<PAGE> 1
. FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 26, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- ---------------
Commission file number 0-18225
CISCO SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
California 77-0059951
(State or other jurisdiction of (I.R.S. Employer Identification
Number)
incorporation or organization)
170 West Tasman Drive
San Jose, California 95134
(Address of principal executive office and zip code)
(408) 526-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to filing requirements for the past 90 days.
YES X NO
------- -------
As of June 2, 1997 669,090,955 shares of the Registrant's common stock were
outstanding.
<PAGE> 2
CISCO SYSTEMS, INC.
FORM 10-Q FOR THE QUARTER ENDED APRIL 26, 1997
<TABLE>
<CAPTION>
INDEX
<S> <C> <C>
Page
Facing sheet 1
Index 2
Part I. Financial information
Item 1. Financial Statements and Supplementary Data
a) Consolidated balance sheets at April 26, 1997 and July 28, 1996
3
b) Consolidated statements of operations for the three and nine month
periods ended April 26, 1997 and April 28, 1996
4
c) Consolidated statements of cash flows for the nine month periods ended
April 26, 1997 and April 28, 1996
5
d) Notes to consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other information 18
Signature 19
Exhibits 20
</TABLE>
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CISCO SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
April 26, July 28,
1997 1996
---------------- ----------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents $ 345,492 $ 279,695
Short-term investments 937,583 758,489
Accounts receivable, net of allowance for doubtful
accounts of $15,018 at April 26, 1997 and
$21,074 at July 28, 1996 1,139,429 622,859
Inventories, net 233,505 301,188
Deferred income taxes 209,392 101,827
Prepaid expenses and other current assets 72,066 95,582
---------------- ------------
Total current assets 2,937,467 2,159,640
Investments 1,123,825 832,114
Restricted investments 334,086 228,644
Property and equipment, net 460,389 331,315
Other assets 208,569 78,519
---------------- ------------
Total assets $ 5,064,336 $ 3,630,232
================ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 218,286 $ 153,683
Income taxes payable 245,967 169,894
Accrued payroll and related expenses 225,264 195,197
Other accrued liabilities 345,864 250,579
----------------- -----------
Total current liabilities 1,035,381 769,353
Minority interest 41,230 41,257
Shareholders' equity:
Preferred stock, no par value, 5,000 shares authorized:
none issued or outstanding at April 26, 1997
and July 28, 1996
Common stock, no par value, 1,200,000 shares authorized:
666,033 shares issued and outstanding at
April 26, 1997 and 649,284 at July 28, 1996 1,276,576 888,067
Retained earnings 2,649,323 1,777,369
Unrealized gains on marketable securities 73,703 158,848
Cumulative translation adjustments (11,877) (4,662)
----------------- ------------
Total shareholders' equity 3,987,725 2,819,622
----------------- ------------
Total liabilities and shareholders' equity $ 5,064,336 $ 3,630,232
================= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------------------------------
Apr. 26, Apr. 28, Apr. 26, Apr. 28,
1997 1996 1997 1996
----------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $1,647,871 $1,087,056 $4,675,074 $2,803,857
Cost of sales 571,339 377,154 1,625,338 957,211
------------- ---------------------------- --------------
Gross margin 1,076,532 709,902 3,049,736 1,846,646
------------- ---------------------------- --------------
Operating expenses:
Research and development 183,714 107,232 496,077 275,107
Sales and marketing 299,339 187,950 846,790 496,728
General and administrative 54,349 38,148 148,236 97,877
Purchased research and development 217,792
------------- ---------------------------- --------------
Total operating expenses 537,402 333,330 1,708,895 869,712
------------- ---------------------------- --------------
Operating income 539,130 376,572 1,340,841 976,934
Realized gain on sale of investment 32,288 134,695
Interest and other income, net 29,093 16,672 77,635 45,176
------------- ---------------------------- --------------
Income before provision for income taxes 600,511 393,244 1,553,171 1,022,110
Provision for income taxes 222,190 147,595 655,449 385,337
------------- ---------------------------- --------------
Net income $ 378,321 $ 245,649 $ 897,722 $ 636,773
============= ============================ ==============
Net income per share $ .55 $ .37 $ 1.31 $ .96
============= ============================ ==============
Shares used in per-share calculation 688,452 669,960 687,416 664,348
============= ============================ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------
April 26, April 28,
1997 1996
--------------- ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 897,722 $ 636,773
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 151,044 73,589
Deferred income taxes (82,459) (34,822)
Tax benefit of disqualifying dispositions 140,547 140,217
Adjustment to conform StrataCom, Inc. fiscal year (11,020)
Purchased research and development from
Netsys Technology, Inc. acquisition 43,203
Change in operating assets and liabilities:
Accounts receivable (514,374) (173,801)
Inventories 70,229 (243,029)
Prepaid expenses and other current assets 23,692 (41,380)
Accounts payable 64,152 116,907
Income taxes payable 75,973 64,770
Accrued payroll and related expenses 28,912 75,873
Other accrued liabilities 70,228 53,790
--------------- ------------
Net cash provided by operating activities 957,849 668,887
--------------- ------------
Cash flows from investing activities:
Purchases of short-term investments (1,045,272) (472,091)
Proceeds from sales and maturities of short-term
investments 919,396 456,857
Purchases of investments (1,335,381) (616,963)
Proceeds from sales of investments 850,949 187,433
Purchases of restricted investments (259,668) (140,754)
Proceeds from sales and maturities of restricted
investments 155,017 105,430
Acquisition of property and equipment (270,240) (170,789)
Acquisition of Telebit Corporation, net of
purchased research and development (25,189)
Other (26,980) 17,420
--------------- ------------
Net cash used in investing activities (1,037,368) (633,457)
--------------- ------------
Cash flows from financing activities:
Issuance of common stock 152,531 81,127
Repurchase of common stock (115,610)
Other (7,215) (9,882)
--------------- ------------
Net cash provided by (used in)
financing activities 145,316 (44,365)
--------------- ------------
Net increase (decrease) in cash and equivalents 65,797 (8,935)
Cash and equivalents, beginning of period 279,695 284,388
--------------- ------------
Cash and equivalents, end of period $ 345,492 $ 275,453
=============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Cisco Systems Inc. ("Cisco" or "the Company") develops, manufactures, markets
and supports high-performance, multiprotocol internetworking systems that link
geographically dispersed local-area and wide-area networks (LANs and WANs,
respectively). Cisco's products include a wide range of routers, LAN and WAN
switches, dial access servers, and network management solutions. The Company
sells its products in approximately 90 countries through a combination of direct
sales and reseller and distribution channels.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company's fiscal year is the 52 or 53 weeks ending on the last Saturday in
July. Fiscal years 1997 and 1996 are both 52 week years. Prior to fiscal year
1997, the Company's fiscal year was the 52 or 53 weeks ending on the last Sunday
in July.
Basis of Presentation
The accompanying financial data as of April 26, 1997 and July 28, 1996 and for
the three and nine month periods ended April 26, 1997 and April 28, 1996, have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The July 28, 1996 balance sheet
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. However, the
Company believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements should be read
in conjunction with the financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K for the year ended July 28, 1996.
In July 1996, the Company acquired StrataCom, Inc.("StrataCom"), a Company that
develops, manufactures, and supports high speed LAN and WAN switching equipment.
The merger was accounted for as a pooling of interests and, accordingly, the
Company's consolidated financial statements were restated for all periods prior
to the merger to include the results of operations, financial positions, and
cash flows for StrataCom for the twelve months ended June 30, 1996. Prior to the
merger, StrataCom used a calendar year-end. In order for both companies to
operate on the same fiscal year for 1997, StrataCom's operations for the one
month period ended July 28, 1996, which are not material to the consolidated
companies, have been reflected as an adjustment to retained earnings in the
first quarter of fiscal 1997.
6
<PAGE> 7
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows for the three and nine month periods ended
April 26, 1997 and April 28, 1996, have been made. The results of operations for
the period ended April 26, 1997 are not necessarily indicative of the operating
results for the full year.
Computation of Net Income Per Share
Net income per common share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
Dilutive common equivalent shares consist of stock options.
3. BUSINESS COMBINATIONS
In September 1996, the Company acquired Nashoba Networks ("Nashoba"), an
innovator in token ring switching technologies. The Company issued approximately
1.6 million shares of common stock for all the outstanding stock of Nashoba in a
transaction accounted for as a pooling of interests. The Company also assumed
remaining outstanding Nashoba stock options which were converted to options to
purchase approximately .1 million shares of the Company's common stock.
Also, in September 1996, the Company acquired Granite Systems, Inc. ("Granite"),
a company established to develop, market, and sell multilayer switching and
gigabit Ethernet equipment. The Company issued approximately 2.2 million shares
of common stock for all the outstanding stock of Granite in a transaction
accounted for as a pooling of interests. The Company also assumed remaining
outstanding Granite stock options which were converted to options to purchase
approximately 1.6 million shares of the Company's common stock.
The historical operations of Nashoba and Granite are not material to the
Company's consolidated operations and financial position on either an individual
or an aggregated basis. Therefore, prior period statements have not been
restated for these acquisitions.
In October 1996, the Company acquired substantially all of the assets of Telebit
Corporation ("Telebit") and its Modem ISDN Channel Aggregation (MICA)
technologies for approximately $200 million in cash. The Company purchased
Telebit patents, MICA intellectual property and established employment contracts
with MICA personnel, and assumed certain preferred stock and notes receivable
related to a management buyout of the remaining assets of Telebit. The
transaction was accounted for as a purchase. Accordingly, the results of
operations of the acquired business and the fair values of the acquired assets
and liabilities were included in the Company's financial statements as of the
effective date. As part of this transaction, the Company recorded approximately
$174 million in purchased research and development expense in the first quarter
of fiscal 1997.
In November 1996, the Company acquired Netsys Technologies ("Netsys"), a
privately held innovator of network infrastructure management and performance
analysis software. Under the terms of the agreement, shares of the Company's
common stock worth approximately $79 million have been exchanged for all
outstanding shares and options of Netsys in
7
<PAGE> 8
a transaction accounted for as a purchase. The Company had held a minority
equity interest in Netsys since February 1995 and had also entered into a
strategic reseller agreement. As part of this transaction, the Company recorded
approximately $43 million in purchased research and development expense and $41
million of goodwill and other intangible assets in the second quarter of fiscal
1997. Amounts allocated to goodwill and other intangibles are amortized on a
straight-line basis over a five-year period.
The historical operations of Telebit and Netsys are not material to the
Company's consolidated operations and financial position on either an individual
or an aggregated basis, therefore, pro forma summaries are not presented. The
amounts allocated to purchased research and development were determined through
established valuation techniques in the high technology communications industry,
and were expensed upon acquisition, because technological feasibility had not
been established and no future alternative uses existed. Research and
development costs to bring the Telebit and Netsys products to technological
feasibility are not expected to have a material impact on the Company's future
results of operations, cash flows, or liquidity.
4. BALANCE SHEET DETAIL
(In thousands)
<TABLE>
<CAPTION>
Inventories: April 26, July 28,
1997 1996
--------------- ----------
(Unaudited)
<S> <C> <C>
Raw materials $ 79,690 $ 134,531
Work in process 106,047 99,723
Finished goods 17,495 51,920
Demonstration systems 30,273 15,014
--------------- -----------
$ 233,505 $ 301,188
=============== ===========
</TABLE>
5. INCOME TAXES
The Company paid income taxes of $514 million during the nine months ended April
26, 1997 and $227 million during the nine months ended April 28, 1996. The
Company's effective tax rate for the fiscal year 1997 has been affected by the
purchased research and development from the acquisition of Netsys and Telebit.
The Company's income taxes currently payable for both federal and state purposes
have been reduced by the tax benefit of disqualifying dispositions of stock
options. The benefit is the difference between the market value of the stock
issued at the time of exercise and the option price tax effected at the
Company's effective tax rate. This benefit totaled $141 million in the first
nine months of 1997, and was credited directly to shareholders' equity.
6. RECENT ACCOUNTING PRONOUNCEMENTS
During February 1997, the Financial Accounting Standards Board issued Statement
No. 128 (SFAS No. 128), "Earnings per Share," (EPS). Under SFAS No. 128 the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. The Statement modifies the standards
for computing earnings per share in APB Opinion No. 15 "Earnings per Share," and
makes them comparable to international EPS standards. It also replaces the
8
<PAGE> 9
presentation of primary EPS with a presentation of basic EPS, and fully diluted
EPS with diluted EPS. Basic EPS excludes dilution and is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS includes the potential dilution
that could occur from the exercise or conversion of securities or other
contracts to issue common stock. The statement also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. SFAS No. 128 is effective for periods ending after
December 15, 1997, including interim periods. The Company will adopt SFAS No.
128 in its second quarter of fiscal year 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this Quarterly Report on Form 10-Q, including,
without limitation, statements containing the words "believes," "anticipates,"
"estimates," "expects," and words of similar import, constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Readers are referred to the "Other Risk Factors" section of the
Company's 1996 Form 10-K filed on October 25, 1996, as well as the "Financial
Risk Management", "Future Growth Subject to Risks", "Potential Volatility in
Operating Results", "Risks Associated With Internet Infrastructure", and
"Volatility of Stock Price" sections contained in this report, which identify
important risk factors that could cause actual results to differ from those
contained in the forward-looking statements.
Net sales grew to $1,648 million in the third quarter of 1997 from $1,087
million in the third quarter of 1996. Net sales for the first nine months of
1997 were $4,675 million, compared to $2,804 million in the first nine months of
1996. The 51.6% increase in net sales between the two three month periods and
the 66.7% increase in net sales between the two nine month periods were
primarily the result of increasing unit sales of LAN switching products such as
the Catalyst 5000, remote access routers such as the Cisco 2500 product family,
high end routers such as the Cisco 7500 product family, and modular access
routers such as the Cisco 4700. These increases were partially offset by
decreasing unit sales of the Company's older product lines, consisting of the
Cisco 7000 and Cisco 4000. The sales growth rate for lower priced access and
switching products targeted toward small and medium sized businesses has grown
at a faster rate than the Company's high-end core router products. These
products typically carry lower average selling prices, and is one factor which
contributed to the slowdown in the Company's overall sequential growth rate.
Additionally, the Company believes customers are awaiting the introduction of
its new high-end product offerings, primarily the gigabit switch router targeted
for the service provider market. As such, the Company has noted a slowing of its
growth rate in its existing high-end product offerings. Sales to international
customers decreased slightly to 49.6% of net sales in the third quarter of 1997,
from 49.9% for the third quarter of 1996. International sales in the first nine
months of 1997 were 48.7% of net sales compared with 49.8% of net sales for the
same period in 1996. These decreases reflect slower sales growth in certain
international
9
<PAGE> 10
markets, particularly Japan, France, and Germany. Sales growth in these markets
have been impacted by certain factors such as weaker economic conditions,
delayed government spending, a stronger dollar versus the local currencies, and
slower adoption of networking technologies, among other factors.
Gross margins remained constant at 65.3% in the third quarter of 1997 compared
with the third quarter of 1996. Gross margins for the first nine months of 1997
were 65.2% compared with 65.9% for the same period in 1996. This decrease is due
to several factors including the continued shift in revenue mix to the Company's
lower margin products consisting primarily of access and workgroup products for
the small to medium-sized customer. These products traditionally have fewer
features and less software functionality than the Company's service provider and
enterprise offerings. The prices of component parts have fluctuated in the
recent past, and the Company expects that this trend may continue. An increase
in the price of component parts may have a material adverse impact on gross
margins. In the third quarter of fiscal 1997, component prices were relatively
stable, however the Company noted some upward movement in the cost of memory
chips, which was offset by improvements in manufacturing efficiencies. The
Company expects that gross margins will continue to decrease in the future,
because it believes that the market for lower margin remote access and switching
products for the small to medium sized customer will continue to increase at a
faster rate than the market for the Company's higher margin router and
high-performance switching products. The Company is attempting to mitigate this
trend through various means, such as increasing the functionality of its
products, controlling royalty costs, and improving manufacturing efficiencies.
There can be no assurance that any efforts made by the Company in these and
other areas will successfully offset decreasing margins.
Research and development expenses increased $76 million in the third quarter of
1997 over the third quarter of 1996, and increased $221 million in the first
nine months of 1997 over the first nine months of 1996. This represents an
increase to 11.1% from 9.9% of net sales in the quarter to quarter period and to
10.6% from 9.8% of net sales for the first nine months of each fiscal year. The
increase reflects the Company's ongoing research and development efforts,
including the further development of the CiscoFusion(TM) architecture, as well
as the acquisition of technologies to bring a broad range of products to the
market in a timely fashion. A significant portion of the increase was due to the
addition of new personnel, as well as higher expenditures on prototypes and
depreciation on new equipment. The Company is primarily developing new
technologies internally. Accordingly, research and development expenses are
expected to increase at the same, or a slightly greater rate than the sales
growth rate. If the Company believes it is unable to enter a particular market
in a timely manner, it may acquire other businesses or license technology from
other businesses as an alternative to internal research and development. All of
the Company's research and development costs are expensed as incurred.
Sales and marketing expenses in the third quarter of fiscal 1997 increased $111
million over the third quarter of fiscal 1996, and $350 million over the first
nine months of 1996. This represents slight increases to 18.2% from 17.3% of net
sales in the quarter to quarter
10
<PAGE> 11
period and to 18.1% from 17.7% of net sales for the first nine months of each
fiscal year. The increases in these expenses resulted from an increase in the
size of the Company's direct sales force and related commissions, additional
marketing programs to support the launch of new products, the entry into new
markets, both domestic and international, and expanding distribution channels.
General and administrative expenses rose by $16 million in the third quarter of
1997 versus the third quarter of 1996 which is a slight decrease to 3.3% from
3.5% of net sales. These expenses increased $50 million in the first nine months
of 1997 from the first nine months of 1996, representing a slight decrease to
3.2% from 3.5% of net sales for the comparable nine month periods, which
reflects management's continued efforts to control discretionary spending. The
dollar increase reflects increased personnel costs necessary to support the
Company's business infrastructure, as well as certain merger and acquisition
related costs. The Company is continuously evaluating potential acquisition
candidates as part of its growth strategy and incurs legal, accounting, and
other related costs associated with this activity. It is management's intent to
keep general and administrative costs relatively constant as a percentage of net
sales; however, this goal is dependent upon the level of acquisition activity,
among other factors.
The amount expensed to purchased research and development in the first nine
months of fiscal 1997 arose from the acquisition of the outstanding shares of
Netsys, and the acquisition of assets and assumption of liabilities of Telebit
(See Note 3).
Recent Accounting Pronouncements
During March 1995, the Financial Accounting Standards Board issued Statement No.
121 (SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which requires the Company to review for
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In certain
situations, an impairment loss would be recognized. SFAS No. 121 is effective
for the Company's fiscal year 1997. The Company does not expect the adoption of
SFAS No. 121 to have a material impact on the Company's financial condition or
results of operations.
During October 1995, the Financial Accounting Standards Board issued Statement
No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation." This
statement, which establishes a fair value-based method of accounting for
stock-based compensation plans, also permits an election to continue following
the requirements of APB Opinion No. 25, "Accounting for Stock Issued to
Employees," with disclosures on a pro forma basis of net income and earnings per
share under the new method. SFAS No. 123 is effective for fiscal year 1997. The
Company has elected to continue to measure compensation cost for its employee
stock compensation plans using the intrinsic value-based method of accounting
prescribed by APB Opinion No. 25. Pro forma disclosure of net income and
earnings per share, which will be made on an annual basis, will reflect the
difference between compensation cost included in net income and the related cost
measured by the fair value-based
11
<PAGE> 12
method defined in SFAS No. 123, including tax effects, that would have been
recognized in the consolidated statement of operations if the fair value-based
method had been used.
During February 1997, the Financial Accounting Standards Board issued Statement
No. 128 (SFAS No. 128), "Earnings per Share," (EPS). Under SFAS No. 128 the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. The Statement modifies the standards
for computing earnings per share in APB Opinion No. 15 "Earnings per Share," and
makes them comparable to international EPS standards. It also replaces the
presentation of primary EPS with a presentation of basic EPS, and fully diluted
EPS with diluted EPS. Basic EPS excludes dilution and is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS includes the potential dilution
that could occur from the exercise or conversion of securities or other
contracts to issue common stock. The statement also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. SFAS No. 128 is effective for periods ending after
December 15, 1997, including interim periods. The Company will adopt SFAS No.
128 in its second quarter of fiscal year 1998.
Financial Risk Management
As a global concern, the Company faces exposure to adverse movements in foreign
currency exchange rates. These exposures may change over time as business
practices evolve and could have a material adverse impact on the Company's
financial results. Historically, the Company's primary exposures related to non
dollar-denominated sales in Japan, Canada, and Australia and non
dollar-denominated operating expenses in Europe, Latin America, and Asia where
the Company sells primarily in U.S. dollars. The Company is planning to expand
its business activities in Europe. As a result, the Company expects to have
exposures related to non dollar-denominated sales in several European
currencies. At the present time, the Company hedges only those currency
exposures associated with certain assets and liabilities denominated in
non-functional currencies and does not generally hedge anticipated foreign
currency cash flows. The hedging activity undertaken by the Company is intended
to offset the impact of currency fluctuations on certain non-functional currency
assets and liabilities. The success of this activity depends upon forecasts of
transaction activity denominated in various currencies, primarily the Japanese
Yen, Canadian Dollar, Australian Dollar, and certain European currencies. To the
extent these forecasts are over or understated during periods of currency
volatility, the Company could experience unanticipated currency gains and
losses.
The Company maintains investment portfolio holdings of various issuers, types,
and maturities. These securities are generally classified as available for sale,
and consequently, are recorded on the balance sheet at fair value with
unrealized gains or losses reported as a separate component of shareholders'
equity. Part of this portfolio includes minority equity investments in several
publicly traded companies, the
12
<PAGE> 13
value of which is subject to market price volatility. The Company also has
certain real estate lease commitments with payments tied to short-term interest
rates. Given the current profile of interest rate exposures, a sharp rise in
interest rates could have a material adverse impact on the market value of the
Company's investment portfolio while increasing the costs associated with its
lease commitments. The Company does not currently hedge these interest rate
exposures.
Future Growth Subject to Risks
The Company's operating performance each quarter is subject to various risks and
uncertainties as discussed in the Company's Annual Report on Form 10-K for 1996
filed on October 25, 1996, and the Company's Registration Statement on Form S-4
filed on June 7, 1996. This report on Form 10-Q should be read in conjunction
with such Annual Report and Form S-4, particularly "Other Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the Annual Report on Form 10-K and "Risk Factors"
contained in Form S-4.
The internetworking business is highly competitive, and as such, the Company's
growth is dependent upon market growth and its ability to enhance its existing
products and introduce new products on a timely basis. One of the ways the
Company has addressed and will continue to address the need to develop new
products is through acquisitions of other companies. Acquisitions involve
numerous risks, including difficulties in assimilation of the operations,
technologies, and products of the acquired companies; risks of entering markets
in which the Company has no or limited direct prior experience and where
competitors in such markets have stronger market positions; and the potential
loss of key employees of the acquired company. The Company must also maintain
its ability to manage any such growth effectively. Failure to manage growth
effectively and successfully integrate acquisitions made by the Company could
adversely affect the Company's business and operating results.
The Company has a number of strategic partnerships with companies including GTE,
Hewlett-Packard, Intel, and Microsoft. These contractual arrangements are
generally limited to specific projects, the goal of which is generally to
facilitate product compatibility and adoption of industry standards. If
successful, these relationships will be mutually beneficial resulting in
industry growth. However, these partnerships carry an element of risk because,
in most cases, the Company must compete in some business areas, and at the same
time cooperate with these companies in other business areas, and because if
these companies fail to perform, Cisco could suffer delays in product
development or other operational difficulties. Failure to manage them
effectively could adversely impact the Company's business and operating results.
The markets for the Company's products are characterized by rapidly changing
technology, evolving industry standards, frequent new product introductions, and
evolving methods of building and operating networks. There can be no assurance
that the Company will successfully identify new product opportunities and
develop and bring new products to market in a timely manner, or that products
and technologies developed by others will not render Cisco's products or
technologies obsolete or noncompetitive. The failure of Cisco's new product
development efforts could have a material adverse effect on Cisco's business
operating results and financial condition.
13
<PAGE> 14
There has been a trend toward industry consolidation for several years. In
recent months, the Company has seen this trend continue, as two significant
industry mergers were announced. In February 1997, 3COM and U.S. Robotics
announced an agreement and plan of merger. In March 1997, Ascend Communications,
Inc. and Cascade Communications Corporation announced that they had signed a
definitive merger agreement. The Company expects this trend toward industry
consolidation to continue, as companies attempt to strengthen or hold their
market positions as the industry evolves. The Company believes that industry
consolidation may provide stronger competitors that are better able to compete
as sole source vendors for customers. This could lead to more variability in
operating results as the Company competes to be a single vendor solution.
