BE TREATED AS THE TRUE OWNER OF THE PROPERTY FOR INCOME TAX PURPOSES, THEREBY ENTITLING INFORMIX (AND NOT BNPLC) TO TAKE DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE TO THE OWNER. TABLE OF CONTENTS Page 1. Definitions 1 "Applicable Purchaser" 1 "Deposit Taker Losses" 1 "Designated Sale Date" 1 "Direct Payments to Participants" 2 "Fair Market Value" 2 "Purchase Price" 2 "Remarketing Notice" 2 "Required Documents" 2 "Shortage Amount" 2 2. Informix's Options and Obligations on the Designated Sale Date 3 (a) Choices 3 (b) Election by Informix 3 (c) Termination of Informix's Option To Purchase 4 (d) Payment to BNPLC 4 (e) Effect of Options on Subsequent Title Encumbrances 4 3. Terms of Conveyance Upon Purchase 5 4. Survival of Informix's Obligations 5 (a) Status of this Agreement 5 (b) Remedies Under the Lease and the Environmental Indemnity 6 5. Remedies Cumulative 6 6. No Implied Waiver 6 7. Attorneys' Fees and Legal Expenses 6 8. Estoppel Certificate 7 9. Notices 7 10. Severability 9 11. Entire Agreement 9 12. Paragraph Headings 9 13. Gender and Number 9 14. GOVERNING LAW 9 15. Successors and Assigns 9 16. WAIVER OF JURY TRIAL 9 17. Income Tax Reporting 10 18. Security for Informix's Obligations; Return of Collateral and Escrowed Proceeds 11 19. Security for BNPLC's Obligations 11 20. Not a Partnership, Etc 11 Exhibits and Schedules Exhibit A Legal Description Exhibit B Grant Deed Exhibit C Preliminary Change of Ownership Form Exhibit D Bill of Sale and Assignment Exhibit E Acknowledgement and Disclaimer Exhibit F Documentary Transfer Tax Request Exhibit G Secretary's Certificate Exhibit H Instruction Letter to Title Insurer Exhibit I Certificate Concerning Tax Withholding Exhibit J Indemnity for Prohibited Encumbrances PURCHASE AGREEMENT This PURCHASE AGREEMENT (this "Agreement") is made as of January 6, 1997, by INFORMIX CORPORATION, a Delaware corporation ("Informix") and BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"). R E C I T A L S A. BNPLC is acquiring the land described in Exhibit A attached hereto and the improvements and fixtures located thereon, if any, and is leasing the same to Informix pursuant to that certain Lease Agreement (as from time to time supplemented, amended or restated, the "Lease") between Informix and BNPLC dated as of the date hereof. (The land described in Exhibit A and any and all other real or personal property from time to time covered by the Lease and included within the "Leased Property" as defined therein are hereinafter collectively referred to as the "Property".) B. BNPLC is also concurrently herewith receiving a separate environmental indemnity from Informix pursuant to an Environmental Indemnity Agreement (as from time to time supplemented, amended or restated, the "Environmental Indemnity") between Informix and BNPLC dated as of the date hereof. C. As a condition to BNPLC's acquisition of any of the land described in Exhibit A, BNPLC requires the agreements of Informix, on and subject to the terms and conditions set out herein, to protect BNPLC against certain losses that BNPLC may suffer if (1) the value of the Property covered from time to time under the Lease is or becomes less than BNPLC's investment in such Property. NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Definitions. As used herein, the terms "BNPLC", "Environmental Indemnity", "Informix", "Property" and "Lease" shall have the meanings indicated above; terms with initial capitals defined in the Lease and used but not defined herein shall have the meanings assigned to them in the Lease; and the terms listed immediately below shall have the following meanings: "Applicable Purchaser" means any third party designated by Informix to purchase the interest of BNPLC in the Property as provided in Paragraph 2(a)(ii) below. "Deposit Taker Losses" shall have the meaning assigned to it in the Pledge Agreement. "Designated Sale Date" means the earlier of: (1) December 31, 1998. (2) the date specified as the effective date of termination of the Lease in any notice to BNPLC given by Informix pursuant to Paragraph 2 of the Lease; (3) any Business Day designated by BNPLC in a written notice given by BNPLC to Informix when an Event of Default by Informix is continuing, provided the notice is given by BNPLC at least thirty (30) days before the Business Day so designated; or (4) any Business Day designated by Informix in a written irrevocable and unconditional notice given by Informix to BNPLC pursuant to the last sentence of subparagraph 13(a) of the Lease (which concerns the right of Informix to cure certain Events of Default by delivering such a notice); provided, the Business Day so designated by Informix must be no earlier than sixty (60) days after the date of such notice, unless an Event of Default has occurred and is continuing on the date of such notice, in which case the Business Date so designated must be no earlier than fifteen (15) days after the date of such notice and no later than thirty (30) days after the date of such notice. If BNPLC sends a notice to Informix pursuant to the preceding clause (3) properly designating a Designated Sale Date, and Informix sends a notice to BNPLC pursuant to the preceding clause (2) or clause (4) properly designating a different Designated Sale Date, the earlier of the two dates so designated shall be the "Designated Sale Date" hereunder regardless of which notice was first sent. "Direct Payments to Participants" means the amounts paid or required to be paid directly to Participants on the Designated Sale Date as provided in Section 6.2 of the Pledge Agreement at the direction of and for Informix by the collateral agent appointed pursuant to the Pledge Agreement from all or any part of the Collateral described therein. "Fair Market Value" means the fair market value of the Property on or about the Designated Sale Date (calculated under the assumptions, whether or not then accurate, that Informix has maintained the Property in compliance with the Lease and all Applicable Laws [including Environmental Laws]; that Informix has completed the construction of any Improvements which was commenced prior to the Designated Sale Date; that all such Improvements are self-sufficient in the sense that any easements or offsite facilities needed for their use will be available at no additional cost to the owner of the Improvements; that Informix has repaired and restored the Property after any damage following fire or other casualty to the extent required by the Lease; that Informix has restored the remainder of the Property after any partial taking by eminent domain to the extent required by the Lease; that Informix has completed any contests of and paid any taxes due [other than Excluded Taxes] or other amounts secured by or allegedly secured by a lien against the Property; that no conditions or circumstances on or about the Property [such as the presence of an endangered species] is discovered that will impede the use or any development of the Property permitted by the Lease; that any use or development of the Property as permitted by the Lease will not be hindered or delayed because of the limited availability of utilities or water; that without undue cost or delay any purchaser paying fair market value for the Property can obtain any necessary permits or licenses needed to use the Property for the purposes permitted by the Lease; and that Informix has cured any title defects affecting the Property, all in accordance with the standards and requirements of the Lease as though the Lease were continuing in force), as determined by an independent MAI appraiser selected by BNPLC, which appraiser must have five (5) years or more experience appraising similar properties in northern California. "Purchase Price" means an amount equal to Stipulated Loss Value outstanding on the Designated Sale Date, plus all costs and expenses (including appraisal costs, withholding taxes (if any) and reasonable Attorneys' Fees, as defined in the Lease) incurred in connection with any sale of the Property by BNPLC hereunder or in connection with collecting sales proceeds due hereunder, less the aggregate amounts (if any) of Direct Payments to Participants and Deposit Taker Losses. "Remarketing Notice" shall have the meaning assigned to it in Paragraph 2(b)(1) below. "Required Documents" means the grant deed and other documents that BNPLC must tender pursuant to Paragraph 3 below. "Shortage Amount" means any amount payable to BNPLC by Informix, rather than by the Applicable Purchaser, pursuant to clause 2(a)(ii) below. 2. Informix's Options and Obligations on the Designated Sale Date. (a) Choices. On the Designated Sale Date, regardless of whether an Event of Default shall have occurred and be continuing, Informix shall have the right and the obligation to either: (i) purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, for a net cash price equal to the Purchase Price; or (ii) cause the Applicable Purchaser to purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, for a net cash price set by Informix, but in no event shall Informix set a net cash price below the lesser of (a) the Fair Market Value of the Property, (b) fifteen percent (15%) of Stipulated Loss Value outstanding immediately prior to the purchase or (c) the Purchase Price. If, however, pursuant to the preceding sentence Informix sets a net cash price below fifteen percent (15%) of Stipulated Loss Value and below the Purchase Price, BNPLC may elect to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser, in which case Informix shall pay BNPLC an amount equal to (A) eighty-five percent (85%) of Stipulated Loss Value, less (B) the sum of (x) any Escrowed Proceeds then held and to be retained by BNPLC, (y) any Direct Payments to Participants and (z) any Deposit Taker Losses. Unless BNPLC elects to keep the Property pursuant to the preceding sentence, Informix must make a supplemental payment to BNPLC on the Designated Sale Date equal to the excess (if any) of the Purchase Price over the net cash price actually paid to BNPLC on the Designated Sale Date by the Applicable Purchaser for BNPLC's interest in the Property and in Escrowed Proceeds, if any. However, provided no Event of Default has occurred and is continuing under the Lease, and provided further that neither Informix nor any Applicable Purchaser has failed to pay any amount required to be paid by this Agreement on the date such amount first became due, any supplemental payment required by the preceding sentence shall not exceed (1) eighty-five percent (85%) of Stipulated Loss Value on the Designated Sale Date, less (2) any Direct Payments to Participants and any Deposit Taker Losses. Any supplemental payment payable to BNPLC by Informix, rather than by the Applicable Purchaser, pursuant to this clause (ii) is hereinafter referred to as the "Shortage Amount." If the net cash price actually paid by the Applicable Purchaser to BNPLC exceeds the Purchase Price and all other sums that are then due from Informix to BNPLC, Informix shall be entitled to such excess. If any amount payable to BNPLC pursuant to this subparagraph 2(a) is not actually paid to BNPLC on the Designated Sale Date, Informix shall pay interest on the past due amount computed at the Default Rate from the Designated Sale Date. However, Tenant shall be entitled to a reduction of the interest required by the preceding sentence equal to the Base Rent, if any, paid by Tenant as provided in Paragraph 17 of the Lease for any holdover period after the Designated Sale Date. (b) Election by Informix. Informix shall have the right to elect whether it will satisfy the obligations set out in clause (i) or (ii) of the preceding Paragraph 2(a); provided, however, that the following conditions are satisfied: (i) To give BNPLC the opportunity to have the Fair Market Value determined by an appraiser as provided in the definition of Fair Market Value above before the Designated Sale Date, Informix must, unless Informix concedes that Fair Market Value will not be less than fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date, provide BNPLC with a Remarketing Notice. "Remarketing Notice" means a notice given by Informix to BNPLC (and to each of the Participants) no earlier than one hundred eighty (180) days before the Designated Sale Date and no later than ninety (90) days before the Designated Sale Date, specifying that Informix does not concede that the Fair Market Value is equal to or greater than fifteen percent (15%) of the Stipulated Loss Value. A Remarketing Notice will be required only if Informix does not concede that Fair Market Value will equal or exceed fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date. But if for any reason (including but not limited to any acceleration of the Designated Sale Date pursuant to clauses (2), (3) or (4) of the definition of Designated Sale Date above) Informix fails to provide a Remarketing Notice within the time periods specified in the definition of Remarketing Notice above, Fair Market Value shall, for purposes of this Agreement, be deemed to be no less than fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date. (ii) To give BNPLC the opportunity to prepare the Required Documents before the Designated Sale Date, Informix must, if it is to elect to satisfy the obligations set forth in clause (ii) of Paragraph 2(a), irrevocably specify an Applicable Purchaser in notice to BNPLC given at least seven (7) days prior to the Designated Sale Date. If for any reason Informix fails to so specify an Applicable Purchaser, Informix shall be deemed to have irrevocably elected to satisfy the obligations set forth in clause (i) of Paragraph 2(a). (c) Termination of Informix's Option To Purchase. Without limiting BNPLC's right to require Informix to satisfy the obligations imposed by Paragraph 2(a), Informix shall have no further option hereunder to purchase the Property if either: (i) Informix shall have elected to satisfy its obligations under clause (ii) of Paragraph 2(a) on the Designated Sale Date and BNPLC shall have elected to keep the Property in accordance with clause (ii) of Paragraph 2(a); or (ii) Informix shall have failed on the Designated Sale Date to make or cause to be made all payments to BNPLC required by this Agreement or by the Lease and such failure shall have continued beyond the thirty (30) day period for tender specified in the next sentence. If BNPLC does not receive all payments due under the Lease and all payments required hereunder on the Designated Sale Date, Informix may nonetheless tender to BNPLC the full Purchase Price and all amounts then due under the Lease, together with interest on the total Purchase Price computed at the Default Rate from the Designated Sale Date to the date of tender, and if presented with such a tender within thirty (30) days after the applicable Designated Sale Date, BNPLC must accept it and promptly thereafter deliver any Escrowed Proceeds and a deed and all other Required Documents listed in Paragraph 3. (d) Payment to BNPLC. All amounts payable under the preceding Paragraphs 2(a) or 2(c) by Informix and, if applicable, by the Applicable Purchaser must be paid directly to BNPLC, and no payment on behalf of or for the account of BNPLC to any other party shall be effective for the purposes of this Agreement. In addition to the payments required under Paragraph 2(a) hereunder, on the Designated Sale Date Informix must pay all amounts then due to BNPLC under the Lease. BNPLC will remit any excess amounts due Informix pursuant to the last sentence of clause (ii) of Paragraph 2(a) promptly after BNPLC's receipt of the same and in no event later than thirty (30) days thereafter. (e) Effect of Options on Subsequent Title Encumbrances. It is the intent of BNPLC and Informix that any conveyance of the Property to Informix or any Applicable Purchaser pursuant to this Agreement shall cut off and terminate any interest in the Property claimed by, through or under BNPLC, including the Participants (but not any unsatisfied obligations to BNPLC under the Lease, the Environmental Indemnity or this Agreement), including but not limited to any Prohibited Encumbrances (as defined in the Lease) and any leasehold or other interests conveyed by BNPLC in the ordinary course of BNPLC's business. Anyone accepting or taking any interest in the Property by or through BNPLC after the date of this Agreement shall acquire such interest subject to the rights and options granted Informix hereby. Further, Informix and any Applicable Purchaser shall be entitled to pay any payment required by this Agreement for the purchase of the Property directly to BNPLC notwithstanding any actual or attempted prior conveyance or assignment by BNPLC, voluntary or otherwise, of any right or interest in this Agreement or the Property; neither Informix nor any Applicable Purchaser shall be responsible for the proper distribution or application of any such payments by BNPLC; and any such payment to BNPLC shall discharge the obligation of Informix to cause such payment to be made to all Persons claiming an interest in such payment. 3. Terms of Conveyance Upon Purchase. Immediately after receipt of all payments to BNPLC required pursuant to the preceding Paragraph 2, BNPLC must, unless it is to keep the Property as permitted by Paragraph 2(a)(ii), (A) deliver Escrowed Proceeds, if any, and (b) convey the interest in the Property received by BNPLC pursuant to the Existing Contract (save and except any interest in or any part of the Property previously taken by eminent domain) by grant deed to Informix or the Applicable Purchaser, as the case may be, subject only to the Permitted Encumbrances (as defined in the Lease) and any other encumbrances that do not constitute Prohibited Encumbrances. However, such conveyance shall not include the right to receive any payment then due BNPLC or that may thereafter become due to BNPLC under the Lease, the Environmental Indemnity or this Agreement because of any expense or liability incurred by BNPLC resulting in whole or in part from events or circumstances occurring before such conveyance. All costs of such purchase and conveyance of every kind whatsoever, both foreseen and unforeseen, shall be the responsibility of the Applicable Purchaser or Informix , and the form of grant deed used to accomplish such conveyance shall be substantially in the form attached as Exhibit B. With such grant deed, BNPLC shall also tender to Informix or the Applicable Purchaser, as the case may be, the following, each fully executed and, where appropriate, acknowledged on BNPLC's behalf by an officer of BNPLC: (1) a Preliminary Change of Ownership Report in the form attached as Exhibit C, (2) a Bill of Sale and Assignment of Contract Rights and Intangible Assets in the form attached as Exhibit D, (3) an Acknowledgment of Disclaimer of Representations and Warranties, in the form attached as Exhibit E, which Informix or the Applicable Purchaser must execute and return to BNPLC, (5) a Documentary Transfer Tax Request in the form attached as Exhibit F, (6) a Secretary's Certificate in the form attached as Exhibit G, (7) a letter to the title insurance company insuring title to the Property in the form attached as Exhibit H, (8) a certificate concerning tax withholding in the form attached as Exhibit I, and (9) if applicable, an Indemnity for Prohibited Encumbrances in the form attached hereto as Exhibit J. The Indemnity for Prohibited Encumbrances described in the preceding sentence shall be required if, but only if, before the other Required Documents are tendered by BNPLC in accordance with this Agreement, Informix shall have identified, provided a written list to BNPLC of, and been unable to obtain a commitment for title insurance against, any title encumbrances that Informix believes in good faith may constitute Prohibited Encumbrances and that, if valid, would constitute Prohibited Encumbrances. Any such Indemnity will be completed by attaching a list of such identified encumbrances as Annex B thereto. 4. Survival of Informix's Obligations. (a) Status of this Agreement. Except as expressly provided herein, this Agreement shall not terminate, nor shall Informix or BNPLC or any of their successors or assigns have any right to terminate this Agreement, nor shall Informix be entitled to any reduction of the Purchase Price hereunder, nor shall the obligations of Informix or BNPLC hereunder (including the obligations of Informix to BNPLC under Paragraph 2) be affected by reason of (i) any damage to or the destruction of all or any part of the Property from whatever cause, (ii) the taking of or damage to the Property or any portion thereof under the power of eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of Informix's use of all or any portion of the Property or any interference with such use by governmental action or otherwise, (iv) any eviction of Informix or any party claiming under Informix by paramount title or otherwise (provided, if Informix is wrongfully evicted by BNPLC or by any third party exercising its rights under a Prohibited Encumbrance, then Informix will have the remedies described in the last sentence of this Paragraph), (v) Informix's prior acquisition or ownership of any interest in the Property, (vi) any default on the part of BNPLC under this Agreement, the Lease or any other agreement to which BNPLC is a party, or (vii) any other cause, whether similar or dissimilar to the foregoing, any existing or future law to the contrary notwithstanding. It is the intention of the parties hereto that the obligations of Informix hereunder (including Informix's obligation to make payments under - and, if applicable, to cause the Applicable Purchaser to make payments under Paragraph 2) shall be separate and independent of the covenants and agreements of BNPLC. Accordingly, subject only to the tender by BNPLC of Required Documents and of any Escrowed Proceeds (if such tender is not excused because of an election by BNPLC to keep the Property under Paragraph 2(a)(ii)), the Purchase Price and the Shortage Amount, as the case may be under Paragraph 2, shall continue to be payable in all events, and the obligations of Informix hereunder shall continue unaffected by any breach of this Agreement by BNPLC. However, nothing in this subparagraph, nor the performance without objection by Informix of its obligations hereunder, shall be construed as a waiver by Informix of any right Informix may have at law or in equity, following (A) any failure by BNPLC to tender any Escrowed Proceeds or a grant deed and the other Required Documents as required by Paragraph 3 (if such tender is not excused because of an election by BNPLC to keep the Property under Paragraph 2(a)(ii)) upon the tender by Informix or the Applicable Purchaser of the payments required by Paragraph 2 and of the other documents to be executed in favor of BNPLC at the closing of the sale hereunder, or (B) any failure by BNPLC to remove all Prohibited Encumbrances before conveying the Property pursuant to this Agreement, (i) to recover monetary damages proximately caused by such failure of BNPLC if BNPLC does not cure the failure within thirty (30) days after Informix demands a cure by written notice to BNPLC, or (ii) to obtain a decree compelling specific performance of BNPLC's obligation hereunder. (b) Remedies Under the Lease and the Environmental Indemnity. No repossession of or re-entering upon the Property or exercise of any other remedies available under the Lease or the Environmental Indemnity shall relieve Informix of its liabilities and obligations hereunder, all of which shall survive the exercise of remedies under the Lease and Environmental Indemnity. Informix acknowledges that the consideration for this Agreement is separate and independent of the consideration for the Lease and the Environmental Indemnity, and Informix's obligations hereunder shall not be affected or impaired by any event or circumstance that would excuse Informix from performance of its obligations under the Lease or the Environmental Indemnity. 5. Remedies Cumulative. No right or remedy herein conferred upon or reserved to BNPLC is intended to be exclusive of any other right or remedy BNPLC has with respect to the Property, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity or by statute. In addition to other remedies available under this Agreement, either party shall be entitled, to the extent permitted by applicable law, to a decree compelling performance of any of the other party's agreements hereunder. 6. No Implied Waiver. The failure of either party to this Agreement to insist at any time upon the strict performance of any covenant or agreement of the other party or to exercise any remedy contained in this Agreement shall not be construed as a waiver or a relinquishment thereof for the future. The waiver by either party of or redress for any violation of any term, covenant, agreement or condition contained in this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. No express waiver by either party shall affect any condition other than the one specified in such waiver and that one only for the time and in the manner specifically stated. A receipt by BNPLC of any payment hereunder with knowledge of the breach of this Agreement shall not be deemed a waiver of such breach, and no waiver by either party of any provision of this Agreement shall be deemed to have been made unless expressed in writing and signed by the waiving party. 7. Attorneys' Fees and Legal Expenses. If either party commences any legal action or other proceeding to enforce any of the terms of this Agreement or the documents and agreements referred to herein, or because of any breach by the other party or dispute hereunder or thereunder, the successful or prevailing party, shall be entitled to recover from the nonprevailing party all Attorneys' Fees incurred in connection therewith, whether or not such controversy, claim or dispute is prosecuted to a final judgment. Any such Attorneys' Fees incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from such judgment, and the obligation for such Attorneys' Fees is intended to be severable from other provisions of this Agreement and not to be merged into any such judgment. 8. Estoppel Certificate. Informix and BNPLC will each, upon not less than twenty (20) days' prior written request by the other, execute, acknowledge and deliver to the requesting party a written statement certifying that this Agreement is unmodified and in full effect (or, if there have been modifications, that this Agreement is in full effect as modified, and setting forth such modification) and either stating that no default exists hereunder or specifying each such default of which the signer may have knowledge. Any such statement may be relied upon by any Participant or prospective purchaser or assignee of BNPLC with respect to the Property. Neither Informix nor BNPLC shall be required to provide such a certificate more frequently than once in any six month period; provided, however, that if either party determines that there is a significant business reason for requiring a current certificate, including, without limitation, the need to provide such a certificate to a prospective purchaser or assignee, the other shall provide a certificate upon request whether or not it had provided a certificate within the prior six month period. 9. Notices. Each provision of this Agreement referring to the sending, mailing or delivery of any notice or referring to the making of any payment to BNPLC, shall be deemed to be complied with when and if the following steps are taken: (a) All payments required to be made by Informix or the Applicable Purchaser to BNPLC hereunder shall be paid to BNPLC in immediately available funds by wire transfer to: Federal Reserve Bank of San Francisco Account: Banque Nationale de Paris ABA #: 121027234 Reference: Informix (Freedom Circle Property) or at such other place and in such other manner as BNPLC may designate in a notice to Informix (provided BNPLC will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to all payments to BNPLC under this Agreement. Any payments required to be made by BNPLC to Informix pursuant to the last sentence of clause (ii) of Paragraph 2(a) shall be paid to Informix in immediately available funds by wire by wire transfer to: Informix Software, Inc., Account No.: 12330-09815, Bank of America, 1850 Gateway Boulevard, Concord, California 94520, ABA#: 121000358; or as Informix may otherwise direct by written notice sent to Agent in accordance herewith (provided Informix will not unreasonably designate a method of payment other than wire transfer). (b) All notices, demands and other communications to be made hereunder to the parties hereto shall be in writing (at the addresses set forth below) and shall be given by any of the following means: (A) personal service, with proof of delivery or attempted delivery retained; (B) electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by United States first class mail, return receipt requested); or (C) registered or certified first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice or other communication sent pursuant to clause (A) or (C) hereof shall be deemed received (whether or not actually received) upon first attempted delivery at the proper notice address on any Business Day between 9:00 A.M. and 5:00 P.M., and any notice or other communication sent pursuant to clause (B) hereof shall be deemed received upon dispatch by electronic means. Address of BNPLC: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention:Jennifer Cho or Rafael Lumanlan Telecopy: (415) 296-8954 And with a copy to: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Telecopy: (214) 969-1550 Address of Informix: INFORMIX CORPORATION 4100 Bohannon Drive Menlo Park , California 94025 Attn: Treasurer Telecopy: (415) 926-6564 With a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Palo Alto, California 94304-1050 Attention: Real Estate Department/BOB Telecopy: (415) 493-6811 10. Severability. Each and every covenant and agreement of Informix contained in this Agreement is, and shall be construed to be, a separate and independent covenant and agreement. If any term or provision of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid and unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby. Further, the obligations of Informix hereunder, to the maximum extent possible, shall be deemed to be separate, independent and in addition to, not in lieu of, the obligations of Informix under the Lease. In the event of any inconsistency between the terms of this Agreement and the terms and provisions of the Lease, the terms and provisions of this Agreement shall control. 11. Entire Agreement. This Agreement and the documents and agreements referred to herein set forth the entire agreement between the parties concerning the subject matter hereof and no amendment or modification of this Agreement shall be binding or valid unless expressed in a writing executed by both parties hereto. 12. Paragraph Headings. The paragraph headings contained in this Agreement are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs hereof. 13. Gender and Number. Within this Agreement, words of any gender shall be held and construed to include any other gender and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. 14. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE UNDER AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS OR CHOICE OF LAWS. 15. Successors and Assigns. The terms, provisions, covenants and conditions hereof shall be binding upon Informix and BNPLC and their respective permitted successors and assigns and shall inure to the benefit of Informix and BNPLC and all permitted transferees, mortgagees, successors and assignees of Informix and BNPLC with respect to the Property; provided, that the rights of BNPLC hereunder shall not pass to Informix or any Applicable Purchaser or any subsequent owner claiming through them. Prior to the Designated Sale Date BNPLC may transfer, assign and convey, in whole or in part, the Property and any and all of its rights under this Agreement and the other Purchase Documents (subject to the terms of this Agreement) by any conveyance that constitutes a Permitted Transfer, but not otherwise. If BNPLC sells or otherwise transfers the Property and assigns its rights under this Agreement, the other Purchase Documents and the Lease pursuant to a Permitted Transfer, then to the extent BNPLC's successor in interest confirms its liability for the obligations imposed upon BNPLC by this Agreement, the other Purchase Documents and the Lease on and subject to the express terms set out herein and therein, BNPLC shall thereby be released from any further obligations hereunder or thereunder, and Informix will look solely to each successor in interest of BNPLC for performance of such obligations. 16. WAIVER OF JURY TRIAL. BNPLC AND INFORMIX EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LEASE, THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Informix and BNPLC each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. Informix and BNPLC each further warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LEASE, THIS AGREEMENT OR THE ENVIRONMENTAL INDEMNITY. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 17. Income Tax Reporting. BNPLC and Informix intend this Agreement and the Lease to have a form for income taxes which is different than the form of this Agreement and the Lease for other purposes, and thus the parties acknowledge and agree as follows: (i) For purposes of determining their respective federal, state and local income tax obligations, BNPLC and Informix believe and intend that this Agreement and the Lease constitute a financing arrangement or conditional sale. Both BNPLC and Informix agree to report this Agreement and the Lease as a financing arrangement or conditional sale on their respective income tax returns (the "Required Reporting"), unless such Required Reporting is challenged in writing by the Internal Revenue Service or another governmental authority with jurisdiction (a "Tax Challenge"). Consistent with the foregoing, BNPLC and Informix expect that Informix (and not BNPLC) shall be treated as the true owner of the Property for income tax purposes, thereby entitling Informix (and not BNPLC) to take depreciation deductions and other tax benefits available to the owner. Informix shall also report all interest earned on Escrowed Proceeds or any collateral pledged pursuant to the Purchase Documents as Informix's income for federal, state and local income tax purposes. REFERENCES IN THIS AGREEMENT OR IN THE LEASE TO A "LEASE" OF THE "PROPERTY" ARE NOT INTENDED FOR INCOME TAX PURPOSES TO REFLECT THE INTENT OF BNPLC OR INFORMIX AS TO THE FORM OF THE TRANSACTIONS COVERED BY, OR THE PROPER CHARACTERIZATION OF, THIS AGREEMENT AND THE LEASE. (ii) For all other purposes, including the determination of the appropriate financial accounting for this Agreement and the determination of their respective rights and remedies under state law, BNPLC and Informix believe and intend that (i) the Lease constitutes a true Lease, not a mere financing arrangement, enforceable in accordance with its express terms (and neither this Paragraph 17 nor the provisions referencing this Paragraph on the title page of this Agreement nor the corresponding provisions in the Lease are intended to affect the enforcement of any other provisions of this Agreement or the Lease) and (ii) this Agreement shall constitute a separate and independent contract, enforceable in accordance with the express terms and conditions set forth herein. In this regard, Informix acknowledges that Informix asked BNPLC to participate in the transactions evidenced by this Agreement and the Lease as a landlord and owner of the Property, not as a lender. Although other transactions might have been used to accomplish similar results, Informix expects to receive certain material accounting and other advantages through the use of a lease transaction. Accordingly, and notwithstanding the Required Reporting for income tax purposes, Informix cannot equitably deny that this Agreement and the Lease should be construed and enforced in accordance with their respective terms, rather than as a mortgage or other security device, in any action brought by BNPLC to enforce this Agreement or the Lease. In the event of a Tax Challenge, BNPLC and Informix shall each provide to the other copies of all notices from the Internal Revenue Service or any other governmental authority presenting the Tax Challenge. Further, before changing from the Required Reporting because of a Tax Challenge, BNPLC and Informix shall each consider in good faith any reasonable suggestions received from the other party to this Agreement about an appropriate response to the Tax Challenge; provided, however, that the suggestions are set forth in a notice delivered no later than thirty Business Days after the suggesting party is first notified of the Tax Challenge; and, provided further, that when presented with a Tax Challenge, BNPLC shall have the right to change from the Required Reporting rather than participate in any litigation or other legal proceeding against the Internal Revenue Service or another governmental authority. In any event, Informix shall indemnify BNPLC and defend and hold BNPLC harmless from and against all Losses imposed on or asserted against or incurred by BNPLC by reason of, in connection with or arising out of any such challenge or any resulting recharacterization of this Agreement or the Lease required by the Internal Revenue Service or another governmental authority, including any additional taxes that may become due upon any sale under this Agreement, to the extent (if any) that such Losses are not offset by tax savings to BNPLC resulting from additional depreciation deductions or other tax benefits of the recharacterization. 18. Security for Informix's Obligations; Return of Collateral and Escrowed Proceeds. Informix's obligations under this Agreement are secured by the Pledge Agreement, reference to which is hereby made for a description of the Collateral covered thereby and the rights and remedies provided to BNPLC thereby. Although the collateral agent and the custodian appointed for BNPLC as provided in the Pledge Agreement shall be entitled to hold all Collateral as security for the full and faithful performance by Informix of Informix's covenants and obligations under this Agreement, the Collateral shall not be considered an advance payment of the Purchase Price or any Shortage Amount or a measure of BNPLC's damages should Informix breach this Agreement. If Informix does breach this Agreement and fails to cure the same within any time specified herein for the cure, BNPLC may, from time to time, without prejudice to any other remedy and without notice to Informix, require the collateral agent and the custodian to immediately apply the proceeds of any disposition of the Collateral (and any cash included in the Collateral) to amounts then due hereunder from Informix. BNPLC shall be entitled to return any Collateral not sold or used to satisfy the obligations secured by the Pledge Agreement directly to Informix notwithstanding any prior actual or attempted conveyance or assignment by Informix, voluntary or otherwise, of any right to receive the same; neither BNPLC not the collateral agent named in the Pledge Agreement shall be responsible for the proper distribution or application by Informix of any such Collateral returned to Informix; and any such return of Collateral to Informix shall discharge any obligation of BNPLC to deliver such Collateral to all Persons claiming an interest in the Collateral. Further, BNPLC shall be entitled to deliver any Escrowed Proceeds it holds on the Designated Sale Date directly to Informix or to any Applicable Purchaser purchasing BNPLC's interest in the Property and the Escrowed Proceeds pursuant to this Agreement notwithstanding any prior actual or attempted conveyance or assignment by Informix, voluntary or otherwise, of any right to receive the same; BNPLC shall not be responsible for the proper distribution or application by Informix or any Applicable Purchaser of any such Escrowed Proceeds paid over to Informix or the Applicable Purchaser; and any such payment of Escrowed Proceeds to Informix or an Applicable Purchaser shall discharge any obligation of BNPLC to deliver the same to all Persons claiming an interest therein. 19. Security for BNPLC's Obligations. To secure Informix's right to recover any damages caused by a breach of Paragraph 3 by BNPLC, including any such breach caused by a rejection or termination of this Agreement in any bankruptcy or insolvency proceeding instituted by or against BNPLC, as debtor, BNPLC does hereby grant to Informix a lien and security interest against all rights, title and interests of BNPLC from time to time in and to the Property. Informix may enforce such lien and security interest judicially after any such breach by BNPLC, but not otherwise. Informix waives any right it has to seek a deficiency judgement against BNPLC in any action brought for a judicial foreclosure of such lien and security interest, and in connection therewith, BNPLC hereby acknowledges that it shall have no right of redemption following any such judicial foreclosure pursuant to Cal. Code Civ. Procedure Section 729. Contemporaneously with the execution of this Agreement, Informix and BNPLC will execute a memorandum of this Agreement which is in recordable form and which specifically references the lien granted in this Paragraph, and Informix shall be entitled to record such memorandum at any time prior to the Designated Sale Date. 20. Not a Partnership, Etc. NOTHING IN THIS PURCHASE AGREEMENT IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN BNPLC AND INFORMIX. NEITHER THE EXECUTION OF THIS PURCHASE AGREEMENT NOR THE ADMINISTRATION OF THIS PURCHASE AGREEMENT OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS PURCHASE AGREEMENT OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPLC TO INFORMIX. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have executed this Purchase Agreement as of the date first above written. "BNPLC" BNP LEASING CORPORATION, a Delaware corporation By: /s/Lloyd G. Cox Lloyd G. Cox, Vice President [Continuation of signature pages to Purchase Agreement dated to be effective January 6, 1997] "Informix" INFORMIX CORPORATION, a Delaware corporation By: /s/ Margaret Brauns Margaret Brauns, Vice President and Treasurer Exhibit A Legal Description REAL PROPERTY in the City of Santa Clara, County of Santa Clara, State of California, described as follows: PARCEL ONE: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being a resubdivision of lands of Marriott Corporation, Successor by Merger to Fespar Enterprises, Inc., and Marriott Hotels, Inc., and Stephen & Mary Dorcich as shown on Record of Survey recorded on January 12, 1977 in Book 386 of Maps, at Page 54, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on December 29, 1977 in Book 410 of Maps, at Pages 29 and 30. PARCEL TWO: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being all of Parcel 3, as shown on that certain `Parcel Map', recorded in Book 410 of Maps, at Pages 29 and 30, Santa Clara County Records", which Map was filed for Record in the Office of the Recorder of the County of Santa Clara, State of California, on May 18, 1979 in Book 442 of Maps, at Page 8. PARCEL THREE: All of Parcel 6, as shown upon that certain Map entitled, "Parcel Map being a Resubdivision of lands of Marriott Corporation, Successor by Merger to Fespar Enterprises, Inc., and Marriott Hotels, Inc., and Stephen & Mary Dorcich as shown on Record of Survey recorded on January 12, 1977 in Book 386 of Maps, at Page 54, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on December 29, 1977 in Book 410 of Maps, at Pages 29 and 30. PARCEL FOUR: All of Parcel 1, as shown upon that certain Map entitled, "Parcel Map being all of Parcel 3, as shown on that certain `Parcel Map', recorded in Book 410 of Maps, at Pages 29 and 30, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on May 18, 1979 in Book 442 of Maps, at Page 8. Exhibit B CORPORATION GRANT DEED RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: NAME: [Informix Corporation or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ MAIL TAX STATEMENTS TO: NAME: [Informix Corporation or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ CORPORATION GRANT DEED FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), hereby grants to [Informix or the Applicable Purchaser] the land situated in the County of Santa Clara, State of California, described on Annex A attached hereto and hereby made a part hereof, together with the improvements currently located on such land and any easements, rights-of-way, privileges, appurtenances and other rights pertaining to such land; provided, however, that this grant is subject to the following, as well as the Permitted Encumbrances described on Annex B: 1. Real Estate Taxes not yet due and payable; 2. General or Special Assessments payable after the date hereof; 3. Liens, claims, easements, covenants, restrictions, encumbrances and other matters of record; 4. Zoning ordinances and regulations; 5. Public Utility Drainage and Highway easements, whether or not of record; 6. Rights of parties in possession; and 7. Encroachments, variations in area or in measurements, boundary line disputes, roadways and other matters not of record which would be disclosed by a survey and inspection of the property conveyed hereby. BNP LEASING CORPORATION Date: As of ____________ By: Its: Vice President Attest: Its: Assistant Secretary STATE OF TEXAS ) ) SS COUNTY OF DALLAS ) On ___________________ before me, , personally appeared and , personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument. WITNESS my hand and official seal. Signature Annex A LEGAL DESCRIPTION REAL PROPERTY in the City of Santa Clara, County of Santa Clara, State of California, described as follows: PARCEL ONE: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being a resubdivision of lands of Marriott Corporation, Successor by Merger to Fespar Enterprises, Inc., and Marriott Hotels, Inc., and Stephen & Mary Dorcich as shown on Record of Survey recorded on January 12, 1977 in Book 386 of Maps, at Page 54, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on December 29, 1977 in Book 410 of Maps, at Pages 29 and 30. PARCEL TWO: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being all of Parcel 3, as shown on that certain `Parcel Map', recorded in Book 410 of Maps, at Pages 29 and 30, Santa Clara County Records", which Map was filed for Record in the Office of the Recorder of the County of Santa Clara, State of California, on May 18, 1979 in Book 442 of Maps, at Page 8. PARCEL THREE: All of Parcel 6, as shown upon that certain Map entitled, "Parcel Map being a Resubdivision of lands of Marriott Corporation, Successor by Merger to Fespar Enterprises, Inc., and Marriott Hotels, Inc., and Stephen & Mary Dorcich as shown on Record of Survey recorded on January 12, 1977 in Book 386 of Maps, at Page 54, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on December 29, 1977 in Book 410 of Maps, at Pages 29 and 30. PARCEL FOUR: All of Parcel 1, as shown upon that certain Map entitled, "Parcel Map being all of Parcel 3, as shown on that certain `Parcel Map', recorded in Book 410 of Maps, at Pages 29 and 30, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on May 18, 1979 in Book 442 of Maps, at Page 8. Annex B Permitted Encumbrances [NOTE: TO THE EXTENT THAT SPECIFIC ENCUMBRANCES (OTHER THAN "PROHIBITED ENCUMBRANCES") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONAL ENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "NOTE" WILL BE DELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. UCH ADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS "PERMITTED ENCUMBRANCES" FROM TIME TO TIME BECAUSE OF INFORMIX'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TO AN ADJUSTMENT AS PROVIDED IN THE LEASE.] This conveyance is subject to any encumbrances that do not constitute "Prohibited Encumbrances" (as defined in the Lease referenced in the Purchase Agreement pursuant to which this Deed is being delivered), including general and special taxes and assessments, and including the following matters to the extent the same are still valid and in force: 1. The fact that the ownership of said land does not include any right of ingress or egress to or from the highway contiguous thereto, said right having been relinquished by deed From: Marriott Hotels, Inc., a Delaware Corporation To: The City of Santa Clara, California, A Municipal Corporation Recorded: May 28, 1974 in Book 0915 at Page 395 of Official Records of Santa Clara County, California Said matter affects: Parcels Two, Three and Four 2. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: City of Santa Clara, California, A Municipal Corporation Recorded: June 11, 1975 in Book B457 at Page 125 Official Records of Santa Clara County, California (A) For: Wire Clearance Easement and Right-of-Way Affects: The Easterly 5 feet of Parcels One and Two (B) For: Right-of-Way and Maintenance Easement Affects: A 5 foot strip of land immediately adjacent to the easement described in (A) above. (C) For: Installing, constructing, maintaining, repairing and replacing underground anchors Affects: As follows: A strip of land 2 feet in width and 15 feet in length, the centerline of said strip being a line bearing South 86 deg 06' 57" West from the Northerly terminus of that course North 0 deg 02' 09" West 469.34 feet in the boundary description of the thereinabove described Parcel 1, the Easterly terminus being the Westerly line of thereinabove described Parcel 3.A strip of land 2 feet in width and 15 feet in length, the centerline of said strip being a line bearing South 86 deg 21' 20" West from the Northerly terminus of that course North 7 deg 43' 57" West 400.11 feet in the boundary description of the thereinabove described Parcel 1, the Easterly terminus being said Westerly line of thereinabove described Parcel 3. A strip of land 2 feet in width and 15 feet in length, the centerline of said strip being a line bearing North 87 deg 41' 54" West from the Northerly terminus of that course North 0 deg 26' 38" East 303.60 feet in the boundary description of the thereinabove described Parcel 1, the Easterly terminus being said Westerly line of thereinabove described Parcel 3. Said matter affects: Parcels One and Two 3. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: City of Santa Clara, California, A Municipal Corporation For: Storm Drainage Easements Recorded: July 14, 1977 in Book C992 at Page 1 Official Records of Santa Clara County, California Affects: As follows: Beginning at a point on the Westerly line of the lands of the City of Santa Clara, A Municipal Corporation, as said lands are described as Parcel 1 in the Grant Deed, recorded on June 11, 1975 in Book B457 Official Records of Santa Clara County, at Page 125; said Point of Beginning being distant on said Westerly line North 0 deg 02' 09" West 33.39 feet from the Northeast corner of Parcel 2 as described in last said Grant Deed; thence from said Point of Beginning leaving last said line South 79 deg 45' 07" West 168.22 feet to a point on the general Northeasterly line of lands of the City of Santa Clara, A Municipal Corporation, as described in the Grant Deed recorded on May 28, 1974 in Book 0915 Official Records of Santa Clara, at Page 395; thence Northwesterly along last said line North 70 deg 14' 53" West 865.00 feet to a point thereon; thence leaving last said line North 19 deg 45' 07" East 35.00 feet; thence Southeasterly along a line parallel with and perpendicularly distant 35.00 feet Northeasterly from said general Northeasterly line of lands of the City of Santa Clara South 70 deg 14' 53" East 855.62 feet to a point thereon; thence leaving said parallel line North 79 deg 45' 07" East 165.14 feet to a point of the above mentioned Westerly line of lands of the City of Santa Clara described in Parcel 1; thence Southerly along last said line South 0 deg 02' 09" East 35.56 feet to the Point of Beginning. Said matter affects: Parcels One, Two and Four 4. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: City of Santa Clara, California, A Municipal Corporation For: Landscaping Purposes Recorded: July 14, 1977 in Book C992 at Page 12 Official Records of Santa Clara County, California Affects: The Easterly 10 feet of Parcel Three; the Northerly and Westerly 10 feet of Parcel One; the Westerly 10 feet of Parcel Two; and the Northerly 10 feet of Parcel Four 5. