SLAB » Topics » Off-Balance Sheet Arrangements

These excerpts taken from the SLAB 10-K filed Feb 11, 2009.

Off-Balance Sheet Arrangements

        In March 2006, we entered into an operating lease agreement and a related participation agreement for a facility at 400 W. Cesar Chavez ("400 WCC") in Austin, Texas for our corporate headquarters. The lease has a term of seven years. The base rent for the term of the lease is an amount equal to the interest accruing on $44.3 million at 110 basis points over the three-month LIBOR (which would be approximately $4.8 million over the remaining term assuming LIBOR averages 1.47% during such term).

        In March 2008, we entered into an operating lease agreement and a related participation agreement for a facility at 200 W. Cesar Chavez ("200 WCC") in Austin, Texas for the expansion of our corporate headquarters. The lease has a term of five years. The base rent for the term of the lease is an amount equal to the interest accruing on $50.1 million at 155 basis points over the three-month LIBOR (which would be approximately $6.4 million over the remaining term assuming LIBOR averages 1.47% during such term).

        We have granted certain rights and remedies to the lessors in the event of certain defaults, including the right to terminate the leases, to bring suit to collect damages, and to compel us to purchase the facilities. The leases contain other customary representations, warranties, obligations, conditions, indemnification provisions and termination provisions, including covenants that we shall maintain unencumbered cash and highly-rated short-term investments of at least $75 million. If our unencumbered cash and highly-rated short-term investments are less than $150 million, we must also maintain a ratio of funded debt to earnings before interest expense, income taxes, depreciation, amortization, lease expense and other non-cash charges (EBITDAR) over the four prior fiscal quarters

43



of no greater than 2 to 1. As of January 3, 2009, we believe we were in compliance with all covenants of the leases.

        During the terms of the leases, we have on-going options to purchase the buildings for purchase prices of approximately $44.3 million for 400 WCC and $50.1 million for 200 WCC. Alternatively, we can cause each such property to be sold to third parties provided we are not in default under that property's lease. We are contingently liable on a first dollar loss basis for up to $35.3 million to the extent that the 400 WCC sale proceeds are less than the $44.3 million purchase option and up to $40.0 million to the extent that the 200 WCC sale proceeds are less than the $50.1 million purchase option.

        In accordance with FASB Interpretation No. (FIN) 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, we determined that the fair value associated with the guaranteed residual values was $1.0 million for 400 WCC and $1.2 million for 200 WCC, as of the inception of the leases. These amounts were recorded in "Other assets, net" and "Long-term obligations and other liabilities" in the Consolidated Balance Sheets and are being amortized over the term of the leases.

        We are required to periodically evaluate the expected fair value of each facility at the end of the lease terms. If we determine that it is estimable and probable that the expected fair values will be less than $44.3 million for 400 WCC and $50.1 million for 200 WCC, we will ratably accrue the loss up to a maximum of approximately $35.3 million and $40.0 million, respectively, over the remaining lease terms as additional rent expense. As of January 3, 2009, we do not believe that a loss contingency accrual is required for either property. However, a prolonged economic downturn could increase the likelihood of such a loss accrual.

        In connection with our headquarters leases, during fiscal 2008 we entered into interest rate swap agreements as a hedge against the variable rent under the leases. Under the terms of the swap agreements, we have effectively converted the variable rents to fixed rents through March 2011 for 400 WCC and March 2013 for 200 WCC. See Note 5, Financial Instruments, to the Consolidated Financial Statements for additional information.

Off-Balance Sheet Arrangements



        In March 2006, we entered into an operating lease agreement and a related participation agreement for a facility at 400 W. Cesar Chavez
("400 WCC") in Austin, Texas for our corporate headquarters. The lease has a term of seven years. The base rent for the term of the lease is an amount equal to the interest accruing on
$44.3 million at 110 basis points over the three-month LIBOR (which would be approximately $4.8 million over the remaining term assuming LIBOR averages 1.47% during such term).



        In
March 2008, we entered into an operating lease agreement and a related participation agreement for a facility at 200 W. Cesar Chavez ("200 WCC") in Austin, Texas for the expansion of
our corporate headquarters. The lease has a term of five years. The base rent for the term of the lease is an amount equal to the interest accruing on $50.1 million at 155 basis points over the
three-month LIBOR (which would be approximately $6.4 million over the remaining term assuming LIBOR averages 1.47% during such term).