The Company has announced that it will realign its business around three key
customer groups. The three groups will include Enterprise, which will be focused
on serving large corporate and institutional customers; Service Provider, which
will serve telecommunications carriers, Internet service providers, and cable
and wireless companies; and Small/Medium Business focused on the small and
medium sized business customer. The Company believes this realignment of
resources will enable it to better meet the needs of its customers. However,
there are risks inherent in any business realignment and the Company can give no
assurance that the realignment will meet its intended objectives. Failure to
manage this transition to a new business model could have a material and adverse
impact on the Company's operating results and financial condition.
Potential Volatility in Operating Results
The Company expects that, in the future, its net sales may grow at a slower rate
than was experienced in previous periods and that on a quarter-to-quarter basis,
the Company's growth in net sales may be significantly lower than its historical
quarterly growth rate. In the Company's most recent quarter, the sequential
sales growth slowed from prior levels, and a disproportionate share of the sales
occurred in the last month of the quarter. These occurrences are extremely
difficult to predict and may happen in the future. The Company's ability to meet
financial expectations could be hampered if the nonlinear sales pattern
continues in future periods. In addition, in response to customer demand, the
Company has attempted to reduce its product manufacturing lead times which may
result in corresponding reductions in order backlog. A decline in backlog levels
could result in more variability and less predictability in the Company's
quarter-to-quarter net sales and operating results going forward. On the other
hand, for certain products, lead times are longer than the Company's goal. If
the Company can not reduce manufacturing lead times for such products, the
Company's customers may cancel orders, or not place further orders if shorter
lead times are available from other manufacturers, thus creating additional
variability.
Although sales to the service provider market have continued to grow, this
market is characterized by large, and often times sporadic purchases. Sales
activity in this industry depends upon the stage of completion of expanding
network infrastructures, the availability of funding, and the extent that they
are affected by regulatory and
14
<PAGE> 15
business conditions in the country of operations. A decline or delay in sales
orders from this industry could have a material adverse effect on the Company's
operating results and financial condition.
Changes in domestic and international telecommunication requirements could
affect the Company's sales of its products. Future changes in tariffs by
regulatory agencies, or application of tariff requirements to currently
untariffed services, could affect the sales of the Company's products for
certain classes of customers. Additionally, in the U.S. the Company's products
must comply with various Federal Communication Commission requirements and
regulations. In countries outside of the U.S., the Company's products must meet
various requirements of local telecommunications authorities. Changes in
tariffs, or failure to obtain timely approval of products could have a material
adverse effect on the Company's operating results and financial condition.
The Company conducts business on a global basis. Accordingly, the Company's
future results could be adversely affected by a variety of uncontrollable and
changing factors including foreign currency exchange rates, regulatory,
political or economic conditions in a specific country or region, trade
protection measures and other regulatory requirements, government spending
patterns, and natural disasters, among other factors. In the third quarter of
fiscal 1997, the Company experienced slower sales growth in Japan, France and
Germany , as well as certain other parts of Europe and Asia. Any or all of these
factors could have a material adverse impact on the Company's future
international business in these or other countries.
The Company also expects that gross margins may be adversely affected by
increases in material or labor costs, heightened price competition, and changes
in channels of distribution or in the mix of products sold. For example, the
Company believes that gross margins may continue to decline over time, because
the sales of lower margin access and switching products targeted toward the
small to medium sized customer have continued to grow at a faster rate than the
Company's higher margin router and high-performance switching products targeted
toward the enterprise and service provider customers. The Company's gross
margins may also be impacted by geographic mix, as well as the mix of
configurations within each product group. The Company continues to expand into
third-party or indirect distribution channels, which generally result in lower
gross margins. In addition, increasing third-party and indirect distribution
channels generally result in greater difficulty in forecasting the mix of the
Company's products, and to a certain degree the timing of its orders.
The Company's growth and ability to meet customer demand also depend in part on
its ability to obtain timely supplies of parts from its vendors. The Company has
experienced component shortages in the past, which have adversely affected its
operations. Although the Company works closely with its vendors to avoid these
types of shortages, there can be no assurance that the Company will not
encounter these problems in the future.
The Company also expects that its operating margins may decrease as it continues
to hire additional personnel and increases other operating expenses to support
its business. The Company plans its operating
15
<PAGE> 16
expense levels based primarily on forecasted revenue levels. As these expenses
are relatively fixed in the short-term, a shortfall in revenues could lead to
operating results being below expectations. The results of operations for the
third quarter of 1997 are not necessarily indicative of results to be expected
in future periods, and the Company's operating results may be subject to
quarterly fluctuations as a result of a number of factors. These factors include
the integration of people, operations, and products from acquired businesses and
technologies; increased competition in the internetworking industry; the overall
trend toward industry consolidation; the introduction and market acceptance of
new products, including Gigabit ethernet and Tag switching; variations in sales
channels, product costs, or mix of products sold; the timing of orders and
manufacturing lead times; and changes in general economic conditions, any of
which could have a material adverse impact on operations and financial results.
Risks Associated with Internet Infrastructure
The Company's management believes that in the future there will be performance
problems with Internet communications which could receive a high degree of
publicity and visibility. As the Company is a large supplier of equipment for
the Internet infrastructure, customers perceptions of the Company's products and
the marketplace's perception of Cisco as a supplier of internetworking products,
whether or not these problems are due to the performance of Cisco's products,
may be adversely affected, particularly as the Company migrates toward providing
end-to-end solutions for its customers. Such an event could also result in an
adverse effect on the market price of the Company's Common Stock and could
adversely affect Cisco's business.
Volatility of Stock Price
The Company's Common Stock has experienced substantial price volatility,
particularly as a result of variations between the Company's actual financial
results and the published expectations of analysts and as a result of
announcements by the Company and its competitors. In addition, the stock market
has experienced extreme price and volume fluctuations that have affected the
market price of many technology companies in particular and have often been
unrelated to the operating performance of any specific company. These factors,
as well as general economic and political conditions, may adversely affect the
market price of the Company's Common Stock in the future.
LIQUIDITY AND CAPITAL RESOURCES
Cash, short-term investments, and investments increased by $537 million from
July 28, 1996 to April 26, 1997, primarily as a result of cash generated by
operations and to a lesser extent through the exercise of employee stock
options. These cash flows were partially offset by tax payments of approximately
$514 million, capital expenditures of approximately $270 million and cash
payments to former Telebit Corporation shareholders and optionees for
approximately $200 million. In fiscal 1996, the Company hedged its minority
equity position in a publicly traded company. The hedge expires quarterly over a
period of two years which commenced in October 1996. Cash proceeds on the sales
of the minority investment in fiscal 1997 were approximately $136 million.
16
<PAGE> 17
Accounts receivable increased 82.9% from July 28, 1996 to April 26, 1997. Days
sales outstanding in receivables increased to 63 days as of April 26, 1997 from
43 days at July 28, 1996. Inventories decreased 22.5% between July 28, 1996 and
April 26, 1997 which reflects the Company's continued inventory management
efforts. Inventory management remains an area of focus, as the Company balances
the need to maintain strategic inventory levels to ensure competitive lead times
versus the risk of inventory obsolescence, due to rapidly changing technology
and customer requirements.
Accounts payable increased by 42.0% at April 26, 1997 over July 28, 1996 because
of increases in operating expenses, and material purchases to support the growth
in net sales. Other accrued liabilities increased by 38.0%, primarily due to
higher deferred revenue on service contracts.
At April 26, 1997, the Company had a line of credit totaling $100.0 million,
which expires April 1998. There have been no borrowings under this agreement.
The Company has entered into certain lease arrangements in San Jose, California,
and Research Triangle Park, North Carolina, where it has established its
headquarters operations and certain research and development and customer
support activities, respectively. In connection with these transactions, the
Company pledged $334 million of its investments as collateral for certain
obligations of the leases. The Company anticipates that it will occupy more
leased property in the future which will require similar pledged securities,
however the Company does not expect the impact of this activity to be material
to liquidity.
The Company's management believes that its current cash and equivalents,
short-term investments, line of credit, and cash generated from operations will
satisfy its expected working capital and capital expenditure requirements
through the next year.
17
<PAGE> 18
PART II. OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<S> <C> <C>
(a) Exhibits
10.46 Lease Agreement between the Company and First State Realty
of America, Inc., dated February 7, 1997, for the Company's
site in Santa Clara, California
10.47 Lease Agreement between the Company and Berg & Berg
Enterprises, Inc., dated December 31, 1996, for the Company's
site in Santa Clara, California
10.48 Lease (Buildings "A" and "C") by and between SBC&D Co., Inc.
and the Company, dated November 26, 1996, located
in San Jose, California
10.49 Lease (Buildings "B" and "D") by and between SBC&D Co., Inc.
and the Company dated November 26, 1996, located in San Jose,
California
11.01 Computation of Net Income per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None
</TABLE>
18
<PAGE> 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cisco Systems, Inc.
Date: June 9, 1997
By /s/ Larry R. Carter
---------------------------
Larry R. Carter, Vice President
Finance, and Chief Financial
Officer (Principal Financial and
Accounting Officer)
19
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT INDEX
- --------------
<S> <C>
10.46 Lease Agreement between the Company and First State Realty
of America, Inc., dated February 7, 1997, for the Company's
site in Santa Clara, California
10.47 Lease Agreement between the Company and Berg & Berg
Enterprises, Inc., dated December 31, 1996, for the Company's
site in Santa Clara, California
10.48 Lease (Buildings "A" and "C") by and between SBC&D Co., Inc.
and the Company, dated November 26, 1996, located
in San Jose, California
10.49 Lease (Buildings "B" and "D") by and between SBC&D Co., Inc.
and the Company dated November 26, 1996, located in San Jose,
California
11.01 Computation of Net Income per Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.46
================================================================================
BUILDING LEASE AGREEMENT
BY AND BETWEEN
FIRST STATE REALTY OF AMERICA, INC.
AS LANDLORD
AND
CISCO SYSTEMS, INC.
AS TENANT
DATED: FEBRUARY 7, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 - PREMISES................................................................................. 1
Section 1.1.................................................................. 1
Section 1.2.................................................................. 1
ARTICLE 2 - TERM; EXTENSIONS............................................................. 1
Section 2.1.................................................................. 1
Section 2.2.................................................................. 2
Section 2.3.................................................................. 2
Section 2.4.................................................................. 3
ARTICLE 3 - DEFINITIONS.................................................................. 3
Section 3.1.................................................................. 3
Additional Rent.................................................. 3
Alterations...................................................... 3
Annual Base Rent................................................. 3
Building......................................................... 3
CC&R's........................................................... 3
Commencement Date................................................ 3
Default Rate..................................................... 3
Effective Date................................................... 3
Environmental Requirements ...................................... 3
Event of Default................................................. 4
Expiration Date.................................................. 4
Extension Term................................................... 4
Extension Term Commencement Date................................. 4
Hazardous Materials.............................................. 4
HVAC............................................................. 4
Landlord......................................................... 4
Lease Term....................................................... 5
Minimum Amount................................................... 5
Permitted Use.................................................... 5
Premises......................................................... 5
Rent............................................................. 5
Tenant........................................................... 5
Tenant Affiliate................................................. 5
Tenant Improvements.............................................. 5
Tenant's Personal Property....................................... 5
ARTICLE 4 - RENT......................................................................... 5
Section 4.1.................................................................. 5
Section 4.2.................................................................. 6
Section 4.3.................................................................. 6
Section 4.4.................................................................. 6
Section 4.5.................................................................. 6
ARTICLE 5 - POSSESSION, LEASEHOLD IMPROVEMENTS........................................... 6
Section 5.1.................................................................. 6
Section 5.2.................................................................. 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 6 - USE OF PREMISES; LIMITATIONS OF USE.......................................... 7
Section 6.1 - Permitted Use.................................................. 7
Section 6.2. - Compliance with Laws.......................................... 7
Section 6.3. - No Unlawful Occupancy......................................... 7
Section 6.4. - Waste; Nuisance............................................... 8
Section 6.5. - Overloading................................................... 8
ARTICLE 7 - TAXES........................................................................ 8
Section 7.1.................................................................. 8
Section 7.2.................................................................. 8
Section 7.3.................................................................. 9
Section 7.4.................................................................. 9
ARTICLE 8 - INSURANCE.................................................................... 10
Section 8.1.................................................................. 10
Section 8.2.................................................................. 11
Section 8.3.................................................................. 12
Section 8.4.................................................................. 12
Section 8.5.................................................................. 12
Section 8.6.................................................................. 12
Section 8.7.................................................................. 12
ARTICLE 9 - INDEMNIFICATION.............................................................. 12
Section 9.1.................................................................. 12
Section 9.2.................................................................. 13
ARTICLE 10 - UTILITIES AND SERVICE....................................................... 13
Section 10.1................................................................. 13
ARTICLE 11 - CONSTRUCTION IMPROVEMENTS................................................... 14
Section 11.1................................................................. 14
Section 11.2................................................................. 14
Section 11.3................................................................. 15
ARTICLE 12 - REPAIRS AND MAINTENANCE..................................................... 16
Section 12.1................................................................. 16
Section 12.2................................................................. 16
Section 12.3................................................................. 16
ARTICLE 13 - DESTRUCTION - FIRE OR OTHER CAUSES.......................................... 16
Section 13.1................................................................. 16
Section 13.2. ............................................................... 17
Section 13.3................................................................. 18
Section 13.4................................................................. 18
Section 13.5................................................................. 18
Section 13.6................................................................. 18
ARTICLE 14 - CONDEMNATION................................................................ 18
Section 14.1................................................................. 18
Section 14.2................................................................. 19
Section 14.3................................................................. 19
Section 14.4................................................................. 19
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 14.5................................................................. 19
Section 14.6................................................................. 20
Section 14.7................................................................. 20
ARTICLE 15 - SIGNS AND ADVERTISING....................................................... 20
ARTICLE 16 - ENTRY BY LANDLORD........................................................... 21
Section 16.1................................................................. 21
Section 16.2................................................................. 21
Section 16.3................................................................. 21
ARTICLE 17 - ASSIGNMENT AND SUBLETTING................................................... 22
Section 17.1................................................................. 22
Section 17.2. ............................................................... 22
Section 17.3................................................................. 23
Section 17.4................................................................. 23
Section 17.5................................................................. 23
Section 17.6................................................................. 23
Section 17.7................................................................. 24
Section 17.8................................................................. 25
ARTICLE 18 - SUBORDINATION............................................................... 25
Section 18.1................................................................. 25
Section 18.2. ............................................................... 25
ARTICLE 19 - DEFAULT..................................................................... 25
Section 19.1. ............................................................... 25
Section 19.2................................................................. 26
Section 19.3................................................................. 27
Section 19.4................................................................. 28
Section 19.5................................................................. 28
Section 19.6................................................................. 28
ARTICLE 20 - NOTICES..................................................................... 28
ARTICLE 21 - BROKER'S COMMISSIONS........................................................ 29
ARTICLE 22 - MECHANIC'S AND OTHER LIENS.................................................. 29
Section 22.1................................................................. 29
Section 22.2................................................................. 30
ARTICLE 23 - NO RENT ABATEMENT........................................................... 30
Section 23.1................................................................. 30
ARTICLE 24 - END OF TERM................................................................. 30
Section 24.1................................................................. 30
Section 24.2................................................................. 30
Section 24.3................................................................. 31
Section 24.4................................................................. 31
ARTICLE 25 - ESTOPPEL CERTIFICATE........................................................ 31
Section 25.1................................................................. 31
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE 26 - HAZARDOUS SUBSTANCES........................................................ 31
Section 26.1................................................................. 31
Section 26.2................................................................. 32
Section 26.3................................................................. 32
Section 26.4................................................................. 32
ARTICLE 27 - PARKING ENTITLEMENTS........................................................ 32
ARTICLE 28 - MISCELLANEOUS............................................................... 33
Section 28.1................................................................. 33
Section 28.2................................................................. 33
Section 28.3................................................................. 33
Section 28.4................................................................. 33
Section 28.5................................................................. 33
Section 28.6................................................................. 33
Section 28.7................................................................. 33
Section 28.9................................................................. 34
Section 28.10................................................................ 34
</TABLE>
<TABLE>
<S> <C>
EXHIBIT DESCRIPTION
A Premises
B CC & R's
C Tenant Improvements
D Devcon Report dated as of
November 23, 1996
</TABLE>
iv
<PAGE> 6
This BUILDING LEASE AGREEMENT (hereinafter the "Lease") dated for
reference purposes as of this 7th day of February, 1997 ("Effective Date"), is
made by and between FIRST STATE REALTY OF AMERICA, INC., a Delaware corporation,
and CISCO SYSTEMS, INC., a California corporation.
ARTICLE 1 - PREMISES
Section 1.1. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord, for the term and subject to the covenants, agreements and
conditions hereinafter set forth, those certain premises located at 4800 Patrick
Henry Drive, Santa Clara, California (the "Premises") as more particularly
described on EXHIBIT A attached hereto and by this reference incorporated
herein, and the improvements thereon (the "Building") including the exclusive
right to use all parking on the Premises, as such parking may be reconfigured by
Tenant from time to time in accordance with all applicable laws and prior
written approval by Landlord, subject to the estates, interests, liens, charges,
encumbrances and matters set forth in EXHIBIT B annexed hereto and made a part
hereof.
Section 1.2. The "Rentable Area" of the Building is agreed to be
fifty-eight thousand three hundred twenty (58,320) square feet. The area of the
Premises leased to Tenant hereunder is agreed to be one hundred fifty-nine
thousand eight hundred twenty-two (159,822) square feet.
ARTICLE 2 - TERM; EXTENSIONS
Section 2.1. The term of this Lease (the "Lease Term") shall be
three (3) years, commencing five (5) days after notice to Tenant by Landlord
that all prior tenants and occupants have vacated the Premises in a condition
similar to the condition of the Premises on the date of this Lease, with all of
such tenant's personal property removed (the "Commencement Date") and, subject
to earlier termination or Tenant's right to extend the Lease Term under the
terms of this Lease, expiring on February 28, 2000 (the "Expiration Date").
Landlord and Tenant agree that, if Landlord fails to deliver actual possession
of the Premises to Tenant on the Commencement Date because of the holding-over
or retention of possession of any tenant, subtenant or occupant or for any other
reason whatsoever, Landlord shall not be liable for any damages thereby, nor
shall this Lease be void or voidable; provided, however, that: (a) Tenant shall
not be liable for the monthly installments of Annual Base Rent or Additional
Rent (as hereinafter defined) due under this Lease until the Commencement Date;
(b) Landlord's failure to deliver actual possession of the Premises to Tenant on
the Commencement Date shall not be construed in any way to extend the Lease
Term; and (c) if Landlord fails to deliver actual possession of the Premises to
Tenant by April 1, 1997, then Tenant shall have the right to terminate this
Lease upon written notice to Landlord, delivered to Landlord no later than April
15, 1997 and Landlord shall refund any Rent previously deposited with
<PAGE> 7
Landlord. Landlord agrees to use its best efforts to deliver the Premises to
Tenant as specified herein. In no event, however, shall Landlord be required to
commence with any action, make any payment, or enter into an agreement with any
holdover tenant, subtenant or occupant to facilitate or accomplish the recovery
of vacant possession of the Premises.
Section 2.2. Landlord hereby grants to Tenant the option to extend
the Lease Term for one (1) successive one (1) year extension term (the
"Extension Term"), upon and subject to the following terms and conditions:
(a) The Extension Term shall commence on the day next
succeeding the Expiration Date of the initial Lease Term.
(b) Tenant shall exercise such option as to the
Extension Term by giving written notice of exercise of the option (the "Option
Notice") to Landlord at least one-hundred eighty (180) days but no more than
three hundred sixty (360) days before the first day of such Extension Term, time
being of the essence.
(c) When exercising such right and on the Expiration
Date of the initial Lease Term, Tenant shall not be in default, beyond any grace
period, in the performance of any of its obligations under this Lease.
(d) If Tenant elects to renew the Lease Term, all the
provisions of this Lease shall be applicable during each Extension Term except
that:
(i) Tenant shall have no further right to renew
this Lease beyond the Extension Term;
(ii) Section 2.4 and Section 11.1 shall be
inapplicable during the Extension Term; and
(iii) Effective as of the commencement of the
Extension Term ("Extension Term Commencement
Date"), the Annual Base Rent in effect shall
be increased as set forth in Section 4.1.
As used hereinafter, the term "Lease Term" shall mean the initial
Lease Term, plus the Extension Term as to which Tenant gives a timely Option
Notice and all references to the Expiration Date shall mean the final day of the
Lease Term as so extended.
Section 2.3. Any holding over by Tenant of all or any part of the
Premises after the expiration of the Lease Term shall be construed as a tenancy
from month-to-month, upon all of the other terms and conditions as set forth in
this Lease, except that Tenant shall pay as Annual Base Rent for the holdover
period an amount equal to one hundred fifty percent (150%) of the last Annual
Base
2
<PAGE> 8
Rent payable hereunder on a per diem basis for thirty (30) days and one hundred
fifty percent (150%) thereafter, plus all Additional Rent payable hereunder.
Landlord may terminate such month-to-month tenancy upon written notice to the
Tenant.
Section 2.4. Landlord shall allow Tenant to accept possession of the
Premises prior to the Commencement Date, if available, subject to all of the
terms and conditions of this Lease; provided that Tenant's performance of
pre-construction and construction activities associated and in accordance with
the Tenant Improvements shall not be deemed to be possession for purposes of
Tenant's obligation to pay Annual Base Rent.
ARTICLE 3 - DEFINITIONS
Section 3.1. The following terms shall have the following meanings
in this Lease:
Additional Rent shall mean all payments other than Annual Base
Rent required to be made by Tenant pursuant to this Lease, including real estate
taxes and insurance.
Alterations shall mean any alterations, additions,
replacements, rebuilding, changes or improvements made in, on or about the
Building or the Premises after the Commencement Date or earlier occupancy
pursuant to Section 2.4, including, but not limited to, lighting, HVAC,
electrical, partitioning, fixtures, drapery and carpentry installations.
Annual Base Rent shall have the meaning ascribed to such term
in Section 4.1 hereof.
Building shall have the meaning ascribed to such term in
Section 1.1 hereof.
CC&R's shall mean those certain covenants, conditions and
restrictions applicable to the Premises included in EXHIBIT B.
Commencement Date shall have the meaning ascribed to such term
in Section 2.1 hereof.
Default Rate shall have the meaning ascribed to such term in
Section 19.6 hereof.
Effective Date shall have the meaning ascribed to such term in
the first paragraph on page one.
Environmental Requirements shall mean all present and future
laws, statutes, ordinances, rules, regulations, orders, codes, licenses,
permits, decrees, judgments, directives or the equivalent of or by the federal
government or any state or other political subdivision thereof having
jurisdiction over the
3
<PAGE> 9
Premises, or any agency, court, or body of the Federal Government, any State or
other political subdivision thereof having jurisdiction over the Premises,
exercising executive, legislative, judicial, regulatory or administrative
functions and relating to or addressing the protection of the environment or
human health.
Event of Default shall have the meaning ascribed to such term
in Section 19.1 hereof.
Expiration Date shall have the meaning ascribed to such term
in Section 2.1 hereof.
Extension Term shall have the meaning ascribed to such term in
Section 2.2 hereof.
Extension Term Commencement Date shall have the meaning
ascribed to such term in Section 2.2(d) hereof.
Hazardous Materials shall mean any material substance that,
whether by its nature or use, is now or hereafter defined as a hazardous waste,
hazardous substance, pollutant or contaminant under any Environmental
Requirement, or which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous or which is now or
hereafter regulated under any Environmental Requirement, or which is or contains
petroleum, gasoline, diesel fuel or any other petroleum hydrocarbon product.
HVAC shall mean heating, ventilating and air conditioning.
Landlord as used herein shall mean only the owner for the time
being in fee of the Premises, or the owner of the leasehold estate created by an
underlying lease, or the mortgagee or the beneficiary under a deed of trust of
the fee or of such underlying lease, in possession for the time being of the
Premises, so that in the event of any sale or transfer of the Premises, or of
the making of any such underlying lease, or of any transfer or assignment or
other conveyance of such underlying lease and the leasehold estate thereby
created, the seller, lessor, transferor or assignor shall be and hereby is
entirely freed and relieved of all agreements, covenants and obligations of
Landlord herein and it shall be deemed and construed without further agreement
between the parties or their successors in interest or between the parties and
the purchase, lessee, transferee or assignee on any such sale, leasing, transfer
or assignment that such purchaser, lessee, transferee or assignee has assumed
and agreed to carry out any and all agreements, covenants and obligations of
Landlord hereunder; provided that such purchaser, lessee, transferee or assignee
recognizes Tenant's leasehold interest in the Premises; and provided, however,
that notwithstanding any such sale, leasing, transfer or assignment, Landlord
shall not be released from any
4
<PAGE> 10
liability or obligation to Tenant accruing prior to the date of such sale,
leasing, transfer or assignment.
Lease Term shall have the meaning ascribed to such term in
Section 2.1 hereof.
Minimum Amount shall have the meaning ascribed thereto in
Section 11.1 hereof.