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: City of Santa Clara, California, A Municipal Corporation For: Underground Electrical Easements Recorded: July 14, 1977 in Book C992 at Page 22 Official Records of Santa Clara County, California Affects: The Northerly and Westerly 10 feet of Parcel One; the Northerly 10 feet of Parcel Four; the Westerly 10 feet of Parcel Two; and the Easterly 10 feet of Parcel Three 6. An unrecorded Agreement, affecting said land, for the purposes, stated herein, upon the terms, covenants and conditions referred to therein, between the parties named herein For: Real Estate Purchase Agreement Dated: October 27, 1977 Executed By: Marriott Corporation, a Delaware corporation and Intel Corporation, a California corporation Said Agreement, among other things, has conditions for special Architectural Standards as to all parcels and conditions for the Sign Parcel and Easements described in said agreement affecting Parcel Four. 7. An easement affecting the portion of said land for the purposes stated herein, and incidental purposes, shown or dedicated by the Map recorded in Book 410 of Maps of Santa Clara County, California, at Pages 29 and 30: For: Proposed Sign Easement Affects: The Southeasterly portion of Parcel Four The above easement was reserved for the benefit of Marriot Corporation, a corporation by Deed recorded December 30, 1977, in Book D380, Page 36, of Official Records of Santa Clara County, California. 8. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: City of Santa Clara, California, A Municipal Corporation For: Street and Utility Purposes Recorded: April 11, 1979 in Book E409 at Page 570 Official Records of Santa Clara County, California Affects: As follows: All that certain Parcel of land lying within Parcel 6 of the Parcel Map filed for Record December 29, 1977 in Book 410 of Maps, Pages 29 & 30, in the Records of Santa Clara County, California, being more particularly described as follows: Beginning at the Northwest corner of said Parcel 6: Thence North 89 deg. 44' 31" East, along the Northerly line of said Parcel 6, a distance of 640.02 feet, to the Northeast corner of said Parcel 6; Thence, South 0 deg. 02' 19" West, along the Easterly line of said Parcel 6, a distance of 35.86 feet to a non-tangent curve concave to the Southwest having a radius of 35.00 feet and a beginning tangent bearing North 30 deg. 57' 51" West; Thence, Northwesterly along said curve, 19.01 feet, through a central angle of 31 deg. 07' 02" to a non-tangent line parallel with and 23.00 feet Southerly of, measured at right angles to, said Northerly line of said Parcel 6; Thence, South 89 deg. 44' 31" West, along said parallel line a distance of 620.80 feet, to the Westerly line of said Parcel 6; Thence, North 17 deg. 37' 57" West along said Westerly line of Parcel 6, a distance of 17.46 feet; Thence, continuing along said Westerly line of Lot 6, North 0 deg. 02' 46" West, 6.34 feet, to the point of beginning. Said matter affects: Parcel Three 9. An easement affecting the portion of said land for the purposes stated herein, and incidental purposes, shown or dedicated by the Map recorded in Book 442 of Maps of Santa Clara County, California, at Page 8 For: Underground Electrical Easement Affects: The Westerly portion of Said Land Said matter affects: Parcel Four 10. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: Marriott Corporation, a Delaware Corporation For: Ingress and Egress to an existing sign Recorded: May 18, 1979 in Book E506 at Page 74 Official Records of Santa Clara County, California Affects: As follows: Commencing on the Southerly line of Freedom Circle at the Northerly common corner of Parcels 3 and 4 as said circle and Parcels are shown on that Parcel Map filed in Book 410 of Maps at Pages 29 and 30, Santa Clara County Records; thence Northeasterly along the Southerly line of Freedom Circle on a curve to the left with a radius of 336 feet through a central angle of 0 deg 54' 9" an arc distance of 5.29 feet to the True Point of Beginning of this description; thence from said True Point of Beginning continuing along said curve to the left with a radius of 336 feet through a central angle of 3 deg 38' 21" an arc distance of 21.34 feet; thence South 15 deg 11' 58" West 134.19 feet; thence South 14 deg 48' 02" East 40.00 feet; thence South 15 deg 11' 58" West 233.34 feet; thence South 70 deg 14' 53" East 207.87 feet to the Westerly line of a 50 foot by 40 foot sign easement as shown on the above mentioned parcel map; thence along the Westerly line of said 50 foot by 40 foot sign easement, South 19 deg 45' 07" West 20.00 feet to the Northerly line of a 35 foot wide storm drainage easement as shown on the above mentioned parcel map; thence along the Northerly line of said 35 foot wide storm drainage easement North 70 deg 14' 53" West 226.21 feet; thence North 15 deg 11' 58" East 246.30 feet; thence North 14 deg 48' 02" West 40.00 feet; thence North 15 deg 11' 58" East 131.73 feet to the Point of Beginning. Said matter affects: Parcel Four 11. A Lease, affecting the premises herein stated, executed by and between the parties named herein, for the term and upon the terms, covenants and conditions therein provided, Dated: July 17, 1978, amended on May 1, 1979 and on May 15, 1979 Lessor: John Arrillaga, Trustee, or his successor trustee, under Trust Agreement dated July 20, 1977 (John Arrillaga Separate Property Trust) as amended, and Richard T. Peery, Trustee, or his successor trustee, under Trust Agreement dated July 20, 1977 (Richard T. Peery Separate Property Trust) Lessee: Pedro's Food Systems, Incorporated, a California Corporation and Peter S. Ramirez, Individually and Peter O. Ramirez, Individually, Jointly and Severally Term: Twenty-five (25) Years commencing on June 1, 1979 Disclosed by: Short Form of Lease Recorded: May 18, 1979 in Book E506 At Page 82 Of Official Records of Santa Clara County, California Affects: Parcel Four An Assignment of the Lessee's interest in said lease was Executed By: Peter S. Ramirez, as individual (Ramirez), and Pedro's Food Systems, Inc., a California Corporation To: Brookside Development, Inc., a California Corporation ("BD"); and Michael R. Martinez, an individual ("Martinez"), Pedro's Management Systems, Inc., a California Corporation Recorded: August 11, 1987 in Book K256 at Page 1114 of Official Records of Santa Clara County, California An un-recorded assignment of the lessee's interest in said lease was Executed By: Brookside Development, Inc., a California Corporation and Michael R. Martinez and Pedro's Management Systems Inc. To: Pedro Management Systems, Inc. Dated: November 17, 1987 An un-recorded assignment of the lessee's interest in said lease was Executed By: Pedro Management Systems, Inc. To: Golden State Restaurants, Inc. Dated: February 18, 1992 Memorandum of Amendment and Assignment of Ground Lease Dated: February 18, 1992 Executed By: John Arrillaga, Trustee or his Successor Trustee, under Trust Agreement dated July 20, 1977 ("John Arrillaga Separate Property Trust"), as amended and Richard T. Peery, Trustee or his Successor Trustee, under Trust Agreement dated July 20, 1977 ("Richard T. Peery Separate Property Trust") and Golden State Restaurants, Inc. Recorded: February 20, 1992 in Book M054 at Page 0873 of Official Records of Santa Clara County, California No representation is made as to the present ownership of said leasehold or matters affecting the rights or interests of the lessor or lessee arising out of or occasioned by said lease. 12. Release Agreement and Covenant Not to Sue executed and acknowledged by Informix Corporation, a Delaware corporation ("Informix"), Peery Private Investment Company - WP, L.P., a California limited partnership, as to an undivided 1/4 interest, Peery Public Investment Company - WP, L.P., a California limited partnership, as to an undivided 1/4 interest, and John Arrillaga, Trustee, or Successor Trustee under Trust Agreement dated July 20, 1977 (The Arrillaga Family Trust) as amended, as to an undivided 2/4 interest (collectively, "P/A") and BNP Leasing Corporation, a Delaware corporation ("BNP") to be filed for record in the Official Records of Santa Clara County, California. 13. Agreement Containing Covenants Running with the Land executed and acknowledged by Informix, P/A and BNP to be filed for record in the Official Records of Santa Clara County, California. EXHIBIT C PRELIMINARY CHANGE OF OWNERSHIP REPORT (uncompleted form) EXHIBIT D BILL OF SALE, ASSIGNMENT OF CONTRACT RIGHTS AND INTANGIBLE ASSETS Reference is made to that certain ______________ dated _______, 1996 (the "Agreement") between Informix Corporation, a __________ Corporation, and _____________________, a ______________ ("Prior Owner"), pursuant to which Informix Corporation named BNP LEASING CORPORATION ("Assignor") as its designee and Prior Owner conveyed to Assignor the real property described in Annex A attached hereto (the "Property). Assignor hereby sells, transfers and assigns unto [INFORMIX OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE], a _____________ ("Assignee"), all of Assignor's right, title and interest in and to the following property, if any, to the extent such property is assignable: (a) any warranties, guaranties, indemnities and claims Assignor may have under the Agreement or under any document delivered by Prior Owner thereunder to the extent related to the Property; (b) all licenses, permits or similar consents (excluding any prepaid utility reservations) from third parties to the extent related to the Property; (c) any Escrowed Proceeds, as defined in that certain Purchase Agreement between Assignor and Informix Corporation dated as of January 6, 1997 (the "Purchase Agreement") (pursuant to which this document is being delivered), and any pending or future award made because of any condemnation affecting the Property or because of any conveyance to be made in lieu thereof, and any unpaid award for damage to the Property and any unpaid proceeds of insurance or claim or cause of action for damage, loss or injury to the Property; (d) any goods, equipment, furnishings, furniture, chattels and personal property of whatever nature that are located on or about the Property; and (e) any general intangibles, permits, licenses, franchises, certificates, and other rights and privileges owned by Assignor and used solely in connection with, or relating solely to, the Property, including any such rights and privileges conveyed to Assignor pursuant to the Agreement; but excluding any rights or privileges of Assignor under (i) the Environmental Indemnity, as defined in the Purchase Agreement, (ii) the Lease, as defined in the Purchase Agreement, to the extent rights under the Lease relate to the period ending on the date hereof, whether such rights are presently known or unknown, including rights of the Assignor to be indemnified against claims of third parties as provided in the Lease which may not presently be known, and including rights to recover any accrued unpaid rent under the Lease which may be outstanding as of the date hereof, (iii) agreements between Assignor and Participants, as defined in the Lease, or any modification or extension thereof, and (iv) any other instrument being delivered to Assignor contemporaneously herewith pursuant to the Purchase Agreement. Assignor does for itself and its heirs, executors and administrators, covenant and agree to warrant and defend the title to the property assigned herein against any Prohibited Encumbrances (as defined in the Lease described in the Purchase Agreement referenced above), but not otherwise. Assignee hereby assumes and agrees to keep, perform and fulfill Assignor's obligations, if any, relating to any permits or contracts, under which Assignor has rights being assigned herein. Executed: _________________, _____. ASSIGNOR: BNP LEASING CORPORATION a Delaware corporation By:_______________________ Its:______________________ ASSIGNEE: [INFORMIX, OR THE APPLICABLE PURCHASER], a _________ corporation By:________________________ Its:_______________________ ANNEX A Legal Description REAL PROPERTY in the City of Santa Clara, County of Santa Clara, State of California, described as follows: PARCEL ONE: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being a resubdivision of lands of Marriott Corporation, Successor by Merger to Fespar Enterprises, Inc., and Marriott Hotels, Inc., and Stephen & Mary Dorcich as shown on Record of Survey recorded on January 12, 1977 in Book 386 of Maps, at Page 54, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on December 29, 1977 in Book 410 of Maps, at Pages 29 and 30. PARCEL TWO: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being all of Parcel 3, as shown on that certain `Parcel Map', recorded in Book 410 of Maps, at Pages 29 and 30, Santa Clara County Records", which Map was filed for Record in the Office of the Recorder of the County of Santa Clara, State of California, on May 18, 1979 in Book 442 of Maps, at Page 8. PARCEL THREE: All of Parcel 6, as shown upon that certain Map entitled, "Parcel Map being a Resubdivision of lands of Marriott Corporation, Successor by Merger to Fespar Enterprises, Inc., and Marriott Hotels, Inc., and Stephen & Mary Dorcich as shown on Record of Survey recorded on January 12, 1977 in Book 386 of Maps, at Page 54, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on December 29, 1977 in Book 410 of Maps, at Pages 29 and 30. PARCEL FOUR: All of Parcel 1, as shown upon that certain Map entitled, "Parcel Map being all of Parcel 3, as shown on that certain `Parcel Map', recorded in Book 410 of Maps, at Pages 29 and 30, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on May 18, 1979 in Book 442 of Maps, at Page 8. EXHIBIT E Acknowledgment of Disclaimer of Representations and Warranties THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this "Certificate") is made as of ___________________, ____, by [INFORMIX OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE], a ___________________ ("Grantee"). Contemporaneously with the execution of this Certificate, BNP Leasing Corporation, a Delaware corporation ("BNPLC"), is executing and delivering to Grantee (1) a Corporation Grant Deed and (2) a Bill of Sale, Assignment of Contract Rights and Intangible Assets (the foregoing documents and any other documents to be executed in connection therewith are herein called the "Conveyancing Documents" and any of the properties, rights or other matters assigned, transferred or conveyed pursuant thereto are herein collectively called the "Subject Property"). Notwithstanding any provision contained in the Conveyancing Documents to the contrary, Grantee acknowledges that BNPLC makes no representations or warranties of any nature or kind, whether statutory, express or implied, with respect to environmental matters or the physical condition of the Subject Property, and Grantee, by acceptance of the Conveyancing Documents, accepts the Subject Property "AS IS," "WHERE IS," "WITH ALL FAULTS" and without any such representation or warranty by Grantor as to environmental matters, the physical condition of the Subject Property, compliance with subdivision or platting requirements or construction of any improvements. Without limiting the generality of the foregoing, Grantee hereby further acknowledges and agrees that warranties of merchantability and fitness for a particular purpose are excluded from the transaction contemplated by the Conveyancing Documents, as are any warranties arising from a course of dealing or usage of trade. Grantee hereby assumes all risk and liability (and agrees that BNPLC shall not be liable for any special, direct, indirect, consequential, or other damages) resulting or arising from or relating to the ownership, use, condition, location, maintenance, repair, or operation of the Subject Property, except for damages proximately caused by (and attributed by any applicable principles of comparative fault to) the Misconduct of BNPLC or any Participant. For purposes hereof, "Misconduct" shall have the meaning assigned to it the Lease Agreement between BNPLC and Informix Corporation dated January 6, 1997. Such Lease Agreement is referenced in the Purchase Agreement of even date therewith between BNPLC and Informix Corporation, pursuant to which the Conveyancing Documents are being delivered. The provisions of this Certificate shall be binding on Grantee, its successors and assigns and any other party claiming through Grantee. Grantee hereby acknowledges that BNPLC is entitled to rely and is relying on this Certificate. EXECUTED as of ________________, ____. ___________________________, a______________________ By:______________________________ Name:_________________________ Title:________________________ Exhibit F Documentary Transfer Tax Request ACCOUNTABLE FORM # DATE: To: Santa Clara County Recorder Subject: REQUEST THAT DOCUMENTARY TRANSFER TAX DECLARATION BE MADE IN ACCORDANCE WITH REVENUE CODE 11932. Re: Instrument Title: Corporation Grant Deed Name of Party Conveying Title: BNP Leasing Corporation The Documentary Transfer Tax is declared to be in the amount of $_______________ for the referenced instrument and is: Computed on full value of property conveyed. Computed on full value less liens/encumbrances remaining thereon at time of sale. This separate declaration is made in accordance with _________________________________. It is requested that the amount paid be indicated on the face of the document after the permanent copy has been made. Sincerely, _______________________________________________________________ Individual (or his agent) who made, signed or issued instrument PART I RECORDING REFERENCE DATA: Serial # Date Recorded SEPARATE PAPER AFFIXED TO INSTRUMENT: "Tax paid" indicated on the face of instrument and the separate request (DRA 3-A) was affixed for Recorder by: Date Documentary Transfer Tax Collector Witnessed by: Date Mail Clerk (Note: Prepare photo for Recorder file.) PART II ACCOUNTABLE FORM # REFERENCE DATA: Title: Serial: Date: INSTRUCTIONS: 1. This slip must accompany document. 2. Mail Clerk hand carry document to Tax Collector to indicate the amount of tax paid. EXHIBIT G SECRETARY'S CERTIFICATE The undersigned, Secretary of BNP Leasing Corporation, a Delaware corporation (the "Corporation"), hereby certifies as follows: 1. That he is the duly, elected, qualified and acting Secretary [or Assistant Secretary] of the Corporation and has custody of the corporate records, minutes and corporate seal. 2. That the following named persons have been properly designated, elected and assigned to the office in the Corporation as indicated below; that such persons hold such office at this time and that the specimen signature appearing beside the name of such officer is his or her true and correct signature. [The following blanks must be completed with the names and signatures of the officers who will be signing the deed and other Required Documents on behalf of the Corporation.] Name Title Signature 3. That the resolutions attached hereto and made a part hereof were duly adopted by the Board of Directors of the Corporation in accordance with the Corporation's Articles of Incorporation and Bylaws. Such resolutions have not been amended, modified or rescinded and remain in full force and effect. IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of the Corporation on this , day of , . [signature] CORPORATE RESOLUTIONS OF BNP LEASING CORPORATION WHEREAS, pursuant to that certain Purchase Agreement (herein called the "Purchase Agreement") dated as of January 6, 1997, by and between BNP Leasing Corporation (the "Corporation") and [INFORMIX OR THE APPLICABLE PURCHASER AS THE CASE MAY BE] ("Purchaser"), the Corporation agreed to sell and Purchaser agreed to purchase or cause the Applicable Purchaser (as defined in the Purchase Agreement) to purchase the Corporation's interest in the property (the "Property") located in Santa Clara, California more particularly described therein. NOW THEREFORE, BE IT RESOLVED, that the Board of Directors of the Corporation, in its best business judgment, deems it in the best interest of the Corporation and its shareholders that the Corporation convey the Property to Purchaser or the Applicable Purchaser pursuant to and in accordance with the terms of the Purchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed in the name and on behalf of the Corporation to cause the Corporation to fulfill its obligations under the Purchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed to take or cause to be taken any and all actions and to prepare or cause to be prepared and to execute and deliver any and all deeds and other documents, instruments and agreements that shall be necessary, advisable or appropriate, in such officer's sole and absolute discretion, to carry out the intent and to accomplish the purposes of the foregoing resolutions. EXHIBIT H BNP LEASING CORPORATION 717 N. HARWOOD SUITE 2630 DALLAS, TEXAS 75201 , [Title Insurance Company] _________________ _________________ _________________ Re: Recording of Grant Deed to [Informix or the Applicable Purchaser] ("Purchaser") Ladies and Gentlemen: BNP Leasing Corporation has executed and delivered to Purchaser a Grant Deed in the form attached to this letter. You are hereby authorized and directed to record the Grant Deed at the request of Purchaser. Sincerely, EXHIBIT I FIRPTA STATEMENT Section 1445 of the Internal Revenue Code of 1986, as amended, provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. Sections 18805, 18815 and 26131 of the California Revenue and Taxation Code, as amended, provide that a transferee of a California real property interest must withhold income tax if the transferor is a nonresident seller. To inform [Informix or the Applicable Purchaser] (the "Transferee") that withholding of tax is not required upon the disposition of a California real property interest by transferor, BNP Leasing Corporation (the "Seller"), the undersigned hereby certifies the following on behalf of the Seller: 1. The Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations); 2. The United States employer identification number for the Seller is _____________________; 3.The office address of the Seller is ___________ __________________. [Note: BNPLC MUST INCLUDE EITHER ONE, BUT ONLY ONE, OF THE FOLLOWING REPRESENTATIONS IN THE FIRPTA STATEMENT, BUT IF THE ONE INCLUDED STATES THAT BNPLC IS DEEMED EXEMPT FROM CALIFORNIA INCOME AND FRANCHISE TAX, THEN BNPLC MUST ALSO ATTACH A WITHHOLDING CERTIFICATE FROM THE CALIFORNIA FRANCHISE TAX BOARD EVIDENCING THE SAME: 4. The Seller is qualified to do business in California. OR 4. The Seller is deemed to be exempt from the withholding requirement of California Revenue and Taxation Code Section 26131(e), as evidenced by the withholding certificate from the California Franchise Tax Board which is attached.] The Seller understands that this certification may be disclosed to the Internal Revenue Service and/or to the California Franchise Tax Board by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. The Seller understands that the Transferee is relying on this affidavit in determining whether withholding is required upon said transfer. The Seller hereby agrees to indemnify and hold the Transferee harmless from and against any and all obligations, liabilities, claims, losses, actions, causes of action, demands, rights, damages, costs, and expenses (including but not limited to court costs and attorneys' fees) incurred by the Transferee as a result of any false misleading statement contained herein. Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Seller. Dated: ___________, ____. By: Name: Title: EXHIBIT J INDEMNITY AGREEMENT THIS INDEMNITY AGREEMENT (this "Agreement") is made as of _________________, _____, by INFORMIX CORPORATION, a Delaware corporation ("Purchaser") [OR THE APPLICABLE PURCHASER] and BNP LEASING CORPORATION, a Delaware corporation ("Seller") and ________________________ ("Title Company"). R E C I T A L S A. Purchaser is acquiring the land described in Annex A attached hereto and any improvements located thereon (the "Property") pursuant to the terms and conditions of that certain Purchase Agreement dated January 6, 1997 by between Seller and Purchaser [or Informix Corporation] (the "Purchase Agreement"). B. In connection with its acquisition of the Property, Seller has been notified as contemplated by the Purchase Agreement that the matters described in Annex B attached hereto (the "Relevant Encumbrances") have been identified as encumbrances upon title to the Property and that such matters, to the extent valid, constitute Prohibited Encumbrances as defined in the Lease referenced in the Purchase Agreement. C. Because of such notice to Seller, Seller is required by the Purchase Agreement to tender this Indemnity Agreement to Purchaser. NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: Seller must promptly remove any of the Relevant Encumbrances that constitute "Prohibited Encumbrances" (which for purposes of this Indemnity Agreement shall have the meaning assigned to it in the Purchase Agreement by reference to a Lease Agreement described therein). Seller must also pay, indemnify and hold harmless Purchaser, the Title Company, the Purchaser's successors and assigns as to the Property and the Title Company's successors and assigns as to any title insurance policy issued to Purchaser by the Title Company covering the Property from and against any and all liabilities, damages, claims, actions, judgments, costs and expenses (including, without limitation, reasonable attorneys' fees) caused by Seller's failure to promptly remove any of the Relevant Encumbrances that constitute Prohibited Encumbrances. Nothing herein shall be construed as an admission by Seller that any of the Relevant Encumbrances do constitute Prohibited Encumbrances or as imposing a duty upon Seller to remove or defend against claims arising out of any Relevant Encumbrances that do not constitute Prohibited Encumbrances. Nothing herein contained shall limit Purchaser's rights or remedies under the Purchase Agreement because of any failure by BNPLC to remove all Prohibited Encumbrances before conveying the Property. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. SELLER, PURCHASER AND THE TITLE COMPANY EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Purchaser, Seller and the Title Company each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. Purchaser, Seller and the Title Company each further warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LEASE OR THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "Seller" BNP LEASING CORPORATION, a Delaware corporation By:____________________________ Lloyd G. Cox, Vice President "Purchaser" INFORMIX CORPORATION, a Delaware corporation By:_____________________________ Name: ______________________ Title: ______________________ "Title Company" ________________________________, a ________________________________ By: Name: ______________________ Title: ______________________ ANNEX A Legal Description REAL PROPERTY in the City of Santa Clara, County of Santa Clara, State of California, described as follows: PARCEL ONE: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being a resubdivision of lands of Marriott Corporation, Successor by Merger to Fespar Enterprises, Inc., and Marriott Hotels, Inc., and Stephen & Mary Dorcich as shown on Record of Survey recorded on January 12, 1977 in Book 386 of Maps, at Page 54, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on December 29, 1977 in Book 410 of Maps, at Pages 29 and 30. PARCEL TWO: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being all of Parcel 3, as shown on that certain `Parcel Map', recorded in Book 410 of Maps, at Pages 29 and 30, Santa Clara County Records", which Map was filed for Record in the Office of the Recorder of the County of Santa Clara, State of California, on May 18, 1979 in Book 442 of Maps, at Page 8. PARCEL THREE: All of Parcel 6, as shown upon that certain Map entitled, "Parcel Map being a Resubdivision of lands of Marriott Corporation, Successor by Merger to Fespar Enterprises, Inc., and Marriott Hotels, Inc., and Stephen & Mary Dorcich as shown on Record of Survey recorded on January 12, 1977 in Book 386 of Maps, at Page 54, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on December 29, 1977 in Book 410 of Maps, at Pages 29 and 30. PARCEL FOUR: All of Parcel 1, as shown upon that certain Map entitled, "Parcel Map being all of Parcel 3, as shown on that certain `Parcel Map', recorded in Book 410 of Maps, at Pages 29 and 30, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on May 18, 1979 in Book 442 of Maps, at Page 8. ANNEX B Relevant Encumbrances [This Annex is to be completed by a list of possible Prohibited Encumbrances identified by Informix and against which Informix has not been able to obtain title insurance.] EX-10.6 3 LEASE AGREEMENT BETWEEN BNP LEASING CORPORATION AND INFORMIX CORPORATION EFFECTIVE AS OF JANUARY 6, 1997 $61,500,000 LEASE AGREEMENT BETWEEN BNP LEASING CORPORATION, AS LANDLORD AND INFORMIX CORPORATION, AS TENANT EFFECTIVE AS OF JANUARY 6, 1997 (Freedom Circle Property) PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN SUBPARAGRAPH 18.(l) OF THIS LEASE, THIS LEASE AND THE PURCHASE AGREEMENT REFERENCED HEREIN ARE TO CONSTITUTE, FOR INCOME TAX PURPOSES ONLY, A FINANCING ARRANGEMENT OR CONDITIONAL SALE. AS PROVIDED IN SUBPARAGRAPH 18.(l) OF THIS LEASE, LANDLORD AND TENANT EXPECT THAT TENANT (AND NOT LANDLORD) SHALL BE TREATED AS THE TRUE OWNER OF THE PROPERTY FOR INCOME TAX PURPOSES, THEREBY ENTITLING TENANT (AND NOT LANDLORD) TO TAKE DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE TO THE OWNER. TABLE OF CONTENTS Page 1. Definitions 2 (a) Accounts 2 (b) Active Negligence 2 (c) Additional Rent 2 (d) Administrative Fee 2 (e) Affiliate 2 (f) Applicable Laws 2 (g) Applicable Purchaser 2 (h) Attorneys' Fees 3 (i) Banking Rules Change 3 (j) Base Rent 3 (k) Base Rent Date 3 (l) Base Rent Period 3 (m) Breakage Costs 3 (n) Business Day 3 (o) Capital Adequacy Charges 3 (p) Closing Costs 4 (q) Change of Control Event 4 (r) Code 4 (s) Collateral 4 (t) Collateral Percentage 4 (u) Debt 4 (v) Default 5 (w) Default Rate 5 (x) Designated Sale Date 5 (y) Effective Rate 5 (z) Environmental Cutoff Date 5 (aa) Environmental Indemnity 5 (bb) Environmental Laws 5 (cc) Environmental Losses 5 (dd) Environmental Report 6 (ee) ERISA 6 (ff) ERISA Affiliate 6 (gg) ERISA Termination Event 6 (hh) Escrowed Proceeds 6 (ii) Eurocurrency Liabilities 7 (jj) Eurodollar Rate Reserve Percentage 7 (kk) Event of Default 7 (ll) Excluded Taxes 7 (mm) Fair Market Value 7 (nn) Fed Funds Rate 7 (oo) Funding Advances 7 (pp) GAAP 8 (qq) Hazardous Substance 8 (rr) Hazardous Substance Activity 8 (ss) Impositions 8 (tt) Improvements 8 (uu) Indemnified Party 8 (vv) Initial Funding Advance 9 (ww) Landlord's Parent 9 (xx) LIBOR 9 (yy) Lien 9 (zz) Losses 9 (aaa) Misconduct 10 (bbb) Participant 10 (ccc) Participation Agreement 10 (ddd) Permitted Encumbrances 10 (eee) Permitted Hazardous Substance Use 10 (fff) Permitted Hazardous Substances 11 (ggg) Permitted Transfer 11 (hhh) Person 11 (iii) Plan 11 (jjj) Pledge Agreement 11 (kkk) Prime Rate 12 (lll) Prohibited Encumbrances 12 (mmm) Purchase Agreement 12 (nnn) Purchase Price 12 (ooo) Qualified Payments 12 (ppp) Remaining Proceeds 13 (qqq) Rent 13 (rrr) Responsible Financial Officer 13 (sss) Stipulated Loss Value 13 (ttt) Subsidiary 13 (uuu) Tenant's Knowledge 13 (vvv) Term 13 (www) Unfunded Benefit Liabilities 13 (xxx) Upfront Fee 14 (yyy) Other Terms and References 14 2. Term 14 3. Rental 15 (a) Base Rent 15 (b) Upfront Fee 15 (c) Administrative Fees 16 (d) Additional Rent 16 (e) Interest and Order of Application 16 (f) Net Lease 16 (g) Withholding Taxes 16 (h) No Demand or Setoff 17 4. Insurance and Condemnation Proceeds 17 5. No Lease Termination 19 (a) Status of Lease 19 (b) Waiver By Tenant 19 6. Purchase Documents and Environmental Indemnity 20 7. Use and Condition of Leased Property 20 (a) Use 20 (b) Condition 20 (c) Consideration of and Scope of Waiver 21 8. Other Representations, Warranties and Covenants of Tenant 21 (a) Financial Matters 21 (b) Existing Contract and Pedro's Ground Lease 21 (c) No Default or Violation 21 (d) Compliance with Covenants and Laws 22 (e) Environmental Representations 22 (f) No Suits 22 (g) Condition of Property 22 (h) Organization 23 (i) Enforceability 23 (j) Not a Foreign Person 23 (k) Omissions 23 (l) Existence 23 (m) Tenant Taxes 23 (n) Operation of Property 23 (o) Debts for Construction 24 (p) Impositions 25 (q) Repair, Maintenance, Alterations and Additions 25 (r) Insurance and Casualty 25 (s) Condemnation 25 (t) Protection and Defense of Title 26 (u) No Liens To Secure Payment or Performance on the Leased Property 27 (v) Books and Records 27 (w) Financial Statements; Required Notices; Certificates as to Default28 (x) Further Assurances 29 (y) Fees and Expenses; General Indemnification; Increased Costs; and Capital Adequacy Charges 29 (aa) Permitted Encumbrances 31 (bb) Environmental 31 (z) Liability Insurance 31 (cc) Affirmative Financial Covenants 33 (dd) Negative Covenants 34 (i) Liens 34 (ii) Transactions with Affiliates 36 (iii) Mergers; Sales of Assets 36 (v) Change of Business 36 (ee) ERISA 37 9. Representations, Warranties and Covenants of Landlord 37 (a) Removal of Prohibited Encumbrances 37 (b) Actions Required of the Title Holder 37 (i) General Requirements. 37 (ii) Examples of Actions Tenant May Require. 38 (iii) Partial Release Provisions. 38 (c) No Default or Violation 40 (d) No Suits 40 (e) Organization 40 (f) Enforceability 40 (g) Existence 40 (h) Not a Foreign Person 40 (i) Estoppel Certificates. 40 (j) Compliance With the Pedro's Ground Lease and the Documents Executed by Landlord at the Closing Under the Existing Contract 41 10. Assignment and Subletting 41 (a) Consent Required 41 (b) Standard for Landlord's Consent to Assignments and Certain Other Matters 41 (c) Consent Not a Waiver 41 (d) Landlord's Assignment 41 11. Environmental Indemnification 42 (a) Indemnity 42 (b) Assumption of Defense 42 (c) Notice of Environmental Losses 42 (d) Rights Cumulative 43 (e) Survival of the Indemnity 43 12. Landlord's Right of Access 43 13. Events of Default 44 (a) Definition of Event of Default 44 (b) Remedies 45 (c) Enforceability 47 (d) Remedies Cumulative 47 (e) Waiver by Tenant 47 (f) No Implied Waiver 47 14. Default by Landlord 47 15. Quiet Enjoyment 48 16. Surrender Upon Termination 48 17. Holding Over by Tenant 48 18. Miscellaneous 49 (a) Notices 49 (b) Severability 50 (c) No Merger 50 (d) NO IMPLIED REPRESENTATIONS BY LANDLORD 50 (e) Entire Agreement 50 (f) Binding Effect 50 (g) Time is of the Essence 51 (h) Termination of Prior Rights 51 (i) Governing Law 51 (j) Waiver of a Jury Trial 51 (k) Not a Partnership, Etc 51 (l) Income Tax Reporting 51 Exhibits and Schedules Exhibit A Legal Description Exhibit B Encumbrance List Exhibit C List of Environmental Reports Exhibit D Covenant Compliance Certificate LEASE AGREEMENT This LEASE AGREEMENT (this "Lease"), made to be effective as of January 6, 1997 (all references herein to the "date hereof" or words of like effect shall mean such effective date), by and between BNP LEASING CORPORATION, a Delaware corporation ("Landlord"), and INFORMIX CORPORATION, a Delaware corporation ("Tenant"); W I T N E S E T H T H A T: WHEREAS, pursuant to a Purchase and Sale Agreement and Escrow Instructions dated as of December ___, 1996 (the "Existing Contract") between Tenant and Peery Private Investment Company - WP, L.P., a California limited partnership, Peery Public Investment Company - WP, L.P., a California limited partnership, and John Arrillaga, Trustee, or Successor Trustee under Trust Agreement dated July 20, 1977 (The Arrillaga Family Trust ) as amended (collectively, "Seller"), concerning the land described in Exhibit A attached hereto (the "Land") and the improvements on such Land, if any, Landlord is acquiring the Land and any improvements thereon from Seller contemporaneously with the execution of this Lease; WHEREAS, in anticipation of Landlord's acquisition of the Land, any improvements on the Land and other rights and interests hereinafter described, Landlord and Tenant have reached agreement as to the terms and conditions upon which Landlord is willing to lease the same to Tenant, and by this Lease Landlord and Tenant desire to evidence such agreement; NOW, THEREFORE, in consideration of the rent to be paid and the covenants and agreements to be performed by Tenant, as hereinafter set forth, Landlord does hereby LEASE, DEMISE and LET unto Tenant for the term hereinafter set forth the Land, together with: (i) Landlord's interest in any and all buildings and improvements now or hereafter erected on the Land, including, but not limited to, the fixtures, attachments, appliances, equipment, machinery and other articles attached to any such buildings and improvements (the "Improvements"); (ii) all easements and rights-of-way now owned or hereafter acquired by Landlord for use in connection with the Land or Improvements or as a means of access thereto; (iii) all right, title and interest of Landlord, now owned or hereafter acquired, in and to (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any and all sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and abutting land (except strips and gores, if any, between the Land and abutting land owned by Landlord, with respect to which this Lease shall cover only the portion thereof to the center line between the Land and the abutting land owned by Landlord). The Land and all of the property described in items 0.(a)(i) through 0.(a)(iii) above are hereinafter referred to collectively as the "Real Property". In addition to conveying the leasehold in the Real Property as described above, Landlord hereby assigns to Tenant for the term of this Lease the right to use and enjoy (and, to the extent the following consist of contract rights, to enforce) any assignable interests or rights in, to or under the following that have been transferred to Landlord by Seller under the Existing Contract: (a) any goods, equipment, furnishings, furniture, chattels and personal property of whatever nature that are located on the Real Property and all renewals or replacements of or substitutions for any of the foregoing; and (b) any general intangibles, permits, licenses, franchises, certificates, and other rights and privileges. All of the property, rights and privileges described above in this paragraph are hereinafter collectively called the "Personal Property". In addition to conveying the leasehold in the Real Property and the rights to use and enjoy any Personal Property as described above, Landlord hereby assigns to Tenant for the term of this Lease all rights of the lessor under the Ground Lease described in Exhibit B attached hereto, pursuant to which the current lessee thereunder is operating a Pedro's Restaurant (the "Pedro's Ground Lease"), including the right to receive and collect directly from such lessee all rent required by the Pedro's Ground Lease. The Real Property, the Personal Property and the rights of the lessor under the Pedro's Ground Lease are hereinafter sometimes collectively called the "Leased Property." Provided, however, the leasehold estate conveyed hereby and Tenant's rights hereunder are expressly made subject and subordinate to the Permitted Encumbrances (as defined below) and to any other claims not constituting Prohibited Encumbrances (as defined below). The Leased Property is leased by Landlord to Tenant and is accepted and is to be used and possessed by Tenant upon and subject to the following terms, provisions, covenants, agreements and conditions: 1. Definitions. As used herein, the terms "Landlord," "Tenant," "Existing Contract," "Seller," "Land," "Improvements," "Real Property," "Personal Property," "Pedro's Ground Lease" and "Leased Property" shall have the meanings indicated above and the terms listed immediately below shall have the following meanings: (a) Accounts. "Accounts" shall have the meaning assigned to it in the Pledge Agreement. (b) Active Negligence. "Active Negligence" of any Person (including Landlord) means, and is limited to, the negligent conduct of activities on the Leased Property by such Person or by others acting and authorized to act on such Person's behalf in a manner that proximately causes actual bodily injury or property damage to occur. "Active Negligence" shall not include (1) any negligent failure of Landlord to act when the duty to act would not have been imposed but for Landlord's status as owner of the Leased Property or as a party to the transactions described in this Lease, (2) any negligent failure of any other Indemnified Party to act when the duty to act would not have been imposed but for such party's contractual or other relationship to Landlord or participation or facilitation in any manner, directly or indirectly, of the transactions described in this Lease, or (3) the exercise in a lawful manner by Landlord (or any party lawfully claiming through or under Landlord) of any remedy provided herein or in the Purchase Documents. (c) Additional Rent. "Additional Rent" shall have the meaning assigned to it in subparagraph 3.(d) below. (d) Administrative Fee. "Administrative Fee" shall have the meaning assigned to it in subparagraph 3.(c). (e) Affiliate. "Affiliate" of any Person means any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, the term "control" when used with respect to any Person means the power to direct the management of policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (f) Applicable Laws. "Applicable Laws" shall have the meaning assigned to it in subparagraph 8.(d) below. (g) Applicable Purchaser. "Applicable Purchaser" means any third party designated by Tenant to purchase the Landlord's interest in the Leased Property and in any Escrowed Proceeds as provided in the Purchase Agreement. (h) Attorneys' Fees. "Attorneys' Fees" means the reasonable fees and expenses of counsel to the parties incurring the same, which may include fairly allocated costs of in-house counsel, printing, photostating, duplicating and other expenses, air freight charges, and reasonable fees billed for law clerks, paralegals, librarians and others not admitted to the bar but performing services under the supervision of an attorney. Such terms shall also include, without limitation, all such reasonable fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any manner or proceeding is brought with respect to the matter for which such fees and expenses were incurred. (i) Banking Rules Change. "Banking Rules Change" means either: (1) the introduction of or any change after the date hereof (other than any change by way of imposition or increase of reserve requirements included in the Eurodollar Rate Reserve Percentage) in any law or regulation, in the generally accepted interpretation by the institutional lending community of any law or regulation or in the interpretation of any law or regulation asserted by any regulator, court or other governmental authority or (2) the compliance with any new guideline or new request after the date hereof from any central bank or other governmental authority (whether or not having the force of law). (j) Base Rent. "Base Rent" means the rent payable by Tenant pursuant to subparagraph 3.(a) below. (k) Base Rent Date. "Base Rent Date" means the first Business Day of every calendar month, beginning with February 3, 1997; provided, the last Base Rent Date shall be December 31, 1998. (l) Base Rent Period. "Base Rent Period" means a period for which Base Rent must be paid under the Lease. The first Base Rent Period shall begin on and include the date of this Lease and shall end on but not include the February 3, 1997, the first Base Rent Date. Each successive Base Rent Period shall (1) begin on and include the Base Rent Date upon which the preceding Base Rent Period ends, and (2) end on but not include the next Base Rent Date. (m) Breakage Costs. "Breakage Costs" means any and all costs, losses or expenses incurred or sustained by Landlord's Parent or any other Participant, for which Landlord's Parent or the other Participant shall expect reimbursement from Landlord, because of the resulting liquidation or redeployment of deposits or other funds used to make or maintain Funding Advances upon any application of a Qualified Payment, any sale of the Leased Property pursuant to the Purchase Agreement or any termination of this Lease by Tenant pursuant to Paragraph 2, if such application, sale or termination is effective as of any day other than a Base Rent Date. Breakage Costs will include losses attributable to any decline in LIBOR as of the effective date of application, sale or termination as compared to LIBOR used to determine the Effective Rate then in effect. (However, if in connection with the application, sale or termination, Landlord's Parent or the applicable Participant actually receives a profit because of a corresponding liquidation or redeployment of deposits held by it as Collateral, then such profit will be offset against costs or expenses that would otherwise be charged as Breakage Costs under this Lease.) Each determination by Landlord's Parent of Breakage Costs shall, in the absence of clear and demonstrable error, be conclusive and binding upon Landlord and Tenant. (n) Business Day. "Business Day" means any day that is (1) not a Saturday, Sunday or day on which commercial banks are generally closed or required to be closed in New York City, New York or San Francisco, California, and (2) a day on which dealings in deposits of dollars are transacted in the London interbank market; provided that if such dealings are suspended indefinitely for any reason, "Business Day" shall mean any day described in clause (1). (o) Capital Adequacy Charges. "Capital Adequacy Charges" means any additional amounts Landlord's Parent or any other Participant requires Landlord to pay as compensation for an increase in required capital as provided in subparagraph 8.(y)(iv).(p) Closing Costs. "Closing Costs" means the excess of $61,500,000 over the sums actually paid by Landlord for or in connection with Landlord's acquisition of the Leased Property (including the payment of amounts secured by any lien to which the Real Property may be subject when it is conveyed to Landlord) at the closing under the Existing Contract, which excess will be advanced by or on behalf of Landlord to pay Attorneys' Fees and other costs incurred in connection with the preparation and negotiation of this Lease, the Purchase Documents, the Environmental Indemnity, the Participation Agreement and related documents. To the extent that Landlord does not itself use such excess to pay expenses incurred by Landlord in connection with the preparation and negotiation of such documents, the remainder thereof will be advanced to Tenant, with the expectation that Tenant shall use any such amount advanced for one or more of the following purposes: (1) the payment or reimbursement of expenses incurred by Tenant in connection with the preparation and negotiation of this Lease, the Purchase Documents, the Environmental Indemnity and related documents; (2) the payment or reimbursement of planning, design, engineering and other expenses incurred by Tenant in connection with activities required for the future development of the Leased Property by Tenant, including (to the extent in accordance with the requirements and limitations imposed by this Lease) subdivision, demolition and grading activities, as appropriate; (3) the maintenance of the Leased Property; (4) the payment of the Upfront Fee and the first Administrative Fee; (5) the payment of Rents next due; the payment of Impositions; or (6) the payment to BNP on any Base Rent Date of a Qualified Payments. (q) Change of Control Event. "Change of Control Event" means the occurrence of any merger or consolidation or sale of assets involving Tenant or its Subsidiaries that is prohibited by subparagraph 8.(dd)(iii). (r) Code. "Code" means the Internal Revenue Code of 1986, as amended from time to time. (s) Collateral. "Collateral" shall have the meaning assigned to it in the Pledge Agreement. (t) Collateral Percentage. "Collateral Percentage" for each Base Rent Period means one hundred percent (100%), which is the minimum Collateral Percentage established by (and as defined in) the Pledge Agreement; provided, however, for purposes of this Lease, the Collateral Percentage for any Base Rent Period shall not exceed a fraction; the numerator of which fraction shall equal the value (determined as provided in the Pledge Agreement) of all Collateral (a) that is, on the first day of such Base Rent Period, held by the Deposit Takers under (and as defined in) the Pledge Agreement subject to a first priority, perfected security interest and pledge in favor of Landlord and the Participants under the Pledge Agreement, and (b) that is free from claims or security interests held or asserted by any third party; and the denominator of which fraction shall equal the Stipulated Loss Value on the first day of such Base Rent Period. (u) Debt. "Debt" of any Person means (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations of such Person to pay the deferred purchase price of property or services, (iv) obligations of such Person as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations of such Person, contingent or otherwise, under any lease of real property or related documents (including a separate purchase agreement) which provide that such Person must purchase or cause another to purchase any interest in the leased property or to otherwise guarantee a minimum residual value of the leased property to the lessor; (vi) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (v) above, (vii) liabilities of another Person secured by a Lien on, or payable out of the proceeds of production from, property of such Person even though such obligation shall not be assumed by such Person (but in the case of such liabilities not assumed by such Person, the liabilities shall constitute Debt of such Person only to the extent of the value of such Person's property encumbered by the Lien securing such liabilities) and (viii) Unfunded Benefit Liabilities. (v) Default. "Default" means any event which, with the passage of time or the giving of notice or both, would (if not cured within any applicable cure period) constitute an Event of Default. (w) Default Rate. "Default Rate" means a floating per annum rate equal to three percent (3%) above the Prime Rate. However, in no event will the Default Rate exceed the maximum interest rate permitted by law. (x) Designated Sale Date. "Designated Sale Date" shall have the meaning assigned to it in the Purchase Agreement. (y) Effective Rate. "Effective Rate" means for each Base Rent Period the per annum rate determined by adding (1) forty-seven and one- half basis points (.475 of 1%), plus (2) the quotient derived by dividing (A) LIBOR for such period, by (B) 100% minus the Eurodollar Rate Reserve Percentage for such period. If LIBOR or the Eurodollar Rate Reserve Percentage changes from Base Rent Period to Base Rent Period, then the Effective Rate shall be automatically increased or decreased, as the case may be, upon the commencement of such period. If for any reason Landlord's Parent determines that it is impossible or unreasonably difficult to determine the Effective Rate with respect to a given Base Rent Period in accordance with the preceding sentences, then the "Effective Rate" for that Base Rent Period shall equal any published index or per annum interest rate determined reasonably and in good faith by Landlord's Parent to be a comparable rate at the beginning of the first day of that period. A comparable interest rate might be, for example, the then existing yield on short term United States Treasury obligations (as compiled by and published in the then most recently published United States Federal Reserve Statistical Release H.15(519) or its successor publication), plus or minus a fixed adjustment based on Landlord's Parent's comparison of past eurodollar market rates to past yields on such Treasury obligations. Any determination by Landlord's Parent of the Effective Rate hereunder shall, in the absence of clear and demonstrable error, be conclusive and binding. (z) Environmental Cutoff Date. "Environmental Cutoff Date" means the later of the dates upon which (i) this Lease terminates, (ii) Tenant surrenders possession of the Leased Property or (iii) Tenant ceases to have any leasehold or other interest in the Leased Property under this Lease or otherwise. (aa) Environmental Indemnity. "Environmental Indemnity" means the separate Environmental Indemnity Agreement dated as of the date hereof executed by Tenant in favor of Landlord covering the Land and certain other property described therein, as such agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (bb) Environmental Laws. "Environmental Laws" means any and all existing and future Applicable Laws pertaining to safety, health or the environment, or to Hazardous Substances or Hazardous Substance Activities, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, hereinafter called "CERCLA"), and the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called "RCRA"). (cc) Environmental Losses. "Environmental Losses" means Losses suffered or incurred by any Indemnified Party relating to or arising out of, based on or as a result of: (i) any Hazardous Substance Activity that occurs or is alleged to have occurred on or prior to the Environmental Cutoff Date; (ii) any violation of Environmental Laws on or prior to the Environmental Cutoff Date relating to the Leased Property or to the ownership, use, occupancy or operation thereof; (iii) any investigation, inquiry, order, hearing, action, or other proceeding by or before any governmental or quasi-governmental agency or authority in connection with any Hazardous Substance Activity that occurs or is alleged to have occurred in whole or in part on or prior to the Environmental Cutoff Date; or (iv) any claim, demand, cause of action or investigation, or any action or other proceeding, whether meritorious or not, brought or asserted against any Indemnified Party which relates to, arises from, is based on, or results from any of the matters described in clauses (i), (ii), or (iii) of this subparagraph 1.