        We
have granted certain rights and remedies to the lessors in the event of certain defaults, including the right to terminate the leases, to bring suit to collect damages, and to compel
us to purchase the facilities. The leases contain other customary representations, warranties, obligations, conditions, indemnification provisions and termination provisions, including covenants that
we shall maintain unencumbered cash and highly-rated short-term investments of at least $75 million. If our unencumbered cash and highly-rated short-term investments are
less than $150 million, we must also maintain a ratio of funded debt to earnings before interest expense, income taxes, depreciation, amortization, lease expense and other non-cash
charges (EBITDAR) over the four prior fiscal quarters



43











of
no greater than 2 to 1. As of January 3, 2009, we believe we were in compliance with all covenants of the leases.



        During
the terms of the leases, we have on-going options to purchase the buildings for purchase prices of approximately $44.3 million for 400 WCC and
$50.1 million for 200 WCC. Alternatively, we can cause each such property to be sold to third parties provided we are not in default under that property's lease. We are contingently liable on a
first dollar loss basis for up to $35.3 million to the extent that the 400 WCC sale proceeds are less than the $44.3 million purchase option and up to $40.0 million to the extent
that the 200 WCC sale proceeds are less than the $50.1 million purchase option.



        In
accordance with FASB Interpretation No. (FIN) 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others,
we determined that the fair value associated with the guaranteed residual values was $1.0 million for 400 WCC and $1.2 million for 200
WCC, as of the inception of the leases. These amounts were recorded in "Other assets, net" and "Long-term obligations and other liabilities" in the Consolidated Balance Sheets and are
being amortized over the term of the leases.



        We
are required to periodically evaluate the expected fair value of each facility at the end of the lease terms. If we determine that it is estimable and probable that the expected fair
values will be less than $44.3 million for 400 WCC and $50.1 million for 200 WCC, we will ratably accrue the loss up to a maximum of approximately $35.3 million and
$40.0 million, respectively, over the remaining lease terms as additional rent expense. As of January 3, 2009, we do not believe that a loss contingency accrual is required for either
property. However, a prolonged economic downturn could increase the likelihood of such a loss accrual.




        In
connection with our headquarters leases, during fiscal 2008 we entered into interest rate swap agreements as a hedge against the variable rent under the leases. Under the terms of the
swap agreements, we have effectively converted the variable rents to fixed rents through March 2011 for 400 WCC and March 2013 for 200 WCC. See Note 5,
Financial
Instruments
, to the Consolidated Financial Statements for additional information.



This excerpt taken from the SLAB 10-Q filed Oct 29, 2008.

Off-Balance Sheet Arrangements

 

In March 2008, we entered into an operating lease agreement and a related participation agreement (collectively, the “lease”) for a facility in Austin, Texas for the expansion of our corporate headquarters.  The lease has a term of five years.  The base rent for the term of the lease is an amount equal to the interest accruing on $50.1 million at 155 basis points over the three-month LIBOR (which would be approximately $13.3 million over the remaining term assuming LIBOR averages 4.33% during such term).  We entered into a lease for a similar building in Austin in March 2006.

 

We have granted certain rights and remedies to the lessor in the event of certain defaults, including the right to terminate the lease, to bring suit to collect damages, and to compel us to purchase the facility.  The lease contains other customary representations, warranties, obligations, conditions, indemnification provisions and termination provisions, including covenants that we shall maintain unencumbered cash and highly-rated short-term investments of at least $75 million.  If our unencumbered cash and highly-rated short-term investments are less than $150 million, we must also maintain a ratio of funded debt to earnings before interest expense, income taxes, depreciation, amortization, lease expense and other non-cash charges (EBITDAR) over the four prior fiscal quarters of no greater than 2 to 1.  As of October 4, 2008, we believe we were in compliance with all covenants of the lease.

 

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During the term of the lease, we have an on-going option to purchase the building for a total purchase price of approximately $50.1 million.  Alternatively,  we can cause the property to be sold to third parties provided we are not in default under the lease.  We are contingently liable on a first dollar loss basis for up to $40.0 million to the extent that the sale proceeds are less than the $50.1 million purchase option.  To the extent that the net proceeds generated from the sale of the facility to a third party exceed the purchase option, we would have the right to receive substantially all of such excess proceeds if the sale occurs prior to the end of the term of the lease. If the property is sold after the term of the lease, we would have the right to recover our $40.0 million guarantee, to the extent such sale proceeds exceed $10.1 million.