Permitted Use shall have the meaning ascribed to such term in
Section 6.1 hereof.
Premises shall have the meaning ascribed to such term in
Section 1.1.
Rent shall mean Annual Base Rent, as defined in Section 4.1
and Additional Rent, as defined in Section 3.1(a).
Tenant shall mean Cisco Systems, Inc. and from and after any
valid assignment of the whole of Tenant's interests in this Lease pursuant to
the provisions hereof, shall mean only the assignee thereof, subject, however,
to the provisions of Section 17.3 herein.
Tenant Affiliate shall have the meaning ascribed to such term
in Section 17.1 hereof.
Tenant Improvements shall mean those certain initial
improvements to the Premises to be constructed by Tenant pursuant to the terms
of Section 11.1 below and EXHIBIT C annexed hereto.
Tenant's Personal Property shall mean Tenant's trade fixtures,
furniture, equipment and other personal property installed or located in the
Premises at any time and from time to time.
ARTICLE 4 - RENT
Section 4.1. Tenant agrees to pay to Landlord as annual rent for the
use of the Premises (herein referred to as "Annual Base Rent"), in lawful money
of the United States, the following sums:
<TABLE>
<CAPTION>
Year Annual Base Rent Monthly Installment
---- ---------------- -------------------
<S> <C> <C>
Commencement Date through $804,816.00 $67,068.00
February 28, 1998
March 1, 1998 - 839,808.00 69,984.00
February 28, 1999
March 1, 1999 - 874,800.00 72,900.00
February 28, 2000
</TABLE>
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<PAGE> 11
<TABLE>
<S> <C> <C> <C>
March 1, 2000 - 909,792.00 75,816.00
February 28, 2001
</TABLE>
Commencing on the Commencement Date, monthly installments of Annual
Base Rent shall be due and payable in advance, on the first day of each calendar
month during the Lease Term. Monthly installments of Annual Base Rent for any
partial calendar months during the Lease Term shall be proportionately reduced.
The first month's rent shall be due and payable upon execution of this Lease.
Section 4.2. All payments of Rent and other charges which are
required to be made by Tenant to Landlord hereunder shall be made payable to and
sent to FIRST STATE REALTY OF AMERICA, INC. at the address set forth in Article
20 below.
Section 4.3. It is the purpose and intent of Landlord and Tenant
that Annual Base Rent shall be net to Landlord, so that this Lease shall yield,
net to Landlord, the Annual Base Rent specified in Section 4.1 hereof in each
year during the initial Lease Term of this Lease and the Annual Base Rent
specified in Section 4.1 hereof in each year during the Extension Term hereof if
renewed and that (except for Landlord's maintenance and repair responsibilities
for the Building foundation, exterior walls and roof); all costs, expenses and
charges directly relating to the Premises which may arise or become due during
the Lease Term shall be paid by Tenant, and that Landlord shall be indemnified
and saved harmless by Tenant from and against the same.
Section 4.4. The Annual Base Rent shall be paid to Landlord without
notice or demand and without abatement, deduction or set-off.
Section 4.5. All taxes, charges, costs and expenses which Tenant
assumes or agrees to pay under any provisions of this Lease together with all
interest and penalties that may accrue thereon in the event of Tenant's failure
to pay the same as herein provided, all other damages, costs and expenses which
Landlord may suffer or incur, and any and all other sums which may become due,
by reason of any default of Tenant or failure on Tenant's part to comply with
the agreements, terms, covenants and conditions of this Lease on Tenant's part
to be performed, and each or any of them, shall be deemed to be Additional Rent
and, in the event of non-payment, Landlord shall have all the rights and
remedies herein provided in the case of non-payment, of Annual Base Rent.
ARTICLE 5 - POSSESSION, LEASEHOLD IMPROVEMENTS
Section 5.1. Landlord shall, on or before the Commencement Date (as
provided in Sections 2.1 and 2.4 above), deliver actual possession of the
Premises to Tenant in its "as is" condition. Tenant acknowledges that it has
made full and complete investigations and inspections of the Premises and,
Tenant
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acknowledges that the Premises are in good condition.
Section 5.2. Tenant covenants that no representations, statements or
warranties, express or implied, have been made by or on behalf of Landlord in
respect thereof, in respect of their condition, or the use or occupation that
may be made thereof, and that Landlord shall in no event whatsoever be liable
for any latent defects therein. Landlord agrees that Tenant shall not be liable
for any latent defects in the Building foundation, exterior walls and roof
except that Tenant shall be responsible for latent defects in the Building
foundation, exterior walls and roof caused by its contractors in connection with
completing the Tenant Improvements.
ARTICLE 6 - USE OF PREMISES; LIMITATIONS OF USE
Section 6.1 - Permitted Use. Tenant shall be permitted to use the
Premises for any reasonable purpose, including, but not limited to, general
office, administrative, sales and service, data processing, training, and/or
storage operations (in each case, a "Permitted Use"), in compliance with
applicable law, the certificate of occupancy for the Premises and the matters
set forth in EXHIBIT B annexed hereto.
Section 6.2. - Compliance with Laws. Tenant shall comply with all
laws concerning the Premises or Tenant's use of the Premises, whether the same
are presently in effect or hereinafter enacted, including, without limitation,
compliance with all Environmental Requirements (except for compliance
obligations arising from Hazardous Materials existing on or under the Premises
prior to the Commencement Date), the obligation at Tenant's cost to alter,
maintain, or (subject to the terms and conditions of Article 13 and Article 14)
restore the Premises (except for the Building foundation, exterior walls and
roof obligations, at Landlord's sole cost and expense except to the extent
affected by the Tenant's contractors when installing the Tenant Improvements) in
compliance and conformity with all laws relating to the condition, use, or
occupancy of the Premises during the Lease Term.
Section 6.3. - No Unlawful Occupancy. Tenant shall not use or
occupy, nor permit or suffer, the Premises or any part thereof to be used or
occupied for any unlawful or illegal business, use or purpose, nor for any
business, use or purpose reasonably deemed by Landlord disreputable or
extrahazardous, nor in such manner as to constitute a nuisance of any kind, nor
for any purpose or in any way in violation of any present or future governmental
laws, ordinances, requirements, orders, directions, rules or regulations
applicable to the Premises. Tenant shall immediately upon the discovery of any
such unlawful, illegal, disreputable or extrahazardous use and take all
necessary steps, legal and equitable, to compel the discontinuance of such use
and, if necessary to discontinue such use, to oust and remove any subtenants,
occupants, or other persons guilty of such unlawful,
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illegal, disreputable or extrahazardous use.
Section 6.4. - Waste; Nuisance.
(a) Tenant shall not use the Premises in any manner that will
constitute waste, nuisance, or unreasonable annoyance (including, but without
limitation, the use of loudspeakers or sound or light apparatus that can be
heard or seen outside the Premises in violation of the CC&Rs or applicable legal
requirements) to owners or occupants of adjacent properties.
(b) Tenant shall not use the Premises for sleeping, washing
clothes, or the preparation, manufacture, or mixing of anything that might emit
any odor or objectionable noises or lights onto adjacent properties.
(c) No secondhand store, auction, distress or fire sale, or
bankruptcy or going-out-of-business sale may be conducted on the Premises
without Landlord's consent. Tenant shall not sell or display merchandise outside
the confines of the Building.
Section 6.5. - Overloading. Tenant shall not do anything on the
Premises that will cause damage to the Premises. No machinery, apparatus, or
other appliance shall be used or operated in or on the Premises that will in any
manner damage the Premises.
ARTICLE 7 - TAXES
Section 7.1. Tenant shall pay before delinquency all taxes that
become payable during the Lease Term which are levied or assessed upon Tenant's
Personal Property.
Section 7.2. Tenant shall be responsible to pay, reimburse and
indemnify Landlord for all taxes, assessments, water rents, rates and charges,
sewer rents, transit taxes, excises, levies and other governmental impositions
and charges of every kind and nature whatsoever, extraordinary as well as
ordinary, foreseen or unforeseen, and each and every installment thereof, which
shall or may during the Lease Term be charged, laid, levied, assessed, imposed,
become due and payable, or liens upon, or arise in connection with the use,
occupancy or possession of, or grow due or payable out of, or for, the Premises
or any part thereof, or any buildings, appurtenances or equipment thereon or
therein or any part thereof, the rent, income or other payments received from
subtenants by Tenant or anyone claiming by, through or under Tenant, such
franchises as may be appurtenant to the use of the Premises or this transaction,
creating or transferring any interest or estate in the Premises, and all taxes
charged, laid, levied, assessed or imposed in lieu of or in addition to the
foregoing under or by virtue of all present or future laws, ordinances,
requirements, orders, directions, rules or regulations of the federal, state,
county and municipal governments and of all other
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<PAGE> 14
governmental authorities whatsoever, and all fees and charges of public and
governmental authorities for construction, maintenance, occupation or use during
the term of any vault, passageway or space in, over or under any sidewalk or
street on or adjacent to the Premises, or for construction, maintenance or use
during the term of any part of any building covered hereby within the limits of
any street. Tenant shall pay any and all of the aforementioned taxes to Landlord
immediately upon receipt from Landlord of evidence that Landlord has paid said
taxes. If Landlord does not receive payment from Tenant within thirty (30) days
after receipt by Tenant of such evidence, Tenant shall be in default of this
Lease.
Section 7.3. All such taxes, water rents, rates and charges, sewer
rents and other governmental levies, impositions and charges which shall be
charged, laid, levied, assessed or imposed for each fiscal period in which the
Lease Term commences and terminates shall be apportioned pro rata between
Landlord and Tenant in accordance with the respective portions of each such
fiscal period during which such Lease Term shall be in effect based on a 365 day
year. Supplementing the foregoing, Tenant shall be solely responsible for any
increases in taxes, assessments or impositions which result from the transfer of
the Premises to the Tenant.
Section 7.4. Nothing herein contained shall require or be construed
to require Tenant to pay any estate, succession, transfer, gift, franchise, or
corporation income tax, that is or may be imposed upon Landlord; provided
however, the if at any time during the Lease Term the methods of taxation
prevailing at the commencement of the Lease Term shall be altered so that in
lieu of or as a substitute for the whole or any part of the taxes, assessments,
levies, impositions or charges now levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed and imposed, (i) a
tax, assessment, levy, imposition or charge, wholly or partially as a capital
levy, or otherwise, on the rents received therefrom, or (ii) a tax, assessment,
levy (including but not limited to any municipal, state or federal levy),
imposition or charge measured by or based in whole or in part upon the Premises
and imposed upon Landlord, or (iii) a license fee measured by the rent payable
by Tenant under this Lease, then to the extent that such taxes, assessments,
levies, impositions, charges or license fees or the part thereof so measured or
based, would be payable if the Premises were the only property of Landlord
subject thereto, Tenant shall pay and discharge the same as herein provided.
Tenant's tax obligations shall not include any environmental assessments,
charges or liens arising in connection with remediation of Hazardous Materials
existing on the Premises prior to the Tenant taking possession.
Tenant shall have the right, with Landlord's written approval, which
approval shall not be unreasonably withheld, at any time and at Tenant's
expense, to contest in good faith by judicial proceedings or otherwise, any real
or personal property assessment,
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<PAGE> 15
valuation or tax reasonably deemed to be excessive by Tenant, and in such event
Tenant shall not be obligated to pay such assessment, valuation or tax until a
final judicial determination of such contest, but shall post such bonds as
required by law to protect Landlord throughout any such contest. If a reduction
of taxes is obtained for any year of the Term during which Tenant paid such
taxes, to the extent Landlord receives a refund of such taxes, Landlord shall
refund such amount to Tenant within five (5) days after such reduction is
received by Landlord.
If, by applicable law, any taxes or assessments may be paid in
installments at the option of the taxpayer, then whether or not Landlord elects
to pay taxes and assessments in such installments, Tenant's liability for such
taxes and assessments shall be computed as if such election had been made, and
only the installments thereof which would have become due during the Term shall
be included in Tenant's tax obligations.
ARTICLE 8 - INSURANCE
Section 8.1. During the term of this Lease, Tenant, at its own cost
and expense, shall:
(a) Keep the Building, all improvements and equipment on, in
or appurtenant to the Premises at the commencement of the Term and thereafter
erected thereon or therein, insured against loss or damage by fire and those
perils included within the classification of "all risks" insurance (excluding
routine maintenance for which Tenant is responsible for under Article 12) with a
deductible of no greater than One Hundred Thousand Dollars ($100,000.00) and in
an amount equal to the full replacement value of the Premises plus other
insurance Landlord deems reasonably necessary, including without limitation such
insurance covered by a Difference in Condition Policy. The Difference in
Condition Policy shall not have a deductible which is greater than twenty
percent (20.0%) of the value of the Building. Tenant shall be responsible for
losses or liabilities. Tenant shall and does hereby indemnify and hold harmless
Landlord, its partners, agents, employees and representatives from and against
all costs, damages, or expenses (including reasonable attorneys' fees) incurred
or paid by Landlord as a result of any claim customarily covered by a Difference
in Condition Policy without any deductible.
(b) Provide and keep in force commercial general liability
insurance, written on a broad form basis, against claims for bodily injury,
personal injury, death or property damage occurring on, in or about the Premises
or any elevators or escalator therein, such insurance to afford minimum
protection, during the Lease Term, of not less than $10,000,000 in respect of
personal injury or death to any one person, and of not less than $10,000,000 in
respect of any one occurrence, and of not less than $2,500,000 for property
damage. Notwithstanding the foregoing
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<PAGE> 16
provisions of this subsection (b) Tenant shall have the right to self-insure
with respect to the insurance required pursuant to this Subsection (b) on all
amounts in excess of TWO MILLION DOLLARS ($2,000,000) so long as (i) Tenant is a
publicly traded U.S. corporation whose stock is traded on a nationally
recognized exchange; (ii) Tenant has not assigned this Lease; (iii) Tenant
maintains a net worth of at least One Hundred Million Dollars ($100,000,000)
according to its most recent audited financial statement; (iv) Tenant governs
and manages its self-insurance program in a manner consistent with programs
managed by prudent businesses whose stock is publicly traded on nationally
recognized exchanges; and (v) applicable Law does not prohibit or render as
unenforceable, indemnification of Landlord for Landlord's own negligence. Upon
request, Tenant shall supply Landlord from time to time with evidence reasonably
satisfactory to Landlord of Tenant's net worth and the satisfaction of the
condition set forth above. If Tenant elects to self-insure, Tenant shall be
responsible for losses or liabilities which would have been assumed by the
insurance companies which would have issued the insurance required of Tenant
under the Lease and Tenant shall accept Landlord's tender of defense for any
claims within the scope of Tenant's indemnity obligations as if Landlord and
Landlord's lender and property manager were named as additional insureds on any
liability policy maintained by Tenant. Tenant will notify Landlord in advance of
any period for which it intends to self-insure and shall provide Landlord with
satisfactory evidence that it complies with these requirements in order to give
Landlord an opportunity to confirm the satisfaction of the conditions set forth
above. For so long as Tenant self-insures, Tenant, for applicable periods, shall
and does hereby indemnify and hold harmless Landlord, its partners, agents,
employees and representatives from and against all costs, damages, or expenses
(including reasonable attorneys' fees) incurred or paid by Landlord as a result
of any claim customarily covered by a broad-form policy of commercial general
liability insurance, including a contractual liability indorsement.
Section 8.2. All insurance provided by Tenant as required by this
Article 8 shall be carried in favor of Landlord and Tenant, as their respective
interests may appear (Landlord or any mortgagee shall be named as loss payee on
the "all risks" and Difference in Condition policies and Landlord and any
mortgagee shall be named as additional insured on the commercial general
liability insurance). All such insurance shall be taken in such responsible
companies, licensed to do business in the State of California (except with
regard to the Difference in Condition insurer which shall be qualified to do
business in California) with a financial rating of at least A-VIII or its
equivalent status as rated in the most recent edition of Best's Insurance
Reports, as Landlord shall reasonably approve. All such policies shall be
non-assessable and shall require thirty (30) days' notice by registered mail to
Landlord and to any mortgagee of Landlord of any cancellation thereof or change
affecting Landlord's coverage thereunder.
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Section 8.3. Tenant shall procure policies for all such insurance
for periods of not less than one year and shall deliver to Landlord upon the
reasonable request of Landlord. Copies of such policies and certificates thereof
with evidence to the payment of premiums thereon, and shall procure renewals
thereof from time to time at least thirty (30) days before the expiration
thereof.
Section 8.4. Tenant shall not violate or permit to be violated any
of the conditions or provisions of any such policy, and Tenant shall so perform
and satisfy the requirements of the companies writing such policies.
Section 8.5. The loss, if any, under any policies provided for in
Section 8.1 (a) shall be adjusted with the insurance companies (a) by Tenant in
the case of any particular casualty resulting in damage or destruction not
exceeding $250,000 in the aggregate, or (b) by Landlord and Tenant in the case
of any particular casualty resulting in damage or destruction exceeding $250,000
in the aggregate. Subject to the rights of the holder of any mortgage or the
beneficiary of a deed of trust to which this Lease is or shall be subject and
subordinate.
The loss, if any, under any policies provided for in Section 8.1(b)
shall be adjusted with the insurance companies by Tenant.
Section 8.6. Tenant and Landlord shall cooperate in connection with
the collection of any insurance moneys that may be due in the event of loss, and
Tenant shall execute and deliver to Landlord copies of such proofs of loss and
other instruments which may be required for the purpose of obtaining the
recovery of any such insurance moneys.
Section 8.7. Tenant agrees to look solely to Landlord's estate and
interest in the Premises for the satisfaction of any right or remedy of Tenant
for the collection of a judgment (or other judicial process) requiring the
payment of money by Landlord, in the event of any liability by Landlord, and no
other property or assets of Landlord shall be subject to levy, execution,
attachment, or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to this Lease, the relationship of Landlord and
Tenant hereunder, or Tenant's use and occupancy of the Premises, of or any other
liability of Landlord to Tenant.
ARTICLE 9 - INDEMNIFICATION
Section 9.1. Except for Landlord's gross negligence or willful
misconduct, its agents or employees, Tenant shall indemnify and save harmless
Landlord against and from all costs, expenses, liabilities, losses, damages,
injunctions, suits, actions, fines, penalties, claims and demands of every kind
or nature, including reasonable counsel fees, by or on behalf of any person,
party or governmental authority whatsoever arising out of (a) any failure by
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Tenant to perform any of the agreements, terms, covenants or conditions of this
Lease on Tenant's part to be performed, (b) any accident, injury or damage which
shall happen in or about the Premises however occurring, and any matter or thing
growing out of the condition, occupation, maintenance, alteration, repair, use
or operation of the Premises, or any part hereof during the Lease Term, (c) any
accident, injury or damage which shall happen on or under the streets,
sidewalks, curbs or vaults in front of or adjacent to the Premises and any
matter or thing growing out of the condition, occupation, maintenance,
alteration, repair, use or operation thereof during the Lease Term, if resulting
form the act, omission, negligence or misconduct of Tenant, its agents,
employees or invitees; (d) Tenant's failure to comply with any laws, ordinances,
requirements, orders, directions, rules or regulations of any federal, state,
county or city governmental authority, (e) any mechanic's lien, conditional bill
of sale, chattel mortgage, security agreement or financing statement made with
respect to or filed against the Premises or any equipment therein or any
materials used in the construction or alteration of any building or improvement
thereon, made by the Tenant or (f) any tax attributable to the execution,
delivery, or recording of this Lease or any modification thereof.
Section 9.2. Tenant is and shall be in exclusive control and
possession of the Premises as provided herein, and Landlord shall not in any
event whatsoever be liable for any injury or damage to any property or to any
person happening on or about the Premises, nor for any injury or damage to any
property of Tenant, or of any other person contained therein, except for injury,
damage, liability or claims caused by the negligence or willful misconduct of
Landlord. The provisions hereof permitting Landlord to enter and inspect the
Premises are made for the purpose of enabling Landlord to be informed as to
whether Tenant is complying with the agreements, terms, covenants and conditions
hereof, and to do such acts as Tenant shall fail to do.
ARTICLE 10 - UTILITIES AND SERVICE
Section 10.1. Tenant shall provide for and shall pay the costs for
all water, gas, electricity, sewage, telephone and other services and utilities
supplied to the Premises. Landlord shall not be required to furnish to Tenant
any utilities or services of any kind whatsoever during the Lease Term, such as,
but not limited to, water, steam, heat, gas, hot water, electricity, light and
power. Landlord shall in no event be required to make any Alterations or repairs
(except for repairs required to be made by Landlord as set forth in Section 12.1
hereof) during the Lease Term. At Tenant's sole cost and expense, Landlord shall
cooperate fully with Tenant in the manner and to the extent reasonably required
by Tenant in obtaining such services for the Premises during the Lease Term.
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ARTICLE 11 - CONSTRUCTION IMPROVEMENTS
Section 11.1. Tenant shall spend a minimum of ONE MILLION ONE
HUNDRED SIXTY-SIX THOUSAND FOUR HUNDRED DOLLARS ($1,166,400) (hereinafter
referred to as the "Minimum Amount") on the Tenant Improvements set forth on
EXHIBIT C annexed hereto exclusive of specialized work which will be of benefit
to the Tenant specifically in the Landlord's opinion. Landlord agrees that
Tenant may use a portion of the Minimum Amount in order to upgrade the Building
and the Premises to all current applicable building and zoning codes in effect.
Landlord also agrees that to the extent the deferred maintenance items and legal
compliance items set forth in EXHIBIT D are not corrected by the current
occupant, Tenant may use a portion of the Minimum Amount up to One Hundred Five
Thousand Dollars ($105,000) to complete said deferred maintenance and legal
compliance items. Tenant shall provide evidence satisfactory to the Landlord
that the Minimum Amount has been expended. Tenant shall use its best efforts to
complete the Tenant Improvements (as defined in EXHIBIT C annexed hereto) within
three (3) months after the Commencement Date, such Tenant Improvements are to be
constructed within the Premises, in accordance with the provisions of this
Article 11 and EXHIBIT C. If Tenant does not spend the Minimum Amount within
twelve (12) months of the Commencement Date, Tenant shall pay the difference
between the actual amount spent on Tenant Improvements and the Minimum Amount to
the Landlord, as compensation to the Landlord in lieu of the Tenant
Improvements.
Section 11.2. Except for nonstructural Alterations not exceeding
$15,000 in the aggregate, Tenant shall not make or suffer to be made any
Alterations in, on or to the Premises or any part thereof without the prior
written consent of Landlord which consent shall not be unreasonably withheld or
delayed. When applying for any such consent, Tenant shall furnish plans and
specifications for the Alterations. Tenant shall keep the Premises free from any
liens arising out of any work performed, materials furnished or obligations
incurred by Tenant in connection with such Alterations. Landlord shall have the
right to post and keep posted at the Premises any notices which Landlord may
reasonably deem proper for the protection of Landlord, the Premises and/or the
Building from such liens. Furthermore, Tenant shall not at any time during the
Lease Term make any Alteration in or to the Premises or to any building thereon,
unless:
(a) the same shall be performed in a professional workmanlike
manner, at Tenant's sole cost and expense, and shall not weaken or impair the
structural strength, or lessen the value, of such buildings as shall be on the
Premise at the time, or change the purposes for which such buildings may be
used;
(b) Tenant shall pay when due or bond all claims for labor or
material furnished to or for Tenant at or for use in
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<PAGE> 20
or on the Premises, which claims may be secured by any mechanics or
materialmen's lien against the Premises or any interest therein; and Tenant
shall hold Landlord harmless from any and all claims, costs, or damages arising
from labor or materials so furnished or alleged to have been furnished. Tenant
agrees to promptly pursue and resolve any illegitimate claims for labor and
materials and, if necessary, Landlord shall cooperate in the resolution of such
claims at Tenant's expense. Tenant shall deliver to Landlord written notice of
its intention to commence any work on or in the Premises at least ten (10) days
prior to such commencement, and Landlord shall have the right, but not the
obligation, to post a notice of non-responsibility at the Premises as provided
by law;
(c) before the commencement of any such work, such plans and
specifications shall be filed with and approved by all governmental departments
or authorities having jurisdiction, and any public utility company having an
interest therein, and all such work shall be done subject to and in accordance
with the requirements of law and local regulations of all governmental
departments or authorities having jurisdiction and of such public utility
company, including, without limitation, any requirements that Tenant obtain
construction permits for such work and a certificate of occupancy upon
completion; and
(d) furnish to Landlord a letter guaranteeing the completion
of such work, free and clear of all liens, encumbrances, chattel mortgages,
conditional bills of sale, security agreements and financing statements
according to said plans and specifications therefore. None of the foregoing
requirements shall prevent Tenant from contesting in good faith any lien against
the Premises, as long as such contest prevents foreclosure of the lien and
Tenant causes such lien to be bonded or insured over in a manner acceptable to
Landlord in its sole discretion.