(cc), or any allegation of any such matters. For purposes of determining whether Losses constitute "Environmental Losses," as the term is used in this Lease, any actual or alleged Hazardous Substance Activity or violation of Environmental Laws relating to the Leased Property will be presumed to have occurred prior to the Environmental Cutoff Date unless Tenant establishes by clear and convincing evidence to the contrary that the relevant Hazardous Substance Activity or violation of Environmental Laws did not occur or commence prior to the Environmental Cutoff Date. Even if Losses are incurred by or asserted against a particular Indemnified Party after the Environmental Cutoff Date, to the extent that such Losses would not have been incurred or asserted but for any matter described in clauses (i), (ii) or (iii) of this subparagraph 1.(cc), or an allegation of any such matter, such Losses will constitute Environmental Losses. (dd) Environmental Report. "Environmental Report" means, collectively, the reports listed on Exhibit C attached hereto. (ee) ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, together with all rules and regulations promulgated with respect thereto. (ff) ERISA Affiliate. "ERISA Affiliate" means any Person who for purposes of Title IV of ERISA is a member of Tenant's controlled group, or under common control with Tenant, within the meaning of Section 414 of the Code, and the regulations promulgated and rulings issued thereunder. (gg) ERISA Termination Event. "ERISA Termination Event" means (i) the occurrence with respect to any Plan of a) a reportable event described in Sections 4043(b)(5) or (6) of ERISA or b) any other reportable event described in Section 4043(b) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA, or (ii) the withdrawal of Tenant or any Affiliate of Tenant from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate any Plan or the treatment of any Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate any Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. (hh) Escrowed Proceeds. "Escrowed Proceeds" means any proceeds that are received by Landlord from time to time during the Term (and any interest earned thereon), which Landlord is holding for the purposes specified in the next sentence, from any party (1) under any casualty insurance policy as a result of damage to the Leased Property, (2) as compensation for any sale of a Parcel pursuant to subparagraph 9.(b)(iii) or for any restriction placed upon the use or development of the Leased Property or for the condemnation of the Leased Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the Leased Property or (4) under any title insurance policy or otherwise as a result of any title defect or claimed title defect with respect to the Leased Property; provided, however, in determining "Escrowed Proceeds" there shall be deducted all expenses and costs of every type, kind and nature (including Attorneys' Fees) incurred by Landlord to collect such proceeds; and provided, further, "Escrowed Proceeds" shall not include any payment to Landlord by a Participant or an Affiliate of Landlord that is made to compensate Landlord for the Participant's or Affiliate's share of any Losses Landlord may incur as a result of any of the events described in the preceding clauses (1) through (4). "Escrowed Proceeds" shall include only such proceeds as are held by Landlord (A) pursuant to Paragraph 4 for the payment to Tenant for the restoration or repair of the Leased Property or (B) for application as a Qualified Payment or as reimbursement of Breakage Costs incurred in connection with a Qualified Payment. "Escrowed Proceeds" shall not include any proceeds that have been applied as a Qualified Payment or to pay Breakage Costs incurred in connection with a Qualified Payment. Until Escrowed Proceeds are paid to Tenant pursuant to Paragraph 4 below or applied as a Qualified Payment or as reimbursement for Breakage Costs incurred in connection with a Qualified Payment, Landlord shall keep the same deposited in an interest bearing account, and all interest earned on such account shall be added to and made a part of Escrowed Proceeds. (ii) Eurocurrency Liabilities. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. (jj) Eurodollar Rate Reserve Percentage. "Eurodollar Rate Reserve Percentage" means, for purposes of determining the Effective Rate for any Base Rent Period, the reserve percentage applicable two Business Days before the first day of such period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding One Billion Dollars with respect to liabilities or deposits consisting of or including Eurocurrency Liabilities (or with respect to any other category or liabilities by reference to which LIBOR is determined) having a term comparable to such period. (kk) Event of Default. "Event of Default" shall have the meaning assigned to it in subparagraph 13.(a) below. (ll) Excluded Taxes. "Excluded Taxes" means (1) all Federal, state and local income taxes upon the Base Rent, the Upfront Fee, the Administrative Fees and any interest paid to Landlord pursuant to subparagraph 3.(e), and any additional compensation claimed by Landlord pursuant to subparagraph 8.(y)(iv); (2) all federal, state and local income taxes upon any amounts paid as reimbursement for or to satisfy Losses incurred by Landlord under this Lease or otherwise to the extent such taxes are offset by a corresponding reduction of Landlord's income taxes because of Landlord's deduction of the reimbursed Losses from Landlord's taxable income or because of any tax credits attributable thereto; (3) any taxes imposed by any governmental authority outside the United States; and (4) any transfer or change of ownership taxes assessed because of Landlord's transfer or conveyance to any third party of any rights or interests in this Lease, the Purchase Documents or the Leased Property, but excluding any such taxes assessed because of any Permitted Transfer. For purposes of this definition, income taxes shall include without limitation any income taxes (whether or not so designated) imposed under the Code or California Bank and Corporation Tax Law as well as Texas corporate franchise taxes. (mm) Fair Market Value. "Fair Market Value" shall have the meaning assigned to it in the Purchase Agreement. (nn) Fed Funds Rate. "Fed Funds Rate" means, for any period, a fluctuating interest rate (expressed as a per annum rate and rounded upwards, if necessary, to the next 1/16 of 1%) equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rates are not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Landlord's Parent from three Federal funds brokers of recognized standing selected by Landlord's Parent. All determinations of the Fed Funds Rate by Landlord's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon Landlord and Tenant. (oo) Funding Advances. "Funding Advances" means the Initial Funding Advance and any subsequent advances made by Landlord's Parent or any other Participant to or on behalf of Landlord in replacement of or renewal and extension of all or part of the Initial Funding Advance. For example, if after the date hereof a new Participant advances funds to or on behalf of Landlord to Landlord's Parent in repayment of all or part of the Initial Funding Advance, such advance of funds by the new Participant shall constitute a Funding Advance hereunder. (pp) GAAP. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, applied on a basis consistent with those used in the preparation of the financial statements referred to in subparagraph 8.(w) (except for changes concurred in by Tenant's independent auditors). (qq) Hazardous Substance. "Hazardous Substance" means (i) any chemical, compound, material, mixture or substance that is now or hereafter defined or listed in, regulated under, or otherwise classified pursuant to, any Environmental Laws as a "hazardous substance," "hazardous material," "hazardous waste," "extremely hazardous waste or substance," "infectious waste," "toxic substance," "toxic pollutant," or any other formulation intended to define, list or classify substances by reason of deleterious properties addressed by Environmental Laws, including, without limitation, ignitability, corrosiveness, reactivity, carcinogenicity, toxicity or reproductive toxicity; (ii) petroleum, any fraction of petroleum, natural gas, natural gas liquids, liquified natural gas, synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas), and ash produced by a resource recovery facility utilizing a municipal solid waste stream, and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iii) asbestos and any asbestos containing material; (iv) "waste" as defined in section 13050(d) of the California Water Code; and (v) any other material that, because of its quantity, concentration or physical or chemical characteristics, poses a significant present or potential hazard to human health or safety or to the environment if released into the workplace or the environment. (rr) Hazardous Substance Activity. "Hazardous Substance Activity" means any actual, proposed or threatened use, storage, holding, release (including, without limitation, any spilling, leaking, leaching, pumping, pouring, emitting, emptying, dumping, disposing into the environment, and the continuing migration into or through soil, surface water, groundwater or any body of water), discharge, deposit, placement, generation, processing, construction, treatment, abatement, removal, disposal, disposition, handling or transportation of any Hazardous Substance from, under, in, into or on the Leased Property, including, without limitation, the movement or migration of any Hazardous Substance from surrounding property, surface water, groundwater or any body of water under, in, into or onto the Leased Property and any resulting residual Hazardous Substance contamination in, on or under the Leased Property. "Hazardous Substance Activity" also means any existence of Hazardous Substances on the Leased Property that would cause the Leased Property or the owner or operator thereof to be in violation of, or that would subject the Leased Property to any remedial obligations under, any Environmental Laws, including without limitation CERCLA and RCRA, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances pertaining to the Leased Property. (ss) Impositions. "Impositions" shall have the meaning assigned to it in subparagraph 8.(p) below. (tt) Improvements. "Improvements," as defined in the recitals at the beginning of this Lease, shall include not only existing improvements to the Land as of the date hereof, if any, but also any new improvements or changes to existing improvements made by Tenant and any replacements, substitutions or restorations thereof. (uu) Indemnified Party. "Indemnified Party" means each of (1) Landlord and any of Landlord's permitted successors and assigns as to all or any portion of the Leased Property or any interest therein (but excluding Tenant or any Applicable Purchaser under the Purchase Agreement or any Person that claims its interest in the Leased Property through or under Tenant or the Applicable Purchaser), (2) the Participants, and (3) any Affiliate, officer, agent, director, employee or servant of any of the parties described in clause (1) or (2) preceding. (vv) Initial Funding Advance. "Initial Funding Advance" means the advance of $61,500,000 made by Landlord's Parent to or on behalf of Landlord on or prior to the date of this Lease to cover the cost of Landlord's acquisition of the Leased Property and Closing Costs. (ww) Landlord's Parent. "Landlord's Parent" means Landlord's Affiliate, Banque Nationale de Paris, a bank organized and existing under the laws of France and any successors of such bank and such Affiliates. (xx) LIBOR. "LIBOR" means, for purposes of determining the Effective Rate for each Base Rent Period, the rate determined by Landlord's Parent to be the average rate of interest per annum (rounded upwards, if necessary, to the next 1/16 of 1%) of the rates at which deposits of dollars are offered or available to Landlord's Parent in the London interbank market at approximately 11:00 a.m. (London time) on the second Business Day preceding the first day of such period. Landlord shall instruct Landlord's Parent to consider deposits, for purposes of making the determination described in the preceding sentence, that are offered: (i) for delivery on the first day of such Base Rent Period, (ii) in an amount equal or comparable to the total (projected on the applicable date of determination by Landlord's Parent) Stipulated Loss Value on the first day of such Base Rent Period, and (iii) for a period of time equal or comparable to the Base Rent Period. If Landlord's Parent so chooses, it may determine LIBOR for any period by reference to the rate reported by the British Banker's Association on Page 3750 of the Telerate Service at approximately 11:00 a.m. (London time) on the second Business Day preceding the first day of such period. If for any reason Landlord's Parent determines that it is impossible or unreasonably difficult to determine LIBOR with respect to a given Base Rent Period in accordance with the preceding sentences, or if Landlord's Parent shall determine that it is unlawful (or any central bank or governmental authority shall assert that it is unlawful) for Landlord, Landlord's Parent or any other Participant to provide or maintain any Funding Advances hereunder during any Base Rent Period for which Base Rent is computed by reference to LIBOR, then "LIBOR" for that Base Rent Period shall equal the rate which is fifty basis points (50/100 of 1%) above the Fed Funds Rate for that period. All determinations of LIBOR by Landlord's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon Landlord and Tenant. (yy) Lien. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any agreement to sell receivables with recourse, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction). Customary bankers' rights of set-off arising by operation of law or by contract (however styled, if the contract grants rights no greater than those arising by operation of law) in connection with working capital facilities, lines of credit, term loans and letter of credit facilities and other contractual arrangements entered into with banks in the ordinary course of business are not "Liens" for the purposes of this Lease. (zz) Losses. "Losses" means any and all losses, liabilities, damages (whether actual, consequential, punitive or otherwise denominated), demands, claims, actions, judgments, causes of action, assessments, fines, penalties, costs, and out-of-pocket expenses (including, without limitation, Attorneys' Fees and the fees of outside accountants and environmental consultants), of any and every kind or character, foreseeable and unforeseeable, liquidated and contingent, proximate and remote, known and unknown. FOR PURPOSES OF DETERMINING THE LIABILITY OF TENANT UNDER THE INDEMNITIES AND AGREEMENTS TO PAY OR PROVIDE REIMBURSEMENT FOR LOSSES (INCLUDING, BUT NOT LIMITED TO "ENVIRONMENTAL LOSSES") SET FORTH HEREIN OR IN THE OTHER DOCUMENTS REFERENCED HEREIN, THE TERM "LOSSES" SHALL INCLUDE LOSSES, LIABILITIES, DAMAGES, DEMANDS, CLAIMS, ACTIONS, JUDGMENTS, CAUSES OF ACTION, ASSESSMENTS, FINES, PENALTIES, COSTS, AND OUT-OF-POCKET EXPENSES INCURRED BY OR ASSERTED AGAINST ANY PARTICULAR INDEMNIFIED PARTY EVEN WHEN CAUSED BY THE NEGLIGENCE OR STRICT LIABILITY OF THAT PARTICULAR OR ANY OTHER INDEMNIFIED PARTY; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL LOSSES, LIABILITIES, DAMAGES, DEMANDS, CLAIMS, ACTIONS, JUDGMENTS, CAUSES OF ACTION, ASSESSMENTS, FINES, PENALTIES, COSTS, AND OUT-OF- POCKET EXPENSES INCURRED BY OR ASSERTED AGAINST A PARTICULAR INDEMNIFIED PARTY AND PROXIMATELY CAUSED BY (AND ATTRIBUTED BY ANY APPLICABLE PRINCIPLES OF COMPARATIVE FAULT TO) MISCONDUCT OF THAT INDEMNIFIED PARTY CONSTITUTE "LOSSES" OF SUCH INDEMNIFIED PARTY FOR PURPOSES OF THIS LEASE AND THE OTHER DOCUMENTS REFERENCED HEREIN; AND PROVIDED, FURTHER, THAT (EXCEPT AS USED IN THE DEFINITION OF "EXCLUDED TAXES" HEREIN) "LOSSES" SHALL NOT IN ANY EVENT INCLUDE EXCLUDED TAXES. (aaa) Misconduct. "Misconduct" of a Person means, and is limited to: (1) if the Person is subject to the terms of this Lease or the Purchase Documents, a breach by such Person of the express provisions of this Lease or the Purchase Documents that continues beyond any period for cure provided herein or therein, and (2) any Active Negligence or wilful misconduct of such Person or its Affiliates or of the officers, employees or employers of such Person or its Affiliates. Misconduct of one Indemnified Party shall not be attributed to a second Indemnified Party if the second Indemnified Party is not an Affiliate, officer, employee or employer of the first. Negligence which does not constitute Active Negligence shall not constitute Misconduct. (bbb) Participant. "Participant" means any Person, including Landlord's Parent, that agrees with Landlord or another Participant to participate in all or some of the risks and rewards to Landlord of this Lease and the Purchase Documents. As of the effective date hereof, the only Participant is Landlord's Parent, but Landlord may agree to share in risks and rewards of this Lease and the Purchase Documents with other Participants in the future. However, no Person other than Landlord's Parent shall qualify as a Participant for purposes of this Lease, the Purchase Documents or any other agreement to which Informix is a party unless, with Informix's prior written approval (such approval not to be unreasonably withheld) or when an Event of Default had occurred and was continuing, such Person became a party to the Pledge Agreement and to the Participation Agreement by executing supplements to those agreements as contemplated therein. (ccc) Participation Agreement. "Participation Agreement" means the Participation Agreement dated the date hereof between Landlord and Landlord's Parent, pursuant to which Landlord's Parent has agreed to participate in certain risks and rewards to Landlord of this Lease and the Purchase Documents, as such Participation Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (ddd) Permitted Encumbrances. "Permitted Encumbrances" means (i) the encumbrances and other matters affecting the Leased Property that are set forth in Exhibit B attached hereto and made a part hereof, and (ii) any provisions of the Existing Contract that survived closing thereunder, and (iii) any easement agreement or other document affecting title to the Leased Property executed by Landlord pursuant to the Existing Contract or pursuant to a document executed in accordance with the Existing Contract or otherwise executed by Landlord at the written request of or with the written consent of Tenant. (eee) Permitted Hazardous Substance Use. "Permitted Hazardous Substance Use" means the use, storage and offsite disposal of Permitted Hazardous Substances in strict accordance with applicable Environmental Laws and with due care given the nature of the Hazardous Substances involved; provided, the scope and nature of such use, storage and disposal shall not include the use of underground storage tanks for any purpose other than the storage of water for fire control, nor shall such scope and nature: (1) exceed that reasonably required for the construction of any Improvements permitted by this Lease or for the operation of the Leased Property for the purposes expressly permitted under subparagraph 7.(a); or (2) include any disposal, discharge or other release of Hazardous Substances in any manner that poses a significant risk of allowing such substances to reach the San Francisco Bay, surface water or groundwater, except (i) through a lawful and properly authorized discharge (A) to a publicly owned treatment works or (B) with rainwater or storm water runoff in accordance with Applicable Laws and any permits obtained by Tenant that govern such runoff; or (ii) any such disposal, discharge or other release of Hazardous Substances for which no permits are required and which are not otherwise regulated under applicable Environmental Laws. Further, notwithstanding anything to the contrary herein contained, Permitted Hazardous Substance Use shall not include any use of the Leased Property in a manner which requires a RCRA treatment, storage or disposal facility permit, including but not limited to a landfill, incinerator or other waste disposal facility. (fff) Permitted Hazardous Substances. "Permitted Hazardous Substances" means Hazardous Substances used and reasonably required for Tenant's operation of the Leased Property for the purposes expressly permitted by subparagraph 7.(a) in strict compliance with all Environmental Laws and with due care given the nature of the Hazardous Substances involved. Without limiting the generality of the foregoing, Permitted Hazardous Substances shall include, without limitation, usual and customary office and janitorial products. (ggg) Permitted Transfer. "Permitted Transfer" means any one or more of the following: (1) the creation or conveyance of rights and interests under the Participation Agreement in favor of Landlord's Parent or other Participants in accordance with subparagraph 1.(bbb); (2) any assignment or conveyance by Landlord of any lien or security interest against the Leased Property (in contrast to a conveyance of Landlord's fee estate in the Leased Property) or of any interest in Rent, payments required by the Purchase Agreement or payments to be generated from the Leased Property after the Term, to any present or future Participant or to any Affiliate of Landlord; (3) any agreement to exercise or refrain from exercising rights or remedies hereunder or under the Purchase Documents or the Environmental Indemnity made by Landlord with any present or future Participant or Affiliate of Landlord; (4) any assignment or conveyance by Landlord requested by Tenant or required by any Permitted Encumbrance, by the Purchase Documents or by Applicable Laws; (5) any assignment or conveyance by Landlord when an Event of Default shall have occurred and be continuing; or (6) any assignment or conveyance by Landlord after the Designated Sale Date. (hhh) Person. "Person" means an individual, a corporation, a partnership, an unincorporated organization, an association, a joint stock company, a joint venture, a trust, an estate, a government or agency or political subdivision thereof or other entity, whether acting in an individual, fiduciary or other capacity. (iii) Plan. "Plan" means at any time an employee pension benefit plan which is covered under Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by Tenant or any Subsidiary for employees of Tenant or any Subsidiary or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which Tenant or any Subsidiary is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. (jjj) Pledge Agreement. "Pledge Agreement" means the Pledge Agreement dated as of the date hereof between Landlord and Tenant, pursuant to which Tenant may pledge certificates of deposit and other collateral as security for Tenant's obligations under the Purchase Agreement (and for the corresponding obligations of Landlord to the Participants under the Participation Agreement), as such Pledge Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (kkk) Prime Rate. "Prime Rate" means the prime interest rate or equivalent charged by Landlord's Parent in the United States as announced or published by Landlord's Parent from time to time, which need not be the lowest interest rate charged by Landlord's Parent. If for any reason Landlord's Parent does not announce or publish a prime rate or equivalent, the prime rate or equivalent announced or published by either Bank of America National Trust & Savings Association or Credit Commercial de France as selected by Landlord shall be used as the Prime Rate. The prime rate or equivalent announced or published by such bank need not be the lowest rate charged by it. The Prime Rate may change from time to time after the date hereof without notice to Tenant as of the effective time of each change in rates described in this definition. (lll) Prohibited Encumbrances. "Prohibited Encumbrances" means, and is limited to, Liens encumbering the Leased Property that are asserted (1) other than as contemplated by this Lease or the Purchase Documents by Landlord itself, (2) by third parties lawfully claiming through or under Landlord (which for purposes of this Lease shall include any judgment lien established against the Leased Property because of a judgment rendered against Landlord and shall also include any lien established against the Leased Property to secure past due Excluded Taxes), or (3) by third parties claiming under a deed or other instrument duly executed by Landlord; provided, however, Prohibited Encumbrances shall not include (A) any Permitted Encumbrances (regardless of whether claimed through or under Landlord), (B) this Lease, the Purchase Documents or any other document executed by Landlord contemporaneously with the execution of this Lease, (C) Liens which are neither lawfully claimed through or under Landlord (as described above) nor claimed under a deed or other instrument duly executed by Landlord, (D) Liens claimed by, through or under Tenant, (E) Liens arising because of Landlord's compliance or good faith attempt to comply with Applicable Law, the Existing Agreement, subparagraph 9.(b) below or any request made by Tenant, (F) Liens securing the payment of property taxes or other amounts assessed against the Leased Property by any governmental authority, other than to secure the payment of Excluded Taxes which Landlord owes but has failed to pay or damages caused by (and attributed by any applicable principles of comparative fault to) Landlord's own Misconduct, or (G) Liens arising because of any breach by Tenant of this Lease or the Purchase Documents. (mmm) Purchase Agreement. "Purchase Agreement" means the Purchase Agreement dated as of the date hereof between Landlord and Tenant pursuant to which Tenant has agreed to purchase or to arrange for the purchase by a third party of the Leased Property, as such Purchase Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (bo) Purchase Documents. "Purchase Documents" means collectively the Purchase Agreement and the Pledge Agreement. (nnn) Purchase Price. "Purchase Price" shall have the meaning assigned to it in the Purchase Agreement. (ooo) Qualified Payments. "Qualified Payments" means any payment designated as such and made by Tenant to Landlord as provided in the definition of Closing Costs set forth above and all payments received by Landlord from time to time during the Term from any party (1) under any casualty insurance policy as a result of damage to the Leased Property, (2) as compensation for any sale of a Parcel pursuant to subparagraph 9.(b)(iii) or for any restriction placed upon the use or development of the Leased Property or for the condemnation of the Leased Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the Leased Property or (4) under any title insurance policy or otherwise as a result of any title defect or claimed title defect with respect to the Leased Property; provided, however, that (x) in determining Qualified Payments, there shall be deducted all expenses and costs of every kind, type and nature (including taxes, Breakage Costs and Attorneys' Fees) incurred by Landlord with respect to the collection of such payments, (y) Qualified Payments shall not include any payment to Landlord by a Participant or an Affiliate of Landlord that is made to compensate Landlord for the Participant's or Affiliate's share of any Losses Landlord may incur as a result of any of the events described in the preceding clauses (1) through (4) and (z) Qualified Payments shall not include any payments received by Landlord that Landlord has paid to Tenant for the restoration or repair of the Leased Property or that Landlord is holding as Escrowed Proceeds. For purposes of computing the total Qualified Payments (and other amounts dependent upon Qualified Payments, such as Stipulated Loss Value) paid to or received by Landlord as of any date, payments described in the preceding clauses (1) through (4) will be considered as Escrowed Proceeds, not Qualified Payments, until they are actually applied as Qualified Payments by Landlord, which Landlord will do as provided in subparagraph 4.(c). (ppp) Remaining Proceeds. "Remaining Proceeds" shall have the meaning assigned to it in subparagraph 4.(a)(ii). (qqq) Rent. "Rent" means the Base Rent and all Additional Rent. (rrr) Responsible Financial Officer. "Responsible Financial Officer" means the chief financial officer, the controller, the treasurer or the assistant treasurer of Tenant. (sss) Stipulated Loss Value. "Stipulated Loss Value" means the amount computed from time to time in accordance with the formula specified in this definition. Such amount shall equal the Initial Funding Advance (i.e., $61,500,000), LESS the amount (if any) of Qualified Payments paid to Landlord on or prior to such date. Thus, for example, if a determination of Stipulated Loss Value is required under subparagraph 3.(a) on the first day of the applicable Base Rent Period, but a portion of the Leased Property has been condemned with the result that $500,000 of net condemnation proceeds have been paid to Landlord and retained by Landlord as Qualified Payments, then the Stipulated Loss Value as of the date of the required determination shall be $61,000,000. Under no circumstances will any payment of Base Rent or the Upfront Fee or any Administrative Fee reduce Stipulated Loss Value. (ttt) Subsidiary. "Subsidiary" means any corporation of which Tenant or its other Subsidiaries own, directly or indirectly, such number of outstanding shares as have more than 50% of the ordinary voting power for the election of directors. (uuu) Tenant's Knowledge. "Tenant's knowledge," "to the knowledge of Tenant" and words of like effect means the actual knowledge (with due investigation) of any of the following employees of Tenant: Howard H. Graham, Senior Vice President, Finance and Chief Financial Officer (with respect to matters arising on or prior to December 31, 1996); Alan S. Henricks, Senior Vice President, Finance and Chief Financial Officer (as to matters arising after December 31, 1996); Margaret R. Brauns, Vice President and Treasurer; David H. Stanley, Vice President, Legal Corporate Services, General Counsel and Secretary; Karen Blasing, Corporate Controller and Chief Accounting Officer; and Clive Merredew, Director, Worldwide Real Estate and Facilities. However, to the extent Tenant's knowledge after the date hereof may become relevant hereunder or under any certificate or other notice provided by Tenant to Landlord in connection with this Lease, "Tenant's knowledge" and words of like effect shall include the then actual knowledge of other employees of Tenant (if any) that have assumed responsibilities of the current employees listed in the preceding sentence or that have replaced such current employees. But none of the employees of Tenant whose knowledge is now or may hereafter be relevant shall be personally liable for the representations of Tenant made herein. (vvv) Term. "Term" shall have the meaning assigned to it in Paragraph 2 below. (www) Unfunded Benefit Liabilities. "Unfunded Benefit Liabilities" means, with respect to any Plan, the amount (if any) by which the present value of all benefit liabilities (within the meaning of Section 4001(a)(16) of ERISA) under the Plan exceeds the fair market value of all Plan assets allocable to such benefit liabilities, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA for calculating the potential liability of Tenant or any ERISA Affiliate of Tenant under Title IV of ERISA. (xxx) Upfront Fee. "Upfront Fee" shall have the meaning assigned to it in subparagraph 3.(b). (yyy) Other Terms and References. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural and vice versa, unless the context otherwise requires. References herein to Paragraphs, subparagraphs or other subdivisions shall refer to the corresponding Paragraphs, subparagraphs or subdivisions of this Lease, unless specific reference is made to another document or instrument. References herein to any Schedule or Exhibit shall refer to the corresponding Schedule or Exhibit attached hereto, which shall be made a part hereof by such reference. All capitalized terms used in this Lease which refer to other documents shall be deemed to refer to such other documents as they may be renewed, extended, supplemented, amended or otherwise modified from time to time, provided such documents are not renewed, extended or modified in breach of any provision contained herein or therein or, in the case of any other document to which Landlord is a party or of which Landlord is an intended beneficiary, without the consent of Landlord. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. The words "this Lease", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Lease as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Paragraph" and "this subparagraph" and similar phrases refer only to the Paragraphs or subparagraphs hereof in which the phrase occurs. The word "or" is not exclusive. Other capitalized terms are defined in the provisions that follow. 2. Term. The term of this Lease (herein called the "Term") shall commence on and include the effective date hereof, and end at 8:00 A.M. on December 31, 1998, unless extended or sooner terminated as herein provided. Notwithstanding any other provision of this Lease which may expressly restrict the early termination hereof, and provided that Tenant is still in possession of the Leased Property and has not breached its obligation to make or have made any payment required by Paragraph 2 of the Purchase Agreement on any prior Designated Sale Date, Tenant may notify Landlord of Tenant's election to terminate this Lease before December 31, 1998, by giving Landlord an irrevocable notice of such election and of the effective date of the termination, which notice must be given (if at all) at least thirty (30) days prior to the effective date of the termination. If Tenant elects to so terminate this Lease, then on the date on which this Lease is to be terminated, not only must Tenant pay all unpaid Rent, Tenant must also pay any Breakage Costs resulting from the termination and must satisfy its obligations under the Purchase Agreement. The payment of all accrued unpaid Rent and any Breakage Costs and the satisfaction of Tenant's obligations under the Purchase Agreement shall be conditions precedent to the effectiveness of any early termination of this Lease by Tenant. The Term may be extended at the option of Tenant for two successive periods of five (5) years each; provided, however, that prior to any such extension the following conditions must have been satisfied: (A) at least one hundred eighty (180) days prior to the commencement of any such extension, Landlord and Tenant must have agreed in writing upon, and received the written consent and approval of Landlord's Parent and all other Participants to (1) a corresponding extension of the date specified in clause (iii) of the definition of Designated Sale Date in the Purchase Agreement, and (2) an adjustment to the Rent that Tenant will be required to pay for the extension, it being expected that the Rent for the extension may be different than the Rent required for the original Term, and it being understood that the Rent for any extension must in all events be satisfactory to both Landlord and Tenant, each in its sole and absolute discretion; (B) there must be no Event of Default continuing hereunder at the time of Tenant's exercise of its option to extend; and (C) immediately prior to any such extension, this Lease must remain in effect. With respect to the condition that Landlord and Tenant must have agreed upon the Rent required for any extension of the Term, neither Tenant nor Landlord is willing to submit itself to a risk of liability or loss of rights hereunder for being judged unreasonable. Accordingly, both Tenant and Landlord hereby disclaim any obligation express or implied to be reasonable in negotiating the Rent for any such extension. Subject to the changes to the Rent payable during any extension of the Term as provided in this Paragraph, if Tenant exercises its option to extend the Term as provided in this Paragraph, this Lease shall continue in full force and effect, and the leasehold estate hereby granted to Tenant shall continue without interruption and without any loss of priority over other interests in or claims against the Leased Property that may be created or arise after the date hereof and before the extension. 3. Rental. (a) Base Rent. Tenant shall pay Landlord rent (herein called "Base Rent") in arrears, in currency that at the time of payment is legal tender for public and private debts in the United States of America, in installments on each Base Rent Date through the end of the Term. Each payment of Base Rent must be received by Landlord no later than 12:00 noon (San Francisco time) on the date it becomes due; if received after 12:00 noon it will be considered for purposes of this Lease as received on the next following Business Day. Each installment of Base Rent shall represent rent allocable to the Base Rent Period ending on the date on which the installment is due. Landlord shall notify Tenant in writing of the Base Rent due for each Base Rent Period at least fifteen (15) days prior to the Base Rent Date on which such period ends. Any failure by Landlord to so notify Tenant shall not constitute a waiver of Landlord's right to payment, but absent such notice Tenant shall not be in default for any underpayment resulting therefrom if Tenant, in good faith, reasonably estimates the payment required, makes a timely payment of the amount so estimated and corrects any underpayment within three (3) Business Days after being notified by Landlord of the underpayment. If Tenant or any other Applicable Purchaser purchases Landlord's interest in the Leased Property pursuant to the Purchase Agreement, any Base Rent for the Base Rent Period ending on the date of purchase (or if the date of Purchase is not a Base Rent Date, then pro rated Base Rent for the Base Rent Period which included the date of purchase) and all outstanding Additional Rent shall be due on the Designated Sale Date in addition to the purchase price and other sums due Landlord under the Purchase Agreement. The Base Rent for each Base Rent Period shall equal the sum of: (1) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) the Collateral Percentage for such Base Rent Period, times (C) twenty two and one-half basis points (0.225 of 1%), times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360); PLUS (2) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) one minus the Collateral Percentage for such Base Rent Period, times (C) the Effective Rate for such Base Rent Period, times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360). Assume, only for the purpose of illustration: that a hypothetical Base Rent Period contains exactly ninety (90) days; that prior to the first day of such Base Rent Period a total of $31,500,000 of Qualified Payments have been received by Landlord, leaving a Stipulated Loss Value of $30,000,000 (the Initial Funding Advance of $61,500,000 less the Qualified Payments of $31,500,000); that the Collateral Percentage for such Base Rent Period is forty percent (40%); and that the Effective Rate for the applicable Base Rent Period is 6%. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal: $30,000,000 x 60% x 6% x 90/360, or $270,000, PLUS $30,000,000 x 40% x .225% x 90/360, or $6,750 = $276,750 (b) Upfront Fee. Upon execution and delivery of this Lease by Landlord, Tenant shall pay Landlord an upfront fee (the "Upfront Fee") as provided in the letter dated November 15, 1996 from Landlord to Tenant, as amended by a letter sent to Landlord on behalf of Tenant dated December 2, 1996 (less the deposit already paid by Tenant pursuant to that letter which will be applied against the Upfront Fee). The Upfront Fee shall represent Additional Rent for the first Base Rent Period. (c) Administrative Fees. Upon execution and delivery of this Lease by Landlord, and again on each anniversary of the date hereof prior to the Designated Sale Date, Tenant shall pay Landlord an administrative fee (an "Administrative Fee") as provided in the letter dated November 15, 1996 from Landlord to Tenant, as amended by a letter sent to Landlord on behalf of Tenant dated December 2, 1996. Each payment of an Administrative Fee shall represent Additional Rent for the Base Rent Period during which it first becomes due. (d) Additional Rent. All amounts which Tenant is required to pay to or on behalf of Landlord pursuant to this Lease, together with every charge, premium, interest and cost set forth herein which may be added for nonpayment or late payment thereof, shall constitute rent (all such amounts, other than Base Rent, are herein called "Additional Rent"). (e) Interest and Order of Application. All Rent shall bear interest, if not paid when first due, at the Default Rate in effect from time to time from the date due until paid; provided, that nothing herein contained will be construed as permitting the charging or collection of interest at a rate exceeding the maximum rate permitted under Applicable Laws. Landlord shall be entitled to apply any amounts paid by or on behalf of Tenant hereunder against any Rent then past due in the order the same became due or in such other order as Landlord may elect. (f) Net Lease. It is the intention of Landlord and Tenant that the Base Rent and all other payments herein specified shall be absolutely net to Landlord. Tenant shall pay all costs, expenses and obligations of every kind relating to the Leased Property or this Lease which may arise or become due during the Term, including, without limitation: (i) Impositions, including any taxes payable by virtue of Landlord's receipt of amounts paid to or on behalf of Landlord in accordance with this subparagraph 3.(f), but not including any Excluded Taxes; (ii) any Capital Adequacy Charges; (iii) any amount for which Landlord is or becomes liable with respect to the Permitted Encumbrances; and (iv) any costs incurred by Landlord (including Attorneys' Fees) because of Landlord's acquisition or ownership of the Leased Property or because of this Lease or the transactions contemplated herein. However, the preceding sentence shall not be construed to make Tenant liable for (1) damages suffered by Landlord because of (and attributed by any applicable principles of comparative fault to) its own Misconduct, (2) Excluded Taxes, (3) withholding taxes permitted by subsection 3.(g), (4) general overhead or internal administrative expenses of Landlord, Landlord's Parent or any Participant, except to the extent allowed by subparagraph 8.(y)(iii) because of changes described in that subparagraph after the date of this Lease, or (5) Environmental Losses for which Tenant is not responsible or required to indemnify Landlord pursuant to Paragraph 11 or the other express provisions of this Lease. (g) Withholding Taxes. Subject to the provisions of this subparagraph 3.(g), but notwithstanding anything else to the contrary in this Lease, to the extent required by law Tenant may deduct United States and California withholding taxes imposed as a way of collecting or in lieu of Excluded Taxes on payments of the Upfront Fee, Administrative Fees, Base Rent, any interest payable pursuant to subparagraph 3.(e) or any additional compensation claimed by Landlord pursuant to subparagraph 8.(y)(iv) (collectively, "Income Payments") from Income Payments, without obligation to gross up, indemnify or otherwise increase payments in consequence thereof. Such withholding will be permitted if, but only if: (i) in the case of withholding for Excluded Taxes imposed by the United States, the Person entitled to receive Income Payments (whether the original Landlord named herein or an assignee of the original Landlord's rights hereunder, a "Payee") is not exempt from withholding by reason of having been organized under the laws of the United States or any State thereof, and such Person shall not have provided Tenant with three (3) counterparts of each of the forms prescribed by the Internal Revenue Service (Form 1001 or 4224, or successor forms, as the case may be) claiming for Payee an exemption from federal withholding on all Income Payments; (ii) in the case of withholding for Excluded Taxes imposed by the State of California, the Payee is not exempt from withholding by reason of having been qualified to do business in California, and such Person shall not have provided Tenant with three (3) counterparts of the forms (if any) prescribed by the California taxing authorities claiming for Payee an exemption from California withholding on all Income Payments; (iii) at least thirty (30) days prior to any withholding from or reduction of Income Payments, Tenant shall have notified the Payee that Tenant believes the withholding is required and permitted by this subparagraph; and (iv) the withholding taxes on the Income Payments would have been assessed even if the applicable taxing authorities had characterized the transactions evidenced by this Lease and the Purchase Agreement as a mere financing arrangement. Any Payee exempt from withholding for Excluded Taxes imposed by the United States by reason of having been organized under the laws of the United States or any State thereof shall provide to Tenant statements conforming to the requirements of Treasury Regulation 1.1441-5(b) or any successor thereto (which statements may be made on a Form W-9). If Tenant shall ever be required to pay Excluded Taxes that Landlord has failed to pay when due because of Tenant's failure to withhold from payments made under this Lease, Landlord shall reimburse Tenant for such Excluded Taxes. Nothing in this subparagraph 3.(g) shall excuse Tenant from its obligation under subparagraph 8.(y)(iii) to compensate Landlord for increased costs attributable to any change in law relating to withholding taxes after the date hereof. (h) No Demand or Setoff. The Base Rent and all Additional Rent shall be paid without notice or demand and without abatement, counterclaim, deduction, setoff or defense, except as expressly provided herein. 4. Insurance and Condemnation Proceeds. (a) Subject to Landlord's rights under this Paragraph 4, and so long as no Event of Default shall have occurred and be continuing, Tenant shall be entitled to use all casualty insurance and condemnation proceeds payable with respect to the Leased Property during the Term for the restoration and repair of the Leased Property or any remaining portion thereof. Except as provided in the last sentence of subparagraph 8.(s), all insurance and condemnation proceeds received with respect to the Leased Property (including proceeds payable under any insurance policy covering the Leased Property which is maintained by Tenant) shall be paid to Landlord and then applied as follows: (i) First, such proceeds shall be used to reimburse Landlord for any costs and expenses, including Attorneys' Fees, incurred in connection with the collection of such proceeds. (ii) Second, the remainder of such proceeds (the "Remaining Proceeds"), shall be held by Landlord as Escrowed Proceeds and applied to reimburse Tenant for the actual cost of the repair, restoration or replacement of the Leased Property. However, any Remaining Proceeds not needed for such purpose shall be applied by Landlord as Qualified Payments, as provided in subparagraph 4.(c), after Tenant notifies Landlord that they are not needed for repairs, restoration or replacement. (b) Any Remaining Proceeds held by Landlord as Escrowed Proceeds shall be deposited by Landlord in an interest bearing account as provided in the definition of Escrowed Proceeds and shall be paid to Tenant as the applicable repair, restoration or replacement progresses and upon compliance by Tenant with such terms, conditions and requirements as may be reasonably imposed by Landlord, but in no event shall Landlord be required to pay any Escrowed Proceeds to Tenant in excess of the actual cost to Tenant of the applicable repair, restoration or replacement, as evidenced by invoices or other documentation reasonably satisfactory to Landlord, it being understood that Landlord may retain any such excess as a Qualified Payment. In any event, Tenant will not be entitled to any abatement or reduction of the Base Rent or any other amount due hereunder except to the extent that such excess Remaining Proceeds result in Qualified Payments which reduce Stipulated Loss Value (and thus payments computed on the basis of Stipulated Loss Value) as provided in the definitions set out above. Further, notwithstanding the inadequacy of the Remaining Proceeds held by Landlord as Escrowed Proceeds, if any, or anything herein to the contrary, Tenant must, after any taking of less than all or substantially all of the Leased Property by condemnation and after any damage to the Leased Property by fire or other casualty, either: (1) promptly restore or improve the Leased Property or the remainder thereof to a value no less than sixty percent (60%) of Stipulated Loss Value (computed after the application of any Remaining Proceeds as a Qualified Payment) and to a reasonably safe and sightly condition; or (2) promptly restore the Leased Property to a reasonably safe and sightly condition and pay to Landlord for application as a Qualified Payment the amount (if any), as determined by Landlord, needed to reduce Stipulated Loss Value (computed after the application of such amount and any available Remaining Proceeds as Qualified Payments) to no more than one hundred sixty-six percent (166%) of the then-current market value of the Leased Property or remainder thereof. Any taking of so much of the Leased Property as, in Landlord's reasonable judgment, makes it impracticable to restore or improve the remainder thereof as required by part (1) of the preceding sentence shall be considered a taking of substantially all the Leased Property for purposes of this Paragraph 4. (c) Notwithstanding the foregoing, if an Event of Default shall have occurred and be continuing, Landlord shall be entitled to receive and collect all insurance or condemnation proceeds payable with respect to the Leased Property, and: (i) Landlord shall apply the Remaining Proceeds received by Landlord as a Qualified Payment (or as reimbursement for Breakage Costs incurred in connection with such Qualified Payment) within ten (10) Business Days after Landlord receives a written notice from Tenant unconditionally directing Landlord to so apply the same; and (ii) in the absence of such a notice from Tenant to Landlord, Landlord shall be entitled to either, at the discretion of Landlord, (A) hold all Remaining Proceeds as Escrowed Proceeds until paid to Tenant as reimbursement for the actual and reasonable cost of repairing, restoring or replacing the Leased Property when Tenant has completed such repair, restoration or replacement, or (B) apply such proceeds as Qualified Payments when and to the extent deemed appropriate by Landlord. When no Event of Default shall have occurred and be continuing, Landlord shall apply any Remaining Proceeds paid to it or other amounts which are to be applied as a Qualified Payment (or as reimbursement for Breakage Costs incurred in connection with a Qualified Payment) within three (3) Business Days after Landlord receives a written notice from Tenant unconditionally directing Landlord to so apply the same. In any event, Landlord may deduct Breakage Costs incurred in connection with a Qualified Payment from the Remaining Proceeds or other amounts available to Landlord for application as the Qualified Payment, and Tenant will reimburse Landlord upon request for any such Breakage Costs that Landlord incurs but does not so deduct. If Remaining Proceeds held by Landlord exceed Stipulated Loss Value and any Rent payable by Tenant, Tenant may get the excess by terminating this Lease in accordance with Paragraph 2 and purchasing any remaining interest of Landlord in the Leased Property and the Escrowed Proceeds, pursuant to the Purchase Agreement. (d) In the event of any taking of all or substantially all of the Leased Property, Landlord shall be entitled to apply all Remaining Proceeds as a Qualified Payment, notwithstanding the foregoing. In addition, if Stipulated Loss Value immediately prior to any taking of all or substantially all of the Leased Property by condemnation exceeds the sum of the Remaining Proceeds resulting from such condemnation, then Landlord shall be entitled to recover the excess from Tenant upon demand as an additional Qualified Payment, whereupon this Lease shall terminate. (e) Nothing herein contained shall be construed to prevent Tenant from obtaining a separate award from any condemning authority for a taking of Tenant's personal property, for moving expenses, for severance damages to other real property owned by Tenant adjacent to the Land or for business interruption, provided, such award is not combined with and does not reduce the award for any taking of the Leased Property, including Tenant's interest therein. (f) Without limiting Landlord's obligations under the other provisions of this Paragraph 4 or Tenant's obligations to make repairs under other provisions of this Lease, Landlord and Tenant each waive any right of recovery against the other, and the other's agents, officers or employees, for any damage to the Leased Property or to the personal property situated from time to time in or on the Leased Property resulting from fire or other casualty covered by a valid and collectible insurance policy; provided, however, that the waiver set forth in this subparagraph 4.