 

In accordance with FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, we determined that the fair value associated with the guaranteed residual value was $1.2 million.  This amount was recorded in “Other assets, net” and “Long-term obligations and other liabilities” in the Condensed Consolidated Balance Sheets and is being amortized over the term of the lease.

 

We are required to periodically evaluate the expected fair value of the facility at the end of the lease term.  If we determine that it is estimable and probable that the expected fair value will be less than $50.1 million, we will ratably accrue the loss up to a maximum of approximately $40.0 million over the remaining lease term.  As of October 4, 2008, we have determined that a loss contingency accrual is not required.

 

Interest Rate Swap Agreements

 

In connection with our headquarters leases, we have entered into interest rate swap agreements as a hedge against the variable rent under the leases.  Under the terms of the swap agreements, we have effectively converted the variable rents to fixed rents through March 2011 for our 400 W. Cesar Chavez building and March 2013 for our 200 W. Cesar Chavez building.  See Note 4, Financial Instruments, to the Condensed Consolidated Financial Statements for additional information.

 

This excerpt taken from the SLAB 10-Q filed Jul 30, 2008.

Off-Balance Sheet Arrangements

 

In March 2008, we entered into an operating lease agreement and a related participation agreement (collectively, the “lease”) for a facility in Austin, Texas for the expansion of our corporate headquarters.  The lease has a term of five years.  The base rent for the term of the lease is an amount equal to the interest accruing on $50.1 million at 155 basis points over the three-month LIBOR (which would be approximately $10.3 million over the remaining term assuming LIBOR averages 2.79% during such term).  We entered into a lease for a similar building in Austin in March 2006.

 

We have granted certain rights and remedies to the lessor in the event of certain defaults, including the right to terminate the lease, to bring suit to collect damages, and to compel us to purchase the facility.  The lease contains other customary representations, warranties, obligations, conditions, indemnification provisions and termination provisions, including covenants that we shall maintain unencumbered cash and highly-rated short-term investments of at least $75 million.  If our unencumbered cash and highly-rated short-term investments are less than $150 million, we must also maintain a ratio of funded debt to earnings before interest expense, income taxes, depreciation, amortization, lease expense and other non-cash charges (EBITDAR) over the four prior fiscal quarters of no greater than 2 to 1.  As of July 5, 2008, we believe we were in compliance with all covenants of the lease.

 

During the term of the lease, we have an on-going option to purchase the building for a total purchase price of approximately $50.1 million.  Alternatively, we can cause the property to be sold to third parties provided we are not in default under the lease.  We are contingently liable for up to $40.0 million to the extent that the sale proceeds are less than the $50.1 million purchase option.  To the extent that the net proceeds generated from the sale of the facility to a third party exceed the purchase option, we would have the right to receive substantially all of such excess proceeds if the sale occurs prior to the end of the term of the lease. If the property is sold after the term of the lease, we would have the right to recover our $40.0 million guarantee, to the extent such sale proceeds exceed $10.1 million.

 

In accordance with FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, we determined that the fair value associated with the guaranteed residual value was $1.2 million.  The amount was recorded in “Other assets, net” and “Long-term obligations and other liabilities” in the condensed consolidated balance sheets and is being amortized over the term of the lease.

 

We are required to periodically evaluate the expected fair value of the facility at the end of the lease term.  If we determine that it is estimable and probable that the expected fair value will be less than $50.1 million, we will ratably accrue the loss up to a maximum of approximately $40.0 million over the remaining lease term.  As of July 5, 2008, we have determined that a loss contingency accrual is not required.

 

25



 

This excerpt taken from the SLAB 10-Q filed Apr 30, 2008.

Off-Balance Sheet Arrangements

 

In March 2008, we entered into an operating lease agreement and a related participation agreement (collectively, the “lease”) for a facility in Austin, Texas for the expansion of our corporate headquarters.  The lease has a term of five years.  The base rent for the term of the lease is an amount equal to the interest accruing on $50.1 million at 155 basis points over the three-month LIBOR (which would be approximately $11.3 million over the five year term assuming LIBOR averages 2.97% during such term).  We entered into a lease for a similar building in Austin in March 2006.