Section 11.3. Unless otherwise provided by Landlord in writing at
the time Landlord approves Tenant's request for such Alterations, all
Alterations to the Premises made by Tenant shall become the property of Landlord
and shall remain upon the Premises at the expiration of this Lease, except that
Tenant may remove all personal property, trade fixtures, machinery and equipment
installed by Tenant. Landlord shall provide written notice to Tenant at the time
when Landlord's approval is given for such Alteration, indicating whether
Landlord requires Tenant upon such expiration or termination of this Lease to
remove any or all such Alterations (other than the Tenant Improvements performed
in connection with the initial renovation of the Premises which shall not be
required to be removed by Tenant), and restore the Premises to the condition
that would exist except for such Alterations. Such removal, restoration, and
repair (except for the Tenant Improvements) shall be completed by Tenant not
later than the expiration or sooner termination of this Lease.
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ARTICLE 12 - REPAIRS AND MAINTENANCE
Section 12.1. Tenant shall, at all times during the Lease Term, and
at its own cost and expense, keep and maintain in good order and condition,
ordinary wear and tear excepted, the Building and all other improvements on the
Premises as of the Commencement Date of the Lease Term and thereafter erected by
Tenant on the Premises, or forming part thereof, and their full equipment and
appurtenances, including without limitation, all windows, plate glass, doors,
interior non-bearing walls and partitions, ceilings and the electrical,
plumbing, lighting, heating, and air conditioning systems, and make all repairs
thereto and restorations, replacements and renewals thereof, both inside and
outside, structural and nonstructural, extraordinary and ordinary, foreseen or
unforeseen, howsoever the necessity or desirability for repairs may occur, and
whether or not necessitated by latent defects or otherwise; and shall use all
reasonable precaution to prevent waste, damage or injury. Landlord shall
maintain and repair the Building foundation, exterior walls and roof provided
that these items are not in any way affected or disturbed by Tenant Improvements
or such maintenance and/or repair was caused by Tenant's use of the Premises. If
it is determined that any such maintenance or repair is required due to Tenant's
negligence or damage caused by the Tenant Improvements, Tenant shall be
responsible for the cost of such maintenance and/or repair.
Section 12.2. Tenant shall also, at its own cost and expense, put,
keep, replace and maintain in thorough repair and in good, safe and substantial
order and condition, and free from dirt, snow, ice rubbish and other
obstructions or encumbrances, the sidewalks, areas, sidewalk hoists, railings,
gutters and curbs in front of and adjacent to the Premises and shall maintain
the landscaping at the Premises in good condition.
Section 12.3. All of Tenant's Personal Property shall remain the
property of Tenant, and Tenant shall have the right to remove the same at any
time during the Lease Term or when vacating the Premises. Tenant shall repair
any damage caused to the Premises by reason of the removal of its fixtures,
machinery and equipment. At the end of the Lease Term, Tenant shall surrender
the Premises to Landlord broom clean and in good condition except for reasonable
wear and tear, any damage caused by condemnation or fire or other casualty and
the Tenant Improvements.
ARTICLE 13 - DESTRUCTION - FIRE OR OTHER CAUSES
Section 13.1. If, during the Lease Term, the Building, improvements
or the equipment (other than Tenant's Personal Property) on, in or appurtenant
to the Premises at the commencement of the Lease Term or thereafter erected
thereon or therein shall be destroyed or damaged in whole or in part by fire or
other cause, Tenant shall give to Landlord immediate notice thereof, and Tenant,
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at its own cost and expense, shall promptly repair, replace and rebuild the
same, at least to the extent of the value and as nearly as possible to the
character of the Building and improvements and the equipment therein existing
immediately prior to such occurrence (other than Tenant's Personal Property);
and Landlord shall in no event be called upon to repair, replace or rebuild any
such buildings, improvements or equipment, nor to pay any of the costs or
expenses thereof beyond or in excess of the insurance proceeds as herein
provided. To the extent that the time for such repairs shall reasonably be
estimated by Landlord to exceed 90 days or if the Building is destroyed to an
extent greater than twenty-five percent (25.0%) of the replacement cost, so long
as the Landlord receives the insurance proceeds for loss of rent for the term
remaining on this Lease at such time, Tenant may elect to terminate this Lease.
If Landlord does not receive the insurance proceeds for loss of rent, Tenant
shall not be entitled to terminate this Lease. Nothing contained in the second
sentence of this Section which allows the Tenant to terminate the Lease, shall
be construed to relieve the Tenant of its obligations as set forth in the first
sentence of this Section.
Section 13.2. (a) All insurance proceeds received by Landlord on
account of such damage or destruction, shall be applied by Landlord to reimburse
Tenant for the payment of the cost of the aforesaid restoration, repairs,
replacement, rebuilding or alterations, including the cost of temporary repairs
or for the protection of property pending the completion of permanent
restoration, repairs, replacements, rebuilding or alterations (all of which
temporary repairs, protection of property and permanent restoration, repairs,
replacement, rebuilding or alterations being hereinafter collectively referred
to as the "restoration"), and, so long as Tenant is not then in default
hereunder, shall be paid out from time to time as such restoration progresses
upon the written request of Tenant which shall be accompanied by the following:
(1) A certificate signed by an officer of Tenant, and by the
architect or engineer in charge of the restoration (selected by Tenant and
approved by Landlord), dated not more than ten (10) days prior to such request,
setting forth the following:
(A) That the sum then requested has been paid by Tenant, that
no part of such expenditures has been or is being made the basis, if any
previous or then pending request, of the withdrawal of insurance money or has
been made out of the proceeds of insurance received by Tenant, and that the sum
then requested does not exceed the value of the services and materials described
in the certificate.
(B) That, there is no outstanding indebtedness known to the
person signing such certificate, after due inquiry, which is then due for labor,
wages, materials, supplies or services in connection with such restoration.
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(C) The cost, as estimated by the person signing such
certificate, of the restoration required to be done subsequent to the date of
such certificate in order to complete the same.
(2) A title company or official search, or other evidence
satisfactory to Landlord showing that there have not been filed with respect to
the Premises any vendor's, contractor's, mechanic's, laborer's or materialman's
statutory or similar lien which has not been discharged of record, except such
as will be discharged upon payment of the sum requested in such certificate.
(b) If the insurance money at the time available for the
purpose, less the actual cost, fees and expenses, if any, incurred in connection
with the adjustment of the loss, shall be insufficient to pay the entire cost of
such restoration, Tenant will pay the deficiency.
Section 13.3. Such work and the performance thereof shall be subject
to and shall be performed in accordance with the provisions of Section 11.2
hereof.
Section 13.4. At least thirty (30) days before the commencement of
such repairs, replacement or rebuilding, Tenant shall notify Landlord of its
intention to commence the same.
Section 13.5. Except as specifically provided herein, this Lease
shall not terminate or be affected in any manner by reason of damage to or
substantial or partial destruction of the buildings, improvements or equipment
on, in or appurtenant to the Premises at the commencement of the Lease Term or
thereafter erected thereon or therein, or by reason of the untenantability of
the Premises, or any part thereof, for or due to any reason or cause whatsoever,
except that Tenant shall be entitled to a proportionate reduction of Rent while
such repairs are being made to the extent of payments received by Landlord under
any loss of rents insurance coverage.
Section 13.6. Tenant waives the provisions of Civil Code Section
1932 (2) and Civil Code Section 1933 (4) with respect to any destruction of the
Premises.
ARTICLE 14 - CONDEMNATION
Section 14.1. In the event that the Premises or any part hereof,
shall be taken in condemnation proceedings or by exercise of any right of
eminent domain or by any agreement in lieu thereof, Landlord shall be entitled
to collect the entire award made in any such proceeding without deduction
therefrom for any estate hereby vested in or owned by Tenant, subject to the
rights of the holder of any mortgage to which this Lease is or shall be subject
and subordinate, and subject also to Tenant's rights as set forth below in this
Article 14. Tenant agrees to execute any and all further documents that may be
reasonably required in order to facilitate
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collection and distribution by Landlord of any and all such awards.
Section 14.2. If at any time during the Lease Term the whole of the
Premises shall be so taken or condemned, this Lease shall terminate and expire
on the date upon which title shall vest in the condemning authority ("the date
of the taking") and the Annual Base Rent provided to be paid by Tenant shall be
apportioned and paid to such date.
Section 14.3. If only a part of the Premises shall be so taken or
condemned, this Lease shall be unaffected by such taking, except that Tenant may
elect to terminate this Lease, in the event of a partial taking, if the
remaining area of the Premises and/or the means of access thereto shall not be
reasonably sufficient for Tenant to continue feasible operation of its business.
Tenant shall give notice of such election to Landlord not later than thirty (30)
days after (i) notice of such taking is given by Landlord to Tenant, or (ii) the
date of such taking, whichever occurs sooner. Upon the giving of such notice by
Tenant, this Lease shall terminate on the date of such taking and the Annual
Base Rent shall be prorated as of such termination date. Upon such partial
taking and this Lease continuing in force as to any part of the Premises, the
Annual Base Rent apportioned to the part taken shall be prorated and adjusted as
of the date of taking and from such date the Annual Base Rent for the Premises
and Additional Rent shall be payable pursuant to Article 4 according to the
rentable area remaining.
Section 14.4. Landlord shall be entitled to receive the entire
award.
Section 14.5. In the event of a partial taking which shall not
result in termination of this Lease, Tenant shall promptly proceed to rebuild,
repair and restore the remainder of any building on the Premises affected
thereby to a complete, independent and self-contained architectural unit, for
the purposes in use before the taking, and Landlord shall pay to Tenant, subject
to the same provisions and limitations specified in Sections 13.2 and 13.3
respecting insurance proceeds, the cost of restoration but in no event to exceed
a sum equal to the amount of the separate award made for consequential damage;
provided, however, that in the event insufficient or no condemnation award is
available to cover the cost of restoration of the Premises, Tenant, at its sole
option, may terminate this Lease if Landlord elects not to provide additional
funds for restoration. Notwithstanding anything to the contrary in the
foregoing, to the extent an award is specified by a governmental authority for
restoration, Landlord shall make such proceeds available to Tenant for
restoration of the Premises. Such work and the performance thereof shall be
subject to and shall be performed in accordance with the provisions of Section
11.2 respecting Alterations. The balance of such separate award or allocated
amount not so used and the award for the portion of the
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Premises taken shall be distributed to Landlord.
Section 14.6. In case of any governmental action, not resulting in
the taking or condemnation of any portion of the Premises but creating a right
to compensation therefor, such as, without limitation, the changing of the grade
of any street upon which the Premises abut, or if less than a fee title to all
or any portion of the Premises shall be taken or condemned by any federal,
state, municipal or governmental authority for temporary use or occupancy,
unless such taking unreasonably interfere's with Tenant's use of the Premises in
which case Tenant may terminate this Lease, this Lease shall continue in full
force and effect without reduction or abatement of rent, and the rights of
Landlord and Tenant shall be unaffected by the other provisions of this Article
14 and shall be governed by applicable law; provided, however, that:
(a) if any such temporary taking for a period not extending
beyond the Lease Term results in changes or alterations in the Building,
improvement, equipment, required parking or utility infrastructure on the
Premises which would necessitate an expenditure to restore the same to their
former condition, or if any other such governmental action shall require
alteration to be made in the Building, improvement or equipment to adapt the
same to the change of grade or other result of such action, then any award or
payment made to cover the expenses of such restoration or alterations shall be
received by Landlord and disbursed substantially in the same manner and subject
to the same conditions as those provided in Section 13.2 and 13.3, hereof with
respect to insurance and other monies or
(b) if any such temporary taking is for a period extending
beyond the Lease Term, the amount of any award or payment allowed or retained
for restoration of any building, improvement or equipment on the Premises, shall
remain the property of Landlord if this Lease shall expire prior to the
restoration of the same to their former condition.
Section 14.7. Each party waives the provisions of the Code of Civil
Procedure Section 1265.130 allowing either party to petition the superior court
to terminate this Lease in the event of a partial taking of the Premises.
ARTICLE 15 - SIGNS AND ADVERTISING
Tenant shall not place any sign on or around the Premises without
the advance written consent of City authorities and Landlord, such consent of
Landlord not to be unreasonably delayed or withheld. Tenant shall maintain any
such signs to which Landlord has consented in good condition at its sole cost
and expense. Landlord may enter upon the Premises and remove any sign not
complying with the terms of this section at Tenant's expense.
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ARTICLE 16 - ENTRY BY LANDLORD
Section 16.1. Landlord and its agents shall have the right to enter
into and upon the Premises at all reasonable times for the purpose of examining
and exhibiting the same; provided, however, that Landlord shall provide notice
to Tenant at least 24 hours in advance thereof, except in case of an emergency.
Supplementing the foregoing, Landlord and its authorized representatives shall
have the right to enter the Premises at all reasonable times for any of the
following purposes;
(a) To determine whether the Premises are in good condition
and whether Tenant is complying with its obligations under this Lease;
(b) To serve, post, or keep posted any notices required or
allowed under the provisions of this Lease;
(c) To Post one "for sale", "for rent" or "for lease" signs
during the last 6 months of the Lease Term, or during any period while Tenant is
in default beyond any applicable cure period;
(d) To show the Premises to prospective brokers, agents,
buyers, tenants, or persons interested in an exchange, at any time during the
Lease Term;
(e) To shore the foundations, footings, and walls of the
Building and other improvements that are a part of the Premises and to erect
scaffolding and protective barricades around and about the Premises, but not so
as to prevent entry to the Premises, and to do any other act or thing necessary
for the safety or preservation of the Premises if any excavation or other
construction is undertaken or is about to be undertaken on any adjacent property
on which excavation or construction is to take place and the adjacent property
owner's authorized representatives; and
(f) to conduct any tests at the Premises which Landlord deems
reasonable or necessary including, without limitation, ground water tests and
core soil tests, provided, however, that Landlord shall not unreasonably disturb
Tenant's operations and occupancy.
Section 16.2. Landlord shall not be liable in any manner for any
inconvenience, disturbance, loss of business, nuisance, or other damage arising
out of Landlord's entry on the Premises as provided in this Article unless due
to Landlords or its agents' acts, omissions, negligence or willful misconduct.
Section 16.3. Tenant shall not be entitled to an abatement or
reduction of rent if Landlord exercises any rights reserved in this Article.
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ARTICLE 17 - ASSIGNMENT AND SUBLETTING
Section 17.1. (a) Tenant shall not assign or sublet the Premises or
any part thereof without the prior written consent of Landlord, which consent
shall not be unreasonably withheld or delayed. Any provision in this Lease to
the contrary notwithstanding, Landlord's consent shall not be required for an
assignment or sublease to any person or entity who controls, is controlled by or
is under common control with Tenant ("Tenant Affiliate"), provided that before
such assignment shall be effective, (a) said Tenant Affiliate shall assume, in
full together with the Tenant, the obligations of Tenant under this Lease, (b)
Landlord shall be given written notice of such assignment and assumption, (c)
the use of the Premises by the Tenant Affiliate shall be as set forth in Section
6.1 and (d) the Tenant remains fully obligated on this Lease for the entire
Lease Term. For purposes of this paragraph, the term "control" means possession,
directly or indirectly, of the power to direct or cause the direction of the
management, affairs and policies of anyone, whether through the ownership of
voting securities, by contract or otherwise.
(b) If Tenant assigns this Lease or subleases the Premises, or
any portion of the Premises, fifty percent (50%) of the amount by which all
rents, additional charges and other consideration of any nature payable under
any such assignment or sublease to Tenant as a result of such assignment or
subletting exceeds, in the aggregate, the total sums which Tenant is obligated
to pay Landlord under this Lease shall be payable to Landlord as Additional Rent
under this Lease as and when they are payable to Tenant by the applicable
assignee or subtenant. The bonus rental provisions of this Section shall be net
of brokerage commissions, reasonable attorneys fees and tenant improvement costs
for demising for any Subtenant or assignee. Tenant shall not be required to pay
any bonus rent for subtenant or assignee which is a Tenant Affiliate.
Section 17.2. Involuntary Assignment. No interest of Tenant
in this Lease shall be assignable by operation of law. Each of the
following acts shall be considered an involuntary assignment.
(a) If Tenant is or becomes bankrupt or insolvent, makes and
assignment for the benefit of creditors, or institutes a proceeding under the
Bankruptcy Act in which Tenant is the bankrupt; of, if Tenant is a partnership
or consists of more than one person or entity, if any partner of the partnership
or other person or entity is or becomes bankrupt of insolvent, or makes and
assignment for the benefit of creditors;
(b) If a writ of attachment or execution is levied on this
Lease;
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(c) If, in any proceeding or action to which Tenant is a
party, a receiver is appointed with authority to take possession of the
Premises.
An involuntary assignment shall constitute a default by Tenant and
Landlord shall have the right to elect to terminate this Lease, in which case
this Lease shall not be treated as an asset of Tenant.
If a writ of attachment or execution is levied on this Lease, Tenant
shall have ten (10) days in which to cause the attachment or execution to be
removed. If any involuntary proceeding in bankruptcy is brought against Tenant,
or if a receiver is appointed, Tenant shall have thirty (30) days in which to
have the involuntary proceeding dismissed or the receiver removed.
Section 17.3. Regardless of Landlord's consent, no subletting or
assignment shall release Tenant of Tenant's obligations hereunder or alter the
primary liability of Tenant to pay the Rent and to perform all other obligations
to be performed by Tenant hereunder. The acceptance of Rent by Landlord from any
other person or entity shall not be deemed to be a waiver by Landlord of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignees of Tenant or any successor of Tenant in the performance of any of
the terms hereof, Landlord may proceed directly against Tenant without the
necessity of exhausting remedies against such assignee or successor. Landlord
may consent to subsequent assignments or subletting of this Lease or amendments
or modifications to this Lease with assignees of Tenant upon obtaining its or
their consent thereto and such action shall not relieve Tenant of liability
under this Lease.
Section 17.4. In the event Tenant shall assign or sublet the
Premises or request the consent of Landlord to any assignment or subletting or
if Tenant shall request the consent of Landlord for any act the Tenant proposes
to do, then Tenant shall pay Landlord's reasonable attorney's fees (based upon
actual time spent provided such time is reasonable and the attorney's regular
hourly rate) and any other expense incurred in connection therewith.
Section 17.5. No assignment made with Landlord's consent or as
hereinabove permitted, shall be effective until there shall have been delivered
to Landlord an executed counterpart of such assignment containing an agreement,
executed by the assignor and the proposed assignee, wherein and whereby such
assignee assumes due performance of the obligations ont he assignor's part to be
performed under this Lease to the end of the term hereof.
Section 17.6. (a) If at any time during the Lease Term Tenant
desires either to sublet all or a portion of the Premises or
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to assign this Lease which requires Landlord's consent, Tenant shall give notice
to Landlord setting forth the identity of the subtenant and the terms of the
sublease, or the assignee and the terms of the assignment, as the case may be,
together with a copy of the subtenant's or assignee's financial statements for
the past three fiscal years and a copy of the proposed sublease or assignment
agreement and any other information requested by Landlord. Landlord shall
approve, such approval not to be unreasonably withheld, or disapprove the
proposed subletting or assignment within fifteen (15) days from receipt of all
such items.
(b) Any sublease permitted hereunder shall be subject and
subordinated to the right of Landlord hereunder and shall contain substantially
the following provision:
"Subtenant has been informed and understands that
Sublandlord is the lessee under an underlying lease of
the entire building of which the Subleased Premises form
a part. In the event of any proceeding to terminate such
underlying lease, or in the event of any action or
proceeding for the exercise of a power of sale under a
deed of trust or for the foreclosure of any mortgage to
which this lease or such underlying lease is subordinate,
Subtenant acknowledges that this lease shall be
terminable by reason of any termination of such
underlying lease, unless the lessor thereunder or the
purchaser at a sale does not elect to terminate this
lease, in which event Sublessor shall attorn to the
lessor thereunder or to the purchaser at the sale on any
such foreclosure."
(c) Tenant shall furnish Landlord with fully executed or
photocopies of all subleases of space in the Premises and with such information
with respect thereto as Landlord may require.
Section 17.7. Effective as of the date of the happening of an Event
of Default or breach of this Lease (as described in Article 19 hereof) and after
any applicable notice and cure period, but subject to the rights of the holder
of any mortgage to which this Lease is subject and subordinate, Tenant hereby
assigns to Landlord all of its right, title and interest in and to all present
and future subleases and all rents due and to become due thereunder. After the
effective date of such assignment, Landlord shall apply any net amount collected
by it from subtenants to the Annual Base Rent or Additional Rent due hereunder.
In the event of the failure of any subtenant to pay subrent to Landlord pursuant
to the foregoing assignment after the happening of any such Event of Default or
breach of this Lease, any such rent thereafter collected by Tenant shall be
deemed to constitute a trust fund for the benefit of Landlord.
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Section 17.8. Tenant shall not mortgage this Lease or execute and
deliver to a trustee, a deed of trust affecting this Lease.
ARTICLE 18 - SUBORDINATION
Section 18.1. This Lease and all rights of Tenant hereunder are and
shall be subject and subordinate to any mortgage, deed of trust or other
instrument of security (including any renewals, modifications, consolidations,
replacement and extension thereof) now or hereafter placed upon the Premises,
the Building, or any portion of any of the foregoing, by Landlord; provided,
however, that the holder of such instrument enters into an agreement with
Tenant, its successors and assigns, in which such holder agrees not to disturb
the possession and other rights of Tenant under this Lease for so long as Tenant
continues to perform its obligations hereunder and is not in default hereunder
beyond any applicable grace and cure period, and, in the event of acquisition of
title by such holder through foreclosure proceedings or otherwise, to accept
Tenant as tenant of the Premises under the terms and conditions of this Lease,
and to perform the Landlord's obligations hereunder. Tenant agrees to recognize
such holder or any other person or entity acquiring title to the Premises as
Landlord.
Section 18.2. Tenant shall upon demand at any time or times execute,
acknowledge and deliver to Landlord any and all instruments that may be
necessary, proper or desirable to subordinate this Lease and all rights
hereunder to the lien of any such mortgage or mortgages and each such renewal,
modification, consolidation, replacement and extension.
ARTICLE 19 - DEFAULT
Section 19.1. If any of the following events shall occur herein
referred to individually as an "Event of Default" and collectively as "Events of
Default"), Tenant shall be deemed to be in default under this Lease:
(a) If Tenant shall fail to pay any Rent or other sum when and
as the same becomes due and payable and such failure is not cured within five
(5) business days after the delivery of notice from Landlord specifying such
failure to pay; provided, however, that such notice shall be in lieu of and not
in addition to any notice required under Section 1161 of the California Code of
Civil Procedure and provided further, that if twice within any twelve month
period the Tenant fails to pay any Rent or other sum when and as the same
becomes due and payable, the cure provision set forth herein shall be reduced
from five (5) days to three (3) days;
(b) If Tenant shall fail to perform any of the other monetary
duties required to be performed by Tenant under this Lease;
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(c) If Tenant shall fail to perform any of the other
non-monetary duties required to be performed by Tenant under this Lease (and
unless a different time period is specified in this Lease), and such failure
shall continue for more than thirty (30) days after discovery thereof by Tenant;
provided, however, that if such duty cannot reasonably be performed within such
thirty (30) day period, Tenant shall have such additional time (up to sixty (60)
days) as is reasonably necessary to perform such duty provided Tenant commences
in good faith to perform such duty and thereafter diligently proceeds therewith
to completion;
(d) If Tenant shall make a general assignment for the benefit
of creditors, or shall be unable to pay its debts generally as they become due,
file a petition in bankruptcy, be adjudicated bankrupt, file a petition seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, consent to, or acquiesce in, the appointment of a receiver,
liquidator, trustee, custodian or other similar official of itself or of the
whole or any substantial part of its properties or assets;
(e) If, without Tenant's consent or acquiescence, (i) a court
of competent jurisdiction shall enter an order, judgment or decree appointing a
receiver, liquidator, trustee, custodian or other similar official of Tenant, or
of the whole or any substantial part of the property or assets of Tenant and
such order, judgment or decree shall remain unvacated, or not set aside, or
unstayed, for thirty (30) days, or (ii) an involuntary case under said
Bankruptcy Code shall be commenced against Tenant or a petition shall be filed
against it seeking similar relief under any other present or future insolvency
act or other applicable law relating to bankruptcy, insolvency, reorganization
or relief of debtors and such case of petition shall remain undismissed for
thirty (30) days, or (iii) under the provisions of any other law for the relief
or aid of debtors, any court of competent jurisdiction shall assume custody or
control of Tenant or of the whole or any substantial part of its property or
assets and such custody or control shall remain unterminated or unstayed for
thirty (30) days;
(f) If, in Landlord's reasonable judgment, Tenant shall vacate
the Premises for such length of time and in such a manner as to endanger the
security or proper maintenance of the Premises or if Tenant shall abandon the
Premises;
(g) If this Lease or the estate of Tenant hereunder shall be
encumbered, mortgaged, transferred or shall pass to or devolve upon any other
person or party, except in a manner permitted under Article 17 hereof.