(f) shall be effective insofar, but only insofar, as compensation for such damage or loss is actually recovered by the waiving party (net of costs of collection) under the policy notwithstanding the waivers set out in this paragraph. Tenant shall cause the insurance policies required of Tenant by this Lease to be properly endorsed, if necessary, to prevent any loss of coverage because of the waivers set forth in this paragraph. If such endorsements are not available, the waivers set forth in this paragraph shall be ineffective to the extent that such waivers would cause required insurance with respect to the Leased Property to be impaired. 5. No Lease Termination. (a) Status of Lease. Except as expressly provided herein, this Lease shall not terminate, nor shall Tenant have any right to terminate this Lease, nor shall Tenant be entitled to any abatement of the Rent, nor shall the obligations of Tenant under this Lease be excused, for any reason whatsoever, including without limitation any of the following: (i) any damage to or the destruction of all or any part of the Leased Property from whatever cause, (ii) the taking of the Leased Property or any portion thereof by eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of Tenant's use of all or any portion of the Leased Property or any interference with such use by governmental action or otherwise, (iv) any eviction of Tenant or of anyone claiming through or under Tenant by paramount title or otherwise (provided, if Tenant is wrongfully evicted by Landlord or by any third party exercising its rights under a Prohibited Encumbrance, then Tenant will have the remedies described in Paragraph 14 below), (v) any default on the part of Landlord under this Lease or under any other agreement to which Landlord and Tenant are parties, (vi) the inadequacy in any way whatsoever of the design or construction of any improvements included in the Leased Property, it being understood that Landlord has not made and will not make any representation express or implied as to the adequacy thereof, or (vii) any other cause whether similar or dissimilar to the foregoing, any existing or future law to the contrary notwithstanding. It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate and independent of the covenants and agreements of Landlord, that the Base Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events and that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated or limited pursuant to an express provision of this Lease. However, nothing in this Paragraph shall be construed as a waiver by Tenant of any right Tenant may have at law or in equity to (i) recover monetary damages for any default under this Lease by Landlord that Landlord fails to cure within the period provided in Paragraph 14, (ii) injunctive relief in case of the violation, or attempted or threatened violation, by Landlord of any of the express covenants, agreements, conditions or provisions of this Lease, or (iii) a decree compelling performance of any of the express covenants, agreements, conditions or provisions of this Lease. (b) Waiver By Tenant. Without limiting the foregoing, Tenant waives to the extent permitted by Applicable Laws, except as otherwise expressly provided herein, all rights to which Tenant may now or hereafter be entitled by law (including any such rights arising because of any implied "warranty of suitability" or other warranty under Applicable Laws) (i) to quit, terminate or surrender this Lease or the Leased Property or any part thereof or (ii) to any abatement, suspension, deferment or reduction of the Base Rent or any other sums payable under this Lease. 6. Purchase Documents and Environmental Indemnity. Tenant acknowledges and agrees that nothing contained in this Lease shall limit, modify or otherwise affect any of Tenant's obligations under the Purchase Documents or Environmental Indemnity, which obligations are intended to be separate, independent and in addition to, and not in lieu of, the obligations established by this Lease. In the event of any inconsistency between the terms and provisions of the Purchase Documents or Environmental Indemnity and the terms and provisions of this Lease, the terms and provisions of the Purchase Documents or Environmental Indemnity (as the case may be) shall control. 7. Use and Condition of Leased Property. (a) Use. Subject to the Permitted Encumbrances and the terms hereof, Tenant may use and occupy the Leased Property so long as no Event of Default occurs hereunder, but only for the continued operation of the Pedro's Restaurant or another restaurant or as reasonably necessary to develop the Land for use for the following purposes and other lawful purposes incidental thereto: (i) administrative and office space; and (ii) research and development of software and other computer-related products; (iii) distribution and warehouse storage of software and other computer- related products; and (iv) assembly of computer-related products using components manufactured elsewhere, but not including the manufacture of computer chips on-site; (v) cafeteria, library, fitness center and other support function uses that Tenant may provide to its employees; and (vi) other lawful purposes approved in advance and in writing by Landlord, which approval will not be unreasonably withheld (but Tenant acknowledges that Landlord's withholding of such approval shall be reasonable if Landlord determines in good faith that (1) giving the approval may materially increase Landlord's risk of liability for any existing or future environmental problem, or (2) giving the approval is likely to substantially increase Landlord's administrative burden of complying with or monitoring Tenant's compliance with the requirements of this Lease). Although the term "computer-related products" in this subparagraph may include products designed to detect, monitor, neutralize, handle or process Hazardous Substances, the use of the Leased Property by Tenant shall not include bringing Hazardous Substances onto the Leased Property for the purpose of researching, testing or demonstrating any such products. (b) Condition. Tenant accepts the Leased Property (and will accept the same upon any purchase of the Landlord's interest therein) in its present state, AS IS, and without any representation or warranty, express or implied, as to the condition of such property or as to the use which may be made thereof. Tenant also accepts the Leased Property without any representation or warranty, express or implied, by Landlord regarding the title thereto or the rights of any parties in possession of any part thereof, except as set forth in subparagraph 9.(a). Landlord shall not be responsible for any latent or other defect or change of condition in the Land, or Improvements, fixtures and personal property (if any) forming a part of the Leased Property, and the Rent hereunder shall in no case be withheld or diminished because of any latent or other defect in such property, any change in the condition thereof or the existence with respect thereto of any violations of Applicable Laws. Nor shall Landlord be required to furnish to Tenant any facilities or service of any kind, such as, but not limited to, water, steam, heat, gas, hot water, electricity, light or power. (c) Consideration of and Scope of Waiver. The provisions of subparagraph 7.(b) above have been negotiated by the Landlord and Tenant after due consideration for the Rent payable hereunder and are intended to be a complete exclusion and negation of any representations or warranties of the Landlord, express or implied, with respect to the Leased Property that may arise pursuant to any law now or hereafter in effect, or otherwise. However, such exclusion of representations and warranties by Landlord is not intended to impair any representations or warranties made by other parties, including Seller, the benefit of which is to pass to Tenant during the Term because of the definition of Personal Property and Leased Property above. 8. Other Representations, Warranties and Covenants of Tenant. Tenant represents, warrants and covenants as follows: (a) Financial Matters. Tenant is solvent and has no outstanding liens, suits, garnishments or court actions which could render Tenant insolvent. There has not been filed by or, to Tenant's knowledge, against Tenant a petition in bankruptcy or a petition or answer seeking an assignment for the benefit of creditors, the appointment of a receiver, trustee, custodian or liquidator with respect to Tenant or any significant portion of Tenant's property, reorganization, arrangement, rearrangement, composition, extension, liquidation or dissolution or similar relief under the federal Bankruptcy Code or any state law. The financial statements and all financial data heretofore delivered to Landlord relating to Tenant have been prepared in accordance with GAAP in all material respects. No material adverse change has occurred in the financial position of Tenant as reflected in Tenant's financial statements covering the fiscal period ended September 29, 1996. (b) Existing Contract and Pedro's Ground Lease. Except to the extent required of Landlord under subparagraph 9.(b), Tenant shall satisfy all surviving obligations of the "Buyer" (as the term "Buyer" is used in the Existing Contract) under the Existing Contract and under all other documents, the execution of which is required by or in connection with the Existing Contract. To the extent required during the Term, Tenant shall also satisfy all obligations of the lessor under the Pedro's Ground Lease. Tenant agrees to indemnify, defend and hold Landlord harmless from and against any and all Losses imposed on or asserted against or incurred by Landlord at any time and from time to time by reason of, in connection with or arising out of any obligations imposed by the Existing Contract or the Pedro's Ground Lease. Because Tenant hereby assumes and agrees to satisfy all surviving obligations of the Buyer under the Existing Contract and all obligations of the lessor under the Pedro's Ground Lease, no failure by Landlord to take any action required by the Existing Contract (save and except any actions required of Landlord under subparagraph 9.(b)) or by the Pedro's Ground Lease shall, for the purposes of this indemnity, be deemed to be caused by the Misconduct of Landlord. The foregoing indemnity is in addition to the other indemnities set out herein and shall not terminate upon the closing of any sale of Landlord's interest in the Leased Property pursuant to the provisions of the Purchase Agreement or the termination of this Lease. Notwithstanding anything herein to the contrary, so long as no Event of Default has occurred and is continuing, Tenant may terminate the Pedro's Ground Lease at any time (and at Tenant's sole expense) during the Term by agreement with the lessee thereunder or by the lawful exercise of any right of termination therein provided to the lessor. (c) No Default or Violation. The execution, delivery and performance by Tenant of this Lease, the Purchase Documents and the Environmental Indemnity do not and will not constitute a breach or default under any other material agreement or contract to which Tenant is a party or by which Tenant is bound or which affects the Leased Property or Tenant's use, occupancy or operation of the Leased Property or any part thereof and do not, to the knowledge of Tenant, violate or contravene any law, order, decree, rule or regulation to which Tenant is subject, and such execution, delivery and performance by Tenant will not result in the creation or imposition of (or the obligation to create or impose) any lien, charge or encumbrance not contemplated by this Lease or the Purchase Documents on, or security interest in, Tenant's property pursuant to the provisions of any of the foregoing. (d) Compliance with Covenants and Laws. The intended use of the Leased Property by Tenant complies, or will comply after Tenant obtains readily available permits, in all material respects with all applicable restrictive covenants, zoning ordinances and building codes, flood disaster laws, applicable health, safety and environmental laws and regulations, the Americans with Disabilities Act and other laws pertaining to disabled persons, and all other applicable laws, statutes, ordinances, rules, permits, regulations, orders, determinations and court decisions (all of the foregoing are herein sometimes collectively called "Applicable Laws"). Tenant has obtained or will promptly obtain all utility, building, health and operating permits as may be required for Tenant's use of the Leased Property by any governmental authority or municipality having jurisdiction over the Leased Property. (e) Environmental Representations. To Tenant's knowledge and except as otherwise disclosed in the Environmental Report, as of the date hereof: (i) neither Tenant nor any prior owner or operator of the Leased Property or any surrounding property has reported or been required to report any release of any Hazardous Substances on or from the Leased Property or the surrounding property pursuant to any Environmental Law; (ii) neither Tenant nor any prior owner or operator of the Leased Property has received from any federal, state or local governmental authority any warning, citation, notice of violation regarding a suspected or known release or discharge of Hazardous Substances on or from the Leased Property or regarding a suspected or known violation of Environmental Laws concerning the Leased Property which has not been completely rectified; and (iii) none of the following are located on the Leased Property: asbestos; urea formaldehyde foam insulation; transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty (50) parts per million; any other Hazardous Substances other than Permitted Hazardous Substances; or any underground storage tank or tanks prohibited by this Lease. Further, Tenant represents that to Tenant's knowledge the Environmental Report is not misleading or inaccurate in any material respect. (f) No Suits. There are no judicial or administrative actions, suits, proceedings or investigations pending or, to Tenant's knowledge, threatened that will affect Tenant's intended use of the Leased Property or the validity, enforceability or priority of this Lease, or Tenant's use, occupancy and operation of the Leased Property or any part thereof, and Tenant is not in default with respect to any order, writ, injunction, decree or demand of any court or other governmental or regulatory authority that could materially and adversely affect the business or assets of Tenant and its Subsidiaries taken as a whole or Tenant's use, occupancy or operation of the Leased Property. No condemnation or other like proceedings are pending or, to Tenant's knowledge, threatened against the Leased Property. (g) Condition of Property. The Land as described in Exhibit A is shown on the plat included as part of the A.L.T.A. Survey prepared by Brian Kangos Foulk, dated 12-4-96, which was delivered to Landlord at the request of Tenant. All material improvements on the Land as of the date hereof are as shown on that survey, and except as shown on that survey there are no easements or encroachments visible or apparent from an inspection of the Real Property. Adequate provision has been made (or can be made at a cost that is reasonable in connection with future development of the Land) for the Leased Property to be served by electric, gas, storm and sanitary sewers, sanitary water supply, telephone and other utilities required for the use thereof. All streets, alleys and easements necessary to serve the Leased Property have been completed and are serviceable (or can be completed at a cost that is reasonable in connection with future development of the Land). No extraordinary circumstances (including any use of the Land as a habitat for endangered species) exists that would materially and adversely affect the future development of the Land. Tenant is not aware of any latent or patent material defects or deficiencies in the Real Property that, either individually or in the aggregate, could materially and adversely affect Tenant's use or occupancy or could reasonably be anticipated to endanger life or limb. (h) Organization. Tenant is duly incorporated and legally existing under the laws of Delaware and is duly qualified to do business in the State of California. Tenant has all requisite power and has procured or will procure on a timely basis all governmental certificates of authority, licenses, permits, qualifications and other documentation required to lease and operate the Leased Property. Tenant has the corporate power and adequate authority, rights and franchises to own Tenant's property and to carry on Tenant's business as now conducted and is duly qualified and in good standing in each state in which the character of Tenant's business makes such qualification necessary (including, without limitation, the State of California) or, if it is not so qualified in a state other than California, such failure does not have a material adverse effect on the properties, assets, operations or businesses of Tenant and its Subsidiaries, taken as a whole. (i) Enforceability. The execution, delivery and performance of this Lease, the Purchase Documents and the Environmental Indemnity are duly authorized and do not require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained and are not in contravention of or conflict with any Applicable Laws or any term or provision of Tenant's articles of incorporation or bylaws. This Lease, the Purchase Documents and Environmental Indemnity are valid, binding and legally enforceable obligations of Tenant in accordance with their terms, except as such enforcement is affected by bankruptcy, insolvency and similar laws affecting the rights of creditors, generally, and equitable principles of general application. (j) Not a Foreign Person. Tenant is not a "foreign person" within the meaning Sections 1445 and 7701 of the Code (i.e., Tenant is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder). (k) Omissions. To Tenant's knowledge, none of Tenant's representations or warranties contained in this Lease or any document, certificate or written statement furnished to Landlord by or on behalf of Tenant contains any untrue statement of a material fact or omits a material fact necessary in order to make the statements contained herein or therein (when taken in their entireties) not misleading. (l) Existence. Tenant shall continuously maintain its existence and its qualification to do business in the State of California. (m) Tenant Taxes. Tenant shall comply with all applicable tax laws and pay before the same become delinquent all taxes imposed upon it or upon its property where the failure to so comply or so pay would have a material adverse effect on the financial condition or operations of Tenant; except that Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any such taxes and pending such contest Tenant shall not be deemed in default under this subparagraph if (1) Tenant diligently prosecutes such contest to completion in an appropriate manner, and (2) Tenant promptly causes to be paid any tax adjudged by a court of competent jurisdiction to be due, with all costs, penalties, and interest thereon, promptly after such judgment becomes final; provided, however, in any event such contest shall be concluded and the tax, penalties, interest and costs shall be paid prior to the date any writ or order is issued under which any of Tenant's property that is material to the business of Tenant and its Subsidiaries taken as a whole may be seized or sold because of the nonpayment thereof. (n) Operation of Property. Tenant shall operate the Leased Property in a good and workmanlike manner and in compliance with all Applicable Laws and will pay all fees or charges of any kind in connection therewith, other than Excluded Taxes. Tenant shall not use or occupy, or allow the use or occupancy of, the Leased Property in any manner which violates any Applicable Law or which constitutes a public or private nuisance or which makes void, voidable or cancelable any insurance then in force with respect thereto. To the extent (but only to the extent) that any of the following would, individually or in the aggregate, materially and adversely affect the value of the Leased Property or Tenant's use, occupancy or operations on the Leased Property, Tenant shall be prohibited by this Lease from: (i) initiating or permitting any zoning reclassification of the Leased Property; (ii) seeking any variance under existing zoning ordinances applicable to the Leased Property; (iii) using or permitting the use of the Leased Property in a manner that would result in such use becoming a nonconforming use under applicable zoning ordinances or similar laws, rules or regulations; (iv) executing or filing any subdivision plat affecting the Leased Property; (v) consenting to the annexation of the Leased Property to any municipality; or (v) taking other comparable action in anticipation of the future development of the Land. If a change in the zoning or other Applicable Laws affecting the permitted use or development of the Leased Property shall occur that Landlord determines will materially reduce the then-current market value of the Leased Property, and if after such reduction the Stipulated Loss Value shall substantially exceed the then-current market value of the Leased Property in the reasonable judgment of Landlord, then Tenant shall pay Landlord an amount equal to such excess for application as a Qualified Payment. Tenant shall make any payment required by the preceding sentence within one hundred eighty (180) days after it is requested by Landlord, and in any event shall make any such payment before the end of the Term. Tenant shall not impose any restrictive covenants or encumbrances upon the Leased Property without the prior written consent of the Landlord; provided, that such consent shall not be unreasonably withheld for any encumbrance or restriction that is required by any municipality or other governmental entity in connection with any rezoning, replatting or development by Tenant otherwise permitted by this Lease or for any encumbrance or restriction that is made expressly subject to this Lease, as modified from time to time, and subordinate to Landlord's interest in the Leased Property by an agreement in form satisfactory to Landlord. Tenant shall not cause or permit any drilling or exploration for, or extraction, removal or production of, minerals from the surface or subsurface of the Leased Property. Tenant shall not do any act whereby the market value of the Leased Property may be materially lessened. Tenant shall allow Landlord or its authorized representative to enter the Leased Property at any reasonable time to inspect the Leased Property and, after reasonable notice, to inspect Tenant's books and records pertaining thereto, and Tenant shall assist Landlord or Landlord's representative in whatever way reasonably necessary to make such inspections. If Tenant receives a written notice or claim from any federal, state or other governmental entity that the Leased Property is not in compliance in any material respect with any Applicable Law, or that any action may be taken against the owner of the Leased Property because the Leased Property does not comply with Applicable Law, Tenant shall promptly furnish a copy of such notice or claim to Landlord. Notwithstanding the foregoing, Tenant may in good faith, by appropriate proceedings, contest the validity and applicability of any Applicable Law with respect to the Leased Property, and pending such contest Tenant shall not be deemed in default hereunder because of a violation of such Applicable Law, if Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and if Tenant promptly causes the Leased Property to comply with any such Applicable Law upon a final determination by a court of competent jurisdiction that the same is valid and applicable to the Leased Property; provided, that in any event such contest shall be concluded and the violation of such Applicable Law must be corrected and any claims asserted against Landlord or the Leased Property because of such violation must be paid by Tenant, all prior to the date that (i) any criminal charges are threatened or instituted against Landlord or any of its directors, officers or employees because of such violation or (ii) any action may be taken by any governmental authority against Landlord or any property owned by Landlord (including the Leased Property) because of such violation. (o) Debts for Construction. Tenant shall cause all debts and liabilities incurred in the construction, maintenance, operation and development of the Leased Property, including without limitation all debts and liabilities for labor, material and equipment and all debts and charges for utilities servicing the Leased Property, to be promptly paid; provided, nothing in this subparagraph will be construed to make Tenant liable for Prohibited Encumbrances or Excluded Taxes. Notwithstanding the foregoing, Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any asserted mechanic's or materialmen's lien and pending such contest Tenant shall not be deemed in default under this subparagraph (or subparagraphs 8.(t) or 8.(u)) because of the contested lien if (1) within sixty (60) days after being asked to do so by Landlord, Tenant bonds over to Landlord's satisfaction any contested liens alleged to secure an amount in excess of $500,000 (individually or in the aggregate) (2) Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and (3) Tenant promptly causes to be paid any amount adjudged by a court of competent jurisdiction to be due, with all costs and interest thereon, promptly after such judgment becomes final; provided, however, that in any event each such contest shall be concluded and the lien, interest and costs shall be paid prior to the date (i) any criminal action may be instituted against Landlord or its directors, officers or employees because of the nonpayment thereof or (ii) any writ or order is issued under which any property owned by Landlord (including the Leased Property) may be seized or sold or any other action is threatened or instituted against Landlord or any property owned by Landlord because of the nonpayment thereof. (p) Impositions. Tenant shall reimburse Landlord for (or, if requested by Landlord, will pay or cause to be paid prior to delinquency) all sales, excise, ad valorem, gross receipts, business, transfer, stamp, occupancy, rental and other taxes, levies, fees, charges, surcharges, assessments or penalties which arise out of or are attributable to this Lease or which are imposed upon Landlord or the Leased Property because of the ownership, leasing, occupancy, sale or operation of the Leased Property, or any part thereof, or relating to or required to be paid by the terms of any of the Permitted Encumbrances, excluding only Prohibited Encumbrances and Excluded Taxes (collectively, all such taxes, levies, fees, charges, surcharges, assessments or penalties, other than Prohibited Encumbrances and Excluded Taxes, are herein called the "Impositions"). If Landlord requires Tenant to pay any Impositions directly to the applicable taxing authority or other party entitled to collect the same, Tenant shall furnish Landlord with receipts showing payment of such Impositions and other amounts prior to delinquency. Notwithstanding the foregoing, Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any asserted Imposition, and pending such contest Tenant shall not be deemed in default of this subparagraph (or subparagraphs 8.(t) or 8.(u)) because of the contested Imposition if (1) within sixty (60) days after being asked to do so by Landlord, Tenant bonds over to the satisfaction of Landlord any lien asserted against the Leased Property and alleged to secure an amount in excess of $500,000 because of the contested Imposition, (2) Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and (3) Tenant promptly causes to be paid any amount adjudged by a court of competent jurisdiction to be due, with all costs, penalties and interest thereon, promptly after such judgment becomes final; provided, however, that in any event each such contest shall be concluded and the Impositions, penalties, interest and costs shall be paid prior to the date (i) any criminal action may be instituted against Landlord or its directors, officers or employees because of the nonpayment thereof or (ii) any writ or order is issued under which any property owned by Landlord (including the Leased Property) may be seized or sold or any other action is threatened or instituted against Landlord or any property owned by Landlord because of the nonpayment thereof. (q) Repair, Maintenance, Alterations and Additions. Tenant shall keep the Leased Property in good order, repair, operating condition and appearance (ordinary wear and tear excepted), causing all necessary repairs, renewals, replacements, additions and improvements to be promptly made, and will not allow any of the Leased Property to be materially misused, abused or wasted or to deteriorate. Further, Tenant shall not, without the prior written consent of Landlord, construct or make any alteration to any Improvements which significantly reduce the fair market value of the Leased Property. However, nothing in this subparagraph 8.(q) shall be construed to prohibit lawful construction or other development activities by Tenant otherwise permitted by this Lease. Further, nothing in this subparagraph 8.(q) or other provisions of this Lease shall be construed to prohibit the demolition by Tenant of the improvements presently used for the operation of Pedro's Restaurant after the termination of the Pedro's Ground Lease. (r) Insurance and Casualty. Throughout the Term, Tenant will keep any valuable Improvements insured against damage by fire and other casualty (earthquake excepted) in a commercially reasonable manner. (s) Condemnation. Immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Leased Property or any portion thereof, or any other similar governmental or quasi-governmental proceedings arising out of injury or damage to the Leased Property or any portion thereof, each party shall notify the other (provided, however, Landlord shall have no liability for its failure to provide such notice) of the pendency of such proceedings. Tenant shall, at its expense, diligently prosecute any such proceedings and shall consult with Landlord, its attorneys and experts and cooperate with them as reasonably requested in the carrying on or defense of any such proceedings. All proceeds of condemnation awards or proceeds of sale in lieu of condemnation with respect to the Leased Property and all judgments, decrees and awards for injury or damage to the Leased Property shall be paid to Landlord as Escrowed Proceeds for application as provided in Paragraph 4 above. Landlord is hereby authorized, in the name of Tenant, at any time when an Event of Default shall have occurred and be continuing, or with Tenant's prior written consent (which consent will not be unreasonably withheld), to execute and deliver valid acquittances for, and to appeal from, any such judgment, decree or award concerning condemnation of any of the Leased Property. Landlord shall not be in any event or circumstances liable or responsible for failure to collect, or to exercise diligence in the collection of, any such proceeds, judgments, decrees or awards. Notwithstanding the foregoing provisions of this subparagraph 8.(s), following any condemnation or sale in lieu of condemnation involving the Leased Property, Tenant shall be entitled to receive directly and hold such condemnation or sale proceeds, so long as the Pledge Agreement continues in force and no Event of Default shall have occurred and be continuing and so long as Tenant applies such proceeds to the restoration, replacement and repair of the remainder of the Leased Property to the extent required by subparagraph 4.(b). (t) Protection and Defense of Title. If any encumbrance or title defect whatsoever affecting Landlord's fee interest in the Leased Property is claimed or discovered (excluding Permitted Encumbrances and Prohibited Encumbrances and this Lease) or if any legal proceedings are instituted with respect to title to the Leased Property, Tenant shall give prompt written notice thereof to Landlord and at Tenant's own cost and expense will promptly cause the removal of any such encumbrance and cure any such defect and will take all necessary and proper steps for the defense of any such legal proceedings, including but not limited to the employment of counsel, the prosecution or defense of litigation and the release or discharge of all adverse claims. If Tenant fails to promptly remove any such encumbrance or title defect (other than a Lien Tenant is contesting as expressly permitted by and in accordance with subparagraph 8.(o) or subparagraph 8.(p)), Landlord (whether or not named as a party to legal proceedings with respect thereto) shall be entitled to take such additional steps as in its judgment may be necessary or proper to remove such encumbrance or cure such defect or for the defense of any such attack or legal proceedings or the protection of Landlord's fee interest in the Leased Property, including but not limited to the employment of counsel, the prosecution or defense of litigation, the compromise or discharge of any adverse claims made with respect to the Leased Property, the removal of prior liens or security interests, and all expenses (including Attorneys' Fees) so incurred of every kind and character shall be a demand obligation owing by Tenant. For purposes of this subparagraph 8.(t), Tenant shall be deemed to be acting promptly to remove any encumbrance or to cure any title defect, other than a Lien which Tenant has itself granted or authorized, so long as Tenant (or a title insurance company obligated to do so) is in good faith by appropriate proceedings contesting the validity and applicability of the encumbrance or defect, and pending such contest Tenant shall not be deemed in default under this subparagraph because of the encumbrance or defect; provided, with respect to a contest of any encumbrance or title defect which is the subject of subparagraphs 8.(o) or 8.(p), Tenant (or the applicable title insurance company) must satisfy the conditions and requirements for a permitted contest set forth in those subparagraphs, and with respect to a contest of any other encumbrance or title defect, Tenant (or the applicable title insurance company) must: (1) diligently prosecute the contest to completion in a manner reasonably satisfactory to Landlord; (2) immediately remove the encumbrance or cure the defect, as and to the extent reasonably required to preserve Landlord's indefeasible fee estate in the Leased Property and to prevent any significant adverse impact the encumbrance or defect may have on the value of the Leased Property, upon a final determination by a court of competent jurisdiction that the encumbrance or defect is valid and applicable to the Leased Property; and (3) in any event conclude the contest and remove the encumbrance or cure the defect and pay any claims asserted against Landlord or the Leased Property because of such encumbrance or defect, all prior to (i) any Designated Sale Date on which neither Tenant nor any Applicable Purchaser purchases the Leased Property pursuant to the Purchase Agreement for a price to Landlord (when taken together with any additional payments made by Tenant pursuant to Paragraph 2(a)(ii) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) of not less than the Purchase Price, (ii) the date any criminal charges are threatened or instituted against Landlord or any of its directors, officers or employees because of such encumbrance or defect or (iii) the date any action may be taken against Landlord or any property owned by Landlord (including the Leased Property) by any governmental authority or any other Person who has or claims rights superior to Landlord because of the encumbrance or defect. (u) No Liens To Secure Payment or Performance on the Leased Property. Tenant shall not, without the prior written consent of Landlord, create, place or permit to be created or placed, or through any act or failure to act, acquiesce in the placing of, or allow to remain, any Lien which secures any payment or performance obligation (except Prohibited Encumbrances, the lien for property taxes on the Leased Property which are not delinquent and any Lien Tenant is contesting as expressly permitted by and in accordance with subparagraph 8.(o) or subparagraph 8.(p)), against or covering the Leased Property or any part thereof regardless of whether the same are expressly or otherwise subordinate to this Lease or Landlord's interest in the Leased Property, and should any prohibited Lien exist or become attached hereafter in any manner to any part of the Leased Property without the prior written consent of Landlord, Tenant shall cause the same to be promptly discharged and released to the satisfaction of Landlord. (v) Books and Records. Tenant shall keep books and records that are accurate and complete in all material respects for the Leased Property and will permit all such books and records (including without limitation all contracts, statements, invoices, bills and claims for labor, materials and services supplied for the operation of any Improvements) to be inspected and copied by Landlord and its duly accredited representatives during reasonable business hours and after five business days advance notice. To the extent, if any, that any such books and records contain proprietary information of Tenant that Tenant identifies as such at the time of inspection, Landlord shall use reasonable efforts to keep such proprietary information confidential. For purposes of this Lease "proprietary information" includes Tenant's intellectual property and trade secrets of value to Tenant about, among other things, Tenant's products, marketing and corporate strategies, but in no event will "proprietary information" include any disclosure of substances and materials (and their chemical composition) which are or previously have been present in, on or under the Leased Property at the time of any inspections by Landlord, nor will "proprietary information" include any additional disclosures reasonably required to permit Landlord to determine whether the presence of such substances and materials has constituted a violation of Environmental Laws. In addition, under no circumstances shall Tenant have any obligation to disclose to Landlord or any other party any proprietary information of Tenant (including, without limitation, any pending applications for patents or trademarks, any research and design and any trade secrets) except if and to the limited extent reasonably necessary to comply with the express provisions of this Lease. Notwithstanding the foregoing, Landlord shall not be prohibited from disclosures of proprietary information: (i) specifically and previously authorized in writing by Tenant; (ii) to any assignee of Landlord claiming through a Permitted Transfer as to any interest in the Leased Property; (iii) to legal counsel, accountants, auditors, environmental consultants and other professional advisors to Landlord so long as Landlord shall inform such persons in writing (if practicable) of the confidential nature of such information and shall direct them to treat such information confidentially; (iv) to regulatory officials having jurisdiction over Landlord or any Participant; (v) as required by legal process; and (vi) of information which has previously become publicly available through the actions or inactions of a person other than Landlord not, to Landlord's knowledge, in breach of an obligation of confidentiality to Tenant. This subparagraph shall not be construed as requiring Tenant to regularly maintain separate books and records relating exclusively to the Leased Property; provided, however, that upon request, Tenant shall construct or abstract from its regularly maintained books and records information required by this subparagraph relating to the Leased Property. (w) Financial Statements; Required Notices; Certificates as to Default. Tenant shall deliver to Landlord and to each Participant of which Tenant has been notified: (i) as soon as available and in any event within one hundred (100) days after the end of each fiscal year of Tenant, a consolidated balance sheet of Tenant and its consolidated Subsidiaries as of the end of such fiscal year and a consolidated income statement and statement of cash flows of Tenant and its consolidated Subsidiaries for such fiscal year, all in reasonable detail and all prepared in accordance with GAAP and accompanied by a report and opinion of independent auditors of national standing selected by Tenant, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualification or exception which Landlord determines, in Landlord's reasonable discretion, is unacceptable; provided that notwithstanding the foregoing, for so long as Tenant is a company subject to the periodic reporting requirements of Section 12 of the Securities Exchange Act of 1934, as amended, Tenant shall be deemed to have satisfied its obligations under this clause (i) so long as Tenant delivers to Landlord the same annual report and report and opinion of independent auditors that Tenant delivers to its stockholders; (ii) as soon as available and in any event within fifty (50) days after the end of each of the first three quarters of each fiscal year of Tenant, the consolidated balance sheet of Tenant and its consolidated Subsidiaries as of the end of such quarter and the consolidated income statement and the consolidated statement of cash flows of Tenant and its consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, all in reasonable detail and all prepared in accordance with GAAP and certified by a Responsible Financial Officer of Tenant (subject to year-end adjustments); provided, that notwithstanding the foregoing, for so long as Tenant is a company subject to the periodic reporting requirements of Section 12 of the Securities Exchange Act of 1934, as amended, Tenant shall be deemed to have satisfied its obligations under this clause (ii) so long as Tenant delivers to Landlord the same Form SEC 10-Q filed with the Securities and Exchange Commission; (iii) together with the financial statements furnished in accordance with subparagraph 8.(w)(ii) and 8.(w)(i), a certificate of a Responsible Financial Officer of Tenant in substantially the form attached hereto as Exhibit E: (i) certifying that to the knowledge of Tenant no Default or Event of Default under this Lease has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a brief statement as to the nature thereof and the action which is proposed to be taken with respect thereto, (ii) certifying that the representations of Tenant set forth in Paragraph 8 of this Lease are true and correct in all material respects as of the date thereof as though made on and as of the date thereof or, if not then true and correct, a brief statement as to why such representations are no longer true and correct, and (iii) with computations demonstrating compliance with the financial covenants contained in subparagraph 8.(cc); (iv) promptly after the sending or filing thereof, copies of all proxy statements, financial statements, reports and registration statements (other than registration statements on Form S-8 or any form substituted therefor) which Tenant files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange; (v) as soon as possible and in any event within five (5) Business Days after a Responsible Financial Officer of Tenant becomes aware of the occurrence of each Default or Event of Default with respect to the Affirmative Financial Covenants described in subparagraph 8.(cc) or the Negative Covenants described in subparagraph 8.(dd), a statement of a Responsible Financial Officer of Tenant setting forth details of such Default or Event of Default and the action which Tenant has taken and proposes to take with respect thereto; (vi) upon request by Landlord, a statement in writing certifying that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, and setting forth such modifications) and the dates to which the Base Rent has been paid and either stating that to the knowledge of Tenant no Default or Event of Default under this Lease has occurred and is continuing or, if a Default or Event of Default under this Lease has occurred and is continuing, a brief statement as to the nature thereof; it being intended that any such statement by Tenant may be relied upon by any prospective purchaser or mortgagee of the Leased Property and by any Participant; and (vii) such other information respecting the condition or operations, financial or otherwise, of Tenant, of any of its Subsidiaries or of the Leased Property as Landlord or any Participant through Landlord may from time to time reasonably request. Landlord is hereby authorized to deliver a copy of any information or certificate delivered to it pursuant to this subparagraph 8.(w) to any Participant and to any regulatory body having jurisdiction over Landlord that requires or requests it. (x) Further Assurances. Tenant shall, on request of Landlord, (i) promptly correct any error which may be discovered in the contents of this Lease or in any other instrument executed in connection herewith or in the execution or acknowledgment thereof; (ii) execute, acknowledge, deliver and record or file such further instruments and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Lease and to subject to this Lease any property intended by the terms hereof to be covered hereby including specifically, but without limitation, any renewals, additions, substitutions, replacements or appurtenances to the Leased Property; (iii) execute, acknowledge, deliver, procure and record or file any document or instrument deemed advisable by Landlord to protect its rights in and to the Leased Property against the rights or interests of third persons; and (iv) provide such certificates, documents, reports, information, affidavits and other instruments and do such further acts as may be necessary, desirable or proper in the reasonable determination of Landlord to enable Landlord, Landlord's Parent and other Participants to comply with the requirements or requests of any agency or authority having jurisdiction over them. (y) Fees and Expenses; General Indemnification; Increased Costs; and Capital Adequacy Charges. (i) Except for any costs paid by Landlord with the proceeds of the Initial Funding Advance as part of the Closing Costs, Tenant shall pay (and shall indemnify and hold harmless Landlord, Landlord's Parent and any Person claiming through Landlord by reason of a Permitted Transfer from and against) all Losses incurred by Landlord or Landlord's Parent or any Person claiming through Landlord through a Permitted Transfer in connection with or because of (A) the ownership of any interest in or operation of the Leased Property, (B) the negotiation or administration of this Lease, the Purchase Documents, Environmental Indemnity or the Participation Agreement (excluding the negotiation or administration of the Participation Agreement between Landlord and Landlord's Parent), or (C) Informix's request for assistance in identifying any new Participant pursuant to Section 4.3 of the Pledge Agreement, whether such Losses are incurred at the time of execution of this Lease or at any time during the Term. Costs and expenses included in such Losses may include, without limitation, all appraisal fees, filing and recording fees, inspection fees, survey fees, taxes (other than Excluded Taxes), brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees, Attorneys' Fees and environmental consulting fees incurred by Landlord with respect to the Leased Property; but will not include an allocation of general overhead or internal administrative expenses of Landlord, Landlord's Parent or any other Participant, except to the extent allowed by subparagraph 8.(y)(iii) because of a Banking Rules Change after the date of this Lease, and will not include costs incurred in connection with the negotiation and execution of agreements between Landlord and Participants. If Landlord pays or reimburses Landlord's Parent for any such Losses, Tenant shall reimburse Landlord for the same notwithstanding that Landlord may have already received any payment from any other Participant on account of such Losses, it being understood that the other Participant may expect repayment from Landlord when Landlord does collect the required reimbursement from Tenant. (ii) Tenant shall also pay (and indemnify and hold harmless Landlord, Landlord's Parent and any Person claiming through Landlord by reason of a Permitted Transfer from and against) all Losses, including Attorneys' Fees, incurred or expended by Landlord or Landlord's Parent or any Person claiming through Landlord through a Permitted Transfer or in connection with (A) the breach by Tenant of any covenant of Tenant herein or in any other instrument executed in connection herewith or (B) Landlord's exercise of any of Landlord's rights and remedies hereunder or under Applicable Law or Landlord's protection of the Leased Property and Landlord's interest therein as permitted hereunder or under Applicable Law. (However, the indemnity in the preceding sentence shall not be construed to make Tenant liable to both Landlord and any Participant or other party claiming through Landlord for the same costs, expenses or damages or for any allocation of general overhead or internal administrative expenses of Landlord, Landlord's Parent or any other Participant except to the extent allowed by subparagraph 8.