 

We have granted certain rights and remedies to the lessor in the event of certain defaults, including the right to terminate the lease, to bring suit to collect damages, and to compel us to purchase the facility.  The lease contains other customary representations, warranties, obligations, conditions, indemnification provisions and termination provisions, including covenants that we shall maintain unencumbered cash and highly-rated short-term investments of at least $75 million.  If our unencumbered cash and highly-rated short-term investments is less than $150 million, we must also maintain a ratio of funded debt to earnings before interest expense, income taxes, depreciation, amortization, lease expense and other non-cash charges (EBITDAR) over the four prior fiscal quarters of no greater than 2 to 1.  As of April 5, 2008, we believe we were in compliance with all covenants of the lease.

 

During the term of the lease, we have an on-going option to purchase the building for a total purchase price of approximately $50.1 million.  Alternatively, we can cause the property to be sold to third parties provided we are not in default under the lease.  We are contingently liable for up to $40.0 million to the extent that the sale proceeds are less than the $50.1 million purchase option.  To the extent that the net proceeds generated from the sale of the facility to a third party exceed the purchase option, we would have the right to receive substantially all of such excess proceeds if the sale occurs prior to the end of the term of the lease. If the property is sold after the term of the lease, we would have the right to recover our $40.0 million guarantee, to the extent such sale proceeds exceed $10.1 million.

 

23



 

In accordance with FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, we determined that the fair value associated with the guaranteed residual value was $1.2 million.  The amount was recorded in “Other assets, net” and “Long-term obligations and other liabilities” in the condensed consolidated balance sheets and is being amortized over the term of the lease.

 

We are required to periodically evaluate the expected fair value of the facility at the end of the lease term.  If we determine that it is estimable and probable that the expected fair value will be less than $50.1 million, we will ratably accrue the loss up to a maximum of approximately $40.0 million over the remaining lease term.  As of April 5, 2008, we have determined that a loss contingency accrual is not required.

 

These excerpts taken from the SLAB 10-K filed Feb 7, 2008.

Off-Balance Sheet Arrangements

        In March 2006, we entered into an operating lease agreement and a related participation agreement (collectively, the "lease") for a facility in Austin, Texas for our corporate headquarters. The lease has a term of seven years. The base rent for the term of the lease is an amount equal to the interest accruing on $44.3 million at 110 basis points over the three-month LIBOR (which would be approximately $13.8 million over the remaining term assuming LIBOR averages 4.83% during such term).

46


        We have granted certain rights and remedies to the lessor in the event of certain defaults, including the right to terminate the lease, to bring suit to collect damages, and to compel us to purchase the facility. The lease contains other customary representations, warranties, obligations, conditions, indemnification provisions and termination provisions, including covenants that we shall maintain unencumbered cash and highly-rated short-term investments of at least $75 million and a ratio of funded debt to earnings before interest expense, income taxes, depreciation, amortization, lease expense and other non-cash charges (EBITDAR) over the four prior fiscal quarters of no greater than 1.5 to 1. As of December 29, 2007, we believe we were in compliance with all covenants of the lease.

        During the term of the lease, we have an on-going option to purchase the building for a total purchase price of approximately $44.3 million. Alternatively, we can cause the property to be sold to third parties provided we are not in default under the lease. We are contingently liable for the guaranteed residual value associated with this property in the event that the net sale proceeds are less than the original financed cost of the facility up to approximately $35.3 million. To the extent that the net proceeds generated from the sale of the facility to a third party exceed $9.0 million, we would have the right to receive (a) substantially all of such excess proceeds if the sale occurs prior to the end of the term or (b) up to approximately $35.3 million of such excess proceeds if the sale occurs after the end of the term.

        In accordance with FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," we determined that the fair value associated with the guaranteed residual value was $1.0 million. The amount was recorded in "Other assets, net" and "Long-term obligations and other liabilities" in the consolidated balance sheets and is being amortized over the term of the lease.

        We are required to periodically evaluate the expected fair value of the facility at the end of the lease term. If we determine that it is estimable and probable that the expected fair value will be less than $44.3 million, we will ratably accrue the loss up to a maximum of approximately $35.3 million over the remaining lease term. As of December 29, 2007, we have determined that a loss contingency accrual is not required.

Off-Balance Sheet Arrangements



        In March 2006, we entered into an operating lease agreement and a related participation agreement (collectively, the "lease") for a facility in Austin, Texas for
our corporate headquarters. The lease has a term of seven years. The base rent for the term of the lease is an amount equal to the interest accruing on $44.3 million at 110 basis points over
the three-month LIBOR (which would be approximately $13.8 million over the remaining term assuming LIBOR averages 4.83% during such term).