Section 19.2. Upon the occurrence of an Event of Default,
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Landlord may at any time thereafter with or without notice or demand, and
without limiting Landlord in the exercise of any other right or remedy which
Landlord may have by reason of such Event of Default whether under this Lease or
under applicable law:
(a) to the extent permitted by law, immediately re-enter and
remove all persons and property from the Premises, storing said property in a
public warehouse or elsewhere at Tenant's expense without liability on the part
of Landlord;
(b) should Landlord elect to re-enter as herein provided, or
should Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Landlord may either terminate this Lease or Landlord
may from time to time, without terminating this Lease, re-let said Premises, or
any part thereof for the account of Tenant either in Landlord's name or
otherwise, upon such terms and conditions and for such period (whether longer
than the balance of the Lease Term hereof or not as Landlord may deem advisable)
either with or without any equipment or fixtures that may be situated thereon or
therein, in which event the rents received on any such re-letting during the
balance of the Lease Term or any part thereof shall be applied first to the
expenses of re-letting and collecting, including necessary renovation and
alteration of the Premises and any attorney's fee and real estate commission
actually paid, and thereafter, toward payment of all sums due or to become due
to Landlord hereunder, and if a sufficient sum shall not be thus realized to pay
such Rent and other charges, Tenant shall pay to Landlord any deficiency and
Landlord may sue therefor; such deficiency shall be paid immediately. No
re-entry or taking possession of said Premises shall terminate this Lease unless
written notice of such intention is given to Tenant. Unpaid installments of Rent
or other sums shall bear interest at the highest legal rate from the date due.
(c) Collect by suit or otherwise the Annual Base Rent or other
sum or enforce by suit or otherwise any covenant or condition or term of the
Lease required to be performed by Tenant.
(d) Terminate this Lease in which event Tenant agrees to
immediately surrender possession of the Premises and to pay Landlord all damages
Landlord may incur by reason of Tenant default including the cost of recovering
possession of the Premises and the unpaid Rent for the remaining Lease Term and
such other amounts as may be permitted by applicable law.
Section 19.3. In the event that Tenant fails to make any payment to
a third party required hereby, or fails to perform any other obligation on its
part set forth herein, Landlord shall have the right, without notice (except as
expressly set forth in paragraphs of this Lease other than this Article 19), to
cure such failure on Tenant's behalf. Any funds advanced by Landlord in so doing
shall be payable within five (5) days after written demand
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from Landlord, together with interest thereon at the highest legal rate all as
Additional Rent. This remedy shall be in addition to the rights and remedies of
Landlord set forth herein or under applicable law.
Section 19.4. No waiver by either party of any default hereunder by
the other party shall be deemed to be a waiver of any subsequent default under
the same or any other term,covenant or condition of this Lease. The subsequent
acceptance of any Rent by Landlord shall in no event be deemed to be a waiver of
any preceding default by Tenant under any term, covenant or condition of this
Lease, other than the failure of Tenant to pay the particular Rent so accepted,
regardless of Landlord's knowledge of such preceding default at the time of
acceptance of such Rent.
Section 19.5. The remedies of Landlord upon Tenant's default as set
forth in this Article 19 are not exclusive; they are cumulative in addition to
any remedies now or later allowed by law.
Section 19.6. Tenant acknowledges that late payment by Tenant to
Landlord of Annual Base Rent will cause Landlord to incur costs not contemplated
by this Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and
accounting charges, and late charges that may be imposed on Landlord by the
terms of any encumbrance and note secured by any encumbrance covering the
Premises. Therefore, if any installment of Rent due from Tenant is not received
by Landlord when due (on the first day of each calendar month) pursuant to
Section 4.1 herein, Tenant shall pay to Landlord an additional sum equal to the
amount of the overdue Rent multiplied by five percent (5.0%) (the "Default
Rate") as a late charge. The parties agree that this late charge represents a
fair and reasonable estimate of the costs that Landlord will incur by reason of
late payment by Tenant. Acceptance of any late charge shall not constitute a
waiver of Tenant's default with respect to the overdue amount, or prevent
Landlord from exercising any of the other rights and remedies available to
Landlord.
ARTICLE 20 - NOTICES
All notices which are required to be given by either party hereunder
shall be in writing, sent by certified or registered mail, postage prepaid,
return receipt requested, and by express mail courier for next day delivery
(i.e. Federal Express, DHL, etc.) and addressed to the parties at the following
addresses:
Landlord:
First State Realty of America, Inc.
P.O. Box 703
New Canaan, CT 06840-0703
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with a copy to:
Peter S. Gummo, Esq.
c/o Gilbert, Segall and Young LLP
Four Landmark Square
Stamford, CT 06901-2502
Tenant:
Notices: Billings/payments:
Cisco Systems, Inc. U.S. Bills/Rents
170 West Tasman Drive P.O. Box 641570
San Jose, CA 95134-1706 MS Lease
Attn: Director San Jose, California 95164
Worldwide Real
Estate
or to such other addresses and to such other persons as the parties may from
time to time designate in writing, by notice as aforesaid. The time of giving of
any such notice shall be deemed to be the earlier of (1) actual delivery; or (2)
the date upon which delivery is attempted and said delivery is refused or
rejected; provided, however, that change of address notices shall be effective
only upon actual receipt.
ARTICLE 21 - BROKER'S COMMISSIONS
Landlord acknowledges and agrees that it shall pay the brokerage
commissions of The Commercial Property Services Company and Cornish & Carey
pursuant to a separate written agreement between Landlord and such brokers,
Landlord and Tenant represent one to another that each has dealt only with The
Commercial Property Services Company and Cornish & Carey as brokers in
connection with this Lease. In the event of a breach of the foregoing
representation, Tenant and Landlord shall indemnify and defend each other
against, and hold one another harmless from, any and all claims, demands,
liabilities, losses, lawsuits, judgments, damages, costs and expenses
(including, but not limited to, attorneys' fees and court costs, whether
incurred at the trial, appellate or administrative levels), which the other
party may incur or suffer, or to which the other party may be subjected, as a
result of such breach. Any liability hereunder shall survive the expiration or
earlier termination of this Lease.
ARTICLE 22 - MECHANIC'S AND OTHER LIENS
Section 22.1. Tenant shall not cause any lien, mortgage or other
encumbrance upon the reversion or other estate of Landlord, or upon any interest
of Landlord in the Premises or in the buildings or improvements thereon; it
being agreed that should Tenant cause any Alterations or repairs to be made to
the Premises,
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or cause any labor to be performed or material to be furnished therein, thereon
or thereto, neither Landlord nor the Premises shall under any circumstances be
liable for the payment of any expense incurred or for the value of any work done
or material furnished, but all such Alterations and repairs, and labor and
material, shall be made, furnished and performed at Tenant's expense, and Tenant
shall be solely and wholly responsible to contractors, laborers and materialmen
furnishing and performing such labor and material.
Section 22.2. If, because of any act or omission (or alleged act or
omission) of Tenant, any mechanic's or other lien, charge or order for the
payment of money shall be filed against the Premises or any building or
improvements thereon or against Landlord, or any conditional bill of sale,
chattel mortgage, security agreement or financing statement shall be made or
filed for or affecting any equipment or any materials used in the construction
or alteration of, or installed in, any such building or improvement (whether or
not such lien, charge or order, conditional bill of sale, chattel mortgage,
security agreement or financing statement, is valid or enforceable as such),
Tenant shall, at its own cost and expense, cause the same to be cancelled and
discharged of record or bonded within fifteen (15) days after notice of filing
thereof.
ARTICLE 23 - NO RENT ABATEMENT
Section 23.1. No abatement, diminution or reduction of Rent, charges
or other compensation shall be claimed by or allowed to Tenant, or any persons
claiming under it, except as may be specified in this Lease, whether for
inconvenience, discomfort, interruption of business, or otherwise, arising from
the making of Alterations or repairs to any buildings now on or which may
hereafter be erected on the Premises, by virtue or because of any present or
future governmental laws, ordinances, requirements, orders, directions, rules or
regulations or arising from any other cause or reason.
ARTICLE 24 - END OF TERM
Section 24.1. Tenant shall, on the last day of the Lease Term, or
upon the sooner termination of the Lease Term, peaceably and quietly surrender
and deliver the Premises to Landlord free of subtenancies (unless Landlord shall
consent to the continuance thereof), broom-clean, including all buildings and,
subject to Section 11.3 herein, Alterations constructed, erected, added or
placed by Tenant thereon, with all equipment in or appurtenant thereto, except
Tenant's Personal Property in good condition and repair, reasonable wear and
tear excepted.
Section 24.2. Any trade fixtures or personal property not used in
connection with the operation of the Premises and belonging to any subtenant, if
not removed at such termination shall, if
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Landlord shall so elect or unless Landlord shall consent to the continuance of
such subtenancy, 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 fixtures or property from the Premises and store them at Tenant's
risk and expense. Except for Landlord's gross negligence and willful misconduct,
Tenant shall repair and restore, and save Landlord harmless from, all damage to
the Premises caused by the removal therefrom, whether by Tenant or by Landlord,
of all such trade fixtures and personal property.
Section 24.3. Upon surrendering the Premises to Landlord as provided
herein, Tenant will pay to Landlord all deposits or other security and all
prepaid rents received from subtenants and other occupants whose tenancies may
continue beyond the last day of the term of this Lease or the sooner termination
thereof and will deliver to Landlord all original subleases and modifications
thereof, and copies of all lease files, plans, records, registers and all other
papers and documents which may be required for the proper operation and
management of the Premises and are then in Tenant's possession. It is agreed
that Landlord will suffer irreparable injury if such records, papers and
documents are not so delivered and that Landlord shall be entitled to mandatory
injunction (including a temporary mandatory injunction pendente lite) to enforce
such delivery. Tenant shall have access to any records, papers and documents so
delivered to such extent and at such times as the same may be reasonably
required after the last day of the Lease Term or such sooner termination
thereof. Nothing herein shall require Landlord to recognize any such existing
sublease as continuing in effect after such last day or sooner termination.
Section 24.4. The provisions of this Article 24 shall survive the
expiration or sooner termination of this Lease.
ARTICLE 25 - ESTOPPEL CERTIFICATE
Section 25.1. Tenant shall, without charge, at any time and from
time to time hereafter, within fifteen (15) days after receipt by Tenant of a
request by Landlord, certify by a written instrument duly executed and
acknowledged to any mortgagee or purchaser, or any other person, firm or
corporation specified by Landlord, as to the validity and force and effect of
this Lease, in accordance with its tenor, as then constituted, as to the
existence of any default on the part of any party thereunder, as to the
existence of any offsets, counterclaims or defenses thereto on the part of
Tenant, and as to any other matters which may be reasonably requested by
Landlord.
ARTICLE 26 - HAZARDOUS SUBSTANCES
Section 26.1. Tenant represents and warrants that it is not
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currently in violation of any Environmental Requirement regarding Hazardous
Materials and has not received any notice of violation, lien, complaint, suit,
order or other notice with respect to any Environmental Requirement and that the
Tenant's operations are in full compliance with all Environmental Requirements.
Section 26.2. Tenant shall comply with in all respects, all
Environmental Requirements at the Premises and will not generate, store, handle,
process or dispose of or otherwise use Hazardous Materials at, in, on, under or
about the Premises, in violation of any Environmental Requirements. If at any
time it is determined that Hazardous Materials are located, in, on, under or
about the Premises, the Tenant will take such action as is necessary in
accordance with relevant Environmental Requirements, at its sole cost and
expenses, to remove said Hazardous Materials from the Premises. If the
undersigned fails to do so, Landlord may, but shall not be obligated to, take
such action it deems is necessary or desirable to remove said Hazardous
Materials from the Premises at the expense of the Tenant. All sums so expended
shall be immediately due and payable on demand and shall bear interest at the
highest rate permitted by law.
Section 26.3. Tenant will defend, indemnify and hold harmless
Landlord from and against any and all claims, demands, penalties, causes of
action, fines, liabilities, settlements, damages, costs, or expenses of whatever
kind or nature, known or unknown, foreseen or unforeseen, contingent or
otherwise, including without limitation, reasonable counsel and consultant fees
and expenses, court costs and litigation expenses, arising out of or in anyway
related to any breach of this Article 26, any damage or injury resulting from
any such Hazardous Material stored, generated, disposed of or used by Tenant or
its agents, employees or contractors in, on or about the Premises and/or any
related violation of any Environmental Requirement.
Section 26.4. The obligations and liabilities of the Tenant under
this Article 26 shall survive the termination of the Lease and shall continue in
full force and effect.
ARTICLE 27 - PARKING ENTITLEMENTS
Section 27. Tenant's Parking Entitlements. Tenant shall be entitled
to the non-exclusive use of the entire parking area improvements located on the
Premises on the Effective Date of this Lease, including, without limitation, the
non-striped parking areas of the Premises, such as the concrete apron, during
the Term. With the prior written consent of the Landlord, Tenant may reconfigure
the existing parking spaces on the Premises and add parking spaces in accordance
with all applicable laws and regulations, including, without limitation, the
Americans with Disabilities Act, and Tenant shall be entitled to install signage
in conformance with Landlord-
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approved plans indicating parking spaces for Tenant's visitor parking and other
reserved parking. Landlord shall have no responsibility for policing or
otherwise enforcing parking rights in the Premises.
ARTICLE 28 - MISCELLANEOUS
Section 28.1. The covenants and conditions contained in this Lease
shall be binding upon and inure to the benefit of the successors and assigns of
the parties hereto.
Section 28.2. Time is of the essence in each and every provision of
this Lease.
Section 28.3. This Lease shall not be recorded without the prior
written consent of Landlord.
Section 28.4. If any provision of this Lease or the application
thereof to any persons or circumstances shall to any extent be held to be
invalid or unenforceable, neither the remainder of this Lease nor the
application of such provision to persons or circumstances other than those as to
whom or which it is held to be invalid or unenforceable shall be affected
thereby, and every provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
Section 28.5. In the event of any litigation or other proceedings
involving the parties hereto for the enforcement of any of the provisions of
this Lease, or any right of Landlord or Tenant in such litigation or other
proceedings, the unsuccessful party in such litigation or other proceedings
hereby agrees to pay to the successful party all costs and expenses, including
reasonable attorney's fees and court costs (whether incurred at the trial,
appellate or administrative levels), incurred by the successful party in such
litigation or other proceedings, all of which may be included in, and is a party
of, any judgment or decision rendered in such litigation or other proceedings.
Section 28.6. This Lease shall be construed and enforced in
accordance with the laws of the State of California, without reference to choice
of law rules.
Section 28.7. All references herein to a "mortgage" shall be deemed
to include a deed of trust and all references to a "mortgagee' shall be deemed
to include the holder of a deed of trust. Landlord hereby represents and
warrants to Tenant that as of the commencement Date there is no mortgagee of
Landlord's interest in the Premises.
Section 28.8. The terms of this Lease are intended by the
parties hereto as a final expression of their agreement with
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respect to the subject matter hereof, and may not be contradicted by evidence or
any prior or contemporaneous agreement. The parties further intend that this
Lease constitute the complete and exclusive statement of its terms, and that no
extrinsic evidence whatsoever may be introduced in any proceedings, if any
(judicial or otherwise), other than by written agreement, executed by all of the
parties hereto or their successors in interest.
Section 28.9. The headings of the various articles of this Lease are
intended solely for means of reference, and are not intended for any purposes
whatsoever to modify, explain or place any construction on any of the provisions
of this Lease.
Section 28.10. Tenant shall provide Landlord copies of all
engineering, architectural and inspections reports it obtains for the Premises
and shall provide Landlord with a corporate resolution authorizing Tenant to
enter into this transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Lease on
the dates set forth below and it shall be effective as of the later of such
dates.
LANDLORD:
FIRST STATE REALTY OF AMERICA, INC.
By: /s/ Peter S. Gummo
-------------------------------
Its President
TENANT:
CISCO SYSTEMS, INC.
By: /s/ Nancy Bareilles
-------------------------------
Its Vice President of Worldwide Real
Estate and Workplace Resources
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STATE OF CONNECTICUT )
) ss: STAMFORD
COUNTY OF FAIRFIELD )
On this the 7th of February 1997, before me, the undersigned
Officer, personally appeared, Peter S. Gummo, who acknowledged himself to be the
President of FIRST STATE REALTY OF AMERICA, INC., a corporation, and that he, as
such President being authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself as President.
IN WITNESS WHEREOF, I hereunto set my hand.
/s/ Nancy Roberta Locke Unger
--------------------------------
Notary Public
STATE OF CALIFORNIA )
) ss:
COUNTY OF SANTA CLARA )
On this the 27 of January 1997, before me, the undersigned Officer,
personally appeared, NANCY BAREILLES, who acknowledged herself/himself to be the
Vice President of Worldwide Real Estate and Workplace Resources of CISCO
SYSTEMS, INC., a corporation, and that she/he, as such President being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself/herself as Vice
President.
IN WITNESS WHEREOF, I hereunto set my hand.
/s/ Nicholas C. Suarez, Jr.
-------------------------------
Notary Public
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EXHIBIT A
Situated in the State of California, County of Santa Clara, City of Santa Clara
and is described as follows:
All of Parcel 19, as shown upon that certain Map entitled, "Parcel Map being a
Resubdivision of Parcels 1,3,4,5, and 9 and areas A, B and D, as shown on Parcel
Map 3399, recorded in Book 368 of Maps, at pages 36 and 37, 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, 1976 in Book 386 of
Maps, at pages 4 and 5.
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EXHIBIT B
1. A Bond No. 52A, Assessment No. 9, for Marriott Business Park
Unit 1.
2. A Bond No. 50R, Assessment No. 445, for Bayshore North
Improvement.
3. Covenants, conditions and restrictions in the declaration,
Executed by: Marriott Corporation, a Delaware corporation
Recorded: March 15, 1976 in Book B915, at page 228, of
official records said covenants, conditions
and restrictions were modified by instrument:
Recorded: November 16, 1977 in Book D281, at page 411,
official records
4. An easement for the purposes shown and incidental purposes as
contained in the instrument,
In favor of: The City of Santa Clara, California, a municipal
corporation
Purpose: Underground electrical easements
Affects: Said land
Recorded: December 1, 1976 in Book C444, at page 600,
official records
5. Agreement For: The installation and maintenance of landscape
improvements
Dated: December 14, 1976
Executed By: The City of Santa Clara, a Municipal
Corporation
Recorded: December 17, 1976 in Book C484, at page 109,
official records
6. Easement in
favor of: City of Santa Clara
Purpose: Installation and repair of underground
electrical systems together with right of way
Affects; The northerly 10 feed of the
southerly 38 feet of the
westerly 243 feet of the
easterly 253 feet of parcel 19
of that parcel map filed for
record December 29, 1976 in book
386 of maps at pages 4 and 5,
Santa Clara records
Recorded: April 11, 1979, in book E409, at page 558,
official records
Any matters arising subsequent to April 13, 1982 provided the same
do not materially interfere with Tenant's intended use of the Premises.
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EXHIBIT C
TENANT IMPROVEMENTS
Tenant shall expend the Minimum Amount for the construction of
standard Office/R&D improvements to the Premises which shall include conversion
of the Building into at least seventy-five percent (75.0%) drop ceiling with a
combination of private and open office space, conference rooms and training
areas, with a separate lobby for the Building.
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EXHIBIT D
DEVCON LETTER DATED NOVEMBER 23, 1996
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EXHIBIT 10.47
STANDARD FORM LEASE
PARTIES: This Lease, executed in duplicate at Cupertino, California, on December
31st, 1996, by and between Berg & Berg Enterprises, Inc., a California
Corporation, and Cisco Systems, Inc., a California Corporation, hereinafter
called respectively Lessor and Lessee, without regard to number or gender.
USE: Witnesseth: That Lessor hereby leases to Lessee, and Lessee hires from
Lessor, for the purpose of conducting therein office, research and development,
light manufacturing, and warehouse activities, and any other legal activity; and
for no other purpose without obtaining the prior written consent of Lessor.
PREMISES: The real property with appurtenances as shown on Exhibit A (the
"Premises") situated in the City of Santa Clara, County of Santa Clara, State of
California, and more particularly described as follows:
65,780 square feet of building, including all improvements thereto, as
shown on Exhibit A.1 including the right to use all parking available
at the Premises. The address for the Premises is 4750 Patrick Henry
Drive, Santa Clara, California. Lessee's pro-rata share of the building
is 100%.
TERM: The term shall be for thirty-six (36) months unless extended pursuant to
Section 35 of this Lease (the "Lease Term"), commencing on the February 1, 1997
(the "Commencement Date") and ending on the date that is thirty-six (36) months
thereafter.
RIGHT TO TERMINATE: If Lessor is unable to deliver possession of the Premises to
Lessee by April 1, 1997, Lessee shall have the right to terminate this Lease by
providing written notice to Lessor no later than April 15, 1997.
RENT: Base rent shall be payable in monthly installments as follows:
Months 1 through 36 $75,647
Base rent as scheduled above shall be payable in advance on or before the first
day of each calendar month during the Lease Term. The term "Rent," as used
herein, shall be deemed to be and to mean the base monthly rent and all other
sums required to be paid by Lessee pursuant to the terms of this Lease. Rent
shall be paid in lawful money of the United States of America, without offset or
deduction, and shall be paid to Lessor at such place or places as may be
designated from time to time by Lessor. Rent for any period less than a calendar
month shall be a pro rata portion of the monthly installment. Upon execution of
this Lease, Lessee shall deposit with Lessor the first month's base rent.
SECURITY DEPOSIT: Lessee shall deposit with Lessor the sum of Seventy-Five
Thousand Six Hundred Forty-Seven Dollars ($75,647) (the "Security Deposit").
The Security Deposit shall be held by Lessor as security for the faithful
performance by Lessee of all of the terms, covenants, and conditions of this
Lease applicable to Lessee. If Lessee commits a default as provided for herein,
including but not limited to a default with respect to the provisions contained
herein relating to the condition of the Premises, Lessor may (but shall not be
required to) use, apply or retain all or any part of the Security Deposit for
the payment of any amount which Lessor may spend by reason of default by Lessee.
If any portion of the Security Deposit is so used or applied, Lessee shall,
within ten days after written demand therefor, deposit cash with Lessor in an
amount sufficient to restore the Security Deposit to its original amount.
Lessee's failure to do so shall be a default by Lessee. Any attempt by Lessee to
transfer or encumber its interest in the Security Deposit shall be null and
void. Upon execution of this Lease, Lessee shall deposit with Lessor the
Security Deposit. Notwithstanding the above, Lessor agrees to waive the
requirement for Lessee to make a security deposit provided Lessee's
shareholder's equity exceeds $50 million. If at any time during this Lease,
Lessee's shareholder's equity is less than $50 million, Lessee shall deposit
with Lessor the Security Deposit referenced above within ten days after the
issuance of Lessee's financial statements indicating the reduction in
shareholder's equity below $50 million. If Lessee fails to make the Security
Deposit as required, Lessee shall be deemed to be in default per Section 14.1
(a) of this Lease.
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LATE CHARGES: Lessee hereby acknowledges that a late payment made by Lessee to
Lessor of Rent and other sums due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges, which may be imposed on Lessor
according to the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of Rent or any other sum due from Lessee is not
received by Lessor or Lessor's designee within ten (10) days after such amount
is due, Lessee shall pay to Lessor a late charge equal to five (5%) percent of
such overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of late
payments made by Lessee. Acceptance of such late charges by Lessor shall in no
event constitute a waiver of Lessee's default with respect to such overdue
amount, nor shall it prevent Lessor from exercising any of the other rights and
remedies granted hereunder. No more than once per calendar year, such late
charge shall not be due and payable from Lessee if an installment of Rent or any
other sum due from Lessee is not received by Lessor or Lessor's designee within
said ten (10) day period after such amount is due if Lessee delivers payment of
such overdue amount within five (5) business days after Lessor's delivery of
notice to Lessee that such overdue amount has not been received by Lessor.
QUIET ENJOYMENT: Lessor covenants and agrees with Lessee that upon Lessee paying
Rent and performing its covenants and conditions under this Lease, Lessee shall
and may peaceably and quietly have, hold and enjoy the Premises for the Lease
Term, subject, however, to the rights reserved by Lessor hereunder. Lessor
warrants that it has the full right and authority to execute and perform the
obligations of Lessor under this Lease and to grant the leasehold estate demised
herein.
IT IS FURTHER MUTUALLY AGREED BETWEEN THE PARTIES AS FOLLOWS:
1. POSSESSION: Possession shall be deemed tendered and rent shall commence on
the Commencement Date.
2. LESSEE'S IMPROVEMENTS: Subject to Lessor's obligation set forth in the first
sentence of Section 2.1, Lessor is delivering the Premises to Lessee in an "AS
IS" physical and operating condition. Lessee agrees, at its sole cost and
expense, to improve the entire building to the standard of a typical Cisco
Systems building including carpeting, drop ceiling, VAV HVAC system, and open
office electrical. Lessee shall not be responsible for the cost of restoration
or improvements to the exterior of the building, foundation, exterior walls,
roof membrane, or roof structure unless such costs are a result of Lessee's
application for modifications to the Premises or actual modifications to the
Premises made by Lessee or Lessee's Agents or the acts or omissions of Lessee or
Lessee's Agents. As part of Lessee's initial improvements, Lessee shall be
permitted to reconfigure parking.