(y)(iii) because of a Banking Rules Change after the date of this Lease.) Tenant shall further indemnify and hold harmless Landlord and all other Indemnified Parties against, and reimburse them for, all Losses which may be imposed upon, asserted against or incurred or paid by them by reason of, on account of or in connection with any bodily or personal injury or death or damage to the property of third parties occurring in or upon or in the vicinity of the Leased Property through any cause whatsoever. (iii) If, after the date hereof, there shall be any increase in the cost to Landlord's Parent or any other Participant agreeing to make or maintain Funding Advances to Landlord in connection with the Leased Property because of any Banking Rules Change, then Tenant shall from time to time, upon demand by Landlord pay to Landlord for the account of Landlord's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate Landlord's Parent or the Participant for such increased cost. A certificate as to the amount of such increased cost, submitted to Landlord and Tenant by Landlord's Parent or the Participant, shall be conclusive and binding for purposes of determining Tenant's obligations hereunder, absent clear and demonstrable error. An increase in costs resulting from any imposition or increase of reserve requirements applicable to Collateral held in Accounts maintained from time to time by Landlord's Parent or other Participants pursuant to the Pledge Agreement would be an increase covered by this subparagraph. (iv) Any Participant (including Landlord's Parent) may demand additional payments (herein called "Capital Adequacy Charges") if the Participant determines that any Banking Rules Change affects the amount of capital to be maintained by it and that the amount of such capital is increased by or based upon the existence of Funding Advances made by it to permit Landlord to maintain Landlord's investment in the Leased Property. To the extent that any Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such advances, Tenant shall pay to Landlord for the account of the Participant the amount so demanded. Without limiting the foregoing, Landlord and Tenant hereby acknowledge and agree that the provisions for calculating Base Rent set forth herein reflect the assumption that the Pledge Agreement will cause a twenty percent (20%) risk weight to be assigned to a percentage (equal to the Collateral Percentage) of the collective investment of Landlord and the Participants in the Leased Property pursuant to 12 Code of Federal Regulations, part 225, as from time to time supplemented or amended, or pursuant to any other similar or successor statute or regulation applicable to Landlord and the Participants. If and so long as such risk weight is increased because of a Banking Rules Change, Capital Adequacy Charges may be collected to yield the same rate of return to Landlord, Landlord's Parent and any other Participants (net of their costs of maintaining required capital) that they would have enjoyed from this Lease absent such increase. (v) Any amount to be paid to Landlord, Landlord's Parent or any other Indemnified Party under this subparagraph 8.(y) shall be a demand obligation owing by Tenant. Tenant's indemnities and obligations under this subparagraph 8.(y) shall survive the termination or expiration of this Lease with respect to any circumstance or event existing or occurring prior to such termination or expiration. (z) Liability Insurance. Tenant shall maintain one or more policies of commercial general liability insurance against claims for bodily injury or death and property damage occurring or resulting from any occurrence in or upon the Leased Property, in standard form and with an insurance company or companies rated by the A.M. Best Company of Oldwick, New Jersey as having a policyholder's rating of A or better and a reported financial information rating of X or better, such insurance to afford immediate protection, to the aggregate limit of not less than $10,000,000 combined single limit for bodily injury and property damage in respect of any one accident or occurrence, with not more than $500,000 self-insured retention. Such commercial general liability insurance shall include blanket contractual liability coverage which insures contractual liability under the indemnifications set forth in this Lease for Losses attributable to bodily injury, personal injury or property damage (other than the indemnifications set forth in Paragraph 11 concerning environmental matters), but such coverage or the amount thereof shall in no way limit such indemnifications. The policy evidencing such insurance shall name as additional insureds Landlord and all Participants of which Tenant has been notified (including Landlord's Parent). Tenant shall maintain with respect to each policy or agreement evidencing such commercial general liability insurance such endorsements as may be reasonably required by Landlord and shall at all times deliver and maintain with Landlord written confirmation (in form satisfactory to Landlord) with respect to such insurance from the applicable insurer or its authorized agent, which confirmation must provide that insurance coverage will not be canceled or reduced without at least fifteen (15) days notice to Landlord. Not less than ten (10) days prior to the expiration date of each policy of insurance required of Tenant pursuant to this subparagraph, Tenant shall deliver to Landlord a certificate evidencing a paid renewal policy or policies. (aa) Permitted Encumbrances. Except to the extent expressly required of Landlord by subparagraph 9.(b), Tenant shall comply with and will cause to be performed all of the covenants, agreements and obligations imposed upon the owner of the Leased Property in the Permitted Encumbrances in accordance with their respective terms and provisions. Tenant shall not, without the prior written consent of Landlord, modify or permit any modification of any Permitted Encumbrance in any manner that could impose significant monetary obligations upon Landlord or any subsequent owner of the Leased Property, could significantly and adversely affect the value of the Leased Property, could impose any lien to secure payment or performance obligations against any part of the Leased Property or would otherwise be material and adverse to Landlord. (bb) Environmental. (i) Environmental Covenants. Tenant covenants: a) not to cause or permit the Leased Property to be in violation of, or do anything or permit anything to be done which will subject the Leased Property to any remedial obligations under, any Environmental Laws, including without limitation CERCLA and RCRA, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances pertaining to the Leased Property; b) not to conduct or authorize others to conduct Hazardous Substance Activities on the Leased Property, except Permitted Hazardous Substance Use; c) to the extent required by Environmental Laws, to remove Hazardous Substances from the Leased Property (or if removal is prohibited by law, to take whatever action is required by law) promptly upon discovery; and d) not to discharge or authorize the discharge of anything (including Permitted Hazardous Substances) from the Leased Property into groundwater or surface water that would require any permit under applicable Environmental Laws, other than storm water runoff. If Tenant's failure to cure any breach of the covenants listed above in this subparagraph 8.(bb)(i) continues beyond the Environmental Cure Period (as defined below), Landlord may, in addition to any other remedies available to it, after notifying Tenant of the remediation efforts Landlord believes are needed, cause the Leased Property to be freed from all Hazardous Substances (or if removal is prohibited by law, to take whatever action is required by law), and the cost of the removal shall be a demand obligation owing by Tenant to Landlord. Further, subject to the provisions of subparagraph 11.(c) below, Tenant agrees to indemnify Landlord against all Losses incurred by or asserted or proven against Landlord in connection therewith. As used in this subparagraph, "Environmental Cure Period" means the period ending on the earlier of: (1) one hundred and eighty days (180) after Tenant is notified of the breach which must be cured within such period, or such longer period as is reasonably required for any cure that Tenant pursues with diligence pursuant to and in accordance with an Approved Plan (as defined below), (2) the date any writ or order is issued for the levy or sale of any property owned by Landlord (including the Leased Property) or any criminal action is threatened or instituted against Landlord or any of its directors, officers or employees because of the breach which must be cured within such period, (3) the end of the Term. As used in this subparagraph, an "Approved Plan" means a plan of remediation of a violation of Environmental Laws for which Tenant has obtained, within one hundred and eighty days (180) after Tenant is notified of the applicable breach of the covenants listed above in this subparagraph 8.(bb)(i), the written approval of the governmental authority with primary jurisdiction over the violation and with respect to which no other governmental authority asserting jurisdiction has claimed such plan is inadequate. (ii) Environmental Inspections and Reviews. Landlord reserves the right to retain an independent professional consultant to review any report prepared by Tenant or to conduct Landlord's own investigation to confirm whether Hazardous Substances Activities or the discharge of anything into groundwater or surface water has occurred in violation of the preceding subparagraph 8.(bb)(i), but Landlord's right to reimbursement for the fees of such consultant shall be limited to the following circumstances: (1) an Event of Default shall have occurred; (2) Landlord shall have retained the consultant to establish the condition of the Leased Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) Landlord shall have retained the consultant to satisfy any regulatory requirements applicable to Landlord or its Affiliates; or (4) Landlord shall have retained the consultant because Landlord has been notified of a violation of Environmental Laws concerning the Leased Property or Landlord otherwise reasonably believes that Tenant has not complied with the preceding subparagraph 8.(bb)(i). Tenant grants to Landlord and to Landlord's agents, employees, consultants and contractors the right during reasonable business hours and after reasonable notice to enter upon the Leased Property to inspect the Leased Property and to perform such tests as are reasonably necessary or appropriate to conduct a review or investigation of Hazardous Substances on, or any discharge into groundwater or surface water from, the Leased Property. Without limiting the generality of the foregoing, Tenant agrees that Landlord will have the same right, power and authority to enter and inspect the Leased Property as is granted to a secured lender under Section 2929.5 of the California Civil Code. Tenant shall promptly reimburse Landlord for the cost of any such inspections and tests, but only when the inspections and tests are (1) ordered by Landlord after an Event of Default; (2) ordered by Landlord to establish the condition of the Leased Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) ordered by Landlord to satisfy any regulatory requirements applicable to Landlord or its Affiliates; or (4) ordered because Landlord has been notified of a violation of Environmental Laws concerning the Leased Property or Landlord otherwise reasonably believes that Tenant has not complied with the preceding subparagraph 8.(bb)(i). (iii) Notice of Environmental Problems. Tenant shall immediately advise Landlord of (i) any discovery of any event or circumstance which would render any of the representations contained in subparagraph 8.(e) inaccurate in any material respect if made at the time of such discovery, (ii) any remedial action taken by Tenant in response to any (A) discovery of any Hazardous Substances other than Permitted Hazardous Substances on, under or about the Leased Property or (B) any claim for damages resulting from Hazardous Substance Activities, (iii) Tenant's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Leased Property which could cause the Leased Property or any part thereof to be subject to any ownership, occupancy, transferability or use restrictions under Environmental Laws, or (iv) any investigation or inquiry affecting the Leased Property by any governmental authority in connection with any Environmental Laws. In such event, Tenant shall deliver to Landlord within thirty (30) days after Landlord's request, a preliminary written environmental plan setting forth a general description of the action that Tenant proposes to take with respect thereto, if any, to bring the Leased Property into compliance with Environmental Laws or to correct any breach by Tenant of the covenants listed above in subparagraph 8.(bb)(i), including, without limitation, any proposed corrective work, the estimated cost and time of completion, the name of the contractor and a copy of the construction contract, if any, and such additional data, instruments, documents, agreements or other materials or information as Landlord may reasonably request. (cc) Affirmative Financial Covenants. (i) Quick Ratio. Tenant shall maintain a ratio of (A) Quick Assets of Tenant and its Subsidiaries (determined on a consolidated basis) to (B) the sum of Current Liabilities of Tenant and its Subsidiaries (determined on a consolidated basis), of not less than 1.00 to 1.00. As used in this subparagraph 8.(cc), "Quick Assets" means the sum (without duplication of any item) of the Collateral held and pledged under the Pledge Agreement, plus unencumbered cash, plus unencumbered short term cash investments, plus other unencumbered marketable securities which are classified as short term investments according to GAAP, plus the fair market value of unencumbered Long-Term Investments, plus unencumbered current net accounts receivable. As used herein "Long-Term Investments" means those investments listed below (to the extent that they are not classified as short term investments in accordance with GAAP): (1) Securities issued or fully guaranteed or fully insured by the United States government, or by any agency thereof and backed by the full faith and credit of the United States, provided that such investments shall have maturities of not longer than two years; (2) Certificates of deposit, time deposits, eurodollar time deposits, repurchase agreements, or banker's acceptances with maturities of not longer than two years which are issued by a bank that is rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. and that is either one of the 50 largest (in assets) banks in the United States or by one of the 100 largest (in assets) banks in the world; and (3) Notes and municipal bonds with maturities of not longer than two years and rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. (For purposes hereof, the maturity of any such municipal bond shall be considered to be the earliest date upon which the holder of the bond can require the obligor on the bond to pay or redeem the bond at par value, whether pursuant to a put option in favor of the holder or because of the expiration of the stated term of the bond.) As used in this subparagraph 8.(cc), "Current Liabilities" means, with respect to any Person, all liabilities of such Person treated as current liabilities in accordance with GAAP and any obligations of such Person that, although not classified as a liability of such Person according to GAAP, are of the kind described in clause (v) of subparagraph 1.(u) (which sets forth the definition of "Debt") and that must be paid within one year of the date of determination. Current Liabilities will including without limitation (a) all obligations payable on demand or within one year after the date in which the determination is made and (b) installment and sinking fund payments required to be made within one year after the date on which determination is made, but excluding all such liabilities or obligations which are renewable or extendable at the option of such Person to a date more than one year from the date of determination. (ii) Minimum Tangible Net Worth. Tenant shall not permit its Consolidated Tangible Net Worth, on a consolidated basis, at the end of any fiscal quarter to be less than the sum of: (A) eighty percent (80%) of Consolidated Tangible Net Worth as of September 29, 1996; plus (B) fifty percent (50%) of Tenant's net income (but without deducting any net losses for any period) earned in each fiscal quarter, starting with the quarter ended December 31, 1996, and ending with the quarter which, at such time, is the most recently ended fiscal quarter; and plus (C) any increase in the Consolidated Tangible Net Worth of Tenant that results from a sale or issuance of the stock of Tenant or its Subsidiaries after September 29, 1996. As used in this subparagraph 8.(cc): "Consolidated Tangible Net Worth" means, at any date of determination thereof, the excess determined in accordance with GAAP of consolidated total assets on such date over consolidated total liabilities on such date; provided, however, that Intangible Assets on such date shall be excluded from any determination of consolidated total assets on such date. "Intangible Assets" means, as of the date of any determination thereof, the total amount of all assets of Tenant and its consolidated Subsidiaries that are properly classified as "intangible assets" in accordance with GAAP and, in any event, shall include, without limitation, goodwill, patents, trade names, trademarks, copyrights, franchises, experimental expense, organization expense, unamortized debt discount and expense, and deferred charges other than prepaid insurance and prepaid taxes and current deferred taxes which are classified on the balance sheet of Tenant and its consolidated Subsidiaries as a current asset in accordance with GAAP and in which classification Tenant's independent auditors concur; provided, however, for purposes of this Lease Intangible Assets shall not include capitalized software costs. (dd) Negative Covenants. Without the prior written consent of Landlord in each case, neither Tenant nor any of its Subsidiaries shall: (i) Liens. Create, incur, assume or suffer to exist any Lien, upon or with respect to any of its properties, now owned or hereafter acquired; provided, however, that the following shall be permitted except to the extent that they would encumber any interest in the Leased Property in violation of other provisions of this Lease or would encumber Collateral covered by the Pledge Agreement: a) Liens for taxes or assessments or other government charges or levies if not yet due and payable or if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained; b) Liens that secure obligations incurred in the ordinary course of business, that are not past due for more than thirty (30) days (or that are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established) and that: (1) are imposed by law, such as mechanic's, materialmen's, landlord's, warehousemen's and carrier's Liens, and other similar Liens; or (2) encumber only equipment or other tangible personal property and any proceeds thereof (including Liens created by equipment leases) and are imposed to secure the payment of the purchase price or other direct costs of acquiring the equipment or other tangible personal property they encumber; c) Liens under workmen's compensation, unemployment insurance, social security or similar legislation (other than ERISA); d) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases, public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; e) judgment and other similar Liens arising in connection with court proceedings; provided that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings; f) easements, rights-of-way, restrictions and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use and enjoyment by Tenant or any such Subsidiary of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto; g) Liens securing obligations of such a Subsidiary to Tenant or to another such Subsidiary; h) Liens incurred after the date of this Lease given to secure the payment of the purchase price or other direct costs incurred in connection with the acquisition, construction, improvement or rehabilitation of assets, including Liens existing on such assets at the time of acquisition thereof or at the time of acquisition by Tenant or a Subsidiary of any business entity (including a Subsidiary) then owning such assets, whether or not such existing Liens were given to secure the payment of the purchase price of the assets to which they attach, provided that (i) except in the case of Liens existing on assets at the time of acquisition of a Subsidiary then owning such assets, the Lien shall be created within six (6) months of the later of the acquisition of, or the completion of the construction or improvement in respect of, such assets and shall attach solely to such assets, and (ii) except in the case of Liens existing on assets at the time of acquisition of a Subsidiary then owning such assets, at the time such Liens are imposed, the aggregate amount remaining unpaid on all Debt secured by Liens on such assets whether or not assumed by Tenant or a Subsidiary shall not exceed an amount equal to seventy-five percent (75%) of the lesser of the total purchase price or fair market value, at the time such Debt is incurred, of such assets; i) existing mortgages and deeds of trust as of the date of this Lease; j) Liens imposed to secure Debt incurred to finance the acquisition of property which has been leased or sold by Tenant or one of its Subsidiaries to another Person (other than Tenant or a Subsidiary of Tenant) pursuant to a lease or sales agreement providing for payments sufficient to pay such Debt in full, provided such Debt is not a general obligation of Tenant or its Subsidiaries, but rather is payable only from the rentals or other sums payable under the lease or sales agreement or from the property sold or leased thereunder; k) Liens not otherwise permitted by this subsection 8.(dd)(i) (and not encumbering the Leased Property or any Collateral) which secure the payment of Debt, provided that (1) at no time does the sum of the aggregate amount of all outstanding Debt secured by such Liens exceed twenty percent (20%) of Consolidated Tangible Net Worth, and (2) such Liens do not constitute Liens against Tenant's interest in any material Subsidiary or blanket Liens against all or substantially all of the inventory, receivables, general intangibles or equipment of Tenant or of any material Subsidiary of Tenant (for purposes of this clause, a "material Subsidiary" means any subsidiary whose assets represent a substantial part of the total assets of Tenant and its Subsidiaries, determined on a consolidated basis in accordance with GAAP); and l) Liens incurred in connection with any renewals, extensions or refunding of any Debt secured by Liens described in the other clauses of this subsection 8.(dd)(i), provided that there is no increase in the aggregate principal amount of Debt secured thereby from that which was outstanding as of the date of such renewal, extension or refunding and no additional property is encumbered. (ii) Transactions with Affiliates. Enter into any transactions that individually or in the aggregate are material to Tenant (including, without limitation, the purchase, sale or exchange of property or the rendering of any service) with any Affiliates, except upon fair and reasonable terms no less favorable to Tenant than would be obtained in a comparable arm's length transaction with a Person not an Affiliate. (iii) Mergers; Sales of Assets. a) Except to the extent permitted by the last sentence of this subparagraph 8.(dd), liquidate or dissolve, or merge, consolidate with or into, or convey, transfer, lease, or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired), to any Person, or enter into any joint venture, partnership or other combination which involves the investment, sale, lease, loan, or other disposition of the business or all of the assets of Tenant and its Subsidiaries or so much thereof as, in the reasonable opinion of Landlord, constitutes a substantial portion of such business or assets. b) Except to the extent permitted by the last sentence of this subparagraph 8.(dd), acquire the assets or business of any Person, other than in the ordinary course of Tenant's business as presently conducted. (iv) Sale of Receivables. Sell for less than the full face value of, or otherwise sell for consideration other than cash, any of its notes or accounts receivable. However, this subparagraph (iv) shall not prohibit: a) any license or sale of products or services in the ordinary course of business where payment for such transactions is made by credit card, provided that the fees and discounts incurred by the Tenant or the Subsidiary in connection therewith shall not exceed the normal and customary fees and discounts incurred for general credit card transactions through major credit card issuers; b) the delivery and endorsement to banks in the ordinary course of business by Tenant or any of its Subsidiaries of promissory notes received in payment of trade receivables, where delivery and endorsement are made prior to the date of maturity of such promissory notes, and the retention by such banks of normal and customary fees and discounts therefor, provided such practice is usual and customary in the country where such activity occurs; or c) other sales of receivables in the ordinary course of Tenant's business and in a manner consistent with past and current practices as of the date this Lease. (v) Change of Business. Permit any significant change in the nature of the business of Tenant and its Subsidiaries, taken as whole, from that presently conducted. Notwithstanding any contrary provisions of subparagraph 8.(dd)(iii), Tenant or any of its Subsidiaries may engage in any of the following transactions, provided that immediately prior to and immediately after giving effect thereto, no Default or Event of Default exists or would exist: (1) liquidate or dissolve Subsidiaries to the extent that such liquidations and dissolutions would not, in the aggregate, result in a material adverse effect on the properties, assets, operations or businesses of Tenant and its Subsidiaries, taken as a whole; or (2) merge with another entity if the corporation surviving the merger is Tenant or a Subsidiary of Tenant; or (3) acquire the assets or business of another Person. (ee) ERISA. (i) Each Plan is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other applicable Federal or state law, and as of the date hereof no event or condition is occurring or exists which would require a notice from Tenant under clause 8.(ee)(ii). (ii) Tenant shall provide a notice to Landlord as soon as possible after, and in any event within ten (10) days after Tenant becomes aware that, any of the following has occurred, with respect to which the potential aggregate liability to Tenant relating thereto is $2,000,000 or more, and such notice shall include a statement signed by a senior financial officer of Tenant setting forth details of the following and the response, if any, which Tenant or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to Pension Benefit Guaranty Corporation by Tenant or an ERISA Affiliate with respect to any of the following or the events or conditions leading up it): (A) the assertion, to secure any Unfunded Benefit Liabilities, of any Lien against the assets of Tenant, against the assets of any Plan of Tenant or any ERISA Affiliate of Tenant or against any interest of Landlord or Tenant in the Leased Property or the Collateral covered by the Pledge Agreement, or (B) the taking of any action by the Pension Benefit Guaranty Corporation or any other governmental authority action against Tenant to terminate any Plan of Tenant or any ERISA Affiliate of Tenant or to cause the appointment of a trustee or receiver to administer any such Plan. 9. Representations, Warranties and Covenants of Landlord. Landlord represents, warrants and covenants as follows: (a) Removal of Prohibited Encumbrances. If a Prohibited Encumbrance is claimed against the Leased Property, including without limitation any judgment lien resulting from a judgment rendered against Landlord, Landlord will at its own cost and expense remove the Prohibited Encumbrance. However, Landlord shall not be responsible for any Lien that is expressly excluded from the definition of Prohibited Encumbrances above. (b) Actions Required of the Title Holder. (i) General Requirements. So long as no Event of Default shall have occurred and be continuing, Landlord shall take any and all action required of Landlord by the Permitted Encumbrances or otherwise required of Landlord by Applicable Laws or reasonably requested by Tenant; provided, that (i) actions Tenant may require of Landlord under this subparagraph shall be limited to actions that can only be taken by Landlord as the owner of the Leased Property, as opposed to any action that can be taken by Tenant or any third party (and the payment of any monetary obligation shall not be an action required of Landlord under this subparagraph unless Landlord shall first have received funds from Tenant, in excess of any other amounts due from Tenant hereunder, sufficient to pay such monetary obligations), (ii) Tenant requests the action to be taken by Landlord (which request must be specific and in writing, if required by Landlord at the time the request is made) and (iii) the action to be taken will not constitute a violation of any Applicable Laws or compromise or constitute a waiver of Landlord's rights hereunder or under the Purchase Documents or Environmental Indemnity or otherwise be reasonably objectionable to Landlord. (ii) Examples of Actions Tenant May Require. The actions Landlord shall perform if reasonably requested by Tenant will include, without limitation, but subject to the conditions set forth in the proviso of the preceding subsection 9.(b)(i), executing or consenting to, or exercising or assisting Tenant to exercise rights under any (I) grant of easements, licenses, rights of way, and other rights in the nature of easements encumbering the Real Property, (II) release or termination of easements, licenses, rights of way or other rights in the nature of easements which are for the benefit of the Real Property or any portion thereof, (III) dedication or transfer of portions of the Real Property not improved with a building, for road, highway or other public purposes, (IV) agreements for the use and maintenance of common areas, for reciprocal rights of parking, ingress and egress and amendments to any covenants and restrictions affecting the Real Property or any portion thereof, (V) documents required to create or administer a governmental special benefit district or assessment district for public improvements and collection of special assessments, (VI) modifications of Permitted Encumbrances, (VII) development agreements, permit applications or other documents required to accommodate the future construction of office improvements on the Land with a density not to exceed approximately 990,000 square feet of building area (or such greater building area as Landlord may approve, which approval shall not be unreasonably withheld) and of structured parking to serve such office improvements, which agreements may provide a master plan for the development of all the Land, or may cover only a portion of the Land, and may provide for phased build-out, (VIII) agreements or other documents required for the demolition of the Pedro's Restaurant on the Land, (IX) confirmations of Tenant's rights under any particular provisions of this Lease which Tenant may wish to provide to a third party or (X) parcel maps subdividing the Real Property into lots or parcels. However, the determination of whether any such action is reasonably requested or reasonably objectionable to Landlord may depend in whole or in part upon the extent to which the requested action shall result in a lien to secure payment or performance obligations against Landlord's interest in the Leased Property, shall cause a decrease in the value of the Leased Property to less than forty-five percent (45%) of Stipulated Loss Value after any Qualified Payments that may result from such action are taken into account, or shall impose upon Landlord any present or future obligations greater than the obligations Landlord is willing to accept in reliance on the indemnifications provided by Tenant hereunder. (iii) Partial Release Provisions. So long as no Event of Default shall have occurred and be continuing, Tenant shall have the option from time to time during the Term to purchase one or more undeveloped portions of the Real Property, consisting of one or more tracts or lots of the Land which can be sold under Applicable Laws separate and apart from the rest of the Land (each, a "Parcel"), for an amount equal to the Release Price (as defined below) with respect thereto. Tenant may exercise such option by delivering to Landlord not less than ninety (90) days prior written notice, which written notice shall describe the Parcel or Parcels to be purchased, the date such Parcels are to be conveyed by Landlord and an estimate by Tenant of the Release Price to be paid by Tenant. In each case Landlord's obligation to convey such Parcels to Tenant shall be subject to Tenant's satisfaction of each of the following conditions: a) Landlord and Tenant shall have agreed upon, entered into and recorded such reciprocal easements relating to the Land and the Parcel to be so sold as they shall deem necessary or reasonably required to preserve usefulness of the Parcels and the remaining Land after the conveyance; b) Tenant shall have paid to Landlord the Release Price for such Parcels; and c) Tenant shall have reimbursed Landlord for, and Landlord shall have received, any new appraisal that Landlord believes it should obtain in connection with the sale to satisfy regulatory requirements applicable to Landlord, Landlord's Parent or other Participants. d) In addition to the Release Price, Tenant shall have paid all costs and expenses necessary to consummate the sale, including all legal fees of Landlord. Upon Tenant's satisfaction of each of the foregoing conditions, Landlord shall convey such Parcel or Parcels to Tenant pursuant to a quitclaim transfer of all of Landlord's right, title and interest therein on as "as is, where is, with all faults" basis free and clear of Prohibited Encumbrances, but otherwise without recourse, representation or warranty of any kind. As used in this subparagraph 9.(b), the "Release Price" with respect to any Parcel or Parcels means the higher of (1) $61,500,000 times a fraction, the numerator of which is the square footage of such Parcel or Parcels, and the denominator of which is the total square footage of all Land described in Exhibit A, and (2) the sales price that Landlord must receive for the Parcel or Parcels if, following the Landlord's sale of thereof and application of the net sales proceeds paid to Landlord as a Qualified Payment, the remaining Leased Property is to have a Remaining Value (as defined below) of no less than forty-five percent (45%) of Stipulated Loss Value. As used in this subparagraph 9.(b), "Remaining Value" means the market value of the Leased Property that Landlord will retain, taking into account any loss of visibility, accessibility or development potential that may result from Landlord's compliance with this subparagraph. Remaining Value will be determined by Chris Carneghi, MAI Certified General Real Estate Appraiser, State of California No. AG001685, if he is then willing and available to make such a determination promptly for Landlord and Tenant; otherwise, Remaining Value will be determined in accordance with the following procedure, unless Landlord and Tenant upon a different procedure or method of determination in a particular case: (A) Landlord and Tenant shall each, within seven (7) days after written notice from either to the other, select an appraiser. If either Landlord or Tenant fails to select an appraiser within the required period, then the appraiser who has been timely selected shall conclusively determine the Remaining Value in accordance with this clause subparagraph within thirty (30) days after his or her selection. (B) Upon the selection of the two appraisers as provided above, such appraisers shall proceed to determine the Remaining Value of the Leased Property that Landlord will retain after any sale required by this subparagraph. Such appraisals shall be submitted in writing no later than thirty (30) days after selection of the second appraiser. If the Remaining Value as determined by such appraisers is identical, such sum they determine shall be the Remaining Value. In the event the lower appraisal is not lower than five percent (5%) below the higher appraisal, then Remaining Value shall be the sum of the two appraisal figures divided by two (2). If either appraiser fails to timely submit his or her appraisal, the timely submitted appraisal shall be determinative of Remaining Value. (C) In the event the lower appraisal is lower than five percent (5%) below the higher appraisal figure, then the two appraisers previously selected shall select a third appraiser. The name of such appraiser shall be submitted at the same time the written appraisals are due. Such third appraiser shall then review the previously submitted appraisals and select the one that, in his professional opinion, more closely reflects the market value of the Leased Property that Landlord will retain, such selection to be submitted in writing no later than seven (7) days after selection of the third appraiser. Such selection shall be determinative of Remaining Value. (D) In making any such determination of Remaining Value, the appraisers shall assume that neither this Lease nor the Purchase Agreement add any value to the Leased Property. Each appraiser selected hereunder shall be an independent MAI-designated appraiser with not less than ten (10) years' experience in commercial real estate appraisal in Santa Clara County, California and surrounding areas. Any Losses (including appraisal fees) incurred by Landlord because of any action taken pursuant to this subparagraph 9.(b) shall be covered by the indemnification set forth in subparagraph 8.(y). Further, for purposes of such indemnification, any action taken by Landlord will be deemed to have been made at the request of Tenant if made pursuant to any request of Tenant's counsel or of any officer of Tenant (or with their knowledge, and without their objection) in connection with the closing under the Existing Contract or the closing of any sale of a Parcel by Landlord pursuant to the foregoing provisions. (c) No Default or Violation. The execution, delivery and performance of this Lease do not contravene, result in a breach of or constitute a default under any material contract or agreement to which Landlord is a party or by which Landlord is bound and do not, to the knowledge of Landlord, violate or contravene any law, order, decree, rule or regulation to which Landlord is subject. (d) No Suits. To Landlord's knowledge there are no judicial or administrative actions, suits or proceedings involving the validity, enforceability or priority of this Lease, and to Landlord's knowledge no such suits or proceedings are threatened. (e) Organization. Landlord is duly incorporated and legally existing under the laws of Delaware and is duly qualified to do business in the State of California. Landlord has or will obtain, at Tenant's expense pursuant to the other provisions of this Lease, all requisite power and all material governmental certificates of authority, licenses, permits, qualifications and other documentation necessary to own and lease the Leased Property and to perform its obligations under this Lease. (f) Enforceability. The execution, delivery and performance of this Lease and the Purchase Documents by Landlord are duly authorized, are not in contravention of or conflict with any term or provision of Landlord's articles of incorporation or bylaws and do not, to Landlord's knowledge, require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained or conflict with any Applicable Laws. This Lease and the Purchase Documents are valid, binding and legally enforceable obligations of Landlord except as such enforcement is affected by bankruptcy, insolvency and similar laws affecting the rights of creditors, generally, and equitable principles of general application; provided, Landlord makes no representation or warranty that conditions imposed by any state or local Applicable Laws to the purchase, ownership, lease or operation of the Leased Property have been satisfied. (g) Existence. Landlord will continuously maintain its existence and right to do business in the State of California to the extent necessary for the performance of Landlord's obligations hereunder. (h) Not a Foreign Person. Landlord is not a "foreign person" within the meaning of the Sections 1445 and 7701 of the Code (i.e., Landlord is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder). (i) Estoppel Certificates. From time to time, if requested by Tenant, Landlord shall provide to Tenant a statement in writing certifying that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, and setting forth such modifications) and the dates to which the Base Rent has been paid and either stating that to the knowledge of Landlord no Default or Event of Default under this Lease has occurred and is continuing or, if a Default or Event of Default under this Lease has occurred and is continuing, a brief statement as to the nature thereof; it being intended that any such statement by Landlord may be relied upon by any permitted sublessee or assign of Tenant or by any with whom Tenant may desire to merge as provided in subparagraph 8.(dd)(v). (j) Compliance With the Pedro's Ground Lease and the Documents Executed by Landlord at the Closing Under the Existing Contract. Landlord shall not itself knowingly violate any material provision of the Pedro's Ground Lease or of any document executed by Landlord in favor of the Seller at the closing under the Existing Contract. 10. Assignment and Subletting. (a) Consent Required. During the term of this Lease, without the prior written consent of Landlord first had and received, Tenant shall not assign, transfer, mortgage, pledge or hypothecate this Lease or any interest of Tenant hereunder and shall not sublet all or any part of the Leased Property, by operation of law or otherwise; provided, that, so long as no Event of Default has occurred and is continuing, Tenant shall be entitled without the consent of Landlord to sublet all or any portion of the space in any then completed Improvements if: (i) any sublease by Tenant is made expressly subject and subordinate to the terms hereof; (ii) no sublease has a term longer than the remainder of the then effective term of this Lease; (iii) the use permitted by such sublease is expressly limited to general office use or restaurant use or other uses approved in advance by Landlord as uses that will not present extraordinary risks of uninsured environmental or other liability; and (iv) no more than forty-five percent of the space in any completed Improvements shall be subleased without Landlord's prior consent to any Person (or group of Persons) that is neither (A) an Affiliate of Tenant nor (B) the operator of a business in the subleased space that is related to the operation of Tenant's own business (such as another venturer in a joint venture with Tenant). (b) Standard for Landlord's Consent to Assignments and Certain Other Matters. Consents and approvals of Landlord which are required by this Paragraph 10 will not be unreasonably withheld, but Tenant acknowledges that Landlord's withholding of such consent or approval shall be reasonable if Landlord determines in good faith that (1) giving the approval may materially increase Landlord's risk of liability for any existing or future environmental problem, (2) giving the approval is likely to substantially increase Landlord's administrative burden of complying with or monitoring Tenant's compliance with the requirements of this Lease, or (3) any transaction for which Tenant has requested the consent or approval would negate Tenant's representations in this Lease regarding ERISA or cause this Lease or the other documents referenced herein to constitute a violation of any provision of ERISA. (c) Consent Not a Waiver. No consent by Landlord to a sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or Tenant's interest hereunder, and no assignment or subletting of the Leased Property or any part thereof in accordance with this Lease or otherwise with Landlord's consent, shall release Tenant from liability hereunder; and any such consent shall apply only to the specific transaction thereby authorized and shall not relieve Tenant from any requirement of obtaining the prior written consent of Landlord to any further sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or any interest of Tenant hereunder. (d) Landlord's Assignment. Landlord shall have the right to transfer, assign and convey, in whole or in part, the Leased Property and any and all of its rights under this Lease by any conveyance that constitutes a Permitted Transfer. (However, any Permitted Transfer shall be subject to all of the provisions of each and every agreement concerning the Leased Property then existing between Landlord and Tenant, including without limitation this Lease and the Purchase Documents.) If Landlord sells or otherwise transfers the Leased Property and assigns its rights under this Lease and the Purchase Documents pursuant to a Permitted Transfer, then to the extent Landlord's successor in interest confirms its liability for the obligations imposed upon Landlord by this Lease and the Purchase Documents on and subject to the express terms and conditions set out herein and therein, the original Landlord shall thereby be released from any obligations thereafter arising under this Lease and the Purchase Documents, and Tenant will look solely to each successor in interest of Landlord for performance of such obligations. 11. Environmental Indemnification. (a) Indemnity. Tenant hereby agrees to assume liability for and to pay, indemnify, defend, and hold harmless each and every Indemnified Party from and against any and all Environmental Losses, subject only to the provisions of subparagraph 11.(c) below. (b) Assumption of Defense. (i) If an Indemnified Party notifies Tenant of any claim, demand, action, administrative or legal proceeding, investigation or allegation as to which the indemnity provided for in this Paragraph 11 applies, Tenant shall assume on behalf of the Indemnified Party and conduct with due diligence and in good faith the investigation and defense thereof and the response thereto with counsel selected by Tenant but reasonably satisfactory to the Indemnified Party; provided, that the Indemnified Party shall have the right to be represented by advisory counsel of its own selection and at its own expense; and provided further, that if any such claim, demand, action, proceeding, investigation or allegation involves both Tenant and the Indemnified Party and the Indemnified Party shall have been advised in writing by counsel that there may be legal defenses available to it which are inconsistent with those available to Tenant, then the Indemnified Party shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, demand, action, proceeding, investigation or allegation on its own behalf, and Tenant shall pay or reimburse the Indemnified Party for all Attorney's Fees incurred by the Indemnified Party because of the selection of such separate counsel. (ii) If any claim, demand, action, proceeding, investigation or allegation arises as to which the indemnity provided for in this Paragraph 11 applies, and Tenant fails to assume promptly (and in any event within fifteen (15) days after being notified of the claim, demand, action, proceeding, investigation or allegation) the defense of the Indemnified Party, then the Indemnified Party may contest (or settle, with the prior written consent of Tenant, which consent will not be unreasonably withheld) the claim, demand, action, proceeding, investigation or allegation at Tenant's expense using counsel selected by the Indemnified Party; provided, that if any such failure by Tenant continues for thirty (30) days or more after Tenant is notified thereof, no such contest need be made by the Indemnified Party and settlement or full payment of any claim may be made by the Indemnified Party without Tenant's consent and without releasing Tenant from any obligations to the Indemnified Party under this Paragraph 11 so long as, in the written opinion of reputable counsel to the Indemnified Party, the settlement or payment in full is clearly advisable. (c) Notice of Environmental Losses. If an Indemnified Party receives a written notice of Environmental Losses that such Indemnified Party believes are covered by this Paragraph 11, then such Indemnified Party will be expected to promptly furnish a copy of such notice to Tenant. The failure to so provide a copy of the notice to Tenant shall not excuse Tenant from its obligations under this Paragraph 11; provided, that if Tenant is unaware of the matters described in the notice and such failure renders unavailable defenses that Tenant might otherwise assert, or precludes actions that Tenant might otherwise take, to minimize its obligations hereunder, then Tenant shall be excused from its obligation to indemnify such Indemnified Party (and any Affiliate of such Indemnified Party) against Environmental Losses, if any, which would not have been incurred but for such failure. For example, if Landlord fails to provide Tenant with a copy of a notice of an obligation covered by the indemnity set out in subparagraph 11.(a) and Tenant is not otherwise already aware of such obligation, and if as a result of such failure Landlord becomes liable for penalties and interest covered by the indemnity in excess of the penalties and interest that would have accrued if Tenant had been promptly provided with a copy of the notice, then Tenant will be excused from any obligation to Landlord (or any Affiliate of Landlord) to pay the excess. (d) Rights Cumulative. The rights of each Indemnified Party under this Paragraph 11 shall be in addition to any other rights and remedies of such Indemnified Party against Tenant under the other provisions of this Lease or under any other document or instrument now or hereafter executed by Tenant, or at law or in equity (including, without limitation, any right of reimbursement or contribution pursuant to CERCLA). (e) Survival of the Indemnity. Tenant's obligations under this Paragraph 11 shall survive the termination or expiration of this Lease. All obligations of Tenant under this Paragraph 11 shall be payable upon demand, and any amount due upon demand to any Indemnified Party by Tenant which is not paid shall bear interest from the date of such demand at a floating interest rate equal to the Default Rate, but in no event in excess of the maximum rate permitted by law. 12. Landlord's Right of Access. (a) Landlord and Landlord's representatives may enter the Leased Property, after five (5) Business Days advance written notice to Tenant (except in the event of an emergency, when no advance notice will be required), for the purpose of making inspections or performing any work Landlord is authorized to undertake by the next subparagraph. So long as Tenant remains in possession of the Leased Property, Landlord or Landlord's representative will, before making any such inspection or performing any such work on the Leased Property, if then requested to do so by Tenant to maintain Tenant's security: (i) sign in at Tenant's security or information desk if Tenant has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification provided by Tenant when Landlord or Landlord's representative first arrives at the Leased Property, (iii) permit an employee of Tenant to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security requirements of Tenant that do not, individually or in the aggregate, interfere with or delay inspections or work of Landlord authorized by this Lease. (b) If Tenant fails to perform any act or to take any action which hereunder Tenant is required to perform or take, or to pay any money which hereunder Tenant is required to pay, and if such failure or action constitutes an Event of Default or causes Landlord or any director, officer, employee or Affiliate of Landlord to be threatened with criminal prosecution or renders Landlord's interest in the Leased Property or any part thereof at risk of forfeiture by forced sale or otherwise, then in addition to any other remedies specified herein or otherwise available, Landlord may, in Tenant's name or in Landlord's own name, perform or cause to be performed such act or take such action or pay such money. Any expenses so incurred by Landlord, and any money so paid by Landlord, shall be a demand obligation owing by Tenant to Landlord. Further, Landlord, upon making such payment, shall be subrogated to all of the rights of the person, corporation or body politic receiving such payment. But nothing herein shall imply any duty upon the part of Landlord to do any work which under any provision of this Lease Tenant may be required to perform, and the performance thereof by Landlord shall not constitute a waiver of Tenant's default. Landlord may during the progress of any such work permitted by Landlord hereunder on or in the Leased Property keep and store upon the Leased Property all necessary materials, tools, and equipment. Landlord shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business, or other damage to Tenant or the subtenants of Tenant by reason of making such repairs or the performance of any such work on or in the Leased Property, or on account of bringing materials, supplies and equipment into or through the Leased Property during the course of such work (except for liability in connection with death or injury or damage to the property of third parties caused by [and attributed by any applicable principles of comparative fault to] the Misconduct of Landlord in connection therewith), and the obligations of Tenant under this Lease shall not thereby be affected in any manner. 