46









        We
have granted certain rights and remedies to the lessor in the event of certain defaults, including the right to terminate the lease, to bring suit to collect damages, and to compel us
to purchase the facility. The lease contains other customary representations, warranties, obligations, conditions, indemnification provisions and termination provisions, including covenants that we
shall maintain unencumbered cash and highly-rated short-term investments of at least $75 million and a ratio of funded debt to earnings before interest expense, income taxes,
depreciation, amortization, lease expense and other non-cash charges (EBITDAR) over the four prior fiscal quarters of no greater than 1.5 to 1. As of December 29, 2007, we believe
we were in compliance with all covenants of the lease.



        During
the term of the lease, we have an on-going option to purchase the building for a total purchase price of approximately $44.3 million. Alternatively, we can
cause the property to be sold to third parties provided we are not in default under the lease. We are contingently liable for the guaranteed residual value associated with this property in the event
that the net sale proceeds are less than the original financed cost of the facility up to approximately $35.3 million. To the extent that the net proceeds generated from the sale of the
facility to a third party exceed $9.0 million, we would have the right to receive (a) substantially all of such excess proceeds if the sale occurs prior to the end of the term or
(b) up to approximately $35.3 million of such excess proceeds if the sale occurs after the end of the term.



        In
accordance with FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," we
determined that the fair value associated with the guaranteed residual value was $1.0 million. The amount was recorded in "Other assets, net" and "Long-term obligations and other
liabilities" in the consolidated balance sheets and is being amortized over the term of the lease.



        We
are required to periodically evaluate the expected fair value of the facility at the end of the lease term. If we determine that it is estimable and probable that the expected fair
value will be less than $44.3 million, we will ratably accrue the loss up to a maximum of approximately $35.3 million over the remaining lease term. As of December 29, 2007, we
have determined that a loss contingency accrual is not required.




This excerpt taken from the SLAB 10-K filed Feb 7, 2007.

Off-Balance Sheet Arrangements

In March 2006, we entered into an operating lease agreement and a related participation agreement (collectively, the “lease”) for a facility in Austin, Texas for our corporate headquarters. The lease has a term of seven years. The base rent for the term of the lease is an amount equal to the interest accruing on $44.3 million at 110 basis points over the three-month LIBOR (which would be approximately $17.9 million over the remaining term assuming LIBOR averages 5.36% during such term).

46




We have granted certain rights and remedies to the lessor in the event of certain defaults, including the right to terminate the lease, to bring suit to collect damages, and to compel us to purchase the facility. The lease contains other customary representations, warranties, obligations, conditions, indemnification provisions and termination provisions, including covenants that we shall maintain unencumbered cash and highly-rated short-term investments of at least $75 million and a ratio of funded debt to earnings before interest expense, income taxes, depreciation, amortization, lease expense and other non-cash charges (EBITDAR) over the four prior fiscal quarters of no greater than 1.5 to 1. As of December 30, 2006, we believe we were in compliance with all covenants of the lease.

During the term of the lease, we have an on-going option to purchase the building for a total purchase price of approximately $44.3 million. Alternatively, we can cause the property to be sold to third parties provided we are not in default under the lease. We are contingently liable for the guaranteed residual value associated with this property in the event that the net sale proceeds are less than the original financed cost of the facility. We are contingently liable for the residual value guarantee associated with the lease of approximately $35.3 million. To the extent that the net proceeds generated from the sale of the facility to a third party exceed $9.0 million, we would have the right to receive (a) substantially all of such excess proceeds if the sale occurs prior to the end of the term or (b) up to approximately $35.3 million of such excess proceeds if the sale occurs after the end of the term.

In accordance with FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” we determined that the fair value associated with the guaranteed residual value was $1.0 million. The amount was recorded in “Other assets, net” and “Long-term obligations and other liabilities” in the consolidated balance sheets and is being amortized over the term of the lease.

We are required to periodically evaluate the expected fair value of the facility at the end of the lease term. If we determine that it is estimable and probable that the expected fair value will be less than $44.3 million, we will ratably accrue the loss up to a maximum of approximately $35.3 million over the remaining lease term. As of December 30, 2006, we have determined that a loss contingency accrual is not required.

This excerpt taken from the SLAB 10-Q filed Oct 23, 2006.

Off-Balance Sheet Arrangements

     In March 2006, we entered into an operating lease agreement and a related participation agreement (collectively, the “lease”) for a facility in Austin, Texas for our corporate headquarters.  The lease has a term of seven years.  The base rent for the term of the lease is an amount equal to the interest accruing on $44.3 million at 110 basis points over the three-month LIBOR (which would be approximately $18.6 million over the remaining term assuming LIBOR averages 5.4% during such term).