2.1 ACCEPTANCE OF PREMISES AND COVENANTS TO SURRENDER: Lessor
represents that the Premises are in good order and repair considering age, and
complies with all requirements for occupancy as of the last remodel by the
former Lessee. Lessor has agreed to this Lease based on a total interior remodel
by Lessee. Lessee agrees on the last day of the Lease Term, or on the sooner
termination of this Lease, to surrender the Premises to Lessor in Good Condition
and Repair. Good Condition and Repair ("Good Condition and Repair") shall not
mean original condition, but shall mean that the Premises are in a commercially
acceptable condition for surrender by a reasonable lessee. The interior walls of
all office and warehouse areas, the floors of all office and warehouse areas,
all suspended ceilings and any carpeting are to be cleaned and in Good Condition
and Repair. Lessee also agrees to surrender unto Lessor all alterations,
additions, and improvements which may have been made in, to, or on the Premises
by Lessee. Lessee, on or before the end of the Lease Term or sooner termination
of this Lease, shall remove all its personal property and trade fixtures from
the Premises, and all such property not so removed shall be deemed to be
abandoned by Lessee. Lessee shall reimburse Lessor for all disposition costs
incurred by Lessor relative to Lessee's abandoned property. If the Premises are
not surrendered at the end of the Lease Term or earlier termination of this
Lease, Lessee shall indemnify Lessor against loss or liability resulting from
any delay caused by Lessee in surrendering the Premises including, without
limitation, any claims made by any succeeding Lessee founded on such delay.
Notwithstanding the foregoing, if (i) Lessee notifies Lessor at least six (6)
months before the end of the Lease Term, (ii) Lessee provides Lessor with a date
certain that Lessee will be vacating the Premises, and (iii) the hold over
requested is for a period of six (6) months or
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less, Lessee shall not be liable for any consequential damages which may result
from the holdover provided the above conditions are met by Lessee, including any
claims pursuant to the foregoing indemnity.
3. USES PROHIBITED: Lessee shall not commit, or suffer to be committed, any
waste upon the Premises, or any nuisance, or other act or thing which may
disturb the quiet enjoyment of any other tenant in or around the buildings in
which the subject Premises are located or allow any sale by auction upon the
Premises, or allow the Premises to be used for any improper, immoral, unlawful
or objectionable purpose, or place any loads upon the floor, walls, or ceiling
which may endanger the structure, or use any machinery or apparatus which will
in any manner vibrate or shake the Premises or the building of which it is a
part, or place any harmful liquids in the drainage system of the building.
Lessee shall not store any materials, including, without limitation, waste
materials or refuse, outside the building proper, except in fully screened or
fenced areas designed for such purpose, which have been approved in writing by
Lessor for such use, subject to any required city approvals. No waste materials
or refuse shall be dumped upon or permitted to remain upon any part of the
Premises outside of the building proper. No materials, supplies, equipment,
finished products or semi-finished products, raw materials or articles of any
nature shall be stored upon or permitted to remain on any portion of the
Premises outside of the building structure, unless approved by the local, state
federal or other applicable governing authority. Lessor consents to Lessee's use
of materials which are incidental to the normal, day-to-day operations of any
office user, such as copier fluids, cleaning materials, etc., but this does not
relieve Lessee of any of its obligations not to contaminate the Premises or
related real property or violated any Hazardous Materials Laws.
4. ALTERATIONS AND ADDITIONS: Lessee shall not make, or suffer to be made, any
alteration or addition to said Premises, or any part thereof in excess of
$15,000 after completion of Lessee's initial improvements, without the express,
advance written consent of Lessor; any addition or alteration to said Premises,
except movable furniture and trade fixtures, shall become at once a part of the
realty and belong to Lessor at the end of the Lease Term or earlier termination
of this Lease. Alterations and additions which are not deemed as trade fixtures
shall include HVAC systems, lighting systems, electrical systems, partitioning,
carpeting, or any other installation which has become an integral part of the
Premises. Lessee agrees that it will not proceed to make such alterations or
additions until all required government permits have been obtained and after
having obtained consent from Lessor to do so, until five (5) days from the
receipt of such consent, so that Lessor may post appropriate notices to avoid
any liability to contractors or material suppliers for payment for Lessee's
improvements. Lessee shall at all times permit such notices to be posted and to
remain posted until the completion of work. At the end of the Lease Term or
earlier termination of this Lease, Lessee shall remove and shall be required to
remove its special tenant improvements and all related equipment installed by
Lessee at or during the Lease Term and Lessee shall return the Premises to the
condition that existed before the installation of the special tenant
improvements. Notwithstanding the above, Lessor agrees to allow any reasonable
standard Cisco System building alterations and improvements as provided for in
Section 2 to remain at the end of the Lease Term or earlier termination of this
Lease.
5. MAINTENANCE OF PREMISES: Lessee shall at its sole cost and expense keep and
maintain the interior of the Premises, including, but not limited to, all
lighting systems, temperature control systems, plumbing systems, and all window
washing, exterior and interior, in Good Condition and Repair, including any
required replacements. Lessee shall maintain all wall surfaces and floor
coverings in Good Condition and Repair, free of holes, gouges, or defacements.
Lessee shall keep and maintain in Good Condition and Repair including
replacements, at Lessee's expense, the following:
1. The exterior of the building, any appurtenances and every part
thereof, including but not limited to, glazing, sidewalks, parking
areas, electrical systems, HVAC systems, elevator systems, roof, and
painting of exterior walls.
2. The HVAC by a service contract with a licensed air conditioning and
heating contractor which contract shall provide for a minimum of
bi-monthly maintenance of all air conditioning and heating equipment at
the Premises including HVAC repairs or
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replacements which are either excluded from such service contract or
any existing equipment warranties.
3. The landscaping by a landscape contract to water, maintain, trim and
replace, when necessary, any shrubbery and landscaping on the Premises.
4. The roof membrane shall be maintained at the expense of Lessor by a
service contract with a licensed reputable roofing contractor which
contract shall provide for a minimum of semi-annual maintenance,
cleaning storm gutters, drains and removing debris and trimming
overhanging trees, repair of the roof, and application of a finish coat
every five years at the Premises. Notwithstanding the terms above
related to the roof, Lessee's total obligation shall be $7,000 per year
to cover any maintenance, repairs, and roof amortization costs.
5. Extermination services.
6. Fire monitoring services.
Lessee hereby waives any and all rights to make repairs at the expense of Lessor
as provided in Section 1942 of the Civil Code of the State of California, and
all rights provided for by Section 1941 of said Civil Code.
Lessor shall be responsible for any structural defects in the Premises including
the roof structure (not membrane), exterior walls and foundation during the
Lease Term.
6. HAZARD INSURANCE: Lessee shall not use, or permit said Premises, or any part
thereof, to be used, for any purpose other than that for which said Premises are
hereby leased; and no use shall be made or permitted to be made of the Premises,
nor acts done, which may cause a cancellation of any insurance policy covering
said building, or any part thereof, nor shall Lessee sell or permit to be kept,
used or sold, in or about said Premises, any article which may be prohibited by
a standard form fire and extended form insurance policy. Lessee shall, at its
sole cost and expense, comply with any and all requirements, pertaining to said
Premises, of any insurance organization or company, necessary for the
maintenance of reasonable fire and general liability insurance, covering said
building and appurtenances. Lessee agrees to purchase and keep in force fire and
extended coverage insurance covering loss or damage to the Premises in an amount
equal to the full replacement cost of said Premises as determined by Lessor,
with proceeds payable to Lessor. For purposes of this Lease, the full
replacement cost of the building shall not be less than $4,900,000. Lessee
acknowledges that the insurance referenced above does not include coverage for
Lessee's personal property. In the event of a loss per the insurance provisions
of this paragraph, Lessee shall be responsible for all deductibles. Lessee
agrees to pay the full cost of said insurance. Lessee shall provide all of the
policies of insurance required in this Lease provided the policies meet the
minimum standards of Lessor ("Lessor's Insurance Standards") as follows and are
paid in full by Lessee: (a) certificates evidencing the insurance required under
this Lease shall be deposited with Lessor thirty (30) days prior to the
Commencement Date, and upon each renewal of such policies, shall be effective
not less than thirty (30) days prior to the expiration date of the term of such
coverage, (b) shall be in a form reasonably satisfactory to Lessor and shall
provide all of the coverage required in this Lease, (c) shall be carried with
companies with a Best Rating of AVIII minimum, (d) shall specifically provide
that such policies shall not be subject to cancellation, reduction of coverage
or other change except after at least thirty (30) days' prior written notice to
Lessor, (e) shall name Lessor, a lender with a security interest in the Premises
identified to Lessee by Lessor, as additional insureds by endorsement to policy
to the extent of the full replacement cost of the Premises, (f) shall provide
the insurance proceeds are payable to Lessor, and (g) shall provide that Lessee
assumes the responsibilities set forth in Section 19 with regard to maintaining
insurance.
Lessor and Lessee hereby waive any rights each may have against the other
related to any loss or damage caused to Lessor or Lessee as the case may be, or
to the Premises or its contents, and which may arise from any risk generally
covered by fire and extended coverage insurance. Lessee shall provide that the
insurance policies insuring the property or the personal property include a
waiver of any right of subrogation which said insurance company may have against
Lessor or Lessee, as the case may be. Lessee shall maintain in full
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force and effect, a policy of rental loss insurance, in an amount equal to the
amount of Rent payable by Lessee commencing on the date of loss during the next
ensuing one (1) year, as reasonably determined by Lessor with proceeds payable
to Lessor ("Loss of Rents Insurance"). Lessee shall pay for the full cost of the
Loss of Rents Insurance. The proceeds payable to Lessor from the Loss of Rents
Insurance coverage shall not be less than $1,020,000 per year payable monthly.
7. ABANDONMENT: Lessee shall not vacate or abandon the Premises at any time
during the Lease Term; and if Lessee shall abandon, vacate or surrender said
Premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to Lessee and left on the Premises shall be deemed to be
abandoned, at the option of Lessor. Notwithstanding the above, the Premises
shall not be considered vacated or abandoned if Lessee maintains the Premises in
Good Condition and Repair, provides security and is not in default.
8. FREE FROM LIENS: Lessee shall keep the subject Premises and the property in
which the subject Premises are situated, free from any and all liens including
but not limited to liens arising out of any work performed, materials furnished,
or obligations incurred by Lessee. However, the Lessor shall allow Lessee to
contest a lien claim, so long as the claim is discharged prior to any
foreclosure proceeding being initiated against the property and provided Lessee
provides Lessor a bond if the lien exceeds $5,000.
9. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Lessee shall, at its sole cost and
expense, comply with all of the requirements of all local, municipal, state and
federal authorities now in force, or which may hereafter be in force, pertaining
to the Premises, and shall faithfully observe in the use of the Premises all
local and municipal ordinances and state and federal statutes now in force or
which may hereafter be in force. Except as stated above, Lessee shall not be
required to pay for the construction of any single improvement required under
this Section in excess of $25,000, unless such improvement (i) is required to
comply with Lessee's particular use of the Premises, (ii) is required as a
result of Lessee or Lessee's Agents application for modifications to the
Premises or (iii) is required as a result of actual modifications to the
Premises made by Lessee or Lessee's Agents; if such improvement is not required
due to Lessee's particular use of the Premises or is not required as a result of
Lessee or Lessee's Agents application for modifications to the Premises or
actual modifications to the Premises by Lessee or Lessee's Agents and such
improvement cost exceeds $25,000, such improvement cost shall be amortized over
the estimated useful life of the improvement, not to exceed 15 years at Wells
Fargo prime rate plus one percent (1%). Lessee shall pay to Lessor the amortized
costs of such improvement on a monthly basis over the Lease Term.
10. LESSEE'S INSURANCE: Lessee, as a material part of the consideration to be
rendered to Lessor, hereby waives all claims against Lessor and Lessor's Agents
for damages to goods, wares and merchandise, and all other personal property in,
upon or about said Premises, and for injuries to persons in, upon or about said
Premises, from any cause arising at any time, and Lessee will hold Lessor and
Lessor's Agents exempt and harmless from any damage or injury to any person, or
to the goods, wares and merchandise and all other personal property of any
person, arising from the use or occupancy of the Premises by Lessee, or from the
failure of Lessee to keep the Premises in good condition and repair, as herein
provided. Lessee shall secure and keep in force a standard policy of commercial
general liability insurance and property damage policy covering the Premises,
including parking areas, insuring the Lessee. A certificate of said policy
naming Lessor as an additional insured shall be delivered to Lessor and will
have a combined single limit for both bodily injury, death and property damage
in an amount not less than two million dollars ($2,000,000) and shall self
insure for a minimum of three million dollars ($3,000,000). The limits of said
insurance shall not, however, limit the liability of Lessee hereunder. The
certificate of Lessee's insurance shall require the insurer to notify Lessor 30
days in advance in writing before any cancellation thereof. Lessee shall obtain,
at Lessee's sole cost and expense, a policy of fire and extended coverage
insurance including coverage for direct physical loss special form, and a
sprinkler leakage endorsement insuring the personal property of Lessee. The
proceeds from any personal property damage policy shall be payable to Lessee.
Lessee shall, at its sole cost and expense, comply with all of the insurance
requirements of all local, municipal, state and federal authorities now in
force, or which may hereafter be in force, pertaining to Lessee's use and
occupancy of the said Premises.
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10.1 LESSEE'S SELF-INSURANCE: Notwithstanding the insurance provisions of this
Lease to the contrary, Lessee shall have the right to self-insure with respect
to any of the insurance required under this Lease and Lessor agrees to waive the
above liability insurance requirements provided (i) Lessee is a publicly traded
U.S. Corporation whose stock is traded on a nationally recognized exchange, (ii)
Lessee has not assigned this Lease, (iii) Lessee maintains a minimum net worth
of at least one hundred million dollars ($100,000,000) according to its most
recent audited financial statements, (iv) Lessee governs and manages its
self-insurance program in a manner consistent with programs managed by prudent
businesses whose stock is publicly traded on nationally recognized exchanges;
and (v) applicable law(s) do not prohibit or render unenforceable
indemnification of Lessor for Lessor's own negligence. Upon request, Lessee
shall supply to Lessor from time to time with evidence reasonably satisfactory
to Lessor of Lessee's net worth and the satisfaction of the conditions set forth
above. If Lessee elects to self-insure, Lessee shall be responsible for losses
or liabilities which would have been assumed by insurance companies which would
have issued the insurance required by Lessee under this Lease in conformance
with Lessor's Insurance Standards plus any deductibles and Lessee shall accept
Lessor's tender of defense for any claims within the scope of Lessee's indemnity
obligations as if Lessor and Lessor's lender, if any, were named as additional
insureds on any liability policy maintained by Lessee meeting Lessor's Insurance
Standards. Lessee will notify Lessor in advance of any period for which Lessee
intends to self-insure and shall provide Lessor with satisfactory evidence that
it complies with the requirements set forth herein in order to give Lessor an
opportunity to confirm the satisfaction of the conditions set forth herein. For
so long as Lessee self-insures, Lessee, for applicable periods, shall and does
hereby indemnify and hold harmless Lessor, its partners, agents, employees and
representatives for and against all costs, damages, or expenses (including
reasonable attorneys' fees) incurred or paid by Lessor as a result of any claim
customarily covered by a broad-form policy of commercial general liability
insurance and property damage provided by such policy(ies) meet Lessor's
Insurance Standards as defined in Section 6, including a contractual liability
endorsement.
11. ADVERTISEMENTS AND SIGNS: Lessee shall not place or permit to be placed, in,
upon or about the Premises any unusual or extraordinary signs, or any signs not
approved by the city, local, state, federal or other applicable governing
authority. Lessee shall not place, or permit to be placed upon the Premises, any
signs, advertisements or notices without the written consent of the Lessor, and
such consent shall not be unreasonably withheld. A sign so placed on the
Premises shall be so placed upon the understanding and agreement that Lessee
will remove same at the end of the Lease Term or earlier termination of this
Lease and repair any damage or injury to the Premises caused thereby, and if not
so removed by Lessee, then Lessor may have the same removed at Lessee's expense.
12. UTILITIES: Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities supplied to the Premises. Any charges for sewer
usage, PG&E, and telephone service to the Premises or related fees shall be the
obligation of Lessee and paid for by Lessee. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion of all
charges which are jointly metered, the determination to be made by Lessor acting
reasonably and on any equitable basis. Lessee and Lessor agree that Lessor shall
not be liable to Lessee for any disruption in any of the utility services to the
Premises.
13. ATTORNEY'S FEES: In case suit should be brought for the possession of the
Premises, for the recovery of any sum due hereunder, because of the breach of
any other covenant herein, or to enforce, protect, or establish any term,
conditions, or covenant of this Lease or the right of either party hereunder,
the losing party shall pay to the Prevailing Party reasonable attorney's fee
which shall be deemed to have accrued on the commencement of such action and
shall be enforceable whether or not such action is prosecuted to judgment. The
term "Prevailing Party" shall mean the party that received substantial relief
requested, whether by settlement, dismissal, summary judgment, judgment, or
otherwise.
14.1 DEFAULT: The occurrence of any of the following shall constitute a default
and breach of this Lease by Lessee: a) Any failure by Lessee to pay Rent or to
make any other payment required to be made by Lessee hereunder when due if not
cured within ten (10) days after written notice thereof by Lessor to Lessee; b)
The abandonment or vacation of the Premises by Lessee except as provided in
Section 7; c) A failure by Lessee to observe and perform any other provision of
this Lease to be observed or performed by Lessee, where such failure continues
for thirty days after written notice thereof by Lessor to Lessee; provided,
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however, that if the nature of such default is such that the same cannot be
reasonably cured within such thirty (30) day period, Lessee shall not be deemed
to be in default if Lessee shall, within such period, commence such cure and
thereafter diligently prosecute the same to completion; d) The making by Lessee
of any general assignment for the benefit of creditors; the filing by or against
Lessee of a petition to have Lessee adjudged a bankrupt or of a petition for
reorganization or arrangement under any law relating to bankruptcy; e) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee's assets or Lessee's interest in this Lease, or the attachment, execution
or other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease.
14.2 SURRENDER OF LEASE: In the event of any such default by Lessee, then in
addition to any other remedies available to Lessor at law or in equity, Lessor
shall have the immediate option to terminate this Lease before the end of the
Lease Term and all rights of Lessee hereunder, by giving written notice of such
intention to terminate. In the event that Lessor terminates this Lease due to a
default of Lessee, then Lessor may recover from Lessee: a) the worth at the time
of award of any unpaid Rent which had been earned at the time of such
termination; plus b) the worth at the time of award of unpaid Rent which would
have been earned after termination until the time of award exceeding the amount
of such rental loss that the Lessee proves could have been reasonably avoided;
plus c) the worth at the time of award of the amount by which the unpaid Rent
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss that the Lessee proves could have been reasonably avoided; plus
d) any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee's failure to perform his obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom; and e) at Lessor's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable
California law. As used in (a) and (b) above, the "worth at the time of award"
is computed by allowing interest at the rate of Wells Fargo's prime rate plus
two percent (2%) per annum. As used in (c) above, the "worth at the time of
award" is 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%).
14.3 RIGHT OF ENTRY AND REMOVAL: In the event of any such default by Lessee,
Lessor shall also have the right, with or without terminating this Lease, to
re-enter the Premises and remove all persons and property from the Premises;
such property may be removed and stored in a public warehouse or elsewhere at
the cost of and for the account of Lessee.
14.4 ABANDONMENT: In the event of the vacation or abandonment, except as
provided in Section 7, of the Premises by Lessee or in the event that Lessor
shall elect to re-enter as provided in paragraph 14.3 above or shall take
possession of the Premises pursuant to legal proceeding or pursuant to any
notice provided by law, and Lessor does not elect to terminate this Lease as
provided in paragraph 14.2 above, then Lessor may from time to time, without
terminating this Lease, either recover all Rent as it becomes due or relet the
Premises or any part thereof for such term or terms and at such rental rates and
upon such other terms and conditions as Lessor, in its sole discretion, may deem
advisable with the right to make alterations and repairs to the Premises. In the
event that Lessor elects to relet the Premises, then Rent received by Lessor
from such reletting shall be applied; first, to the payment of any indebtedness
other than Rent due hereunder from Lessee to Lessor; second, to the payment of
any cost of such reletting; third, to the payment of the cost of any alterations
and repairs to the Premises; fourth, to the payment of Rent due and unpaid
hereunder; and the residue, if any, shall be held by Lessor and applied to the
payment of future Rent as the same may become due and payable hereunder. Should
that portion of such Rent received from such reletting during any month, which
is applied by the payment of Rent hereunder according to the application
procedure outlined above, be less than the Rent payable during that month by
Lessee hereunder, then Lessee shall pay such deficiency to Lessor immediately
upon demand therefor by Lessor. Such deficiency shall be calculated and paid
monthly. Lessee shall also pay to Lessor, as soon as ascertained, any costs and
expenses incurred by Lessor in such reletting or in making such alterations and
repairs not covered by the rentals received from such reletting.
14.5 NO IMPLIED TERMINATION: No re-entry or taking possession of the Premises by
Lessor pursuant to 14.3 or 14.4 of this Article 14 shall be construed as an
election to terminate this Lease unless a written notice of such intention is
given to Lessee or unless the termination thereof is decreed by a court of
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competent jurisdiction. Notwithstanding any reletting without termination by
Lessor because of any default by Lessee, Lessor may at any time after such
reletting elect to terminate this Lease for any such default.
15. SURRENDER OF LEASE: The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Lessor, terminate all or any existing subleases or sub tenancies,
or may, at the option of Lessor, operate as an assignment to him of any or all
such subleases or subtenancies.
16. TAXES: Lessee shall pay and discharge punctually and when the same shall
become due and payable without penalty, all real estate taxes, personal property
taxes, taxes based on vehicles utilizing parking areas in the Premises, taxes
computed or based on rental income (other than federal, state and municipal net
income taxes), environmental surcharges, privilege taxes, excise taxes, business
and occupation taxes, school fees or surcharges, gross receipts taxes, sales
and/or use taxes, employee taxes, occupational license taxes, water and sewer
taxes, assessments (including, but not limited to, assessments for public
improvements or benefit), assessments for local improvement and maintenance
districts, and all other governmental impositions and charges of every kind and
nature whatsoever, regardless of whether now customary or within the
contemplation of the parties hereto and regardless of whether resulting from
increased rate and/or valuation, or whether extraordinary or ordinary, general
or special, unforeseen or foreseen, or similar or dissimilar to any of the
foregoing (all of the foregoing being hereinafter collectively called "Tax" or
"Taxes") which, at any time during the Lease Term, shall be applicable or
against the Premises, or shall become due and payable and a lien or charge upon
the Premises under or by virtue of any present or future laws, statutes,
ordinances, regulations, or other requirements of any governmental authority
whatsoever. The term "Environmental Surcharge" shall include any and all
expenses, taxes, charges or penalties imposed by the Federal Department of
Energy, Federal Environmental Protection Agency, the Federal Clean Air Act, or
any regulations promulgated thereunder, or any other local, state or federal
governmental agency or entity now or hereafter vested with the power to impose
taxes, assessments or other types of surcharges as a means of controlling or
abating environmental pollution or the use of energy (i) generally imposed on
similar properties in a wide geographic area without regard to whether the
properties subject to the tax are contaminated by Hazardous Materials and which
is part of a comprehensive plan imposed by a governmental unit or (ii) imposed
with respect to the Premises as the result of the presence of Hazardous
Materials for which Lessee is required to indemnify Lessor under Section 33
below or to undertake remediation pursuant to Section 33.5 below. The term "Tax"
shall include, without limitation, all taxes, assessments, levies, fees,
impositions or charges levied, imposed, assessed, measured, or based in any
manner whatsoever (i) in whole or in part on the Rent payable by Lessee under
this Lease, (ii) upon or with respect to the use, possession, occupancy,
leasing, operation or management of the Premises, (iii) upon this transaction or
any document to which Lessee is a party creating or transferring an interest or
an estate in the Premises, (iv) upon Lessee's business operations conducted at
the Premises, (v) upon, measured by or reasonably attributable to the cost or
value of Lessee's equipment, furniture, fixtures and other personal property
located on the Premises or the cost or value of any leasehold improvements made
in or to the Premises by or for Lessee, regardless of whether title to such
improvements shall be in Lessor or Lessee, or (vi) in lieu of or equivalent to
any Tax set forth in this Section 16. In the event any such Taxes are payable by
Lessor and it shall not be lawful for Lessee to reimburse Lessor for such Taxes,
then the Rent payable thereunder shall be increased to net Lessor the same net
rent after imposition of any such Tax upon Lessor as would have been payable to
Lessor prior to the imposition of any such Tax. It is the intention of the
parties that Lessor shall be free from all such Taxes and all other governmental
impositions and charges of every kind and nature whatsoever. However, nothing
contained in this Section 16 shall require Lessee to pay any Federal or State
income, franchise, estate, inheritance, succession, transfer or excess profits
tax imposed upon Lessor. If any general or special assessment is levied and
assessed against the Premises, Lessor agrees to use its best reasonable efforts
to cause the assessment to become a lien on the Premises securing repayment of a
bond sold to finance the improvements to which the assessment relates which is
payable in installments of principal and interest over the maximum term allowed
by law. It is understood and agreed that Lessee's obligation under this
paragraph will be prorated to reflect the Commencement Date and the end of the
Lease Term. It is further understood that if Taxes cover the Premises and Lessee
does not occupy the entire Premises, the Taxes will be allocated to the portion
of the Premises occupied by Lessee based on a pro-rata square footage or other
equitable basis. Notwithstanding the above, Lessee shall have no obligation for
taxes until
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due or any personal property taxes attributable to sculptures or other objects
of art installed by Lessor on the Premises or reserves for future taxes.