13. Events of Default. (a) Definition of Event of Default. Each of the following events shall be deemed to be an "Event of Default" by Tenant under this Lease: (i) Tenant shall fail to pay when due any installment of Rent due hereunder and such failure shall continue for three (3) Business Days after Tenant is notified in writing of the delinquency thereof. (ii) Tenant shall fail to cause any representation or warranty of Tenant contained herein that is false or misleading in any material respect when made to be made true and not misleading (other than as described in the other clauses of this subparagraph 13.(a)), or Tenant shall fail to comply with any term, provision or covenant of this Lease (other than as described in the other clauses of this subparagraph 13.(a)), and in either case shall not cure such failure prior to the earlier of (A) thirty (30) days after written notice thereof is sent to Tenant or (B) the date any writ or order is issued for the levy or sale of any property owned by Landlord (including the Leased Property) or any criminal action is threatened or instituted against Landlord or any of its directors, officers or employees because of such failure; provided, however, that so long as no such writ or order is issued and no such criminal action is threatened or instituted, if such failure is susceptible of cure but cannot with reasonable diligence be cured within such thirty day period, and if Tenant shall promptly have commenced to cure the same and shall thereafter prosecute the curing thereof with reasonable diligence, the period within which such failure may be cured shall be extended for such further period (not to exceed an additional ninety (90) days) as shall be necessary for the curing thereof with reasonable diligence. (iii) Tenant shall fail to comply with any term, provision or condition of the Purchase Documents and, if the Purchase Documents expressly provide a time within which Tenant may cure such failure, Tenant shall not cure the failure within such time. (iv) Tenant shall abandon the Leased Property. (v) Tenant shall fail to make any payment or payments of principal, premium or interest, on any Debt of Tenant described in the next sentence when due (taking into consideration the time Tenant may have to cure such failure, if any, under the documents governing such Debt). As used in this clause 13.(a)(v), "Debt" shall mean only a Debt of Tenant now existing or arising in the future, (A) payable to Landlord or any Participant or any Affiliate of Landlord or any Participant, the outstanding balance of which has become due by reason of acceleration or maturity, or (B) payable to any Person, with respect to which $5,000,000 or more is actually due and payable because of acceleration or otherwise. (vi) Tenant or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Tenant or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of thirty (30) consecutive days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or Tenant or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this clause (vi). (vii) Any order, judgment or decree is entered in any proceedings against Tenant or any Subsidiary decreeing the dissolution of Tenant or such Subsidiary and such order, judgment or decree remains unstayed and in effect for more than sixty (60) days. (viii) Any order, judgment or decree is entered in any proceedings against Tenant or any Subsidiary decreeing a split-up of Tenant or such Subsidiary which requires the divestiture of assets representing a substantial part, or the divestiture of the stock of a Subsidiary whose assets represent a substantial part, of the consolidated assets of Tenant and its Subsidiaries (determined in accordance with GAAP) or which requires the divestiture of assets, or stock of a Subsidiary, which shall have contributed a substantial part of the consolidated net income of Tenant and its Subsidiaries (determined in accordance with GAAP) for any of the three fiscal years then most recently ended, and such order, judgment or decree remains unstayed and in effect for more than sixty (60) days. (ix) A final judgment or order for the payment of money in an amount (not covered by insurance) which exceeds $3,000,000 shall be rendered against Tenant or any of its Subsidiaries and within sixty (60) days after the entry thereof, such judgment or order is not discharged or execution thereof stayed pending appeal, or within thirty (30) days after the expiration of any such stay, such judgment is not discharged. (x) Any ERISA Termination Event that Landlord determines might constitute grounds for the termination of any Plan or for the appointment by the appropriate United States district court of a trustee to administer any Plan shall have occurred and be continuing thirty (30) days after written notice to such effect shall have been given to Tenant by Landlord, or any Plan shall be terminated, or a trustee shall be appointed by an appropriate United States district court to administer any Plan, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan. (xi) A Change of Control Event not approved in advance by Landlord shall occur. Notwithstanding the foregoing, any Default that could become an Event of Default under clause 13.(a)(ii) may be cured within the earlier of the periods described in parts (A) and (B) of clause 13.(a)(ii) by Tenant's delivery to Landlord of a written notice irrevocably exercising Tenant's option under the Purchase Agreement to purchase Landlord's interest in the Leased Property and designating as the Designated Sale Date any Business Day which is at least fifteen (15) days after the date of such notice and not later than thirty (30) days after the date of such notice; provided, however, Tenant must, as a condition to the effectiveness of its cure, on the date so designated as the Designated Sale Date tender to Landlord the full purchase price required by the Purchase Agreement and all Rent and all other amounts then due or accrued and unpaid hereunder (including reimbursement for Breakage Costs and other Losses incurred by Landlord in connection with the applicable Default hereunder, regardless of whether Landlord shall have been reimbursed for such costs in whole or in part by Participants) and Tenant must also furnish written confirmation that all indemnities set forth herein (including specifically, but without limitation, the general indemnity set forth in subparagraph 8.(y) and the environmental indemnity set forth in Paragraph 11 shall survive the payment of such amounts by Tenant to Landlord and the conveyance of Landlord's interest in the Leased Property to Tenant. (b) Remedies. Upon the occurrence of an Event of Default which is not cured within any applicable period expressly permitted by subparagraph 13.(a), at Landlord's option and without limiting Landlord in the exercise of any other right or remedy Landlord may have on account of such default, and without any further demand or notice except as expressly described in this subparagraph 13.(b): (i) By notice to Tenant, Landlord may terminate Tenant's right to possession of the Leased Property. A notice given in connection with unlawful detainer proceedings specifying a time within which to cure a default shall terminate Tenant's right to possession if Tenant fails to cure the default within the time specified in the notice. (ii) Upon termination of Tenant's right to possession and without further demand or notice, Landlord may re-enter the Leased Property in any manner not prohibited by Applicable Law and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property in the Leased Property may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of Tenant. (iii) Upon termination of Tenant's right to possession, this Lease shall terminate and Landlord may recover from Tenant: a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination; b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the scheduled Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; and d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform Tenant's obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, the costs and expenses (including Attorneys' Fees, advertising costs and brokers' commissions) of recovering possession of the Leased Property, removing persons or property therefrom, placing the Leased Property in good order, condition, and repair, preparing and altering the Leased Property for reletting, all other costs and expenses of reletting, and any loss incurred by Landlord as a result of Tenant's failure to perform Tenant's obligations under the Purchase Documents. The "worth at the time of award" of the amounts referred to in subparagraph 13.(b)(iii)a) and subparagraph 13.(b)(iii)b) shall be computed by allowing interest at ten percent (10%) per annum or such other rate as may be the maximum interest rate then permitted to be charged under California law at the time of computation. The "worth at the time of award" of the amount referred to in subparagraph 13.(b)(iii)c) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). e) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. (iv) The Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in force even after lessee's breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations). Accordingly, even though Tenant has breached this Lease and abandoned the Leased Property, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord may enforce all of Landlord's rights and remedies under this Lease, including the right to recover the Rent as it becomes due under this Lease. Tenant's right to possession shall not be deemed to have been terminated by Landlord except pursuant to subparagraph 13.(b)(i) hereof. The following shall not constitute a termination of Tenant's right to possession: a) Acts of maintenance or preservation or efforts to relet the Leased Property; b) The appointment of a receiver upon the initiative of Landlord to protect Landlord's interest under this Lease; or c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by Tenant. (c) Enforceability. This Paragraph 13 shall be enforceable to the maximum extent not prohibited by Applicable Law, and the unenforceability of any provision in this Paragraph shall not render any other provision unenforceable. (d) Remedies Cumulative. No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing under Applicable Law or in equity. In addition to other remedies provided in this Lease, Landlord shall be entitled, to the extent permitted by Applicable Law, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the covenants, agreements, conditions or provisions of this Lease to be performed by Tenant, or to a decree compelling performance of any of the other covenants, agreements, conditions or provisions of this Lease to be performed by Tenant, or to any other remedy allowed to Landlord under Applicable Law or in equity. Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy or insolvency of Tenant by reason of the termination of this Lease, 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, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above. Without limiting the generality of the foregoing, nothing contained herein shall modify, limit or impair any of the rights and remedies of Landlord under the Purchase Documents or Environmental Indemnity. (e) Waiver by Tenant. To the extent permitted by law, Tenant hereby waives and surrenders for itself and all claiming by, through and under it, including creditors of all kinds, (i) any right and privilege which it or any of them may have under any present or future constitution, statute or rule of law to have a continuance of this Lease for the term hereby demised after termination of Tenant's right of occupancy by order or judgment of any court or by any legal process or writ, or under the terms of this Lease, or after the termination of this Lease as herein provided, and (ii) the benefits of any present or future constitution, or statute or rule of law which exempts property from liability for debt or for distress for rent, and (iii) the provisions of law relating to notice and/or delay in levy of execution in case of eviction of a lessee for nonpayment of rent. (f) No Implied Waiver. The failure of Landlord to insist at any time upon the strict performance of any covenant or agreement or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future. The waiver of or redress for any violation by Tenant of any term, covenant, agreement or condition contained in this Lease shall not prevent a similar subsequent act from constituting a violation. Any express waiver shall affect only the term or condition specified in such waiver and only for the time and in the manner specifically stated therein. A receipt by Landlord of any Base Rent or other payment hereunder with knowledge of the breach of any covenant or agreement contained in this Lease shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. 14. Default by Landlord. If Landlord should default in the performance of any of its obligations under this Lease, Landlord shall have the time reasonably required, but in no event less than thirty (30) days, to cure such default after receipt of written notice from Tenant specifying such default and specifying what action Tenant believes is necessary to cure the default. If Tenant prevails in any litigation brought against Landlord because of Landlord's failure to cure a default within the time required by the preceding sentence, then Tenant shall be entitled to an award against Landlord for the damages proximately caused to Tenant by such default. 15. Quiet Enjoyment. Provided no Event of Default has occurred and is continuing, Landlord shall not during the Term disturb Tenant's peaceable and quiet enjoyment of the Leased Property; however, such enjoyment shall be subject to the terms, provisions, covenants, agreements and conditions of this Lease and to the Permitted Encumbrances and any other claims or encumbrances not constituting Prohibited Encumbrances. Any breach by Landlord of the foregoing covenant of quiet enjoyment shall, subject to the other provisions of this Lease, render Landlord liable to Tenant for any monetary damages proximately caused thereby, but as more specifically provided in Paragraph 5 above, no such breach shall entitle Tenant to terminate this Lease or excuse Tenant from its obligation to pay Base Rent and other amounts hereunder. 16. Surrender Upon Termination. Unless Tenant or an Applicable Purchaser purchases Landlord's entire interest in the Leased Property pursuant to the terms of the Purchase Agreement, Tenant shall, upon the termination of Tenant's right to occupancy, surrender to Landlord the Leased Property, including any buildings, alterations, improvements, replacements or additions constructed by Tenant, with any fixtures and furnishings included in the Leased Property, but not including movable furniture and other personal property not covered by this Lease, free of all Hazardous Substances (including Permitted Hazardous Substances) and tenancies and, to the extent required by Landlord, with all Improvements in the same condition as of the date hereof, excepting only (i) ordinary wear and tear (provided that the Leased Property shall have been maintained as required by the other provisions hereof) and (ii) alterations and additions which are expressly permitted by the terms of this Lease and which have been completed by Tenant in a good and workmanlike manner in accordance with all Applicable Laws. Any movable furniture or movable personal property belonging to Tenant or any party claiming under Tenant, if not removed at the time of such termination and if Landlord shall so elect, shall be deemed abandoned and become the property of Landlord without any payment or offset therefor. If Landlord shall not so elect, Landlord may remove such property from the Leased Property and store it at Tenant's risk and expense. Tenant shall bear the expense of repairing any damage to the Leased Property caused by such removal by Landlord or Tenant. 17. Holding Over by Tenant. Should Tenant not purchase Landlord's right, title and interest in the Leased Property as provided in the Purchase Agreement, but nonetheless continue to hold the Leased Property after the termination of this Lease without Landlord's written consent, whether such termination occurs by lapse of time or otherwise, such holding over shall constitute and be construed as a tenancy from day to day only, at a daily Base Rent equal to: (i) the unpaid Purchase Price on the day in question, times (ii) the Holdover Rate (as defined below) for such day, divided by (iii) 360; subject, however, to all of the terms, provisions, covenants and agreements on the part of Tenant hereunder. No payments of money by Tenant to Landlord after the termination of this Lease shall reinstate, continue or extend the Term of this Lease and no extension of this Lease after the termination thereof shall be valid unless and until the same shall be reduced to writing and signed by both Landlord and Tenant; provided, however, following any breach by Landlord of its obligations to tender a deed and other documents on the Designated Sale Date as provided in the Purchase Agreement, Tenant may at its option continue its possession and use of the Leased Property pursuant to this Lease, as if the Term had been extended, for a period not to exceed 180 days after the Designated Sale Date or such longer time as may be proscribed by Applicable Law. As used herein, the "Holdover Rate" means: (1) for any day prior to the date on which Landlord tenders a deed and other documents as required by the Purchase Agreement (or is excused from its obligation to tender by Tenant's breach or anticipatory repudiation of the Purchase Agreement), a rate equal to the Fed Funds Rate on that day plus one hundred basis points (1%); (2) for any day on which or within ninety (90) days after Landlord tenders a deed and other documents as required by the Purchase Agreement (or is excused from its obligation to tender by Tenant's breach or anticipatory repudiation of the Purchase Agreement), the per annum Prime Rate in effect for such day; and (3) for any day after the ninety (90) days described in the preceding clause, a rate which is three percent (3%) above the per annum Prime Rate. 18. Miscellaneous. (a) Notices. Each provision of this Lease, or of any Applicable Laws with reference to the sending, mailing or delivery of any notice or with reference to the making of any payment by Tenant to Landlord, shall be deemed to be complied with when and if the following steps are taken: (i) All Rent required to be paid by Tenant to Landlord hereunder shall be paid to Landlord in immediately available funds by wire transfer to: Federal Reserve Bank of San Francisco Account: Banque Nationale de Paris ABA #: 121027234 Reference: Informix (Freedom Circle Street Property) or at such other place and in such other manner as Landlord may designate in a notice to Tenant (provided Landlord will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to all payments and other obligations of Tenant under this Lease. (ii) All notices, demands and other communications to be made hereunder to the parties hereto shall be in writing (at the addresses set forth below, or in the case of communications to Participants, at the addresses for notice established by the Participation Agreement) and shall be given by any of the following means: (A) personal service, with proof of delivery or attempted delivery retained; (B) electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by United States first class mail, return receipt requested); or (C) registered or certified first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice or other communication sent pursuant to clause (A) or (C) hereof shall be deemed received (whether or not actually received) upon first attempted delivery at the proper notice address on any Business Day between 9:00 A.M. and 5:00 P.M., and any notice or other communication sent pursuant to clause (B) hereof shall be deemed received upon dispatch by electronic means. Address of Landlord: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Rafael Lumanlan Telecopy: (415) 296-8954 And with a copy to: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Telecopy: (214) 969-1550 Address of Tenant: INFORMIX CORPORATION 4100 Bohannon Drive Menlo Park , California 94025 Attn: Treasurer Telecopy: (415) 926-6564 With a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Palo Alto, California 94304-1050 Attention: Real Estate Department/BOB Telecopy: (415) 493-6811 (b) Severability. If any term or provision of this Lease or the application thereof shall to any extent be held by a court of competent jurisdiction to be invalid and unenforceable, the remainder of this Lease, or the application of such term or provision other than to the extent to which it is invalid or unenforceable, shall not be affected thereby. (c) No Merger. There shall be no merger of this Lease or of the leasehold estate hereby created with the fee estate in the Leased Property or any part thereof by reason of the fact that the same person may acquire or hold, directly or indirectly, this Lease or the leasehold estate hereby created or any interest in this Lease or in such leasehold estate as well as the fee estate in the Leased Property or any interest in such fee estate, unless all Persons with an interest in the Leased Property that would be adversely affected by any such merger specifically agree in writing that such a merger shall occur. (d) NO IMPLIED REPRESENTATIONS BY LANDLORD. LANDLORD AND LANDLORD'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE LEASED PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY TENANT BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THE PROVISIONS OF THIS LEASE AND THE PURCHASE DOCUMENTS. (e) Entire Agreement. This Lease and the instruments referred to herein supersede any prior negotiations and agreements between the parties concerning the Leased Property and no amendment or modification of this Lease shall be binding or valid unless expressed in a writing executed by both parties hereto. (f) Binding Effect. All of the covenants, agreements, terms and conditions to be observed and performed by the parties hereto shall be applicable to and binding upon their respective successors and, to the extent assignment is permitted hereunder, their respective assigns. (g) Time is of the Essence. Time is of the essence as to all obligations of Tenant and all notices required of Tenant under this Lease, but this paragraph shall not limit Tenant's opportunity to prevent an Event of Default by curing any breach within the cure period (if any) applicable under subparagraph 13.(a). (h) Termination of Prior Rights. Without limiting the rights and obligations of Tenant under this Lease, Tenant acknowledges that any and all rights or interest of Tenant in and to the Land, the improvements to the Land and to any other property included in the Leased Property (except under this Lease and the Purchase Agreement) are hereby superseded. Tenant quitclaims unto Landlord any rights or interests Tenant has in or to the Land, the improvements to the Land and to any other property included in the Leased Property other than the rights and interests created by this Lease and the Purchase Agreement. (i) Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of California, without regard to conflict of laws principals. (j) Waiver of a Jury Trial. LANDLORD AND TENANT EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LEASE OR ANY OTHER DOCUMENT OR DEALINGS BETWEEN THEM RELATING TO THIS LEASE OR THE LEASED PROPERTY. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Tenant and Landlord each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Lease and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. Tenant and Landlord each further warrants and represents that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS LEASE OR THE LEASED PROPERTY. In the event of litigation, this Lease may be filed as a written consent to a trial by the court. (k) Not a Partnership, Etc. NOTHING IN THIS LEASE IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN LANDLORD AND TENANT. NEITHER THE EXECUTION OF THIS LEASE NOR THE ADMINISTRATION OF THIS LEASE OR OTHER DOCUMENTS REFERENCED HEREIN BY LANDLORD, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF LANDLORD UNDER OR PURSUANT TO THIS LEASE OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF LANDLORD TO TENANT. (l) Income Tax Reporting. Landlord and Tenant intend this Lease and the Purchase Agreement to have a form for income taxes which is different than the form of this Lease and the Purchase Agreement for other purposes, and thus the parties acknowledge and agree as follows: a) For purposes of determining their respective federal, state and local income tax obligations, Landlord and Tenant believe and intend that this Lease and the Purchase Agreement constitute a financing arrangement or conditional sale. Both Landlord and Tenant agree to report this Lease and the Purchase Agreement as a financing arrangement or conditional sale on their respective income tax returns (the "Required Reporting"), unless such Required Reporting is challenged in writing by the Internal Revenue Service or another governmental authority with jurisdiction (a "Tax Challenge"). Consistent with the foregoing, Landlord and Tenant expect that Tenant (and not Landlord) shall be treated as the true owner of the Property for income tax purposes, thereby entitling Tenant (and not Landlord) to take depreciation deductions and other tax benefits available to the owner. Tenant shall also report all interest earned on Escrowed Proceeds or the collateral covered by the Pledge Agreement as Tenant's income for federal, state and local income tax purposes. REFERENCES IN THIS LEASE OR IN THE PURCHASE AGREEMENT TO A "LEASE" OF THE "LEASED PROPERTY" ARE NOT INTENDED FOR INCOME TAX PURPOSES TO REFLECT THE INTENT OF LANDLORD OR TENANT AS TO THE FORM OF THE TRANSACTIONS COVERED BY, OR THE PROPER CHARACTERIZATION OF, THIS LEASE AND THE PURCHASE AGREEMENT. b) For all other purposes, including the determination of the appropriate financial accounting for this Lease and the determination of their respective rights and remedies under state law, Landlord and Tenant believe and intend that (i) this Lease constitutes a true Lease, not a mere financing arrangement, enforceable in accordance with its express terms (and neither this subparagraph 18.(l) nor the provisions referencing this subparagraph on the title page of this Lease nor the corresponding provisions in the Purchase Agreement are intended to affect the enforcement of any other provisions of this Lease or the Purchase Agreement) and (ii) the Purchase Agreement shall constitute a separate and independent contract, enforceable in accordance with the express terms and conditions set forth therein. In this regard, Tenant acknowledges that Tenant asked Landlord to participate in the transactions evidenced by this Lease and the Purchase Agreement as a landlord and owner of the Leased Property, not as a lender. Although other transactions might have been used to accomplish similar results, Tenant expects to receive certain material accounting and other advantages through the use of a lease transaction. Accordingly, and notwithstanding the Required Reporting for income tax purposes, Tenant cannot equitably deny that this Lease and the Purchase Agreement should be construed and enforced in accordance with their respective terms, rather than as a mortgage or other security device, in any action brought by Landlord to enforce this Lease or the Purchase Agreement. In the event of a Tax Challenge, Landlord and Tenant shall each provide to the other copies of all notices from the Internal Revenue Service or any other governmental authority presenting the Tax Challenge. Further, before changing from the Required Reporting because of a Tax Challenge, Landlord and Tenant shall each consider in good faith any reasonable suggestions received from the other party to this Lease about an appropriate response to the Tax Challenge; provided, however, that the suggestions are set forth in a written notice delivered no later than thirty (30) Business Days after the suggesting party is first notified of the Tax Challenge; and, provided further, that when presented with a Tax Challenge, Landlord and Tenant shall each have the right to change from the Required Reporting rather than participate in any litigation or other legal proceeding against the Internal Revenue Service or another governmental authority. In any event, Tenant must indemnify and hold harmless Landlord from and against all liabilities, costs, additional taxes and other expenses that may arise or become due because of any challenge to the Required Reporting or because of any resulting recharacterization of this Lease or the Purchase Agreement required by the Internal Revenue Service or another governmental authority, including any additional taxes that may become due upon any sale under the Purchase Agreement, to the extent (if any) that such liabilities, costs, additional taxes and other expenses are not offset by tax savings resulting from additional depreciation deductions or other tax benefits to Landlord of the recharacterization. [The signature pages follow.] IN WITNESS WHEREOF, this Lease Agreement is hereby executed in multiple originals as of the effective date above set forth. "Landlord" BNP LEASING CORPORATION, a Delaware corporation By: /s/ Lloyd G. Cox Lloyd G. Cox, Vice President [Continuation of signature pages to Lease Agreement dated to be effective January 6, 1997] "Tenant" INFORMIX CORPORATION, a Delaware corporation By: /s/ Margaret Brauns Margaret Brauns, Vice President and Treasurer Exhibit A Legal Description REAL PROPERTY in the City of Santa Clara, County of Santa Clara, State of California, described as follows: PARCEL ONE: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being a resubdivision of lands of Marriott Corporation, Successor by Merger to Fespar Enterprises, Inc., and Marriott Hotels, Inc., and Stephen & Mary Dorcich as shown on Record of Survey recorded on January 12, 1977 in Book 386 of Maps, at Page 54, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on December 29, 1977 in Book 410 of Maps, at Pages 29 and 30. PARCEL TWO: All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being all of Parcel 3, as shown on that certain `Parcel Map', recorded in Book 410 of Maps, at Pages 29 and 30, Santa Clara County Records", which Map was filed for Record in the Office of the Recorder of the County of Santa Clara, State of California, on May 18, 1979 in Book 442 of Maps, at Page 8. PARCEL THREE: All of Parcel 6, as shown upon that certain Map entitled, "Parcel Map being a Resubdivision of lands of Marriott Corporation, Successor by Merger to Fespar Enterprises, Inc., and Marriott Hotels, Inc., and Stephen & Mary Dorcich as shown on Record of Survey recorded on January 12, 1977 in Book 386 of Maps, at Page 54, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on December 29, 1977 in Book 410 of Maps, at Pages 29 and 30. PARCEL FOUR: All of Parcel 1, as shown upon that certain Map entitled, "Parcel Map being all of Parcel 3, as shown on that certain `Parcel Map', recorded in Book 410 of Maps, at Pages 29 and 30, Santa Clara County Records", which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California, on May 18, 1979 in Book 442 of Maps, at Page 8. Exhibit B Permitted Encumbrances This conveyance is subject to the following matters, but only to the extent the same are still valid and in full force and effect: 1. General and Special Taxes and Assessments, if any, for the fiscal year 1996-97 Assessment No.: 104-40-018 Code No.: 07-117 First Installment: $7,231.56 Paid Includes Assessment of $3,253.81 (50P) Second Installment: $7,231.56 Payable, but not yet due Includes Assessment of $3,253.81 (50P) Assessed Valuation Of Personal Property: NONE Homeowners Exemption: $None Said matter affects: Parcel One 2. General and Special Taxes and Assessments, if any, for the fiscal year 1996-97 Assessment No.: 104-40-021 Code No.: 07-117 First Installment: $11,391.08 Paid Includes Assessment of $5,125.04 (50P) Second Installment: $11,391.08 Payable, but not yet due Includes Assessment of $5,125.04 (50P) Assessed Valuation Of Personal Property: NONE Homeowners Exemption: $None Said matter affects: Parcel Two 3. General and Special Taxes and Assessments, if any, for the fiscal year 1996-97 Assessment No.: 104-40-023 Code No.: 07-117 First Installment: $14,673.16 Paid Includes Assessment of $6,601.96 (50P) Second Installment: $14,673.16 Payable, but not yet due Includes Assessment of $6,601.96 (50P) Assessed Valuation Of Personal Property: NONE Homeowners Exemption: $None Said matter affects: Parcel Three 4. General and Special Taxes and Assessments, if any, for the fiscal year 1996-97 Assessment No.: 104-40-020 Code No.: 07-117 First Installment: $17,531.64 Paid Second Installment: $17,531.64 Payable, but not yet due Assessed Valuation Of Personal Property: NONE Homeowners Exemption: $None Said matter affects: Parcel Four 5. Diagram Assessment collected with County Taxes under Act of 1915 as follows: Designation: Assessment No.: 437 Assessment Code: 50P Assessment District: Bayshore North Improvement District #163 Remaining Balance of Principal: $16,914.37 Remaining Balance of Interest: $2,401.14 The above amount of Principal and Interest to be collected with taxes for the tax year. Said matter affects: Parcel One 6. Diagram Assessment collected with County Taxes under Act of 1915 as follows: Designation: Assessment No.: 508 Assessment Code: 50P Assessment District: Bayshore North Improvement District #163 Remaining Balance of Principal: $26,653.65 Remaining Balance of Interest: $3,783.70 The above amount of Principal and Interest to be collected with taxes for the tax year. Said matter affects: Parcel Two 7. Diagram Assessment collected with County Taxes under Act of 1915 as follows: Designation: Assessment No.: 441 Assessment Code: 50P Assessment District: Bayshore North Improvement District #163 Remaining Balance of Principal: $34,340.61 Remaining Balance of Interest: $4,874.95 The above amount of Principal and Interest to be collected with taxes for the tax year. Said matter affects: Parcel Three 8. Diagram Assessment collected with County Taxes under Act of 1915 as follows: Designation: Assessment No.: 507 Assessment Code: 50P Assessment District: Bayshore North Improvement District #163 Remaining Balance of Principal: $10,526.42 Remaining Balance of Interest: $1,494.32 The above amount of Principal and Interest to be collected with taxes for the tax year. Said matter affects: Parcel Four 9. The lien of Supplemental taxes, if any, assessed as a result of transfer of interest and/or new construction, said supplemented taxes being assessed pursuant to Chapter 3.5 commencing with Section 75 of California Revenue and Taxation code, for which no Notice of Assessment has been issued, as of the date hereof. 10. The fact that the ownership of said land does not include any right of ingress or egress to or from the highway contiguous thereto, said right having been relinquished by deed From: Marriott Hotels, Inc., a Delaware Corporation To: The City of Santa Clara, California, A Municipal Corporation Recorded: May 28, 1974 in Book 0915 at Page 395 of Official Records of Santa Clara County, California Said matter affects: Parcels Two, Three and Four 11. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: City of Santa Clara, California, A Municipal Corporation Recorded: June 11, 1975 in Book B457 at Page 125 Official Records of Santa Clara County, California (A) For: Wire Clearance Easement and Right-of-Way Affects: The Easterly 5 feet of Parcels One and Two (B) For: Right-of-Way and Maintenance Easement Affects: A 5 foot strip of land immediately adjacent to the easement described in (A) above. (C) For: Installing, constructing, maintaining, repairing and replacing underground anchors Affects: As follows: A strip of land 2 feet in width and 15 feet in length, the centerline of said strip being a line bearing South 86 deg 06' 57" West from the Northerly terminus of that course North 0 deg 02' 09" West 469.34 feet in the boundary description of the thereinabove described Parcel 1, the Easterly terminus being the Westerly line of thereinabove described Parcel 3. A strip of land 2 feet in width and 15 feet in length, the centerline of said strip being a line bearing South 86 deg 21' 20" West from the Northerly terminus of that course North 7 deg 43' 57" West 400.11 feet in the boundary description of the thereinabove described Parcel 1, the Easterly terminus being said Westerly line of thereinabove described Parcel 3. A strip of land 2 feet in width and 15 feet in length, the centerline of said strip being a line bearing North 87 deg 41' 54" West from the Northerly terminus of that course North 0 deg 26' 38" East 303.60 feet in the boundary description of the thereinabove described Parcel 1, the Easterly terminus being said Westerly line of thereinabove described Parcel 3. Said matter affects: Parcels One and Two 12. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: City of Santa Clara, California, A Municipal Corporation For: Storm Drainage Easements Recorded: July 14, 1977 in Book C992 at Page 1 Official Records of Santa Clara County, California Affects: As follows: Beginning at a point on the Westerly line of the lands of the City of Santa Clara, A Municipal Corporation, as said lands are described as Parcel 1 in the Grant Deed, recorded on June 11, 1975 in Book B457 Official Records of Santa Clara County, at Page 125; said Point of Beginning being distant on said Westerly line North 0 deg 02' 09" West 33.39 feet from the Northeast corner of Parcel 2 as described in last said Grant Deed; thence from said Point of Beginning leaving last said line South 79 deg 45' 07" West 168.22 feet to a point on the general Northeasterly line of lands of the City of Santa Clara, A Municipal Corporation, as described in the Grant Deed recorded on May 28, 1974 in Book 0915 Official Records of Santa Clara, at Page 395; thence Northwesterly along last said line North 70 deg 14' 53" West 865.00 feet to a point thereon; thence leaving last said line North 19 deg 45' 07" East 35.00 feet; thence Southeasterly along a line parallel with and perpendicularly distant 35.00 feet Northeasterly from said general Northeasterly line of lands of the City of Santa Clara South 70 deg 14' 53" East 855.62 feet to a point thereon; thence leaving said parallel line North 79 deg 45' 07" East 165.14 feet to a point of the above mentioned Westerly line of lands of the City of Santa Clara described in Parcel 1; thence Southerly along last said line South 0 deg 02' 09" East 35.56 feet to the Point of Beginning. Said matter affects: Parcels One, Two and Four 13. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: City of Santa Clara, California, A Municipal Corporation For: Landscaping Purposes Recorded: July 14, 1977 in Book C992 at Page 12 Official Records of Santa Clara County, California Affects: The Easterly 10 feet of Parcel Three; the Northerly and Westerly 10 feet of Parcel One; the Westerly 10 feet of Parcel Two; and the Northerly 10 feet of Parcel Four 14. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: City of Santa Clara, California, A Municipal Corporation For: Underground Electrical Easements Recorded: July 14, 1977 in Book C992 at Page 22 Official Records of Santa Clara County, California Affects: The Northerly and Westerly 10 feet of Parcel One; the Northerly 10 feet of Parcel Four; the Westerly 10 feet of Parcel Two; and the Easterly 10 feet of Parcel Three 15. An unrecorded Agreement, affecting said land, for the purposes, stated herein, upon the terms, covenants and conditions referred to therein, between the parties named herein For: Real Estate Purchase Agreement Dated: October 27, 1977 Executed By: Marriott Corporation, a Delaware corporation and Intel Corporation, a California corporation Said Agreement, among other things, has conditions for special Architectural Standards as to all parcels and conditions for the Sign Parcel and Easements described in said agreement affecting Parcel Four. 16. An easement affecting the portion of said land for the purposes stated herein, and incidental purposes, shown or dedicated by the Map recorded in Book 410 of Maps of Santa Clara County, California, at Pages 29 and 30: For: Proposed Sign Easement Affects: The Southeasterly portion of Parcel Four The above easement was reserved for the benefit of Marriot Corporation, a corporation by Deed recorded December 30, 1977, in Book D380, Page 36, of Official Records of Santa Clara County, California. 17. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: City of Santa Clara, California, A Municipal Corporation For: Street and Utility Purposes Recorded: April 11, 1979 in Book E409 at Page 570 Official Records of Santa Clara County, California Affects: As follows: All that certain Parcel of land lying within Parcel 6 of the Parcel Map filed for Record December 29, 1977 in Book 410 of Maps, Pages 29 & 30, in the Records of Santa Clara County, California, being more particularly described as follows: Beginning at the Northwest corner of said Parcel 6: Thence North 89 deg. 44' 31" East, along the Northerly line of said Parcel 6, a distance of 640.02 feet, to the Northeast corner of said Parcel 6; Thence, South 0 deg. 02' 19" West, along the Easterly line of said Parcel 6, a distance of 35.86 feet to a non-tangent curve concave to the Southwest having a radius of 35.00 feet and a beginning tangent bearing North 30 deg. 57' 51" West; Thence, Northwesterly along said curve, 19.01 feet, through a central angle of 31 deg. 07' 02" to a non-tangent line parallel with and 23.00 feet Southerly of, measured at right angles to, said Northerly line of said Parcel 6; Thence, South 89 deg. 44' 31" West, along said parallel line a distance of 620.80 feet, to the Westerly line of said Parcel 6; Thence, North 17 deg. 37' 57" West along said Westerly line of Parcel 6, a distance of 17.46 feet; Thence, continuing along said Westerly line of Lot 6, North 0 deg. 02' 46" West, 6.34 feet, to the point of beginning. Said matter affects: Parcel Three 18. An easement affecting the portion of said land for the purposes stated herein, and incidental purposes, shown or dedicated by the Map recorded in Book 442 of Maps of Santa Clara County, California, at Page 8 For: Underground Electrical Easement Affects: The Westerly portion of Said Land Said matter affects: Parcel Four 19. An easement affecting the portion of said land and for the purposes stated herein, and incidental purposes, In Favor Of: Marriott Corporation, a Delaware Corporation For: Ingress and Egress to an existing sign Recorded: May 18, 1979 in Book E506 at Page 74 Official Records of Santa Clara County, California Affects: As follows: Commencing on the Southerly line of Freedom Circle at the Northerly common corner of Parcels 3 and 4 as said circle and Parcels are shown on that Parcel Map filed in Book 410 of Maps at Pages 29 and 30, Santa Clara County Records; thence Northeasterly along the Southerly line of Freedom Circle on a curve to the left with a radius of 336 feet through a central angle of 0 deg 54' 9" an arc distance of 5.29 feet to the True Point of Beginning of this description; thence from said True Point of Beginning continuing along said curve to the left with a radius of 336 feet through a central angle of 3 deg 38' 21" an arc distance of 21.34 feet; thence South 15 deg 11' 58" West 134.19 feet; thence South 14 deg 48' 02" East 40.00 feet; thence South 15 deg 11' 58" West 233.34 feet; thence South 70 deg 14' 53" East 207.87 feet to the Westerly line of a 50 foot by 40 foot sign easement as shown on the above mentioned parcel map; thence along the Westerly line of said 50 foot by 40 foot sign easement, South 19 deg 45' 07" West 20.00 feet to the Northerly line of a 35 foot wide storm drainage easement as shown on the above mentioned parcel map; thence along the Northerly line of said 35 foot wide storm drainage easement North 70 deg 14' 53" West 226.21 feet; thence North 15 deg 11' 58" East 246.30 feet; thence North 14 deg 48' 02" West 40.00 feet; thence North 15 deg 11' 58" East 131.73 feet to the Point of Beginning. Said matter affects: Parcel Four 20. A Lease, affecting the premises herein stated, executed by and between the parties named herein, for the term and upon the terms, covenants and conditions therein provided, Dated: July 17, 1978, amended on May 1, 1979 and on May 15, 1979 Lessor: John Arrillaga, Trustee, or his successor trustee, under Trust Agreement dated July 20, 1977 (John Arrillaga Separate Property Trust) as amended, and Richard T. Peery, Trustee, or his successor trustee, under Trust Agreement dated July 20, 1977 (Richard T. Peery Separate Property Trust) Lessee: Pedro's Food Systems, Incorporated, a California Corporation and Peter S. Ramirez, Individually and Peter O. Ramirez, Individually, Jointly and Severally Term: Twenty-five (25) Years commencing on June 1, 1979 Disclosed by: Short Form of Lease Recorded: May 18, 1979 in Book E506 At Page 82 Of Official Records of Santa Clara County, California Affects: Parcel Four An Assignment of the Lessee's interest in said lease was Executed By: Peter S. Ramirez, as individual (Ramirez), and Pedro's Food Systems, Inc., a California Corporation To: Brookside Development, Inc., a California Corporation ("BD"); and Michael R. Martinez, an individual ("Martinez"), Pedro's Management Systems, Inc., a California Corporation Recorded: August 11, 1987 in Book K256 at Page 1114 of Official Records of Santa Clara County, California An un-recorded assignment of the lessee's interest in said lease was Executed By: Brookside Development, Inc., a California Corporation and Michael R. Martinez and Pedro's Management Systems Inc. To: Pedro Management Systems, Inc. Dated: November 17, 1987 An un-recorded assignment of the lessee's interest in said lease was Executed By: Pedro Management Systems, Inc. To: Golden State Restaurants, Inc. Dated: February 18, 1992 Memorandum of Amendment and Assignment of Ground Lease Dated: February 18, 1992 Executed By: John Arrillaga, Trustee or his Successor Trustee, under Trust Agreement dated July 20, 1977 ("John Arrillaga Separate Property Trust"), as amended and Richard T. Peery, Trustee or his Successor Trustee, under Trust Agreement dated July 20, 1977 ("Richard T. Peery Separate Property Trust") and Golden State Restaurants, Inc. Recorded: February 20, 1992 in Book M054 at Page 0873 of Official Records of Santa Clara County, California No representation is made as to the present ownership of said leasehold or matters affecting the rights or interests of the lessor or lessee arising out of or occasioned by said lease. 21. Release Agreement and Covenant Not to Sue executed and acknowledged by Informix Corporation, a Delaware corporation ("Informix"), Peery Private Investment Company - WP, L.P., a California limited partnership, as to an undivided 1/4 interest, Peery Public Investment Company - WP, L.P., a California limited partnership, as to an undivided 1/4 interest, and John Arrillaga, Trustee, or Successor Trustee under Trust Agreement dated July 20, 1977 (The Arrillaga Family Trust) as amended, as to an undivided 2/4 interest (collectively, "P/A") and BNP Leasing Corporation, a Delaware corporation ("BNP") to be filed for record in the Official Records of Santa Clara County, California. 22. Agreement Containing Covenants Running with the Land executed and acknowledged by Informix, P/A and BNP to be filed for record in the Official Records of Santa Clara County, California. Exhibit C List of Environmental Reports 1. Phase I report titled "Final Preliminary Site Assessment" for Parcel #104-40-018, Santa Clara, California, dated December 17, 1996, prepared by Harza Consulting Engineers and Scientists. 2. Phase I report titled "Final Preliminary Site Assessment" for Parcel #104-40-021, Santa Clara, California, dated November 17, 1996, prepared by Harza Consulting Engineers and Scientists. 3. Phase I report titled "Final Preliminary Site Assessment" for Parcel #104-40-023, Santa Clara, California, dated November 17, 1996, prepared by Harza Consulting Engineers and Scientists. 4. Phase I report titled "Final Preliminary Site Assessment" for 3935 Freedom Circle Santa Clara, California, dated November 17, 1996, prepared by Harza Consulting Engineers and Scientists. Exhibit D Financial Covenant Compliance Certificate BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Rafael Lumanlan Re: Informix/BNP Lease Agreement (Freedom Circle Property) Gentlemen: I, the undersigned, the [chief financial officer, controller, treasurer or the assistant treasurer] of INFORMIX CORPORATION, do hereby certify, represent and warrant that: 1. This Certificate is furnished pursuant to subparagraph 8.(w)(iii) of that certain Lease Agreement dated as of January 6, 1997 (the "Lease Agreement," the terms defined therein being used herein as therein defined) between INFORMIX CORPORATION (the "Tenant"), and you. 2. Annex 1 attached hereto sets forth financial data and computations evidencing the Tenant's compliance with certain covenants of the Lease Agreement, all of which data and computations are complete, true and correct. 3. To the knowledge of Tenant no Default or Event of Default under the Lease Agreement has occurred and is continuing. 4. The representations of Tenant set forth in the Lease Agreement are true and correct in all material respects as of the date hereof as though made on and as of the date hereof. Executed this _____ day of ______________, 199__. INFORMIX CORPORATION Name:_________________________ Title:________________________ [cc all Participants] Annex 1 To Compliance Certificate For the _________________ Ended ________________, 199__ I. PARAGRAPH 8.(cc)(i): Quick Ratio A. Unencumbered Cash and Cash Equivalents and other "Quick Assets" as defined in Paragraph 8.(cc)(i) of the Lease: $_____________ B. "Current Liabilities" as defined in Paragraph 8.(cc)(i) of the Lease: $_____________ C. Ratio of A to B: _____ to 1.00 F. Minimum ratio computed as provided in Paragraph 8.(cc)(i) of the Lease: 1.00 to 1.00 II. PARAGRAPH 8.(cc)(ii): Minimum Tangible Net Worth A. Reported stockholders equity: $_____________ B. "Intangible Assets" as defined in Paragraph 8.(cc)(ii) of the Lease: $_____________ D. Consolidated Tangible Net Worth (A - B): $_____________ E. Minimum computed as provided in Paragraph 8.(cc)(ii) of the Lease: $_____________ EX-10.7 4 PLEDGE AGREEMENT BETWEEN INFORMIX CORPORATION, BNP LEASING CORPORATION AND BANQUE NATIONALE DE PARIS EFFECTIVE AS OF JANUARY 6, 1997 PLEDGE AGREEMENT This PLEDGE AGREEMENT (this "Agreement") is made as of January 6, 1997, by INFORMIX CORPORATION, a Delaware corporation ("Informix"); BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"); BANQUE NATIONALE DE PARIS as a "Participant"; and BANQUE NATIONALE DE PARIS, acting in its capacity as agent for BNPLC and the Participants (in such capacity, "Agent"). RECITALS A. Informix and BNPLC are parties to: (i) a Lease Agreement dated the date hereof (the "Lease"), pursuant to which BNPLC has agreed to lease certain property to Informix; and (ii) a Purchase Agreement dated the date hereof (the "Purchase Agreement") pursuant to which Informix has agreed to purchase BNPLC's interest in such property or to cause such property to be purchased from BNPLC by a third party. B. Pursuant to a Participation Agreement dated the date hereof (the "Participation Agreement"), BNP has agreed with BNPLC to participate in the risks and rewards to BNPLC of the Lease and the Purchase Agreement, and the parties to this Agreement anticipate that other financial institutions may become parties to the Participation Agreement as Participants, agreeing to participate in the risks and rewards to BNPLC of the Lease and the Purchase Agreement. C. To reduce the Base Rent required by the Lease as therein provided, Informix may from time to time deliver cash collateral for its obligations to BNPLC under the Purchase Agreement and for BNPLC's corresponding obligations to Participants under the Participation Agreement. This Agreement sets forth the terms and conditions governing such cash collateral. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1 Definitions and Interpretation. Section 1.1 Definitions. When used in this Agreement, the following terms shall have the following respective meanings: "Account" shall mean any deposit account maintained by a Deposit Taker into which Cash Collateral may be deposited at any time, excluding the Transition Account. "Account Office" shall mean, with respect to any Account maintained by any Deposit Taker, the office of such Deposit Taker at which such Account is maintained. "Agent" shall have the meaning given to that term in the introductory paragraph hereof. "BNPLC" shall have the meaning given to that term in the introductory paragraph hereof. "BNPLC's Corresponding Obligations to Participants" shall mean BNPLC's obligations under the Participation Agreement to pay Participants their respective Percentages of (or amounts equal to their respective Percentages of) sums "actually received by BNPLC" (as defined in the Participation Agreement) in satisfaction of Informix's Purchase Agreement Obligations; provided, however, any modification of the Participation Agreement executed after the date hereof without Informix's consent shall not be considered for purposes of determining BNPLC's Corresponding Obligations to Participants under this Agreement. "Cash Collateral" shall mean (i) all funds of Informix which Informix has delivered to Agent for deposit with a Deposit Taker pursuant to this Agreement, and (ii) any additional funds delivered to Agent as Collateral pursuant to Section 0. "Certificate of Deposit" shall mean a certificate of deposit issued by a Deposit Taker as required by Section 0 below to evidence an Account into which Cash Collateral has been deposited pursuant to this Agreement. Each Certificate of Deposit shall be issued in an amount equal to the Value of the Account which it evidences and shall otherwise be in the form set forth as Attachment 1. "Collateral" shall have the meaning given to that term in Section 0 hereof. "Collateral Adjustment Fee" means the amount of $7,500, payable to BNPLC as additional Rent under the Lease, if and to the extent required from time to time by this Agreement. "Collateral Imbalance" shall mean on any date prior to the Designated Sale Date that the Value (without duplication) of Accounts maintained by and Certificates of Deposit issued by the Deposit Taker for any Participant (other than a Disqualified Deposit Taker) does not equal such Participant's Percentage, multiplied by the lesser of (1) the Minimum Collateral Value in effect on such date, or (2) the aggregate Value of all Collateral subject to this Agreement on such date. For purposes of determining whether a Collateral Imbalance exists, the Value of any Accounts maintained by a bank that is acting as Deposit Taker for two or more Participants will be deemed to be held for them in proportion to their respective Percentages, and the Value of any Accounts maintained by a bank as Deposit Taker for both a Participant and BNPLC (as in the case of BNP acting as Deposit Taker for itself, as a Participant, and for BNPLC) will be deemed to be held for the Participant only to the extent necessary to prevent or mitigate a Collateral Imbalance and otherwise for BNPLC. "Collateral Percentage" shall mean the percentage designated by Informix pursuant to Section 0. "Default" means any Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an Event of Default. "Deposit Taker" for BNPLC shall mean BNP and for each Participant shall mean the Participant itself; provided, that each of BNPLC and the Participants, for itself only, may from time to time designate another Deposit Taker as provided in Sections 0 and 0 below. "Deposit Taker Losses" shall mean the Value of any Cash Collateral delivered to a Deposit Taker that will not be returned to Informix and will not be disposed of or applied by the Agent as provided herein or as required by applicable law. "Deposit Taker's Acknowledgment and Agreement" shall have the meaning given to that term in subsection 0 hereof. "Disqualified Deposit Taker" shall mean any Deposit Taker with whom Agent may decline to deposit Collateral pursuant to Section 0. "Event of Default" shall mean the occurrence of any of the following: (a) the failure by Informix to pay all or any part of Informix's Purchase Agreement Obligations when due, after giving effect to any applicable notice and grace periods expressly provided for in the Purchase Agreement; (b) the failure by Informix to provide funds as and when required by Section 0 of this Agreement, if within three (3) Business Days after such failure commences Informix does not (1) cure such failure by delivering the funds required by Section 0, and (2) pay to BNPLC as additional Rent under the Lease an amount equal to interest at the Default Rate (as defined in the Lease) on such funds for the period from which they were first due to the date of receipt by Agent, and (3) pay to BNPLC a Collateral Adjustment Fee; (c) the failure by Informix timely and properly to observe, keep or perform any covenant, agreement, warranty or condition herein required to be observed, kept or performed (other than a failure described in another clause of this definition of Event of Default), if such failure is not cured within thirty (30) days after Agent gives Informix written notice thereof; (d) the failure of any representation made by Informix in subsection 0 to be true, if within fifteen (15) days after Informix becomes aware of such failure, Informix does not (1) notify Agent, BNPLC and the Participants of such failure, and (2) cure such failure, and (3) pay to BNPLC any additional Base Rent that has accrued under the Lease because of (or that would have accrued if BNPLC had been aware of) such failure, and (4) pay to BNPLC interest at the Default Rate on any such additional Base Rent, and (5) pay to BNPLC a Collateral Adjustment Fee; (e) the failure of any representation herein by Informix to be true (other than a failure described in another clause of this definition of Event of Default), if such failure is not cured within thirty (30) days after Agent gives Informix written notice thereof; (f) the failure of the pledge or security interest contemplated herein in the Transition Account or any Account, Certificate of Deposit or Cash Collateral to be a valid, perfected, first priority pledge or security interest (regardless of the characterization of the Transition Account or any Accounts, Certificates of Deposit or Cash Collateral as deposit accounts, instruments or general intangibles under the UCC), if within fifteen (15) days after Informix becomes aware of such failure, Informix does not (1) notify Agent, BNPLC and the Participants of such failure, and (2) cure such failure, and (3) pay to BNPLC any additional Base Rent that has accrued under the Lease because of (or that would have accrued if BNPLC had been aware of) such failure, and (4) pay to BNPLC interest at the Default Rate on any such additional Base Rent, and (5) pay to BNPLC a Collateral Adjustment Fee; and (g) the failure by BNPLC to pay when due any of BNPLC's Corresponding Obligations to Participants, after giving effect to any applicable notice and grace periods expressly provided for in the Participation Agreement. Notwithstanding the foregoing, if ever the aggregate Value of Cash Collateral held by Agent and the Deposit Takers exceeds the Minimum Collateral Value then in effect, a failure of the pledge or security interest contemplated herein in such excess Cash Collateral to be a valid, perfected, first priority pledge or security interest shall not constitute an Event of Default under this Agreement. "Informix" shall have the meaning given to that term in the introductory paragraph hereof. "Informix's Purchase Agreement Obligations" shall mean all of Informix's obligations under the Purchase Agreement, including (i) Informix's obligation to pay the entire Purchase Price and Shortage Amount, if any, as the case may be, as required under Paragraph 2(a) of the Purchase Agreement if BNPLC elects to enforce specific performance of the Purchase Agreement, and (ii) any damages incurred by BNPLC because of (A) Informix's breach of the Purchase Agreement or (B) the rejection by Informix of the Purchase Agreement in any bankruptcy or insolvency proceeding. "Lien" shall mean, with respect to any property or assets, any right or interest therein of a creditor to secure indebtedness of any kind which is owed to him or any other arrangement with such creditor which provides for the payment of such indebtedness out of such property or assets or which allows him to have such indebtedness satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or any other charge or encumbrance for security purposes, whether arising by law or agreement or otherwise, but excluding any right of offset which arises without agreement in the ordinary course of business. "Lien" also means any filed financing statement, any registration with an issuer of uncertificated securities, or any other arrangement which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement is undertaken before or after such Lien exists. "Minimum Collateral Value" shall mean (1) as of the Designated Sale Date or any prior date, an amount equal to the Collateral Percentage multiplied by the Stipulated Loss Value determined as of that date in accordance with the Lease; and (2) as of any date after the Designated Sale Date, an amount equal to the Purchase Price plus any unpaid interest on past due amounts that has accrued pursuant to Paragraph 2(a) of the Purchase Agreement. "Notice of Security Interest" shall have the meaning given to that term in Subsection 0 hereof. "Other Liable Party" shall mean any Person, other than Informix, who may now or may at any time hereafter be primarily or secondarily liable for any of the Secured Obligations or who may now or may at any time hereafter have granted to Agent a Lien upon any of the Collateral. "Participants" shall mean BNP and any other financial institutions which may hereafter become parties to (i) this Agreement by completing, executing and delivering to Informix and Agent a Supplement, and (ii) the Participation Agreement. "Participation Agreement" shall have the meaning given to such term in Recital B hereof. "Percentage" shall mean with respect to each Participant and the Deposit Taker for such Participant, such Participant's "Percentage" as defined in the Participation Agreement. "Qualified Deposit Taker" means one of the fifty largest (measured by total assets) U.S. banks, or one of the one hundred largest (measured by total assets) banks in the world, with debt ratings of at least (i) A- (in the case of long term debt) and A-1 (in the case of short term debt) or the equivalent thereof by Standard and Poor's Corporation, and (ii) A (in the case of long term debt) and P-1 (in the case of short term debt) or the equivalent thereof by Moody's Investor Service, Inc. The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, Informix shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the status of any bank as a Qualified Deposit Taker. "Secured Obligations" shall mean and include both Informix's Purchase Agreement Obligations and BNPLC's Corresponding Obligations to Participants. "Supplement" shall mean a supplement to this Agreement in the form of Attachment 2. "Transaction Documents" shall mean, collectively, this Agreement, the Lease, the Purchase Agreement and the Participation Agreement. "Transition Account" shall have the meaning given it in Section 5.2. "UCC" shall mean the Uniform Commercial Code as in effect in the State of California from time to time, and the Uniform Commercial Code as in effect in any other jurisdiction which governs the perfection or non-perfection of the pledge of and security interests in the Collateral created by this Agreement. "Value" shall mean with respect to any Account, Certificate of Deposit or Cash Collateral on any date, a dollar value determined as follows (without duplication): (a) cash shall be valued at its face amount on such date; (b) an Account shall be valued at the principal balance thereof on such date; and (c) a Certificate of Deposit shall be valued at the face amount thereof. Section 1.2 Other Definitions. Reference is hereby made to the Lease, the Purchase Agreement and the Participation Agreement for a statement of the terms thereof. All capitalized terms used in this Agreement which are defined in the Lease or the Purchase Agreement and not otherwise defined herein shall have the same meanings herein as set forth therein. All terms used in this Agreement which are defined in the UCC and not otherwise defined herein shall have the same meanings herein as set forth therein, except where the context otherwise requires. Section 1.3 Attachments. All attachments to this Agreement are a part hereof for all purposes. Section 1.4 Amendment of Defined Instruments. Unless the context otherwise requires or unless otherwise provided herein, references in this Agreement to a particular agreement, instrument or document (including references to the Lease, Purchase Agreement and Participation Agreement) also refer to and include all valid renewals, extensions, amendments, modifications, supplements or restatements of any such agreement, instrument or document; provided that nothing contained in this Section shall be construed to authorize any Person to execute or enter into any such renewal, extension, amendment, modification, supplement or restatement. Section 1.5 References and Titles. All references in this Agreement to Attachments, Articles, Sections, subsections, and other subdivisions refer to the Attachments, Articles, Sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any subdivision are for convenience only and do not constitute any part of any such subdivision and shall be disregarded in construing the language contained in this Agreement. The words "this Agreement", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Article," "this Section" and "this subsection" and similar phrases refer only to the Articles, Sections or subsections hereof in which the phrase occurs. The word "or" is not exclusive, and the word "including" (in all of its forms) means "including without limitation". Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa unless the context otherwise requires. 2 Pledge and Grant of Security Interest. As security for the Secured Obligations, Informix hereby pledges and assigns to Agent (for the ratable benefit of BNPLC and the Participants) and grants to Agent (for the ratable benefit of BNPLC and the Participants) a continuing security interest in all right, title and interest of Informix in and to the following property, whether now owned or hereafter acquired by Informix (collectively and severally, the "Collateral"): (a) All Cash Collateral, all Accounts, the Transition Account and all Certificates of Deposit issued from time to time and general intangibles arising therefrom or relating thereto (provided, however, in no event shall such general intangibles be deemed to include any general intangibles not related to the foregoing, including, without limitation, any intellectual property of Informix); and all documents, instruments and agreements evidencing the same; all extensions, renewals, modifications and replacements of the foregoing; and any interest or other amounts payable in connection therewith; and (b) All proceeds of the foregoing (including whatever is receivable or received when Collateral or proceeds is invested, sold, collected, exchanged, returned, substituted or otherwise disposed of, whether such disposition is voluntary or involuntary, including rights to payment and return premiums and insurance proceeds under insurance with respect to any Collateral, and all rights to payment with respect to any cause of action affecting or relating to the Collateral). The pledge, assignment and grant of a security interest made by Informix hereunder is for security of the Secured Obligations only; the parties to this Agreement do not intend that Informix's delivery of the Collateral to Agent as herein provided will constitute an advance payment of any Secured Obligations or liquidated damages, nor do the parties intend that the Collateral increase the dollar amount of the Secured Obligations. 3 Setting the Collateral Percentage. Effective as of the date of this Agreement, and so long as any portion of the Secured Obligations remain outstanding, the Collateral Percentage is one hundred percent (100%). 4 Provisions Concerning Deposit Takers. Section 4.1 Qualification of Deposit Takers Generally. Agent may decline to deposit or maintain Collateral hereunder with any Person designated as a Deposit Taker, if such Person has failed to satisfy or no longer satisfies the following requirements: 4.1.1 Such Person must have received from Agent and Informix a completed, executed Notice of Security Interest in the form of Attachment 3 (a "Notice of Security Interest") which specifically identifies any and all Accounts in which such Person shall hold Cash Collateral delivered to it pursuant to this Agreement and which designates Account Offices with respect to all such Accounts in California, New York, Illinois or another location approved by Agent and Informix. 4.1.2 Such Person must have executed the Acknowledgement and Agreement at the end of such Notice of Security Interest (the "Deposit Taker's Acknowledgement and Agreement") and returned the same to Agent. Further, such Person must have complied with the Deposit Taker's Acknowledgement and Agreement, and the representations set forth therein with respect to such Person must continue to be true and correct. 4.1.3 Such Person must be a commercial bank, organized under the laws of the United States of America or a state thereof or under the laws of another country which is doing business in the United States of America; must be authorized to maintain deposit accounts for others through Account Offices in California or New York (as specified in the Deposit Taker's Acknowledgement and Agreement); must be an Affiliate of BNPLC or the Participant for whom such Person will act as Deposit Taker or must have a combined capital, surplus and undivided profits of at least $500,000,000. 4.1.4 Such Person must have complied with the provisions in this Agreement applicable to Deposit Takers, including the provisions of Section 0 concerning the issuance and redemption of Certificates of Deposit. Section 4.2 Existing Deposit Takers. As of the date of this Agreement, BNP (as Deposit Taker for itself and for BNPLC) has satisfied the requirements set forth in the preceding Section for Deposit Takers. Section 4.3 Replacement of Participants Proposed by Informix. So long as no Event of Default has occurred and is continuing, BNPLC shall not unreasonably withhold its approval for a substitution under the Participation Agreement of a new Participant proposed by Informix for any Participant, the Deposit Taker for whom has ceased to be a Qualified Deposit Taker; provided, however, that (A) the proposed substitution can be accomplished without a release or breach by BNPLC of its rights and obligations under the Participation Agreement; (B) the new Participant will agree (by executing Supplements to this Agreement and to the Participation Agreement as contemplated herein and therein and by other agreements as may be reasonably required by BNPLC and Informix) to become a party to the Participation Agreement and to this Agreement, to designate a Qualified Deposit Taker as the Deposit Taker for it under this Agreement and to accept a Percentage under the Participation Agreement equal to the Percentage of the Participant to be replaced; (C) the new Participant (or Informix) will provide the funds required to pay the termination fee by Section 6.4 of the Participation Agreement to accomplish the substitution; (D) Informix (or the new Participant) agrees in writing to indemnify and defend BNPLC for any and all Losses incurred by BNPLC in connection with or because of the substitution, including the cost of preparing supplements to the Participation Agreement and this Agreement and including any cost of defending and paying any claim asserted by the Participant to be replaced because of the substitution (but not including any liability of BNPLC to such Participant for damages caused by BNPLC's bad faith or gross negligence in the performance of BNPLC's obligations under the Participation Agreement prior to the substitution); (E) the new Participant shall be a reputable financial institution having a net worth of no less than seven and one half percent (7.5%) of total assets and total assets of no less than $10,000,000,000.00 (all according to then recent audited financial statements); and (F) in no event will BNPLC be required to approve a substitution pursuant to this Section 0 which will replace a Participant that is an Affiliate of BNPLC. BNPLC shall attempt in good faith to assist (and cause its Affiliate, Banque Nationale de Paris, to attempt in good faith to assist) Informix in identifying a new Participant that Informix may propose to substitute for an existing Participant pursuant to this Paragraph, as Informix may reasonably request from time to time. However, in no event shall BNPLC itself, or any of its Affiliates, be required to take the Percentage of any Participant to be replaced. Section 4.4 Mandatory Substitution for Disqualified Deposit Takers. If any Deposit Taker shall cease to satisfy the requirements set forth in Section 0, the party for whom such Disqualified Deposit Taker has been designated as Deposit Taker (i.e., BNPLC or the applicable Participant) shall promptly (1) provide notice thereof to Agent and Informix, and (2) designate a substitute Deposit Taker and cause the substitute to satisfy the requirements set forth in Section 0. Pending the designation of the substitute and the satisfaction by it of the requirements set forth in Section 0, Agent may withdraw Collateral held by the Disqualified Deposit Taker and deposit such Collateral with other Deposit Takers, subject to Section 0 below. Section 4.5 Voluntary Substitution of Deposit Takers. With the written approval of Agent, which approval will not be unreasonably withheld, the Deposit Taker for BNPLC or any Participant shall be replaced by any Person designated by BNPLC or the applicable Participant, as the case may be; provided, such Person has satisfied the requirements set forth in Section 0; and, provided further, unless the replacement is required by Section 0, at the time of the replacement such Person must be a Qualified Deposit Taker. Section 4.6 Delivery of Notice of Security Interest by Informix and Agent. To the extent required to permit the substitution or replacement of a Deposit Taker for BNPLC or any Participant as provided in Sections 0 and 0, Informix and Agent shall promptly execute and deliver any properly completed Notice of Security Interest requested by BNPLC or the applicable Participant. Section 4.7 Constructive Possession of Collateral. The possession by a Deposit Taker of any deposit accounts, money, instruments, chattel paper or other property constituting Collateral or evidencing Collateral shall be deemed to be possession by Agent or a person designated by Agent, for purposes of perfecting the security interest granted to Agent hereunder pursuant to the UCC, to the extent applicable; and notifications to a Deposit Taker by other Persons holding any such property, and acknowledgements, receipts or confirmations from any such Persons delivered to a Deposit Taker, shall be deemed notifications to, or acknowledgements, receipts or confirmations from, financial intermediaries, bailees or agents (as applicable) of such Deposit Taker for the benefit of Agent for the purposes of perfecting such security interests under Applicable Law. Section 4.8 Attempted Offset by Deposit Takers. By delivery of a Deposit Taker's Acknowledgement and Agreement, each Deposit Taker shall be required to agree not to setoff or attempt a setoff, without in each case first obtaining the prior written authorization of Agent, amounts owed to it, including any Secured Obligations, against any Collateral held by it from time to time. Any Deposit Taker for BNPLC or a Participant shall not be permitted by BNPLC or the applicable Participant, as the case may be, to violate such agreement. However, Informix acknowledges and agrees that Agent shall not be responsible for, or be deemed to have taken any action against Informix because of, any Deposit Taker's violation of such agreement; and, neither BNPLC nor any Participant shall be responsible for, or be deemed to have taken any action against Informix because of, any violation of such agreement by a Deposit Taker for another party. Section 4.9 Deposit Taker Losses. Agent shall not be responsible for any Deposit Taker Losses. If for any reason, however, Deposit Taker Losses with respect to a Deposit Taker for a particular Participant will exceed the amount of payments in satisfaction of Secured Obligations that such Participant would have been entitled to receive under the Participation Agreement absent such Deposit Takers Losses, then such Participant shall promptly pay the excess to Agent as additional Collateral hereunder. 5 Delivery and Maintenance of Cash Collateral. Section 5.1 Delivery of Funds by Informix. On the date hereof and on each Base Rent Date, Informix must deliver to Agent, subject to the pledge and security interest created hereby, funds as Cash Collateral then needed (if any) to cause the Value of the Collateral to be no less than the Minimum Collateral Value. Each delivery of funds required by the preceding sentence must be received by Agent no later than 12:00 noon (San Francisco time) on the Base Rent Date it is required; if received after 12:00 noon it will be considered for purposes of the Lease as received on the next following Business Day. At least ten (10) Business Days prior to any Base Rent Date upon which it is expected that Informix will be required to deliver additional funds pursuant to this Section, Informix shall notify BNPLC, Agent and each of the Participants thereof and of the amount Informix expects to deliver to Agent as Cash Collateral on the applicable Base Rent Date. In addition to required deliveries of Cash Collateral as provided in the foregoing provisions, Informix may on any date (whether or not a Base Rent Date) deliver additional Cash Collateral to Agent as necessary to prevent any Default from becoming an Event of Default. Upon receipt of any funds delivered to it by Informix as Cash Collateral, Agent shall immediately deposit the same with the Deposit Takers in accordance with the requirements of Sections 0 and 0 below. Section 5.2 Transition Account. Pending deposit in the Accounts or other application as provided herein, all Cash Collateral received by Agent shall be credited to and held by Agent in an account (the "Transition Account") styled "Informix Collateral Account, held for the benefit of BNPLC and the Participants," separate and apart from all other property and funds of Informix or other Persons, and no other property or funds shall be deposited in the Transition Account. The books and records of Agent shall reflect that the Transition Account and all Cash Collateral on deposit therein are owned by Informix, subject to a pledge and security interest in favor of Agent for the benefit of BNPLC and Participants. Section 5.3 Allocation of Cash Collateral Among Deposit Takers. Funds received by Agent from Informix as Cash Collateral will be allocated for deposit among the Deposit Takers as follows: first, to the extent possible the funds will be allocated as required to rectify and prevent any Collateral Imbalance; and second, the funds will be allocated to the Deposit Taker for BNPLC, unless the Deposit Taker for BNPLC has become a Disqualified Deposit Taker, in which case the funds will be allocated to other Deposit Takers who are not Disqualified Deposit Takers as Agent deems appropriate. Further, if for any reason a Collateral Imbalance is determined by Agent to exist, Agent shall, as required to rectify or mitigate the Collateral Imbalance, promptly reallocate Collateral among Deposit Takers by withdrawing Cash Collateral from some Accounts and redepositing it in other Accounts. (If any party to this Agreement believes that the Value of the Accounts held by a particular Deposit Taker causes a Collateral Imbalance to exist, that party will promptly notify BNPLC, Informix and Agent.) Subject to the foregoing, and provided that Agent does not thereby create or exacerbate a Collateral Imbalance, Agent may withdraw and redeposit Cash Collateral in order to reallocate the same among Deposit Takers from time to time as Agent deems appropriate. For purposes of illustration only, examples of the allocations required by this Section are set forth in Attachment 4. Section 5.4 Issuance and Redemption of Certificates of Deposit. Upon the receipt of any deposit of Cash Collateral from Agent, each Deposit Taker shall issue a Certificate of Deposit evidencing the Account into which such deposit is made and deliver such Certificate of Deposit to Agent for the benefit of BNPLC and the Participants. Upon depositing any Cash Collateral into an Account that is already evidenced by an outstanding Certificate of Deposit, Agent will surrender the outstanding Certificate of Deposit, and in exchange the Deposit Taker receiving the deposit will issue a new Certificate of Deposit, evidencing the total amount of Cash Collateral in the Account after the deposit. A Deposit Taker that has issued a Certificate of Deposit may require the surrender of the Certificate of Deposit as a condition to a withdrawal from the Account evidenced thereby, including any withdrawal required or permitted by this Agreement. Upon surrender of a Certificate of Deposit in connection with a withdrawal of less than all of the Cash Collateral in the Account evidenced thereby, the applicable Deposit Taker will concurrently issue a new Certificate of Deposit to Agent, evidencing the balance of the Cash Collateral remaining on deposit in the Account after the withdrawal. Notwithstanding the foregoing, if any Certificate of Deposit held by Agent shall be destroyed, lost or stolen, the Deposit Taker that issued the Certificate, upon the written request of Agent, shall issue a new Certificate of Deposit to Agent in lieu of and in substitution for the Certificate of Deposit so destroyed, lost or stolen. However, as applicant for the substituted Certificate of Deposit, Agent must indemnify the applicable Deposit Taker against any liability on the Certificate of Deposit destroyed, lost or stolen, and Agent shall furnish to the Deposit Taker an affidavit of an officer of Agent setting forth the fact of destruction, loss or theft and confirming the status of Agent as holder of the Certificate of Deposit immediately prior to the destruction, loss or theft. If any Certificate of Deposit held by Agent shall become mutilated, the Deposit Taker that issued the Certificate, upon the written request of Agent, shall issue a new Certificate of Deposit to Agent in exchange and substitution for the mutilated Certificate of Deposit. Agent shall hold all Certificates of Deposit for the benefit of BNPLC and the Participants, subject to the pledge and security interest created hereby. Section 5.5 Status of the Accounts Under the Reserve Requirement Regulations. Deposit Takers shall be permitted to structure the Accounts as nonpersonal time deposits under 12 C.F.R., Part II, Chapter 204 (commonly known as "Regulation D"). Accordingly, each Deposit Taker may require at least seven days advance notice of any withdrawal or transfer of funds from Accounts it maintains and may limit the number of withdrawals or transfers from such Accounts to no more than six in any calendar month, notwithstanding anything to the contrary herein or in any deposit agreement that Informix and any Deposit Taker may enter into with respect to any Account. As necessary to satisfy the seven days notice requirement with respect to withdrawals by Agent when required by Informix pursuant to the provisions below, Agent shall notify Deposit Takers promptly after receipt of any notice from Informix described in subsection 0 or 0 or in Section 0. Section 5.6 Acknowledgment by Informix that Requirements of this Pledge Agreement are Commercially Reasonable. Informix acknowledges and agrees that the requirements set forth herein concerning receipt, deposit, withdrawal, allocation, application and distribution of Cash Collateral by Agent, including the requirements and time periods set forth in the next Article, are commercially reasonable. 6 Withdrawal of Cash Collateral. Informix may not withdraw Cash Collateral, except as follows: Section 6.1 Withdrawal of Collateral Prior to the Designated Sale Date. Informix may require Agent to present Certificates of Deposit for payment and withdraw Cash Collateral from Accounts on any date prior to the Designated Sale Date and to deliver such Cash Collateral to Informix, free and clear of all liens and security interests hereunder; provided, however, that in each case: 6.1.1 Such withdrawal and delivery of the Cash Collateral to Informix will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value. 6.1.2 by a notice in the form of Attachment 5, Informix must give Agent, BNPLC and the Participants notice of the required withdrawal at least ten (10) Business Days prior to the date upon which the withdrawal is to occur. 6.1.3 No Default or Event of Default shall have occurred and be continuing at the time Informix gives the notice required by the preceding subsection or on the date upon which the withdrawal is required. 6.1.4 Informix must pay to Agent any and all costs incurred by Agent in connection with the withdrawal, including (if applicable) any early withdrawal penalties and other breakage charges specified at or prior to the time any Account was initially established. 6.1.5 Agent shall determine the Accounts from which to make any withdrawal required by Informix pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance. Section 6.2 Withdrawal and Application of Cash Collateral to Reduce or Satisfy the Secured Obligations to the Participants. To reduce the Purchase Price under and as defined in the Purchase Agreement (and, thus, the Secured Obligations), Informix may require Agent to withdraw a percentage (equal to the aggregate of all Participants' Percentages) of the total Cash Collateral then held by or for Agent pursuant to this Agreement on the Designated Sale Date (regardless of whether an Event of Default shall have occurred and be continuing on the Designated Sale Date) and to deliver the same, free and clear of all liens and security interests hereunder, directly to the Participants in proportion to their respective Percentages; provided, that: 6.2.1 by a notice in the form of Attachment 6, Informix must have notified Agent, BNPLC and each of the Participants of the required withdrawal and payment to Participants at least ten (10) Business Days prior to the Designated Sale Date upon which it is to occur; and 6.2.2 the required withdrawal shall be made as determined by Agent, first, from the Accounts maintained by the Deposit Takers for the Participants, and then (to the extent necessary) from other Accounts. Section 6.3 Withdrawal and Application of Cash Collateral to Reduce or Satisfy the Secured Obligations to BNPLC. To satisfy Informix's Purchase Agreement Obligations, Informix may require Agent to withdraw any Cash Collateral held by the Deposit Taker for BNPLC pursuant to this Agreement on the Designated Sale Date (regardless of whether an Event of Default shall have occurred and be continuing on the Designated Sale Date) and to deliver the same, free and clear of all liens and security interests hereunder, directly to BNPLC as a payment on behalf of Informix of amounts due under the Purchase Agreement; provided, that by a notice in the form of Attachment 7, Informix must have notified Agent and BNPLC of the required withdrawal and payment to BNPLC at least ten (10) Business Days prior to the Designated Sale Date. Section 6.4 Withdrawal of Cash Collateral From Accounts Maintained by Disqualified Deposit Takers. Informix may from time to time require Agent to withdraw any or all Cash Collateral from any Account maintained by a Disqualified Deposit Taker and deposit it, still subject to the pledge and grant of security interest hereunder, with other Deposit Takers who are not Disqualified Deposit Takers (in accordance with the requirements of Section 0 and 0) on any date prior to the Designated Sale Date; provided, that by a notice in the form of Attachment 8, Informix must have notified Agent, BNPLC and each of the Participants of the required withdrawal at least ten (10) Business Days prior to the date upon which it is to occur. Section 6.5 Withdrawal and Application of Cash Collateral to Pay the Release Price Required by Paragraph 9(b) of the Lease. To pay the Release Price under and as defined in the Lease (and to thereby reduce Stipulated Loss Value under and as defined in the Lease, which will in turn reduce the Secured Obligations), Informix may require Agent to present Certificates of Deposit for payment and withdraw Cash Collateral from Accounts on any date the Release Price must be paid and to deliver such Cash Collateral to BNPLC for application against the Release Price then due, free and clear of all liens and security interests hereunder; provided, however, that in each case: 6.5.1 Such withdrawal and delivery of the Cash Collateral to BNPLC will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value (computed after any payment of the Release Price in connection therewith). 6.5.2 by a notice in the form of Attachment 9, Informix must give Agent, BNPLC and the Participants notice of the required withdrawal at least ten (10) Business Days prior to the date upon which the withdrawal is to occur. 6.5.3 No Default or Event of Default shall have occurred and be continuing at the time Informix gives the notice required by the preceding subsection or on the date upon which the withdrawal is required. 6.5.4 Informix must pay to Agent any and all costs incurred by Agent in connection with the withdrawal, including (if applicable) any early withdrawal penalties and other breakage charges specified at or prior to the time any Account was initially established. 6.5.5 Agent shall determine the Accounts from which to make any withdrawal required by Informix pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance. 7 Representations and Covenants of Informix. Section 7.1 Representations of Informix. Informix represents to BNPLC, Agent and the Participants as follows: 7.1.1 Informix is the legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time Informix acquires rights in the Collateral, will be the legal and beneficial owner thereof). No other Person has (or, in the case of after-acquired Collateral, at the time Informix acquires rights therein, will have) any right, title, claim or interest (by way of Lien, purchase option or otherwise) in, against or to the Collateral. 7.1.2 Agent has (or in the case of after-acquired Collateral, at the time Informix acquires rights therein, will have) a valid, first priority, perfected pledge of and security interest in the Collateral, regardless of the characterization of the Collateral as deposit accounts, instruments or general intangibles under the UCC, but assuming that the representations of each Deposit Taker in its Deposit Taker's Acknowledgment and Agreement are true. 7.1.3 Informix has delivered to Agent, together with all necessary stock powers, endorsements, assignments and other necessary instruments of transfer, the originals of all documents, instruments and agreements evidencing Accounts, Certificates of Deposit or Cash Collateral. 7.1.4 Informix's chief executive office is located at the address of Informix set forth in Section 12.1(b) hereof. 7.1.5 To the knowledge of Informix, neither the ownership or the intended use of the Collateral by Informix, nor the pledge of Accounts or the grant of the security interest by Informix to Agent herein, nor the exercise by Agent of its rights or remedies hereunder, will (i) violate any provision of (a) Applicable Law, (b) the articles or certificate of incorporation, charter or bylaws of Informix, or (c) any agreement, judgment, license, order or permit applicable to or binding upon Informix, or (ii) result in or require the creation of any Lien, charge or encumbrance upon any assets or properties of Informix except as expressly contemplated in this Agreement. Except as expressly contemplated in this Agreement, to the knowledge of Informix no consent, approval, authorization or order of, and no notice to or filing with any court, governmental authority or third party is required in connection with the pledge or grant by Informix of the security interest contemplated herein or the exercise by Agent of its rights and remedies hereunder. Section 7.2 Covenants of Informix. Informix hereby agrees as follows: 7.2.1 Informix, at Informix's expense, shall promptly procure, execute and deliver to Agent all documents, instruments and agreements and perform all acts which are necessary or desirable, or which Agent may request, to establish, maintain, preserve, protect and perfect the Collateral, the pledge thereof to Agent or the security interest granted to Agent therein and the first priority of such pledge or security interest or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the preceding sentence, Informix shall (A) procure, execute and deliver to Agent all stock powers, endorsements, assignments, financing statements and other instruments of transfer requested by Agent, (B) deliver to Agent promptly upon receipt all originals of Collateral consisting of instruments, documents and chattel paper and (C) cause the security interest of Agent in any Collateral consisting of securities to be recorded or registered in the books of any financial intermediary or clearing corporation requested by Agent. 7.2.2 Informix shall not use or permit any Collateral to be used in violation of any provision of the this Agreement or any other Transaction Document or any Applicable Law. 7.2.3 Informix shall pay promptly when due all taxes and other governmental charges, all Liens and all other charges now or hereafter imposed upon, relating to or affecting any Collateral (but this provision shall not be construed to make Informix for taxes on net income earned by any Deposit Taker). 7.2.4 Without thirty (30) days' prior written notice to Agent, Informix shall not change Informix's name or place of business (or, if Informix has more than one place of business, its chief executive office). 7.2.5 Informix shall appear in and defend, on behalf of Agent, any action or proceeding which may affect Informix's title to or Agent's interest in the Collateral. 7.2.6 Subject to the express rights of Informix under Article 0, Informix shall not surrender or lose possession of (other than to Agent or a Deposit Taker pursuant hereto), sell, encumber, lease, rent, option, or otherwise dispose of or transfer any Collateral or right or interest therein, and Informix shall keep the Collateral free of all Liens. 7.2.7 Informix will not take any action which would in any manner impair the value or enforceability of Agent's pledge of or security interest in any Collateral, nor will Informix fail to take any action which is required to prevent (and which Informix knows is required to prevent) an impairment of the value or enforceability of Agent's pledge of or security interest in any Collateral. 7.2.8 Informix shall pay (and shall indemnify and hold harmless Agent from and against) all Losses incurred by Agent in connection with or because of (A) the interest acquired by Agent in any Collateral pursuant to this Agreement, or (B) the negotiation or administration of this Agreement, whether such Losses are incurred at the time of execution of this Agreement or at any time in the future. Costs and expenses included in such Losses may include, without limitation, all filing and recording fees, taxes, Uniform Commercial Code search fees and Attorneys' Fees incurred by Agent with respect to the Collateral. As used in this subsection the term "Agent" shall refer not only to the Person designated as such in the introductory paragraph of this Agreement, but also to each director, officer, agent, attorney, employee, representative and Affiliate of such Person. 8 Authorized Action by Agent. Informix hereby irrevocably appoints Agent as its attorney-in-fact for the purpose of authorizing Agent to perform (but Agent shall not be obligated to and shall incur no liability to Informix or any third party for failure to perform) any act which Informix is obligated by this Agreement to perform, and to exercise, consistent with the other provisions of this Agreement, such rights and powers as Informix might exercise with respect to the Collateral during any period in which a Default or Event of Default has occurred and is continuing, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) insure, process, preserve and enforce the Collateral; (d) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (e) pay any indebtedness of Informix relating to the Collateral; and (f) execute UCC financing statements and other documents, instruments and agreements required hereunder. Informix agrees that such care as Agent gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in Agent's possession; provided, however, that Agent shall not be obligated to Informix to give any notice or take any action to preserve rights against any other Person in connection with the Secured Obligations or with respect to the Collateral. 9 Default and Remedies. In addition to all other rights and remedies granted to Agent, BNPLC or the Participants by this Agreement, the Lease, the Purchase Agreement, the Participation Agreement, the UCC and other Applicable Laws, Agent may, upon the occurrence and during the continuance of any Event of Default, exercise any one or more of the following rights and remedies, all of which will be in furtherance of its rights as a secured party under the UCC: (a) Agent may collect, receive, appropriate or realize upon the Collateral or otherwise foreclose or enforce the pledge of or security interests in any or all Collateral in any manner permitted by Applicable Law or in this Agreement; and (b) Agent may notify any or all Deposit Takers to pay all or any portion of the Collateral held by such Deposit Taker(s) directly to Agent. Agent shall distribute the proceeds of all Collateral received by Agent after the occurrence of an Event of Default to BNPLC and the Participants for application to the Secured Obligations. If any proceeds of Collateral remain after all Secured Obligations have been paid in full, Agent will deliver or direct the Deposit Takers to deliver such proceeds to Informix or other Persons entitled thereto. In any case where notice of any sale or disposition of any Collateral is required, Informix hereby agrees that seven (7) Business Days notice of such sale or disposition is reasonable. 10 Other Recourse. To the fullest extent permitted by applicable law, Informix waives any right to require that Agent, BNPLC or the Participants proceed against any other Person, exhaust any Collateral or other security for the Secured Obligations, or to have any Other Liable Party joined with Informix in any suit arising out of the Secured Obligations or this Agreement, or pursue any other remedy in their power. Informix waives any and all notice of acceptance of this Agreement. Informix further waives notice of the creation, modification, rearrangement, renewal or extension for any period of any of the Secured Obligations of any Other Liable Party from time to time and any defense arising by reason of any disability or other defense of any Other Liable Party or by reason of the cessation from any cause whatsoever of the liability of any Other Liable Party. Until all of the Secured Obligations shall have been paid in full, Informix shall have no right to subrogation, reimbursement, contribution or indemnity against any Other Liable Party and Informix waives the right to enforce any remedy which Agent, BNPLC or any Participant has or may hereafter have against any Other Liable Party, and waives any benefit of and any right to participate in any other security whatsoever now or hereafter held by Agent, BNPLC or any Participant. Informix authorizes Agent, BNPLC and the Participants, without notice or demand and without any reservation of rights against Informix and without affecting Informix's liability hereunder or on the Secured Obligations, from time to time to (a) take or hold any other property of any type from any other Person as security for the Secured Obligations, and exchange, enforce, waive and release any or all of such other property, (b) after any Event of Default, apply or require the application of the Collateral (in accordance with this Agreement) or such other property in any order they may determine and to direct the order or manner of sale thereof as they may determine, (c) renew, extend for any period, accelerate, modify, compromise, settle or release any of the obligations of any Other Liable Party with respect to any or all of the Secured Obligations or other security for the Secured Obligations, and (d) release or substitute any Other Liable Party. 