     We have granted certain rights and remedies to the lessor in the event of certain defaults, including the right to terminate the lease, to bring suit to collect damages, and to compel us to purchase the facility.  The lease contains other customary representations, warranties, obligations, conditions, indemnification provisions and termination provisions, including covenants that we shall maintain unencumbered cash and highly-rated short term investments of at least $75 million and a ratio of funded debt to earnings before interest expense, income taxes, depreciation, amortization, lease expense and other non-cash charges (EBITDAR) over the four prior fiscal quarters of no greater than 1.5 to 1.  As of September 30, 2006, we believe we were in compliance with all covenants of the lease.

     During the term of the lease, we have an on-going option to purchase the building for a total purchase price of approximately $44.3 million.  Alternatively, we can cause the property to be sold to third parties provided we are not in default under the lease.  We are contingently liable for the guaranteed residual value associated with this property in the event that the net sale proceeds are less than the original financed cost of the facility.  We are contingently liable for the residual value guarantee associated with the lease of approximately $35.3 million.  To the extent that the net proceeds generated from the sale of the facility to a third party exceed $9.0 million, we would have the right to receive (a) substantially all of such excess proceeds if the sale occurs prior to the end of the term or (b) up to approximately $35.3 million of such excess proceeds if the sale occurs after the end of the term.

     In accordance with the FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” we determined that the fair value associated with the guaranteed residual value was $1.0 million.  The amount was recorded in “Other assets, net” and “Long-term obligations and other liabilities” in the condensed consolidated balance sheets and is being amortized over the term of the lease.

     We are required to periodically evaluate the expected fair value of the facility at the end of the lease term.  If we determine that it is estimable and probable that the expected fair value will be less than $44.3 million, we will ratably accrue the loss up to a maximum of approximately $35.3 million over the remaining lease term.  As of September 30, 2006, we have determined that a loss contingency accrual is not required.

28




 

This excerpt taken from the SLAB 10-Q filed Jul 24, 2006.

Off-Balance Sheet Arrangements

     In March 2006, we entered into an operating lease agreement and a related participation agreement (collectively, the “lease”) for a facility in Austin, Texas for our corporate headquarters.  The lease has a term of seven years.  The base rent for the term of the lease is an amount equal to the interest accruing on $44.3 million at 110 basis points over the three-month LIBOR (which would be approximately $19.7 million over the remaining term assuming LIBOR averages 5.5% during such term).

     We have granted certain rights and remedies to the lessor in the event of certain defaults, including the right to terminate the lease, to bring suit to collect damages, and to compel us to purchase the facility.  The lease contains other customary representations, warranties, obligations, conditions, indemnification provisions and termination provisions, including covenants that we shall maintain unencumbered cash and highly-rated short term investments of at least $75 million and a ratio of funded debt to earnings before interest expense, income taxes, depreciation, amortization, lease expense and other non-cash charges (EBITDAR) over the four prior fiscal quarters of no greater than 1.5 to 1.  As of July 1, 2006, we believe we were in compliance with all covenants of the lease.

     During the term of the lease, we have an on-going option to purchase the building for a total purchase price of approximately $44.3 million.  Alternatively, we can cause the property to be sold to third parties provided we are not in default under the lease.  We are contingently liable for the guaranteed residual value associated with this property in the event that the net sale proceeds are less than the original financed cost of the facility.  We are contingently liable for the residual value guarantee associated with the lease of approximately $35.3 million.  To the extent that the net proceeds generated from the sale of the facility to a third party exceed $9.0 million, we would have the right to receive (a) substantially all of such excess proceeds if the sale occurs prior to the end of the term or (b) up to approximately $35.3 million of such excess proceeds if the sale occurs after the end of the term.

     In accordance with the FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” we determined that the fair value associated with the guaranteed residual value was $1.0 million.  The amount was recorded in “Other assets, net” and “Long-term obligations and other liabilities” in the condensed consolidated balance sheets and is being amortized over the term of the lease.

26




     We are required to periodically evaluate the expected fair value of the facility at the end of the lease term.  If we determine that it is estimable and probable that the expected fair value will be less than $44.3 million, we will ratably accrue the loss up to a maximum of approximately $35.3 million over the remaining lease term.  As of July 1, 2006, we have determined that a loss contingency accrual is not required.

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