Subject to any limitations or restrictions imposed by any deeds of trust or
mortgages now or hereafter covering or affecting the Premises, Lessee shall have
the right to contest or review the amount or validity of any Tax by appropriate
legal proceedings but which is not to be deemed or construed in any way as
relieving, modifying or extending Lessee's covenant to pay such Tax at the time
and in the manner as provided in this Section 16. However, as a condition of
Lessee's right to contest, if such contested Tax is not paid before such contest
and if the legal proceedings shall not operate to prevent or stay the collection
of the Tax so contested, Lessee shall, before instituting any such proceeding,
protect the Premises and the interest of Lessor and of the beneficiary of a deed
of trust or the mortgagee of a mortgage affecting the Premises against any lien
upon the Premises by a surety bond, issued by an insurance company acceptable to
Lessor and in an amount equal to one and one-half (1 1/2) times the amount
contested or, at Lessor's option, the amount of the contested Tax and the
interest and penalties in connection therewith. Any contest as to the validity
or amount of any Tax, whether before or after payment, shall be made by Lessee
in Lessee's own name, or if required by law, in the name of Lessor or both
Lessor and Lessee. Lessee shall defend, indemnify and hold harmless Lessor from
and against any and all costs or expenses, including attorneys' fees, in
connection with any such proceedings brought by Lessee, whether in its own name
or not. Lessee shall be entitled to retain any refund of any such contested Tax
and penalties or interest thereon which have been paid by Lessee. Nothing
contained herein shall be construed as affecting or limiting Lessor's right to
contest any Tax at Lessor's expense. In the event Lessor receives the refund of
any such contested Taxes, Lessor shall refund such amount to Lessee within
thirty (30) days after such refund in received by Lessor during the Lease Term.
17. NOTICES: Unless otherwise provided for in this Lease, any and all written
notices or other communication (the "Communication") to be given in connection
with this Lease shall be given in writing and shall be given by certified mail,
"return receipt requested", fully prepaid, in a sealed envelope addressed to
the intended recipient as follows:
(a) to the Lessor at: 10050 Bandley Drive
Cupertino, California 95014
Attention: Carl E. Berg
Fax No: (408) 725-1626
(b) to the Lessee at: Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134
Attention: Vice President, Worldwide Real
Estate and Workplace Resources
and for billings and notices of nonpayment to:
U.S. Bills/Rents
P.O. Box 641570
MS Lease
San Jose, California 95164
or such other addresses or individual as may be designated by a Communication
given by a party to the other parties as aforesaid. Any Communication given by
certified mail shall be conclusively deemed to have been made on the day on
which delivery is made or refused.
18. ENTRY BY LESSOR: Lessee shall permit Lessor and its agents to enter into and
upon said Premises at all reasonable times subject to 24 hours advance written
notice to Lessee, except in emergency situations in which case no notice
required, using the minimum amount of interference and inconvenience to Lessee
and Lessee's business, subject to any security regulations of Lessee, for the
purpose of inspecting the same or for
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the purpose of maintaining the building in which said Premises are situated, or
for the purpose of making repairs, alterations or additions to any other portion
of said building, including the erection and maintenance of such scaffolding,
canopies, fences and props as may be required, without any rebate of Rent and
without any liability to Lessee for any loss of occupation or quiet enjoyment of
the Premises; and shall permit Lessor and his agents, at any time within ninety
(90) days prior to the end of the Lease Term, to place upon said Premises any
usual or ordinary "For Sale" or "For Lease" signs and exhibit the Premises to
prospective tenants at reasonable hours. Notice for entry under this Section 18
can be made telephonically to Lessee's designated representative at the
Premises.
19. DESTRUCTION OF PREMISES: In the event of a partial or complete destruction
of the Premises during the Lease Term from any cause except earthquakes, Lessee
shall forthwith repair the same under the laws and regulations of State,
Federal, County, or Municipal authorities, except that Lessee shall be entitled
to a proportionate reduction of Rent while such repairs are being made to the
extent of payments received by Lessor under the Loss of Rents Insurance
coverage.
20. ASSIGNMENT AND SUBLETTING: Lessee shall not assign this Lease, or any
interest therein, and shall not sublet the said Premises or any part thereof, or
any right or privilege appurtenant thereto, or cause any other person or entity
(a bona fide subsidiary or affiliate of Lessee excepted) to occupy or use the
Premises, or any portion thereof, without the advance written consent of Lessor.
Whether or not Lessor's consent to a sublease or assignment is required, in the
event of any sublease or assignment, Lessee shall be and shall remain primarily
liable for the performance of all conditions, covenants, and obligations of
Lessee hereunder and, in the event of a default by an assignee or sublessee,
Lessor may proceed directly against the original Lessee hereunder and/or any
other predecessor of such assignee or sublessee without the necessity of
exhausting remedies against said assignee or sublessee.
21. CONDEMNATION: If any part of the Premises shall be taken for any public or
quasi-public use, under any statute or by right of eminent domain or private
purchase in lieu thereof, and a part thereof remains which is susceptible of
occupation hereunder, this Lease shall as to the part so taken, terminate as of
the date title vests in the condemnor or purchaser, and the Rent payable
hereunder shall be adjusted so that the Lessee shall be required to pay for the
remainder of the Lease Term only that portion of Rent as the value of the part
remaining, subject to Lessee's and Lessor's mutual agreement that as a result of
such taking, the remainder of the Premises is reasonably suitable for Lessee's
continued occupancy and use of the Premises. The rental adjustment resulting
will be computed at the same Rental rate for the remaining part not taken;
however, Lessor shall have the option to terminate this Lease as of the date
when title to the part so taken vests in the condemnor or purchaser. If all of
the Premises, or such part thereof be taken so that there does not remain a
portion susceptible for occupation hereunder, this Lease shall thereupon
terminate. If a part or all of the Premises be taken, all compensation awarded
upon such taking shall be payable to the Lessor. Lessee may file a separate
claim and be entitled to any award granted to Lessee.
22. EFFECTS OF CONVEYANCE: The term "Lessor" as used in this Lease, means only
the owner for the time being of the land and building constituting the Premises,
so that, in the event of any sale of said land or building, or in the event of a
Lease of said building, Lessor shall be and hereby is entirely freed and
relieved of all covenants and obligations of Lessor hereunder, and it shall be
deemed and construed, without further agreement between the parties and the
purchaser of any such sale, or the Lessor of the building, that the purchaser or
lessor of the building has assumed and agreed to carry out any and all covenants
and obligations of the Lessor hereunder. If any security is given by Lessee to
secure the faithful performance of all or any of the covenants of this Lease on
the part of Lessee, Lessor may transfer and deliver the security, as such, to
the purchaser at any such sale of the building, and thereupon the Lessor shall
be discharged from any further liability.
23. SUBORDINATION: This Lease, in the event Lessor notifies Lessee in writing,
shall be subordinate to any ground lease, deed of trust, or other hypothecation
for security now or hereafter placed upon the real property at which the
Premises are a part and to any and all advances made on the security thereof and
to renewals, modifications, replacements and extensions thereof. Lessee agrees
to promptly execute any documents which may be required to effectuate such
subordination provided as long as Lessee is not in
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<PAGE> 11
default according to the terms and conditions of this Lease, such party
requesting subordination recognizes Lessee's rights under this Lease and
Lessee's right to possession of the Premises pursuant to the terms of this
Lease, and such subordination document does not materially restrict or limit
Lessee's rights or materially increase Lessee's obligations under this Lease.
Notwithstanding such subordination, if Lessee is not in default and so long as
Lessee shall pay the Rent and observe and perform all of the provisions and
covenants required under this Lease, Lessee's right to quiet possession of the
Premises shall not be disturbed or effected by any subordination.
24. WAIVER: The waiver by Lessor of any breach of any term, covenant or
condition, herein contained shall not be construed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition therein contained. The subsequent acceptance of Rent
hereunder by Lessor shall not be deemed to be a waiver of Lessee's breach of any
term, covenant, or condition of the Lease.
25. HOLDING OVER: Any holding over after the end of the Lease Term requires
Lessor's written approval prior to the end of the Lease Term, which,
notwithstanding any other provisions of this Lease, Lessor may withhold and
shall be construed to be a tenancy at sufferance from month to month. Lessee
shall pay to Lessor monthly base rent equal to one and one-half (1.5) times the
monthly base rent installment due in the last month of the Lease Term and all
other additional rent and all other terms and conditions of the Lease shall
apply, so far as applicable. Holding over by Lessee without written approval of
Lessor shall subject Lessee to the liabilities and obligations provided for in
this Lease and by law, including, but not limited to those in Section 2.1 of
this Lease. Lessee shall indemnify and hold Lessor harmless against any loss or
liability resulting from any delay caused by Lessee in surrendering the
Premises, including without limitation, any claims made or penalties incurred by
any succeeding lessee or by Lessor. No holding over shall be deemed or construed
to exercise any option to extend or renew this Lease in lieu of full and timely
exercise of any such option as required hereunder.
26. SUCCESSORS AND ASSIGNS: The covenants and conditions herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all of the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.
27. ESTOPPEL CERTIFICATES: Lessee shall at any time during the Lease Term, upon
not less than ten (10) days prior written notice from Lessor, execute and
deliver to Lessor a statement in writing certifying that, this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification) and the dates to which the Rent and other charges have been
paid in advance, if any, and acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder or specifying
such defaults if they are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises. Lessee's
failure to deliver such a statement within such time shall be conclusive upon
the Lessee that (a) this Lease is in full force and effect, without modification
except as may be represented by Lessor; (b) there are no uncured defaults in
Lessor's performance.
28. TIME: Time is of the essence of the Lease.
29. CAPTIONS: The headings on titles to the paragraphs of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part thereof. This instrument contains all of the
agreements and conditions made between the parties hereto and may not be
modified orally or in any other manner than by an agreement in writing signed by
all of the parties hereto or their respective successors in interest.
30. PARTY NAMES: Landlord and Tenant may be used in various places in this Lease
as a substitute for Lessor and Lessee respectively.
31. EARTHQUAKE INSURANCE: As a condition of Lessor agreeing to waive the
requirement for earthquake insurance, Lessee agrees that it will pay, as
additional Rent, an amount not to exceed Twenty-Six Thousand
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<PAGE> 12
Three Hundred Dollars ($26,300) per year for earthquake insurance if Lessor
desires to obtain some form of earthquake insurance in the future, if and when
available, on terms acceptable to Lessor.
32. HABITUAL DEFAULT: Notwithstanding anything to the contrary contained in
Section 14 herein, Lessor and Lessee agree that if Lessee shall have defaulted
in the payment of Rent for three or more times during any twelve month period
during the Lease Term, then such conduct shall, at the option of the Lessor,
represent a separate event of default which cannot be cured by Lessee. Lessee
acknowledges that the purpose of this provision is to prevent repetitive
defaults by the Lessee under the Lease, which constitute a hardship to the
Lessor and deprive the Lessor of the timely performance by the Lessee hereunder.
33. HAZARDOUS MATERIALS
33.1 DEFINITIONS: As used in this Lease, the following terms shall have the
following meaning:
a. The term "Hazardous Materials" shall mean (i) polychlorinated
biphenyls; (ii) radioactive materials and (iii) any chemical, material
or substance now or hereafter defined as or included in the definitions
of "hazardous substance" "hazardous water", "hazardous material",
"extremely hazardous waste", "restricted hazardous waste" under Section
25115, 25117 or 15122.7, or listed pursuant to Section 25140 of the
California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous
Waste Control Law), (ii) defined as "hazardous substance" under Section
25316 of the California Health and Safety Code, Division 20, Chapter
6.8 (Carpenter-Presley-Tanner Hazardous Substances Account Act), (iii)
defined as "hazardous material", "hazardous substance", or "hazardous
waste" under Section 25501 of the California Health and Safety Code,
Division 20, Chapter 6.95 (Hazardous Materials Release, Response, Plans
and Inventory), (iv) defined as a "hazardous substance" under Section
25181 of the California Health and Safety Code, Division 20l, Chapter
6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi)
asbestos, (vii) listed under Article 9 or defined as "hazardous" or
"extremely hazardous" pursuant to Article II of Title 22 of the
California Administrative Code, Division 4, Chapter 20, (viii) defined
as "hazardous substance" pursuant to Section 311 of the Federal Water
Pollution Control Act, 33 U.S.C. 1251 et seq. or listed pursuant to
Section 1004 of the Federal Water Pollution Control Act (33 U.S.C.
1317), (ix) defined as a "hazardous waste", pursuant to Section 1004 of
the Federal Resource Conservation and Recovery Act, 42 U.S.C. 6901 et
seq., (x) defined as "hazardous substance" pursuant to Section 101 of
the Comprehensive Environmental Responsibility Compensations, and
Liability Act, 42 U.S.C. 9601 et seq., or (xi) regulated under the
Toxic Substances Control Act, 156 U.S.C. 2601 et seq.
b. The term "Hazardous Materials Laws" shall mean any local, state and
federal laws, rules, regulations, or ordinances relating to the use,
generation, transportation, analysis, manufacture, installation,
release, discharge, storage or disposal of Hazardous Material.
c. The term "Lessor's Agents" as used herein shall mean Lessor's
agents, representatives, employees, contractors, subcontractors,
directors, officers and partners.
d. The term "Lessee's Agents" as used herein shall mean Lessee's
agents, representatives, employees, contractors, subcontractors,
directors, officers, partners, invitees or any other person in or about
the Premises.
33.2 LESSEE'S RIGHT TO INVESTIGATE: Lessee shall be entitled to cause such
inspection, soils and ground water tests, and other evaluations to be made of
the Premises as Lessee deems necessary regarding (i) the presence and use of
Hazardous Materials in or about the Premises, and (ii) the potential for
exposure to Lessee's employees and other persons to any Hazardous Materials used
and stored by previous occupants in or about the Premises. Lessee shall provide
Lessor with copies of all inspections, tests and evaluations. Lessee shall
indemnify, defend, and hold Lessor harmless from any cost, claim or expense
arising from such entry by Lessee or from the performance of any such
investigation by such Lessee. Within thirty (30) days of the Commencement Date,
Lessee shall provide Lessor with the results of its Hazardous Materials
investigations which shall be used to establish a base line level for Hazardous
Materials at the Premises.
33.3 LESSOR'S REPRESENTATIONS: Lessor hereby represents and warrants to the best
of Lessor's knowledge that the Premises are, as of the date of this Lease, in
compliance with all Hazardous Material Laws.
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<PAGE> 13
33.4 LESSEE'S OBLIGATION TO INDEMNIFY: Lessee, at its sole cost and expense,
shall indemnify, defend, protect and hold Lessor and Lessor's Agents harmless
from and against any and all cost or expenses, including those described under
subparagraphs i, ii and iii herein below set forth, arising from or caused in
whole or in part, directly or indirectly by:
a. Lessee's or Lessee's Agents' use, analysis, storage, transportation,
disposal, release, threatened release, discharge or generation of
Hazardous Material to, in, on, under, about or from the Premises; or
b. Lessee's or Lessee's Agents failure to comply with Hazardous
Material laws; or
c. Any release of Hazardous Material to, in, on, under, about, from or
onto the Premises caused by Lessee or Lessee's Agents or occurring
during the Lease Term, except ground water contamination from other
parcels where the source is from off the Premises not arising from or
caused by Lessee or Lessee's Agents.
The cost and expenses indemnified against include, but are not limited to the
following:
i. Any and all claims, actions, suits, proceedings, losses, damages,
liabilities, deficiencies, forfeitures, penalties, fines, punitive
damages, cost or expenses;
ii. Any claim, action, suit or proceeding for personal injury
(including sickness, disease, or death), tangible or intangible
property damage, compensation for lost wages, business income, profits
or other economic loss, damage to the natural resources of the
environment, nuisance, pollution, contamination, leaks, spills, release
or other adverse effects on the environment;
iii. The cost of any repair, clean-up, treatment or detoxification of
the Premises necessary to bring the Premises into compliance with all
Hazardous Material Laws, including the preparation and implementation
of any closure, disposal, remedial action, or other actions with regard
to the Premises, and expenses (including, without limitation,
reasonable attorney's fees and consultants fees, investigation and
laboratory fees, court cost and litigation expenses).
33.5 LESSEE'S OBLIGATION TO REMEDIATE CONTAMINATION: Lessee shall, at its sole
cost and expense, promptly take any and all action necessary to remediate
contamination of the Premises by Hazardous Materials during the Lease Term
occurring as a result of acts or omissions of Lessee or Lessee's Agents, but
Lessee shall only be obligated to remediate to levels required now or in the
future by any governmental agency having jurisdiction over such contamination.
33.6 OBLIGATION TO NOTIFY: Lessor and Lessee shall each give written notice to
the other as soon as reasonably practical of (i) any communication received from
any governmental authority concerning Hazardous Material which related to the
Premises and (ii) any contamination of the Premises by Hazardous Materials which
constitutes a violation of any Hazardous Material Laws.
33.7 SURVIVAL: The obligations of Lessee under this Section 33 shall survive the
Lease Term or earlier termination of this Lease.
33.8 CERTIFICATION AND CLOSURE: On or before the end of the Lease Term or
earlier termination of this Lease, Lessee shall deliver to Lessor a
certification executed by Lessee stating that, to the best of Lessee's
knowledge, there exists no violation of Hazardous Material Laws resulting from
Lessee's obligation in Paragraph 33. If pursuant to local ordinance, state or
federal law, Lessee is required, at the expiration of the Lease Term, to submit
a closure plan for the Premises to a local, state or federal agency, then Lessee
shall furnish to Lessor a copy of such plan.
33.9 PRIOR HAZARDOUS MATERIALS: Lessee shall have no obligation to clean up or
to hold Lessor harmless with respect to, any Hazardous Material or wastes
discovered on the Premises which were not introduced into, in, on, about, from
or under the Premises during the Lease Term or ground water contamination from
other parcels where the source is from off the Premises not arising from or
caused by Lessee or Lessee's Agents.
34. BROKERS: Lessor and Lessee represent that they have not utilized or
contacted a real estate broker or finder with respect to this Lease other than
CPS ("CPS") and Lessee agrees to indemnify and hold Lessor harmless against any
claim, cost, liability or cause of action asserted by any broker or finder
claiming
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<PAGE> 14
through Lessee other than CPS. Lessor shall at its sole cost and expense pay the
brokerage commission per Lessor's standard commission schedule to CPS in
connection with this transaction. Lessor represents and warrants that it has not
utilized or contacted a real estate broker or finder with respect to this Lease
other than CPS and Lessor agrees to indemnify and hold Lessee harmless against
any claim, cost, liability or cause of action asserted by any broker or finder
claiming through Lessor.
35. OPTION TO EXTEND: Lessor hereby grants to Lessee one (1) option to extend
the Lease Term, with the extended term to be for a period of one (1) year, on
the following terms and conditions:
(i) Lessee shall give Lessor written notice of its exercise of its
option to extend no earlier than twenty-four (24) calendar months, nor
later than six (6) calendar months before the Lease Term would end but
for said exercise. Time is of the essence.
(ii) Lessee may not extend the Lease Term pursuant to any option
granted by this section 35 if Lessee is in default as of the date of
the exercise of its option. If Lessee has committed a default by Lessee
as defined in Section 14 or 32 that has not been cured or waived by
Lessor in writing by the date that any extended term is to commence,
then Lessor may elect not to allow the Lease Term to be extended,
notwithstanding any notice given by Lessee of an exercise of this
option to extend.
(iii) All terms and conditions of this Lease shall apply during the
extended term, except that the base rent shall be $82,225.
(iv) Once Lessee delivers a notice of exercise of its options to extend
the Lease Term, Lessee may not withdraw such exercise and subject to
the provisions of this Section 35, such notice shall operate to extend
the Lease Term. Upon any extension of the Lease Term pursuant to this
Section 35, the term "Lease Term" as used in this Lease shall
thereafter include the then extended term.
(v) The option rights of Cisco Systems, Inc. granted under this Section
35 are granted for Cisco Systems, Inc.'s personal benefit and may not
be assigned or transferred by Cisco Systems, Inc. or exercised if Cisco
Systems, Inc. is not occupying the Premises at the time of exercise.
Notwithstanding the above, Lessor waives the above due to the limit of
one year on the option herein.
36. APPROVALS: Whenever in this Lease the Lessor's or Lessee's consent is
required, such consent shall not be unreasonably or arbitrarily withheld or
delayed. In the event that the Lessor or Lessee does not respond to a request
for any consents which may be required of it in this Lease within ten business
days of the request of such consent in writing by the Lessee or Lessor, such
consent shall be deemed to have been given by the Lessor or Lessee.
37. AUTHORITY: Each party executing this Lease represents and warrants that he
or she is duly authorized to execute and deliver the Lease. If executed on
behalf of a corporation, that the Lease is executed in accordance with the
by-laws of said corporation (or a partnership that the Lease is executed in
accordance with the partnership agreement of such partnership), that no other
party's approval or consent to such execution and delivery is required, and that
the Lease is binding upon said individual, corporation (or partnership) as the
case may be in accordance with its terms.
38. INDEMNIFICATION OF LESSOR: Except to the extent caused by the sole
negligence or willful misconduct of Lessor or Lessor's Agents, Lessee shall
defend, indemnify and hold Lessor harmless from and against any and all
obligations, losses, costs, expenses, claims, demands, attorney's fees,
investigation costs or liabilities on account of, or arising out of the use,
condition or occupancy of the Premises or any act or omission to act of Lessee
or Lessee's Agents or any occurrence in, upon, about or at the Premises,
including, without limitation, any of the foregoing provisions arising out of
the use, generation, manufacture, installation, release, discharge, storage, or
disposal of Hazardous Materials by Lessee or Lessee's Agents. It is understood
that Lessee is and shall be in control and possession of the Premises and that
Lessor shall in no event be responsible or liable for any injury or damage or
injury to any person whatsoever, happening on, in,
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<PAGE> 15
about, or in connection with the Premises, or for any injury or damage to the
Premises or any part thereof. This Lease is entered into on the express
condition that Lessor shall not be liable for, or suffer loss by reason of
injury to person or property, from whatever cause, which in any way may be
connected with the use, condition or occupancy of the Premises or personal
property located herein. The provisions of this Lease permitting Lessor to enter
and inspect the Premises are for the purpose of enabling Lessor to become
informed as to whether Lessee is complying with the terms of this Lease and
Lessor shall be under no duty to enter, inspect or to perform any of Lessee's
covenants set forth in this Lease. Lessee shall further indemnify, defend and
hold harmless Lessor from and against any and all claims arising from any breach
or default in the performance of any obligation to Lessee's part to be performed
under the terms of this Lease. The provisions of Section 38 shall survive the
Lease Term or earlier termination of this Lease with respect to any damage,
injury or death occurring during the Lease Term.
39. LESSOR'S LIABILITY: If Lessee should recover a money judgment against Lessor
arising in connection with this Lease, the judgment shall be satisfied only out
of the Lessor's interest in the Premises and any proceeds from the sale or
refinance of the Premises and neither Lessor or any of its partners shall be
liable personally for any deficiency.
40. MISCELLANEOUS PROVISIONS: All rights and remedies hereunder are cumulative
and not alternative to the extent permitted by law and are in addition to all
other rights or remedies in law and in equity.
41. CHOICE OF LAW: This lease shall be construed and enforced in accordance with
the substantive laws of the State of California. The language of all parts of
this lease shall in all cases be construed as a whole according to its fair
meaning and not strictly for or against either Lessor or Lessee.
42. ENTIRE AGREEMENT: This Lease is the entire agreement between the parties,
and there are no agreements or representations between the parties except as
expressed herein. Except as otherwise provided for herein, no subsequent change
or addition to this Lease shall be binding unless in writing and signed by the
parties hereto.
IN WITNESS WHEREOF, Lessor and Lessee have executed these presents, the day and
year first above written.
LESSOR LESSEE
BERG & BERG ENTERPRISES, INC. CISCO SYSTEMS, INC.