11 Provisions Concerning Agent. In the event of any conflict between the following and other provisions in this Agreement, the following will control: Section 11.1 Appointment and Authority. BNPLC and each Participant hereby irrevocably authorizes Agent, and Agent hereby undertakes, to take all actions and to exercise such powers under this Agreement as are specifically delegated to Agent by the terms hereof, together with all other powers reasonably incidental thereto. The relationship of Agent to the Participants is only that of one commercial bank acting as collateral agent for others, and nothing herein shall be construed to constitute Agent a trustee or other fiduciary for any Participant or anyone claiming through or under a Participant nor to impose on Agent duties and obligations other than those expressly provided for in this Agreement. With respect to any matters not expressly provided for in this Agreement and any matters which this Agreement places within the discretion of Agent, Agent shall not be required to exercise any discretion or take any action, and it may request instructions from BNPLC and Participants with respect to any such matter, in which case it shall be required to act or to refrain from acting (and shall be fully protected and free from liability to all Participants in so acting or refraining from acting) upon the instructions of the Majority, as defined in the Participation Agreement, including itself as a Participant and BNPLC; provided, however, that Agent shall not be required to take any action which exposes it to a risk of personal liability that it considers unreasonable or which is contrary to this Agreement or the other documents referenced herein or to Applicable Law. Section 11.2 Exculpation, Agent's Reliance, Etc. Neither Agent nor any of its directors, officers, agents, attorneys, or employees shall be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that this sentence shall not excuse any such Person from liability for its own Misconduct. Without limiting the generality of the foregoing, Agent (1) may treat the rights of any Participant under its Participation Agreement as continuing until Agent receives written notice of the assignment or transfer of those rights in accordance with such Participation Agreement, signed by such Participant and in form satisfactory to Agent; (2) may consult with legal counsel (including counsel for Informix), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, unless the action taken or omitted constitutes Misconduct; (3) makes no warranty or representation and shall not be responsible for any statements, warranties or representations made in or in connection with this Agreement or the other documents referenced herein; (4) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of the Transaction Documents on the part of any party thereto, or to inspect the property (including the books and records) of any party thereto; (5) shall not be responsible to any Participant for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Transaction Document or any instrument or document furnished in connection therewith; (6) may rely upon the representations and warranties of Informix, Participants and Deposit Takers in exercising its powers hereunder; and (6) shall incur no liability under or in respect of the Transaction Documents by acting upon any notice, consent, certificate or other instrument or writing (including any telecopy, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper Person or Persons. Section 11.3 Participant's Credit Decisions. Each Participant acknowledges that it has, independently and without reliance upon Agent or any other Participant, made its own analysis of Informix and the transactions contemplated hereby and its own independent decision to enter into the Transaction Documents to which it is a party. Each Participant also acknowledges that it will, independently and without reliance upon Agent or any other Participant and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Transaction Documents. Section 11.4 Indemnity. Each Participant agrees to indemnify Agent (to the extent not reimbursed by Informix within ten (10) days after demand) from and against such Participant's Percentage of any and all Losses of any kind or nature whatsoever which to any extent (in whole or in part) may be imposed on, incurred by, or asserted against Agent growing out of, resulting from or in any other way associated with any of the Collateral, the Transaction Documents and the transactions and events (including the enforcement thereof) at any time associated therewith or contemplated therein. THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LOSSES ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT, PROVIDED ONLY THAT NO PARTICIPANT SHALL BE OBLIGATED UNDER THIS SECTION TO INDEMNIFY AGENT FOR THAT PORTION, IF ANY, OF ANY LOSS WHICH IS PROXIMATELY CAUSED BY AGENT'S OWN INDIVIDUAL MISCONDUCT, AS DETERMINED IN A FINAL JUDGMENT RENDERED AGAINST AGENT. Cumulative of the foregoing, each Participant agrees to reimburse Agent promptly upon demand for such Participant's Percentage Share of any costs and expenses to be paid to Agent by Informix hereunder to the extent that Agent is not timely reimbursed by Informix as provided in the subsection 0. As used in this Section the term "Agent" shall refer not only to the Person designated as such in the introductory paragraph of this Agreement, but also to each director, officer, agent, attorney, employee, representative and Affiliate of such Person. Section 11.5 Rights as Participant and Deposit Taker. In its capacity as a Participant, Agent shall have the same rights and obligations as any Participant and may exercise such rights as though it were not Agent. In its capacity as a Deposit Taker, Agent shall have the same rights and obligations as any Deposit Taker and may exercise such rights as though it were not Agent. Agent and any of its Affiliates may accept deposits from, lend money to, act as Trustee under indentures of, and generally engage in any kind of business with Informix or its Affiliates, all as if Agent were not designated as the Agent hereunder and without any duty to account therefor to any other Participant. Section 11.6 Investments. Whenever Agent in good faith determines that it is uncertain about how to distribute any funds which it has received hereunder, or whenever Agent in good faith determines that there is any dispute among BNPLC and Participants about how such funds should be distributed, Agent may choose to defer distribution of the funds which are the subject of such uncertainty or dispute. If Agent in good faith believes that the uncertainty or dispute will not be promptly resolved, or if Agent is otherwise required to invest funds pending distribution, Agent shall invest such funds pending distribution, all interest on any such investment shall be distributed upon the distribution of such investment and in the same proportion and to the same Persons as such investment. All moneys received by Agent for distribution to BNPLC or Participants shall be held by Agent pending such distribution solely as Agent hereunder, and Agent shall have no equitable title to any portion thereof. Section 11.7 Benefit of Section 0. The provisions of this Article 0 (other than the following Section 0) are intended solely for the benefit of Agent, BNPLC and Participants, and Informix shall not be entitled to rely on any such provision or assert any such provision in a claim or defense against Agent, BNPLC or any Participant. Agent, BNPLC and Participants may waive or amend such provisions as they desire without any notice to or consent of Informix. Section 11.8 Resignation. Agent may resign at any time by giving written notice thereof to BNPLC, Participants and Informix. Upon any such resignation the Majority (as defined in the Participation Agreement) shall have the right to appoint a successor Agent, subject to Informix's consent, such consent not to be unreasonably withheld. A successor must be appointed for any retiring Agent, and such Agent's resignation shall become effective when such successor accepts such appointment. If, within thirty days after the date of the retiring Agent's resignation, no successor Agent has been appointed and has accepted such appointment, then the retiring Agent may appoint a successor Agent, which shall be a commercial bank organized or licensed to conduct a banking or trust business under the laws of the United States of America or of any state thereof. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder, the provisions of this Article 0 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. 12 Miscellaneous. Section 12.1 Payments. All payments and deliveries of funds required to be made by Informix to Agent hereunder shall be paid or delivered to Agent in immediately available funds by wire transfer to: Federal Reserve Bank of San Francisco Account: Banque Nationale de Paris (for further credit to Informix Collateral Account held for the benefit of BNPLC and Participants) ABA #: 121027234 Reference: Informix (Receipts of Collateral). or at such other place and in such other manner as Agent may designate in a notice sent to Informix in accordance herewith (provided BNPLC will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to all payments and deliveries of funds by Informix to Agent under this Agreement. Any payments or return of funds required to be made by Agent to Informix pursuant to this Agreement shall be paid to Informix in immediately available funds by wire transfer to: Informix Software, Inc., Account No.: 12330-09815, Bank of America, 1850 Gateway Boulevard, Concord, California 94520, ABA#: 121000358; or as Informix may otherwise direct by written notice sent to Agent in accordance herewith (provided Informix will not unreasonably designate a method of payment other than wire transfer). Section 12.2 Notices. All notices, demands and other communications to be made hereunder to the parties hereto shall be in writing (at the addresses set forth below) and shall be given by any of the following means: (A) personal service, with proof of delivery or attempted delivery retained; (B) electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by United States first class mail, return receipt requested); or (C) registered or certified first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice or other communication sent pursuant to clause (A) or (C) hereof shall be deemed received (whether or not actually received) upon first attempted delivery at the proper notice address on any Business Day between 9:00 A.M. and 5:00 P.M., and any notice or other communication sent pursuant to clause (B) hereof shall be deemed received upon dispatch by electronic means. Address of Informix: Informix Corporation 4100 Bohannon Drive Menlo Park, California 94025 Attn: Treasurer Telecopy: (415) 926-6564 With a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Palo Alto, California 94304-1050 Attention: Real Estate Department/BOB Telecopy: (415) 493-6811 Address of BNPLC: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Rafael Lumanlan Telecopy: (415) 296-8954 And with a copy to: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Telecopy: (214) 969-1550 Address of Agent: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Rafael Lumanlan Telecopy: (415) 296-8954 With a copy to: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Telecopy: (214) 969-1550 Address of Participants: As set forth in Schedule 1 to the Participation Agreement Section 12.3 Waivers; Amendments. Any term, covenant, agreement or condition of this Agreement may be amended or waived only in writing and signed by the parties hereto. No failure or delay by Agent, BNPLC or any Participant in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. Unless otherwise specified in any such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. Section 12.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Informix, Agent, BNPLC and the Participants which become parties hereto and their respective permitted successors and assigns pursuant to a Permitted Transfer; provided, however, that Participants may sell, assign and delegate their respective rights and obligations hereunder only as permitted by the Participation Agreement and the Lease. Section 12.5 Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law or any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. Section 12.6 Cumulative Rights, etc. Except as herein expressly provided to the contrary, the rights, powers and remedies of Agent, BNPLC and the Participants under this Agreement shall be in addition to all rights, powers and remedies given to them by virtue of any Applicable Law, any other Transaction Document or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing their respective rights hereunder. Informix waives any right to require Agent, BNPLC or any Participant to proceed against any Person or to exhaust any Collateral or to pursue any remedy in Agent's, BNPLC's or such Participant's power. Section 12.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules (except to the extent otherwise provided in the UCC). Section 12.8 Survival of Agreements. All representations and warranties of Informix herein, and all covenants and agreements herein shall survive the execution and delivery of this Agreement, the execution and delivery of any other Transaction Documents and the creation of the Secured Obligations and continue until terminated or released as provided herein. Section 12.9 Other Liable Party. Neither this Agreement nor the exercise by Agent or the failure of Agent to exercise any right, power or remedy conferred herein or by law shall be construed as relieving any Other Liable Party from liability on the Secured Obligations or any deficiency thereon. This Agreement shall continue irrespective of the fact that the liability of any Other Liable Party may have ceased or irrespective of the validity or enforceability of any other agreement evidencing or securing the Secured Obligations to which Informix or any Other Liable Party may be a party, and notwithstanding the reorganization, death, incapacity or bankruptcy of any Other Liable Party, or any other event or proceeding affecting any Other Liable Party. Section 12.10 Termination. Following the Designated Sale Date, upon satisfaction in full of all Secured Obligations and upon written request for the termination hereof delivered by Informix to Agent, (i) this Agreement and the pledge and security interest created hereby shall terminate and all rights to the Collateral shall revert to Informix and (ii) Agent will, upon Informix's request and at Informix's expense execute and deliver to Informix such documents as Informix shall reasonably request to evidence such termination and release. Section 12.11 Counterparts. This Agreement may be separately executed in any number of counterparts, all of which when so executed shall be deemed to constitute one and the same Pledge Agreement. [The signature pages follow.] IN WITNESS WHEREOF, Informix, BNPLC, Agent and the Participants whose signatures appear below have caused this Agreement to be executed as of the day and year first above written. "Informix" INFORMIX CORPORATION By: /s/Margaret R. Brauns Margaret Brauns, Vice President and Treasurer [Continuation of signature pages to Pledge Agreement dated to be effective January 6, 1997] "BNPLC" BNP LEASING CORPORATION By: /s/Lloyd G. Fox Lloyd G. Cox, Vice President [Continuation of signature pages to Pledge Agreement dated to be effective January 6, 1997] "AGENT" BANQUE NATIONALE DE PARIS By: /s/Jennifer Cho Jennifer Cho, Vice President By: /s/Charles Day Charles Day, Assistant Vice President "PARTICIPANT" BANQUE NATIONALE DE PARIS By: /s/Jennifer Cho Jennifer Cho, Vice President By: /s/Charles Day Charles Day, Assistant Vice President ATTACHMENT 1 TO PLEDGE AGREEMENT CERTIFICATE OF DEPOSIT (No. _________) [_________, _____] [NAME OF THE ISSUING DEPOSIT TAKER AND THE ADDRESS OF ITS APPLICABLE ACCOUNT OFFICE] Payable to the order of: BANQUE NATIONALE DE PARIS, as Agent under the Pledge Agreement dated January 6, 1997 between it, BNP Leasing Corporation, Informix Corporation and others Dollars in current funds, without interest, seven days after presentment of this certificate properly endorsed. The bank issuing this certificate certifies that on the date indicated above the payee deposited the dollar amount indicated above, and that such amount shall be payable as provided above. Authorized Signature ATTACHMENT 2 TO PLEDGE AGREEMENT SUPPLEMENT TO PLEDGE AGREEMENT [__________, ____] Banque Nationale de Paris ____________________ ____________________ ____________________ Informix Corporation ____________________ ____________________ ____________________ 1. Reference is made to the Pledge Agreement dated as of January 6, 1997 (the "Pledge Agreement") among Informix Corporation ("Informix"), BNP Leasing Corporation ("BNPLC"), the financial institutions which are from time to time participants under and as defined in such Pledge Agreement (collectively, the "Participants") and Banque Nationale de Paris, acting in its capacity as agent for BNPLC and the Participants (in such capacity, "Agent"). Unless otherwise defined herein, all capitalized terms used in this Supplement have the respective meanings given to those terms in the Pledge Agreement. 2. The undersigned hereby certifies to Agent and Informix that the undersigned has become a party to the Participation Agreement by executing a supplement as provided therein and that its Percentage thereunder is ______%. 3. The undersigned, by executing and delivering this Supplement to Informix and Agent, hereby agrees to become a party to the Pledge Agreement and agrees to be bound by all of the terms thereof applicable to Participants. The Deposit Taker for the undersigned shall be _________________, until such time as another Deposit Taker for the undersigned shall be designated in accordance with Sections 0 or 0 of the Pledge Agreement. The undersigned certifies to Agent and Informix that such Deposit Taker is a Qualified Deposit Taker and satisfies the requirements for a Deposit Taker set forth in Section 0 of the Pledge Agreement. IN WITNESS WHEREOF, the undersigned has executed this Supplement as of the day and year indicated above. [ ] By: Name: Title: ATTACHMENT 3 TO PLEDGE AGREEMENT NOTICE OF SECURITY INTEREST [_________, _____] [Name of Deposit Taker] [Address of Deposit Taker] 1. Reference is made to the Pledge Agreement dated as of January 6, 1997 (the "Pledge Agreement") among Informix Corporation ("Informix"), BNP Leasing Corporation ("BNPLC"), the financial institutions which are from time to time Participants under and as defined in such Pledge Agreement (collectively, the "Participants") and Banque Nationale de Paris, acting in its capacity as agent for BNPLC and the Participants (in such capacity, "Agent"). Unless otherwise defined herein, all capitalized terms used in this Supplement have the respective meanings given to those terms in the Pledge Agreement. 2. Informix has informed Agent that Informix has established with the addressee of this Notice (the "Deposit Taker") the following non-interest bearing Account(s) to be maintained at the following Account Office(s): Account Account Account Type Office Number Time Deposit Time Deposit Time Deposit Informix has further informed Agent that Informix intends to maintain Cash Collateral in such Account(s), and that to evidence such Account(s) and the amount of Cash Collateral held therein from time to time, Informix has authorized the Deposit Taker to issue Certificates of Deposit payable to the order of Agent as provided in the Pledge Agreement. 3. Informix and Agent hereby notify Deposit Taker that, pursuant to the Pledge Agreement, Informix has granted to Agent, for the ratable benefit of BNPLC and the Participants as security for the Secured Obligations, a pledge of and security interest in all Accounts and other Collateral maintained by Informix with Deposit Taker, including the Account(s) described in paragraph 2 above. 4. In furtherance of such grant, Informix and Agent hereby authorize and direct Deposit Taker to: (a) hold all Collateral for Agent and as Agent's bailee, separate and apart from all other property and funds of Informix and all other Persons and to permit no other funds to be deposited or credited to the Account(s); (b) make a notation in its books and records of the interest of Agent in the Collateral and that the Account(s) and all deposits therein or sums credited thereto are subject to a pledge and security interest in favor of Agent; (c) issue and redeem Certificates of Deposit evidencing the Account(s), as directed by Agent pursuant to the Pledge Agreement; (d) take such other steps as Agent may reasonably request to record, maintain, validate and perfect its pledge of and security interest in the Collateral; and (e) upon receipt of notice from Agent that an Event of Default has occurred, transfer and deliver to Agent or its nominee, together with all necessary endorsements, all or such portion of the Collateral held by Deposit Taker as Agent shall direct; provided, however, that in connection therewith the Deposit Taker may require compliance by Agent with the provisions in Section 0 of the Pledge Agreement for redemption of any outstanding Certificates of Deposit which evidence the Account(s). 5. Informix and Agent agree that (a) the possession by Deposit Taker of all money, instruments, chattel paper and other property constituting Collateral shall be deemed to be possession by Agent or a person designated by Agent, for purposes of perfecting the security interest granted to Agent hereunder pursuant to Section 9305, 8313 or 8321 of the UCC, as the case may be, and (b) notifications by Deposit Taker to other Persons holding any such property, and acknowledgements, receipts or confirmations from such Persons delivered to Deposit Taker, shall be deemed notifications to, or acknowledgements, receipts or confirmations from, financial intermediaries, bailees or agents (as applicable) of the Deposit Taker for the benefit of Agent for the purposes of perfecting such security interests under applicable law. 6. As contemplated by the Pledge Agreement, please acknowledge Deposit Taker's receipt of, and consent to, this notice and confirm the representations and agreements set forth in the Acknowledgement and Agreement attached hereto by executing the same and returning this letter to Agent. For your files, a copy of this letter is enclosed which you may retain. The authorizations and directions set forth herein may not be revoked or modified without the written consent of Agent. "AGENT" BANQUE NATIONALE DE PARIS By: Name: Title: By: Name: Title: "Informix" INFORMIX CORPORATION By: Name: Title: ACKNOWLEDGEMENT AND AGREEMENT OF DEPOSIT TAKER Deposit Taker hereby acknowledges receipt of, and consents to, the above notice, acknowledges that it will hold the Collateral for Agent and as Agent's bailee, agrees to comply with the authorizations and directions set forth above and represents to and agrees with Informix and Agent as follows: (a) Deposit Taker is a commercial bank, organized under the laws of the United States of America or a state thereof or under the laws of another country which is doing business in the United States of America. Deposit Taker is authorized to maintain deposit accounts for others through the Account Offices specified in the above notice, and Deposit Taker will not move the accounts described in the above notice to other offices without the prior written authorization of Agent and Informix. (b) Deposit Taker has a combined capital, surplus and undivided profits of at least $500,000,000. (c) The information set forth above regarding the Account(s) is accurate. Such Account(s) is (are) currently open and Deposit Taker has no prior notice of any other pledge, security interest, Lien, adverse claim or interest in such Account(s). (d) To the knowledge of the undersigned representative of Deposit Taker, all actions necessary to perfect the pledge to Agent of and security interest of Agent in such Account(s) have been taken under the laws of the jurisdiction in which the applicable Account Office(s) is (are) located. (e) Deposit Taker shall promptly notify Informix and Agent if the representations made by Deposit Taker above cease to be true and correct. (f) Deposit Taker shall not (i) allow the withdrawal of funds from any Account by any Person other than Agent or (ii) without in each case first obtaining the prior written authorization of Agent, setoff or attempt to setoff any amounts owed to Deposit Taker, including any Secured Obligations, against any Collateral held from time to time by Deposit Taker. [ ] By: Name: Title: [Date] ATTACHMENT 4 TO PLEDGE AGREEMENT EXAMPLES OF CALCULATIONS REQUIRED TO AVOID A COLLATERAL IMBALANCE The examples below are provided to illustrate the calculations required for allocations of Cash Collateral in a manner that will avoid a Collateral Imbalance. The examples are not intended to reflect actual numbers under this Pledge Agreement or actual Percentages of BNPLC or any of the Participants; nor are the examples intended to provide a formula for the allocations that would be appropriate in every case. The examples also reflect adjustments that would be appropriate if the Collateral Percentage were adjusted from time to time, although this Agreement provides that such percentage is to remain at 100% so long as this Agreement remains in force. EXAMPLE NO. 1 Assumptions: 1. Two Participants ("Participant A" and "Participant B") are parties to the Participation Agreement with BNPLC. Participant A's Percentage is 50% and Participant B's Percentage is 45%, leaving BNPLC with a Percentage of 5%. 2. On the date of this Pledge Agreement, the Initial Funding Advance under the Lease was provided as follows, resulting in a Stipulated Loss Value of $50,000,000: A. Landlord's Parent (providing BNPLC's share) (5%) $2,500,000 B. Participant A (50%) 22,500,000 C. Participant B (45%) 25,000,000 TOTAL $50,000,000 3. The Minimum Collateral Value on the date of this Pledge Agreement was $30,000,000 (reflecting a Collateral Percentage of 60% times Stipulated Loss Value). 4. On the date of this Pledge Agreement, Informix delivered to Agent Cash Collateral of $30,000,000, equal to the Minimum Collateral Value, as required by Section 0 of this Pledge Agreement. Allocation of Cash Collateral Required: To avoid a Collateral Imbalance under these assumptions, Agent would be required to allocate the $30,000,000 to the Deposit Takers for BNPLC and the Participants as follows: A. BNPLC's Deposit Taker (5% of Minimum Collateral Value) $1,500,000 B. Participant A's Deposit Taker 15,000,000 (50% of Minimum Collateral Value) C. Participant B's Deposit Taker 13,500,000 (45% of Minimum Collateral Value) TOTAL $30,000,000 EXAMPLE NO. 2 Assumptions: Assume the same facts as in Example No. 1, and in addition assume that: 1. Effective as of the first Base Rent Date, Informix increased its Collateral Percentage from 60% to 80%, raising the Minimum Collateral Value to $40,000,000. Because of such increase, Informix also delivered an additional $10,000,000 as Cash Collateral to Agent on the first Base Rent Date, bringing the total of all Cash Collateral delivered by Informix to $40,000,000 as required by Section 0 of this Pledge Agreement. 2. Also effective as of the first Base Rent Date, a new Participant approved by Informix ("Participant C") became a party to the Pledge Agreement and the Participation Agreement, taking a Percentage of 20%. Simultaneously, Participant A and Participant B entered into supplements to the Participation Agreement which reduced their Percentages to 40% and 35%, respectively. Allocation of Cash Collateral Required: To avoid a Collateral Imbalance under these assumptions, Agent would be required to allocate the Cash Collateral as required to leave the Deposit Takers for BNPLC and the Participants with the following amounts: A. BNPLC's Deposit Taker $2,000,000 (5% of Minimum Collateral Value) B. Participant A's Deposit Taker 16,000,000 (40% of Minimum Collateral Value) C. Participant B's Deposit Taker 14,000,000 (35% of Minimum Collateral Value) D. Participant C's Deposit Taker 8,000,000 (20% of Minimum Collateral Value) TOTAL $40,000,000 Thus, to prevent a Collateral Imbalance, Agent would have to allocate the $10,000,000 of additional Cash Collateral it received on the first Base Rent Date as follows: A. BNPLC's Deposit Taker $500,000 ($2,000,000 less $1,500,000 already on deposit) B. Participant A's Deposit Taker 1,000,000 ($16,000,000 less $15,000,000 already on deposit) C. Participant B's Deposit Taker 500,000 ($14,000,000 less $13,500,000 already on deposit) D. Participant C's Deposit Taker 8,000,000 ($8,000,000 less $0 already on deposit) TOTAL $10,000,000 EXAMPLE NO. 3 Assumptions: Assume the same facts as in Example No. 2, except that: 1. Instead of increasing its Collateral Percentage from 60% to 80%, Informix increased its Collateral Percentage to 70% on the first Base Rent Date, raising the Minimum Collateral Value to $35,000,000. Because of such increase, Informix delivered an additional $5,000,000 as additional Cash Collateral to Agent on the first Base Rent Date, bringing the total of all Cash Collateral delivered by Informix to $35,000,000 as required by Section 0 of this Pledge Agreement. Allocation of Cash Collateral Required: To avoid a Collateral Imbalance under these assumptions, Agent would be required to allocate the Cash Collateral as required to leave the Deposit Takers for BNPLC and the Participants with the following amounts: A. BNPLC's Deposit Taker $1,750,000 (5% of Minimum Collateral Value) B. Participant A's Deposit Taker 14,000,000 (40% of Minimum Collateral Value) C. Participant B's Deposit Taker 12,250,000 (35% of Minimum Collateral Value) D. Participant C's Deposit Taker 7,000,000 (20% of Minimum Collateral Value) TOTAL $35,000,000 Thus, to prevent a Collateral Imbalance, Agent would have to allocate the $5,000,000 of additional Cash Collateral it received on the first Base Rent Date as follows: A. BNPLC's Deposit Taker $250,000 ($1,750,000 less $1,500,000 already on deposit) B. Participant A's Deposit Taker (1,000,000) ($14,000,000 less $15,000,000 already on deposit) C. Participant B's Deposit Taker (1,250,000) ($12,250,000 less $13,500,000 already on deposit) D. Participant C's Deposit Taker 7,000,000 ($7,000,000 less $0 already on deposit) TOTAL $5,000,000 NOTE: THE NEGATIVE AMOUNTS (IN PARENTHESIS) ABOVE REPRESENT REQUIRED WITHDRAWALS RATHER THAN DEPOSITS. AS EXAMPLE NO. 3 ILLUSTRATES, TO AVOID A COLLATERAL IMBALANCE AGENT MAY FROM TIME TO TIME HAVE TO WITHDRAW CASH COLLATERAL HELD BY THE DEPOSIT TAKER FOR ONE PARTICIPANT AND DEPOSIT IT IN AN ACCOUNT MAINTAINED BY A DEPOSIT TAKER FOR ANOTHER PARTICIPANT. ATTACHMENT 5 TO PLEDGE AGREEMENT NOTICE OF INFORMIX'S REQUIREMENT TO WITHDRAW EXCESS CASH COLLATERAL [_________, _____] Banque Nationale de Paris [address of BNP] Re: Pledge Agreement dated January 6, 1997, between Informix Corporation, BNP Leasing Corporation, Banque Nationale de Paris and any other financial institutions that have become Participants as described therein Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 0 of the Pledge Agreement, Informix requires you to withdraw from the Accounts and return to Informix the following amount: ____________________________ Dollars ($__________) on the following date: __________, ____ To assure you that Informix has satisfied the conditions to its right to require such withdrawal, and to induce you to comply with this notice, Informix certifies to you that: 1. Your withdrawal and delivery of the amount specified above to Informix will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value. After giving effect to such withdrawal, the Collateral remaining in the Accounts maintained by the Deposit Takers will be: ____________________________ Dollars ($__________), and the Minimum Collateral Value on the date specified above will equal: ____________________________ Dollars ($__________). Such Minimum Collateral Value equals the Collateral Percentage of: __________ percent (___%), times the Stipulated Loss Value of: ____________________________ Dollars ($__________). 2. Informix is giving this notice to you, BNPLC and the Participants at least ten (10) Business Days prior to the Base Rent Date specified above. 3. No Default or Event of Default has occurred and is continuing as of the date of this notice, and Informix does not anticipate that any Default or Event of Default will have occurred and be continuing on the date upon which the withdrawal is required. 4. Informix shall pay to you any and all costs incurred by you in connection with the withdrawal, including (if applicable) any early withdrawal penalties and other breakage charges specified at or prior to the time any Account was initially established. 5. Informix agrees that you may determine the Accounts from which to make any withdrawal required by Informix pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance. NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE STATEMENTS ABOVE ARE NOT CORRECT OR IF THE DATE FOR WITHDRAWAL SPECIFIED ABOVE IS LESS THAN TEN BUSINESS DAYS AFTER YOUR RECEIPT OF THIS NOTICE. HOWEVER, WE ASK THAT YOU NOTIFY INFORMIX IMMEDIATELY IF FOR ANY REASON YOU BELIEVE THIS NOTICE IS DEFECTIVE. Please remember that the express terms of Certificates of Deposit issued pursuant to the Pledge Agreement require presentment of the Certificates of Deposit seven days before Cash Collateral is to be withdrawn from the Accounts they evidence. Accordingly, you must present Certificates of Deposit to Deposit Takers seven days prior to the withdrawal of Cash Collateral required by this notice. For your convenience, we have attached a letter as Annex 1 to this notice that you might execute and send to Deposit Takers to advise them of your intent to withdraw and of your presentment of Certificates of Deposit as required in connection therewith. The attached letter also sets forth the amounts Informix believes you must withdraw from each Account to avoid a Collateral Imbalance. INFORMIX CORPORATION Name:_________________________ Title:________________________ [cc BNPLC and all Participants] Annex 1 TO INFORMIX'S NOTICE OF REQUIREMENT TO WITHDRAW CASH EXCESS COLLATERAL [_________, _____] Deposit Takers on the Attached Distribution List Re: Pledge Agreement dated January 6, 1997, between Informix Corporation, BNP Leasing Corporation, Banque Nationale de Paris and any other financial institutions that have become Participants as described therein Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 0 of the Pledge Agreement, Informix requires Agent to withdraw from the Accounts and return to Informix the amounts listed below on the following date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw the following amounts from the following Accounts, and with this letter the undersigned is presenting Certificates of Deposit as required in connection with such withdrawal: Deposit Taker Account No. Amount 1. $ 2. $ 3. $ 4. $ TOTAL WITHDRAWALS: $ BANQUE NATIONALE DE PARIS, AS AGENT Name:_________________________ Title:________________________ [cc BNPLC and Informix] ATTACHMENT 6 TO PLEDGE AGREEMENT NOTICE OF INFORMIX'S REQUIREMENT OF DIRECT PAYMENTS TO PARTICIPANTS [_________, _____] Banque Nationale de Paris [address of BNP] Re: Pledge Agreement dated January 6, 1997, between Informix Corporation, BNP Leasing Corporation, Banque Nationale de Paris and any other financial institutions that have become Participants as described therein Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 0 of the Pledge Agreement, Informix requires you to withdraw from the Accounts and pay directly to the Participants (in proportion to their respective Percentages) the following amount: ____________________________ Dollars ($__________) on the following date (i.e., the Designated Sale Date): __________, ____ The amount specified above equals the following percentage (equal to the aggregate of all Participant's Percentages): __________ percent (___%), times the total of all Cash Collateral presently pledged under the Pledge Agreement: ____________________________ Dollars ($__________). To assure you that Informix has satisfied the conditions to its right to require such withdrawal, and to induce you to comply with this notice, Informix certifies to you that Informix is giving this notice to you, BNPLC and the Participants at least ten (10) Business Days prior to the Designated Sale Date specified above. Please remember that the express terms of Certificates of Deposit issued pursuant to the Pledge Agreement require presentment of the Certificates of Deposit seven days before Cash Collateral is to be withdrawn from the Accounts they evidence. Accordingly, you must present Certificates of Deposit to Deposit Takers seven days prior to the withdrawal of Cash Collateral required by this notice. For your convenience, we have attached a letter as Annex 1 to this notice that you might execute and send to Deposit Takers to advise them of your intent to withdraw and of your presentment of Certificates of Deposit as required in connection therewith. The attached letter also sets forth the amounts Informix believes you must withdraw from each Account to comply with subsection 0 of the Pledge Agreement. INFORMIX CORPORATION Name:_________________________ Title:________________________ [cc BNPLC and all Participants] Annex 1 TO INFORMIX'S NOTICE OF REQUIREMENT TO WITHDRAW CASH COLLATERAL FOR DIRECT PAYMENTS TO PARTICIPANTS [_________, _____] Deposit Takers on the Attached Distribution List Re: Pledge Agreement dated January 6, 1997, between Informix Corporation, BNP Leasing Corporation, Banque Nationale de Paris and any other financial institutions that have become Participants as described therein Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 6.2 of the Pledge Agreement, Informix requires Agent to withdraw from the Accounts and pay to the Participants (in proportion to their respective Percentages) the amounts listed below on the following date (i.e., the Designated Sale Date): __________, ____ Accordingly, on such date, the undersigned intends to withdraw the following amounts from the following Accounts, and with this letter the undersigned is presenting Certificates of Deposit as required in connection with such withdrawal: Deposit Taker Account No. Amount 1. $ 2. $ 3. $ 4. $ TOTAL WITHDRAWALS: $ BANQUE NATIONALE DE PARIS, AS AGENT Name:_________________________ Title:________________________ [cc BNPLC and Informix] ATTACHMENT 7 TO PLEDGE AGREEMENT NOTICE OF INFORMIX'S REQUIREMENT OF DIRECT PAYMENT TO BNPLC [_________, _____] Banque Nationale de Paris [address of BNP] Re: Pledge Agreement dated January 6, 1997, between Informix Corporation, BNP Leasing Corporation, Banque Nationale de Paris and any other financial institutions that have become Participants as described therein Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 0 of the Pledge Agreement, Informix requires you to withdraw from the Account maintained by the Deposit Taker for BNPLC and pay directly to BNPLC on behalf of Informix as a payment required by the Purchase Agreement the following amount: ____________________________ Dollars ($__________) on the following date (i.e., the Designated Sale Date): __________, ____ To assure you that Informix has satisfied the conditions to its right to require such withdrawal, and to induce you to comply with this notice, Informix certifies to you that Informix is giving this notice to you and BNPLC at least ten (10) Business Days prior to the Designated Sale Date specified above and that the amount specified above. Please remember that the express terms of Certificates of Deposit issued pursuant to the Pledge Agreement require presentment of the Certificates of Deposit seven days before Cash Collateral is to be withdrawn from the Accounts they evidence. Accordingly, you must present Certificates of Deposit to the Deposit Taker for BNPLC seven days prior to the withdrawal of Cash Collateral required by this notice. For your convenience, we have attached a letter as Annex 1 to this notice that you might execute and send to the Deposit Taker for BNPLC to advise it of your intent to withdraw and of your presentment of Certificates of Deposit as required in connection therewith. The attached letter also sets forth the amount Informix believes you must withdraw to comply with Section 0 of the Pledge Agreement. INFORMIX CORPORATION Name:_________________________ Title:________________________ [cc BNPLC] Annex 1 TO INFORMIX'S NOTICE OF REQUIREMENT OF DIRECT PAYMENT TO BNPLC [_________, _____] [Name of the Deposit Taker for BNPLC] [Address of such Deposit Taker] Re: Pledge Agreement dated January 6, 1997, between Informix Corporation, BNP Leasing Corporation, Banque Nationale de Paris and any other financial institutions that have become Participants as described therein Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 0 of the Pledge Agreement, Informix requires Agent to withdraw from the Account maintained by you, as Deposit Taker for BNPLC, the sum of: ____________________________ Dollars ($__________) and pay the same to BNPLC as a payment required by the Purchase Agreement on the following date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw such amount from the following Account maintained by you as Deposit Taker for BNPLC, and with this letter the undersigned is presenting Certificate(s) of Deposit as required in connection with such withdrawal. BANQUE NATIONALE DE PARIS, AS AGENT Name:_________________________ Title:________________________ [cc BNPLC and Informix] ATTACHMENT 8 TO PLEDGE AGREEMENT NOTICE OF INFORMIX'S REQUIREMENT OF A WITHDRAWAL OF CASH COLLATERAL FROM A DISQUALIFIED DEPOSIT TAKER [_________, _____] Banque Nationale de Paris [address of BNP] Re: Pledge Agreement dated January 6, 1997, between Informix Corporation, BNP Leasing Corporation, Banque Nationale de Paris and any other financial institutions that have become Participants as described therein Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 0 of the Pledge Agreement, Informix requires you to withdraw from the following Account maintained by the following Deposit Taker: Deposit Taker Account No. Cash Collateral in the following amount: ____________________________ Dollars ($__________) and to deposit such Cash Collateral with other Deposit Takers who are not Disqualified Deposit Takers no later than ten (10) Business Days after the date upon which you receive this notice. To assure you that Informix has the right to require such withdrawal, and to induce you to comply with this notice, Informix certifies to you that the Deposit Taker specified above has become a Disqualified Deposit Taker because it no longer satisfies the requirements listed in Section 0 of the Pledge Agreement. Specifically, such Deposit Taker no longer satisfies the following requirements: [Informix MUST INSERT HERE A DESCRIPTION OF WHICH REQUIREMENTS THE DEPOSIT TAKER NO LONGER SATISFIES AND HOW Informix HAS DETERMINED THAT THE REQUIREMENTS ARE NO LONGER SATISFIED, ALL IN SUFFICIENT DETAIL TO PERMIT THE PARTICIPANT FOR WHOM SUCH DEPOSIT TAKER HAS BEEN MAINTAINING AN ACCOUNT TO RESPOND IF IT BELIEVES THAT Informix IS IN ERROR.] Please remember that the express terms of Certificates of Deposit issued pursuant to the Pledge Agreement require presentment of the Certificates of Deposit seven days before Cash Collateral is to be withdrawn from the Accounts they evidence. Accordingly, you must present Certificates of Deposit to the Deposit Taker specified above seven days prior to the withdrawal of Cash Collateral required by this notice. For your convenience, we have attached a letter as Annex 1 to this notice that you might execute and send to such Deposit Taker to advise it of your intent to withdraw and of your presentment of Certificates of Deposit as required in connection therewith. The attached letter also sets forth the amount Informix believes you must withdraw to comply with Section 0 of the Pledge Agreement. INFORMIX CORPORATION Name:_________________________ Title:________________________ [cc BNPLC] Annex 1 TO INFORMIX'S NOTICE OF REQUIREMENT OF A WITHDRAWAL OF CASH COLLATERAL FROM A DISQUALIFIED DEPOSIT TAKER [_________, _____] [Name of the Deposit Taker for BNPLC] [Address of such Deposit Taker] Re: Pledge Agreement dated January 6, 1997, between Informix Corporation, BNP Leasing Corporation, Banque Nationale de Paris and any other financial institutions that have become Participants as described therein Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 0 of the Pledge Agreement, Informix has advised Agent that you are a Disqualified Deposit Taker, and Informix requires Agent to withdraw from the Account maintained by you, as a Deposit Taker under the Pledge Agreement, the sum of: ____________________________ Dollars ($__________) no later than the following date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw such amount from the Account maintained by you as Deposit Taker (Account No. __________), and with this letter the undersigned is presenting Certificate(s) of Deposit as required in connection with such withdrawal. BANQUE NATIONALE DE PARIS, AS AGENT Name:_________________________ Title:________________________ [cc BNPLC and Informix] ATTACHMENT 9 TO PLEDGE AGREEMENT NOTICE OF INFORMIX'S REQUIREMENT TO WITHDRAW CASH COLLATERAL FOR PAYMENT OF THE RELEASE PRICE [_________, _____] Banque Nationale de Paris [address of BNP] Re: Pledge Agreement dated January 6, 1997, between Informix Corporation, BNP Leasing Corporation, Banque Nationale de Paris and any other financial institutions that have become Participants as described therein Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 0 of the Pledge Agreement, Informix requires you to withdraw from the Accounts and pay to BNPLC for application against the Release Price required by Lease the following amount: ____________________________ Dollars ($__________) on the following date: __________, ____ To assure you that Informix has satisfied the conditions to its right to require such withdrawal, and to induce you to comply with this notice, Informix certifies to you that: 1. Your withdrawal and delivery of the amount specified above to Informix will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value (computed after payment of the Release Price in connection therewith). After giving effect to such withdrawal, the Collateral remaining in the Accounts maintained by the Deposit Takers will be: ____________________________ Dollars ($__________), and the Minimum Collateral Value on the date specified above will equal: ____________________________ Dollars ($__________). Such Minimum Collateral Value equals the Collateral Percentage of: __________ percent (___%), times the projected Stipulated Loss Value of: ____________________________ Dollars ($__________). 2. Informix is giving this notice to you, BNPLC and the Participants at least ten (10) Business Days prior to the date for payment of the Release Price specified above. 3. No Default or Event of Default has occurred and is continuing as of the date of this notice, and Informix does not anticipate that any Default or Event of Default will have occurred and be continuing on the date upon which the withdrawal is required. 4. Informix shall pay to you any and all costs incurred by you in connection with the withdrawal, including (if applicable) any early withdrawal penalties and other breakage charges specified at or prior to the time any Account was initially established. 5. Informix agrees that you may determine the Accounts from which to make any withdrawal required by Informix pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance. NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE STATEMENTS ABOVE ARE NOT CORRECT OR IF THE DATE FOR WITHDRAWAL SPECIFIED ABOVE IS LESS THAN TEN BUSINESS DAYS AFTER YOUR RECEIPT OF THIS NOTICE. HOWEVER, WE ASK THAT YOU NOTIFY INFORMIX IMMEDIATELY IF FOR ANY REASON YOU BELIEVE THIS NOTICE IS DEFECTIVE. Please remember that the express terms of Certificates of Deposit issued pursuant to the Pledge Agreement require presentment of the Certificates of Deposit seven days before Cash Collateral is to be withdrawn from the Accounts they evidence. Accordingly, you must present Certificates of Deposit to Deposit Takers seven days prior to the withdrawal of Cash Collateral required by this notice. For your convenience, we have attached a letter as Annex 1 to this notice that you might execute and send to Deposit Takers to advise them of your intent to withdraw and of your presentment of Certificates of Deposit as required in connection therewith. The attached letter also sets forth the amounts Informix believes you must withdraw from each Account to avoid a Collateral Imbalance. INFORMIX CORPORATION Name:_________________________ Title:________________________ [cc BNPLC and all Participants] Annex 1 TO INFORMIX'S NOTICE OF REQUIREMENT TO WITHDRAW CASH EXCESS COLLATERAL [_________, _____] Deposit Takers on the Attached Distribution List Re: Pledge Agreement dated January 6, 1997, between Informix Corporation, BNP Leasing Corporation, Banque Nationale de Paris and any other financial institutions that have become Participants as described therein Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 0 of the Pledge Agreement, Informix requires Agent to withdraw from the Accounts and pay to BNPLC the amounts listed below on the following date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw the following amounts from the following Accounts, and with this letter the undersigned is presenting Certificates of Deposit as required in connection with such withdrawal: Deposit Taker Account No. Amount 1. $ 2. $ 3. $ 4. $ TOTAL WITHDRAWALS: $ BANQUE NATIONALE DE PARIS, AS AGENT Name:_________________________ Title:________________________ [cc BNPLC and Informix] EX-11 5 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS INFORMIX CORPORATION EXHIBIT 11.1 STATEMENT RE: COMPUTATION OF NET INCOME PER-SHARE
(in thousands, except per-share data) FOR THE YEARS ENDED DECEMBER 31, 1996 1995 (1) 1994 (1) (2) Net income used for earnings per-share calculation $ 97,818 $ 97,644 $ 61,913 Net Income Per Common Share: Weighted average outstanding shares 149,310 145,062 137,742 Net effect of outstanding options 6,263 5,565 5,040 Weighted average common and common equivalent shares outstanding 155,573 150,627 142,782 Net income per-share $ 0.63 $ 0.65 $ 0.43
Fully diluted computation not presented since such amounts differ by less than 3 percent of the net income per share amounts shown above. Notes: (1) Amounts presented have been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of-interests. (2) Share and per-share information has been restated to reflect a two-for-one stock split (effected in the form of a stock dividend) which was effective June 26, 1995. EX-21 6 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT NAME PARENT JURISDICTION OF INCORPORATION Illustra Information Technologies, Inc. Informix Corporation Delaware Informix Software, Inc. Informix Corporation Delaware Informix International, Inc. Informix Software, Inc. Delaware Informix Credit Company Informix Software, Inc. Delaware Picasso Systems, Inc. Illustra Information Technologies, Inc. Delaware Stanford Technology Group, Inc. Informix Corporation California Informix Software Argentina, S.A. Informix International, Inc. Argentina Informix Software GmbH Informix International, Inc. Austria Informix Software Pty. Ltd. Informix International, Inc. Australia Informix Software NV Informix International, Inc. Belgium Informix do Brasil Comercio e Servicios Ltda. Informix International, Inc. Brazil Informix Software (Canada), Inc. Informix International, Inc. Canada Informix Software de Chile, S.A. Informix International, Inc. Chile Informix Software (China) Co., Ltd Informix International, Inc. China Informix Software de Columbia S.A. Informix International, Inc. Columbia Informix Software sro Informix International, Inc. Czech Republic Informix Software A/S Informix International, Inc. Denmark Illustra Information Technologies, Ltd. Illustra Information Technologies, Inc. England Informix Software Ltd. Informix International, Inc. England Innovative Software Ltd. Informix Software Ltd. England Illustra Information Technologies, SA Illustra Information Technologies, Inc. France Informix Software SARL Informix International, Inc. France Informix Software GmbH Informix International, Inc. Germany Informix GmbH Informix Software GmbH Germany Gamhausen & Partners, GmbH Informix International, Inc. Germany Informix Software (Hong Kong) Ltd. Informix International, Inc. Hong Kong Informix Holdings Company Informix Software Ireland Limited Ireland Informix Software Ireland Limited Informix International, Inc. Ireland Informix Software SpA Informix International, Inc. Italy Informix Kabushiki Kaisha Informix Holdings Company Japan Informix Software Kabushiki Kaisha Informix International, Inc. Japan Informix Korea Ltd. Informix Holdings Company Korea Informix Software (Korea) Ltd. Informix International, Inc. Korea Informix Sdn Bhd Informix International, Inc. Malaysia Informix Software de Mexico S.A. de C.V. Informix International, Inc. Mexico Informix Software B.V. Informix International, Inc. Netherlands Informix Software Limited Informix International, Inc. New Zealand Informix Software AS Informix International, Inc. Norway Informix Software de Peru S.A. Informix International, Inc. Peru Informix Software Spolka z.o.o. Informix International, Inc. Poland Informix Software Portugal Ltda. Informix International, Inc. Portugal Informix Software Limited Liability Company Informix International, Inc. Russia Informix Software Asia-Pacific Pte. Ltd. Informix International, Inc. Singapore Informix Software, SPOL. s.r.o. Informix Software GmbH Slovakia I.N.I.X. South Africa (Pty.) Limited Informix International, Inc. South Africa Informix Software Iberica, S.A. Informix International, Inc. Spain Informix Software AB Informix International, Inc. Sweden Informix Software AG Informix International, Inc. Switzerland Informix Software (Taiwan) Inc. Informix International, Inc. Taiwan Informix Software (Thailand) Limited Informix International, Inc. Thailand Informix Software, V.I., Inc. Informix International, Inc. Virgin Islands Informix Software de Venezuela, S.A. Informix International, Inc. Venezuela
EX-23 7 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 33-46715, 33-50610, 33-50608, 33-50607, 333- 01409; and Form S-4 No. 333-143) and in the related Prospectuses of our report dated February 3, 1997, with respect to the consolidated financial statements and schedule of Informix Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1996. /s/ERNST & YOUNG LLP San Jose, California March 28, 1997 EX-27 8 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the financial statements contained in the Company's Form 10-K for the periods ending December 31, 1996, 1995 and 1994 and is qualified in its entirety by reference to such financial statements. 12-MOS 12-MOS 12-MOS DEC-31-1996 DEC-31-1995 DEC-31-1994 DEC-31-1996 DEC-31-1995 DEC-31-1994 226,508 164,305 132,283 41,151 98,685 66,347 275,525 198,306 138,100 21,429 12,854 6,049 3,678 2,801 1,922 557,924 486,089 351,647 293,318 152,942 98,315 106,591 71,310 52,753 903,842 691,146 449,545 229,566 233,247 150,828 0 0 0 0 0 0 0 0 0 1,508 1,480 1,422 569,206 429,085 281,711 903,842 691,146 449,545 708,035 539,733 364,661 939,311 714,219 470,112 48,058 38,165 24,773 192,908 129,705 71,572 609,059 438,688 303,449 14,983 8,508 3,837 2,617 1,154 441 148,209 152,808 96,022 50,391 55,164 34,074 97,818 97,644 61,948 0 0 0 0 0 0 0 0 0 97,818 97,644 61,948 0.63 0.65 0.43 0.63 0.65 0.43 FINANCIAL DATA FOR THE 12-MONTH PERIODS ENDING DECEMBER 31, 1995 AND 1994 HAVE BEEN RESTATED TO REFLECT THE COMPANY'S BUSINESS COMBINATION WITH ILLUSTRA INFORMATION TECHNOLOGIES, INC. AS A POOLING-OF-INTERESTS.
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