By: /s/Carl E. Berg By: /s/Martha Holmes for Nancy Bareilles
----------------------------- ---------------------------------------
signature of authorized signature of authorized
representative representative
Carl E. Berg Nancy Breilles
- -------------------------------- ------------------------------------------
printed name printed name
G.P. Vice President, Worldwide Real Estate
- -------------------------------- ------------------------------------------
title title & Workplace Resources
12/31/96 December 31, 1996
- -------------------------------- ------------------------------------------
date date
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<PAGE> 16
Exhibit A
Site Plan to be attached.
<PAGE> 17
Exhibit A.1
Floor Plan to be attached.
<PAGE> 1
EXHIBIT 10.48
LEASE AGREEMENT
(BUILDING A AND BUILDING C)
1. Parties. This Lease, dated for reference purposes as of
November 26, 1996, is made by and between SBC&D CO., INC., a California
corporation ("Landlord"), and CISCO SYSTEMS, INC., a California corporation
("Tenant").
2. Demise of Premises. Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord, upon the terms and conditions hereinafter
set forth, those certain premises (the "Premises") to be situated on the real
property more particularly described in EXHIBIT "A" attached hereto (the
"Land") located in the City of San Jose, County of Santa Clara, State of
California, described as follows:
(a) Those two (2) buildings to be constructed on the Land
by Landlord in accordance with the terms of the Improvement Agreement described
below and which are identified as "Building A" and "Building C" on the site
plan attached hereto as EXHIBIT "B" (hereinafter referred to as the "Buildings"
or "Building A and Building C"). Building A and Building C shall contain
approximately 150,000 square feet.
(b) The leasehold improvements to be constructed by
Landlord in Building A and Building C in accordance with the Improvement
Agreement (the "Tenant Improvements").
The Buildings and the Tenant Improvements are collectively referred to
in this Lease as the "Improvements". The Improvements are to be constructed by
Landlord in accordance with the Improvement Agreement attached hereto as
EXHIBIT "C" (the "Improvement Agreement").
Upon any termination of this Lease with respect to either Building A
or Building C and the Tenant Improvements therein pursuant to Subparagraph 4(c)
below, the term "Buildings" shall thereafter mean only the Building remaining
subject to this Lease, and the terms "Improvements" and "Premises" shall each
mean only the Building and Tenant Improvements remaining subject to this Lease.
In addition to the lease of the Premises described above, Landlord
hereby grants to Tenant the non-exclusive right to use the Common Area in
accordance with the terms of Paragraph 8 below. At such time as Tenant is
leasing both of the Buildings described under this Lease and both of the
Buildings described in the Adjacent Lease, Tenant shall be entitled to use all
of the parking spaces located on the Land (which total parking spaces shall be
equal to approximately one thousand ninety-one (1,091) parking spaces). In the
event Tenant is no longer the tenant of any Building under this Lease, Tenant's
right to use the parking areas within the Common Area under this Lease shall be
limited to the non-exclusive use of that number of parking spaces determined by
dividing the number of square feet of Building then leased by Tenant under this
Lease by 1,000 and then multiplying that quotient by four (4) and then
multiplying that product by eighty-five percent (85%). For example, if Tenant
vacates Building A covered by this Lease and continues to lease seventy-six
thousand square feet in Building B, then Tenant would be entitled to the
non-exclusive
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<PAGE> 2
use of two hundred fifty-eight (258) spaces under this Lease. Such 258 spaces
is arrived at by dividing 76,000 by 1,000, then multiplying that quotient (i.e.
76) by 4, and then multiplying that product (i.e. 304) by 85%. Landlord
reserves the right to grant to future tenants of Building A and/or Building C
(following the termination of this Lease with respect to either Building) and
tenants of the Adjacent Buildings referred to below, and to the agents,
employees, invitees, contractors, guests, customers and representatives of such
tenants, or to any other user authorized by Landlord, the non-exclusive right
to use the Common Area for pedestrian and vehicular ingress and egress and
vehicular parking.
3. Conditions Precedent. The effectiveness of this Lease is
hereby conditioned upon the satisfaction of the following conditions
precedent:
(i) Landlord's acquisition of the Land on or
before March 3, 1997; and
(ii) Landlord's obtaining a binding, written
commitment or agreement for the financing, joint venture development or sale of
the Premises on or before January 10, 1997, that is acceptable in form and
substance to Landlord in its sole discretion, and which commitment or agreement
is in a form and content acceptable to Landlord in its sole discretion; and
(iii) Landlord and Tenant concurrently herewith
entering into another lease agreement (the "Adjacent Lease") on terms
substantially the same as this lease covering two (2) additional buildings (and
leasehold improvements therein) to be constructed by Landlord on another
portion of the Land. Such additional two buildings are hereinafter referred to
herein as "Building B and Building D" or the "Adjacent Buildings".
With respect to the condition set forth in clause (i) above, Landlord
hereby agrees that in the event Landlord does not acquire the Land by January
10, 1997, then, provided the seller of the Land does not breach its obligation
to sell the Land and provided further that all contingencies to Landlord's
obligation to close escrow on the Land are satisfied, Landlord (or its
successor or assign) shall acquire the Land upon the earlier of (A) the date
five (5) business days following the date such seller obtains a water quality
certification (approved by Landlord) or waiver of such certification from the
San Francisco Bay Regional Water Quality Control Board, or (B) March 3, 1997.
If any of the foregoing conditions precedent are not satisfied by the
applicable outside dates established therefor, then Landlord may terminate
this Lease by written notice to Tenant given not later than three (3) business
days following the outside date established for satisfaction of the applicable
condition precedent as set forth above. Upon any such termination of this
Lease, neither party shall have any obligations to the other in connection with
or under this Lease except for obligations accruing prior to the termination
and obligations which, by their terms, survive the termination of this Lease.
If any of the foregoing conditions precedent are not satisfied on or
before March 3, 1997, then Tenant shall have the right to terminate this Lease
by written notice to Landlord given not later than the earlier of (y) the date
such conditions are satisfied, or (z) March
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<PAGE> 3
10, 1997. In the event that Tenant fails to give such notice of termination
by the earlier of the dates set forth in clause (y) and (z) of the immediately
preceding sentence, then Tenant shall be deemed to have waived its right to
terminate this Lease as provided above.
Tenant acknowledges that Landlord may subdivide or parcelize
the Land into two (2) separate legal parcels, each containing approximately the
same square footage as the other. If Landlord so subdivides or parcelizes the
Land into two (2) separate legal parcels as described above, Building A and
Building C shall be situated on one of the legal parcels and Building B and
Building D shall be located on the other legal parcel. Tenant has no objection
to Landlord subdividing or parcelizing the Land as described above and Tenant
agrees to reasonably cooperate with Landlord, at no material cost to Tenant, in
any such subdivision or parcelization of the Land as described above.
4. Lease Term.
(a) Lease Term. The term of this Lease ("Lease Term")
shall be for the period commencing on the Commencement Date (as defined below)
and ending four (4) years following the later of the Substantial Completion
Date (as defined in Subparagraph 4(a) below) under this Lease or the
Substantial Completion Date (as defined in Subparagraph 4(a) of the Adjacent
Lease) under the Adjacent Lease; provided, however, that Tenant shall have the
right to terminate this Lease as to Building A and/or Building C pursuant to
Subparagraph 3(c) below and Tenant shall have the right to extend the Lease
Term as to both Buildings (but not one of the Buildings) pursuant to
Subparagraph 3(d) below.
(b) Commencement Date. As used in this Lease, the term
"Commencement Date" shall mean the earlier of: (i) the date on which all
Improvements to be constructed by Landlord under the Improvement Agreement have
been substantially completed (the "Substantial Completion Date"), or (ii) the
date Tenant commences its business operations in Building A or Building C. Such
Improvements shall be deemed substantially completed upon the occurrence of the
earlier of the following:
(i) the date on which all Improvements to be
constructed by Landlord have been substantially completed except for (1) punch
list items which do not prevent Tenant from using the Buildings for their
intended use, and (2) such work as Landlord is required to perform but which is
delayed because of tenant delays as described in paragraph 7 of the Improvement
Agreement attached hereto as Exhibit "C"; or
(ii) the date the City of San Jose completes a
final inspection of Building A and Building C and the Tenant Improvements to be
constructed therein and the building inspector issues or gives his/her final
sign off on the applicable building permit covering such Buildings and Tenant
Improvements.
Landlord agrees to exercise diligent, good faith efforts to
substantially complete construction of the respective Buildings and the Tenant
Improvements therein (and the parking areas and common area access appurtenant
thereto ) not later than the applicable dates set forth immediately below:
-3-
<PAGE> 4
<TABLE>
<S> <C>
Building A (and parking areas October 15, 1997
and common area access
appurtenant thereto)
Building C (and parking areas October 30, 1997
and common area access
appurtenant thereto)
</TABLE>
If Building A, Building C and the parking areas and common area access
appurtenant thereto to be constructed by Landlord pursuant to the terms of
Exhibit "C" are not substantially completed on or before the target dates set
forth above, then Landlord shall not be liable for any damage or loss incurred
by Tenant for Landlord's failure for whatever cause to deliver possession of
the Buildings by a particular date, nor shall this Lease be void or voidable on
account of such failure to deliver possession of the Buildings; provided,
however, if Landlord does not deliver possession of the Buildings to Tenant by
March 1, 1998, Tenant shall have the right to terminate this Lease by written
notice delivered to Landlord within five (5) days thereafter, and Landlord and
Tenant shall be relieved of their respective obligations hereunder; provided
further that the date of March 1, 1998 above shall be extended by the number of
days the work on the improvements to be constructed by Landlord is delayed due
to tenant delays as described in paragraph 7 of the Improvement Agreement
attached hereto as EXHIBIT "C". In the event of any such termination by Tenant
for failure of Landlord to deliver possession of a Building to Tenant by March
1, 1998, as such date may be extended by Tenant delays as described above,
Landlord shall promptly reimburse Tenant for all costs of construction of
tenant improvements paid by Tenant solely with respect to the applicable
Building or Buildings under this Lease for which possession has not been
delivered to Tenant.
(c) Termination Options. Provided Tenant is not in
default both as of the date Tenant exercises the applicable Termination Option
described herein and as of the termination of this Lease with respect to the
applicable Building and Tenant Improvements therein, Tenant shall have the
right to terminate this Lease with respect to a single Building designated by
Tenant (the "Termination Options") as of the last day of the first, second and
third quarters of the last twelve months of the initial Lease Term (the
"Termination Dates") by giving written notice to Landlord of the applicable
Building and termination no later than ninety (90) days prior to the applicable
Termination Date and by vacating and surrendering possession of the applicable
Building and Tenant Improvements therein in accordance with the provisions of
Paragraph 34 below; provided, however, if Tenant exercises its Termination
Option as to either Building B or Building D under the Adjacent Lease prior to
the exercise of any Termination Option as to Building A or Building C hereunder,
then Tenant shall not have the right to exercise the Termination Option as to
Building A or Building C until Tenant has exercised the Termination Option
under the Adjacent Lease as to both Building B and Building D. Tenant further
agrees that under no circumstances shall it be permitted to exercise the
Termination Option under this Lease and under the Adjacent Lease concurrently.
If Tenant timely exercises a Termination Option with respect to Building A or
Building C and the Tenant Improvements located therein,
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then such termination as to such applicable Building and Tenant Improvements
located therein shall be effective as of the date Tenant vacates and surrenders
possession of the applicable Building and Tenant Improvements in accordance
with the provisions of Paragraph 34 below, but in no event earlier than the
applicable Termination Date. In the event this Lease is terminated by Tenant
as to any Building, Tenant shall be excused from obligations under this Lease
with respect to such Building which would have otherwise accrued following the
effective date of such termination. Upon the effective date of each early
termination of this Lease with respect to a Building, Tenant's Proportionate
Share (defined in Subparagraph 8(e)(ii) below) shall be appropriately reduced
in accordance with Subparagraph 8(e)(ii). Anything in this Lease to the
contrary notwithstanding, the parties hereto agree that if Tenant exercises any
Termination Option under this Subparagraph 4(c), Tenant shall have no right to
extend the Lease Term pursuant to the terms of Subparagraph 4(d) below as to
either Building A or Building C, or both Buildings, and any exercise of an
Extension Option by Tenant hereunder after any exercise of a Termination Option
hereunder shall be deemed void and of no force or effect. In addition,
anything in this Lease to the contrary notwithstanding, if Tenant exercises any
Extension Option described below, then Tenant shall have no right to terminate
this Lease early as to Building A or Building C or the Tenant Improvements
therein as provided in this Subparagraph 4(c) and any exercise of a Termination
Option hereunder by Tenant after any exercise of an Extension Option hereunder
shall be deemed void and of not force or effect.
(d) Extension Options. Subject to the terms of
Subparagraph 4(c) above, Tenant shall have either two (2) options to extend the
Lease Term for a period of one (1) year each or, alternatively, one (1) option
to extend the Lease Term for a period of three (3) years (such applicable
option(s) hereinafter being referred to as the "Extension Options" and the
period(s) or term(s) of such applicable Extension Option hereinafter being
referred to as the "Extension Terms") provided that Tenant is not in default
both as of the date Tenant exercises the applicable Extension Option and as of
the first day of the applicable Extension Term, and provided, further, that
Tenant gives Landlord written notice of Tenant's exercise of the applicable
Extension Option at least one hundred and eighty (180) days prior to the end
of the then-current Lease Term. If Tenant first exercises an Extension Option
for a term of one (1) year, then Tenant shall be deemed to have waived the
right to exercise the Extension Option for a period of three (3) years.
Conversely, if Tenant first exercises the Extension Option for a period of
three (3) years, then Tenant shall be deemed to have waived the right to
exercise the Extension Options for a period of one (1) year each. If Tenant
timely exercises an Extension Option in the manner prescribed herein, then such
exercise shall be with respect to both Building A and Building C. All of the
terms of this Lease shall apply to each Extension Term, except that the Monthly
Installment of rent shall be calculated as set forth in Subparagraph 5(b)
below, Tenant shall not be entitled to any additional Extension Options or
Termination Options, and the provisions of EXHIBIT "C" shall not be applicable
to the Extension Terms. If Tenant fails to exercise, or fails to effectively
exercise, the first one (1) year Extension Option, then the second one (1) year
Extension Option shall be void and of no force or effect. The one-year
Extension Options shall be personal to Cisco Systems, Inc. and may not be
assigned to, transferred to or exercised for the benefit of any third party
(other than an Affiliate of Tenant as defined in Paragraph 25 below). Any
exercise of one-year Extension Option by or on behalf of any assignee,
sublessee or transferee (other than an Affiliate of Tenant) of
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Tenant's rights or interests in this Lease or the Premises, or any portion
thereof, shall be void and of no force and effect. Notwithstanding the
foregoing, Tenant shall have the right to assign the three-year Extension
Option to an Affiliate of Tenant or to an assignee, sublessee or transferee of
the Premises, or portion thereof, approved by Landlord under this Lease;
provided, however, in such instance, Cisco Systems, Inc. shall not be relieved
or released of Tenant's obligations under this Lease during such three-year
Extension Term. Tenant shall have no right to exercise an Extension Option if
Tenant has previously exercised a Termination Option as to Building A or
Building C as described in Subparagraph 4(c).
(e) Early Entry. Tenant may enter the Buildings prior to
the Commencement Date to install fixtures and equipment therein, provided
Tenant first obtains the prior written approval of Landlord for such entry,
which approval shall not be unreasonably withheld but which Landlord may
withhold if Landlord determines in its reasonable discretion that such entry
will delay completion of construction of the Improvements which Landlord is
required to construct pursuant to EXHIBIT "C". If Landlord permits Tenant to
so enter upon the Premises, such entry shall be subject to all of the terms and
conditions of this Lease, excepting only the obligation to pay the Monthly
Installment of rent or Additional Rent (as defined in Subparagraph 5(d) below).
Tenant shall coordinate its entry onto the Premises with Landlord and the
contractors and other personnel employed by Landlord. Tenant shall at all
times while exercising its right of entry, refrain from interfering with the
construction activities of Landlord's personnel. In any case, Tenant shall
repair any damage to the Improvements constructed by Landlord resulting from
the entry upon the Premises by Tenant or Tenant's Agents prior to the
Commencement Date or caused by the installation of fixtures and equipment by
Tenant or Tenant's Agents. If the entry by Tenant or Tenant's Agents upon the
Premises prior to the Commencement Date interferes with Landlord's construction
activities, then Landlord shall give Tenant written notice requesting that
Tenant cease such interference. If Tenant does not immediately comply with
such notice from Landlord requesting that Tenant cease interference with
Landlord's construction activities, and if the entry by Tenant prior to the
Commencement Date causes a delay in completing the construction of the
Improvements, then the Commencement Date shall be deemed to have occurred on
the date the Improvements would have been completed had there been no such
delay caused by Tenant or its a, employees, contractors or representatives. If
Tenant does not immediately comply with notice from Landlord requesting that
Tenant cease any interference with Landlord's construction activities, Tenant
shall be required to vacate the Premises and shall have no further right to
enter the Premises until the Commencement Date.
5. Rent.
(a) Time of Payment. Tenant shall pay to Landlord as
rent for the Premises the respective sums specified in Subparagraph 5(b) below
(the "Monthly Installment") each month in advance on the first day of each
calendar month, without deduction or offset, prior notice or demand, commencing
on the Rent Commencement Date (defined below) and continuing through the Lease
Term (as extended, if at all, pursuant to Subparagraph 4(d) above), together
with such additional rents as are payable by Tenant to Landlord under the terms
of this Lease. The Monthly Installment for any period during the
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<PAGE> 7
Lease Term which is less than one (1) full month shall be a pro rata portion of
the Monthly Installment based upon a thirty (30) day month. For purposes
hereof, the "Rent Commencement Date" shall mean the Substantial Completion Date
as described in Subparagraph 4(b), except that if Tenant commences its business
operations in either Building A and/or Building C prior to the Substantial
Completion Date, then the Rent Commencement Date as to the applicable
Building(s) in which Tenant has commenced its business operations shall be
the date that Tenant first commenced such business operations in the applicable
Building(s).
(b) Monthly Installment. The Monthly Installment of rent
for the period commencing on the Commencement Date of this Lease and ending on
the Substantial Completion Date (if the Commencement Date and Substantial
Completion Date are different dates) and the Monthly Installment of rent for
the first year of the lease Term, commencing on the Substantial Completion
Date, shall be equal to One Hundred Five Thousand Eight Hundred Twenty Dollars
($105,820) per month for Building A and One Hundred Eight Thousand Six Hundred
Eighty Dollars ($108,680) per month for Building C.
The Monthly Installment of rent during the Lease years following the
first year of the Lease Term (including, without limitation, during each
Extension Term) shall be the Monthly installment of rent for the immediately
preceding year plus an additional Three Thousand Seven Hundred Dollars ($3,700)
per month for Building A and Three Thousand Eight Hundred Dollars ($3,800) per
month for Building C (which totals an additional Seven Thousand Five Hundred
Dollars ($7,500) per month for Building A and Building C). Such Seven Thousand
Five Hundred Dollar ($7,500) monthly increase on each anniversary of the
Commencement Date as provided in the immediately preceding sentence is the
equivalent of a Five Cent ($0.05) per rentable square foot per month increase
in the monthly rental rate for the Buildings on each anniversary of the
Commencement Date.
(c) Late Charges. Tenant acknowledges that late payment
by Tenant to Landlord of rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which will
be extremely difficult to ascertain. Such costs include, but are not limited
to, processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord within ten (10) days after Landlord's delivery to
Tenant of written notice stating that such amount has not been paid when due,
then Tenant shall pay to Landlord, as additional rent, a late charge equal to
six percent (6%) of such overdue amount. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant. Acceptance of such late charge
by Landlord shall in no event constitute a waiver of Tenant's default with
respect to such overdue amount, nor prevent Landlord from exercising any of its
other rights and remedies granted hereunder.
(d) Additional Rent. All taxes, insurance premiums,
Common Area Expenses (as defined in Subparagraph 8(b)), late charges, costs,
expenses and other sums which Tenant is required to pay under this Lease,
together with all interest and penalties
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that may accrue thereon in the event of Tenant's failure to pay such amounts,
and all reasonable damages, costs, and attorneys' fees and expenses which
Landlord may incur by reason of any default of Tenant or failure on Tenant's
part to comply with the terms of this Lease, shall be deemed to be additional
rent ("Additional Rent") and shall be paid, commencing as of the applicable
Rent Commencement Date, in addition to the Monthly Installment of rent, and, in
the event of nonpayment by Tenant, Landlord shall have all of the rights and
remedies with respect thereto as Landlord has for the nonpayment of the Monthly
Installment of rent.
(e) Place of Payment. Rent shall be payable in lawful
money of the United States of America to Landlord at 511 Division Street,
Campbell, California 95008 or to such other person(s) or at such other place(s)
as Landlord may designate in writing.
(f) Advance Payment. Not later than two (2) days
following the date the condition set forth in Paragraph 3(ii) above is
satisfied and Tenant is notified in writing of such fact, Tenant shall pay to
Landlord the Monthly Installment of Rent in the amount of Two Hundred Fourteen
Thousand Five Hundred Dollars ($214,500) for the first full month following the
Substantial Completion Date.
6. Security Deposit. Tenant shall not be obligated to deliver a
security deposit to Landlord.
7. Use of Premises.
(a) Restrictions on Use. Tenant shall use the Premises
for any lawful purpose provided such use is in conformance and compliance with
all applicable governmental laws, regulations, rules and ordinances including,
without limitation, all applicable environmental and zoning and land use laws,
regulations, rules, and ordinances (collectively, "Laws"). Tenant shall
indemnify, defend and hold Landlord harmless against any loss, expense, damage,
attorneys' fees or liabilities arising out of the failure of Tenant to comply
with any Law applicable to Tenant's use and occupancy of the Premises. Tenant
shall not commit or suffer to be committed, any waste upon the Premises, or any
nuisance, or other acts or things which may disturb the quiet enjoyment of any
other tenant in Building A or Building C (in the event Tenant exercises its
Termination Option with respect to Building A and/or Building C) or in Building
B or Building D, or allow any sale by auction upon the Premises, or allow the
Premises to be used for any unlawful purpose, or place any loads upon the
floor, walls or ceiling which would endanger the structure, or place any
harmful liquids in the drainage system of the Premises. No waste materials or
refuse shall be dumped upon or permitted to remain upon any part of the
Premises outside of the Buildings, except in trash containers placed inside
exterior enclosures designated for that purpose by Landlord. No materials,
supplies, equipment, finished products or semifinished products, raw materials
or articles of any nature shall be stored upon or permitted to remain on any
portion of the Parcel outside of the Buildings. Tenant shall strictly comply
with the provisions of Paragraph 39 below.
(b) Wetlands. Tenant acknowledges that certain wetlands
areas, consisting of approximately 5.3 acres, currently exist on the Land and
that the current owner of the
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<PAGE> 9
Land has been authorized, under 33 CFR 330 Appendix A, Department of the Army
Nationwide Permit 26, Headwaters and Isolated Waters pursuant to Section 404 of
the Clean Water Act (33 U. S. C. 1344) to fill such wetlands areas. Such
authorization to fill the wetlands areas is subject to compliance of the
Nationwide Permit Conditions attached to the Nationwide Permit referred to
above and the special condition attached to such Nationwide Permit
authorization. A copy of such Nationwide Permit authorization dated September
11, 1996 (File No. 17991S) has been provided to Tenant for its information.
Tenant agrees on behalf of itself and its agents, employees, contractors,
representatives, invitees, licensees, assignees and sublessees, not to violate
any of the terms or conditions of the Nationwide Permit authorization referred
to above and not to modify any portion of the wetlands areas to be filled, or
caused to be filled, by Landlord. Tenant further agrees that if it assigns
or sublets any portion of the Premises as permitted by the terms of this Lease,
Tenant shall, prior to the effective date of such assignment or subletting,
disclose in writing to such assignee or sublessee that the Nationwide Permit
authorization referred to above exists (and provide a copy of the same to such
permitted assignee or sublessee) and require that such assignee or sublessee
(and any of its assignees or sublessees) agree in writing not to violate any of
the terms or conditions of the Nationwide Permit authorization referred to
above.
(c) Initial Occupancy. Tenant shall be obligated to take
possession and enter into occupancy of the Premises within thirty (30) days
following the Substantial Completion Date; provided, however, that Landlord's
sole remedy for breach of this covenant alone, at Landlord's election by
written notice to Tenant, shall be to terminate this Lease. In the event of
such termination under this clause (c), neither party shall have any further
obligations under this Lease except Landlord's and Tenant's respective
indemnification obligations under this Lease shall survive such termination of
this Lease.
8. Common Area.
(a) Landlord's Obligations. Landlord shall maintain the
Common Area (defined below) in a manner consistent with the maintenance of
common areas at comparable Buildings in North San Jose. Landlord shall at all
times have exclusive control of the Common Area and may at any time, for
purposes of repair, replacement, maintenance, security, operation, or
management of the Common Area, or any portion thereof, or to cut off any
prescriptive rights in any portion of the Common Area, temporarily close any
part thereof (so long as such closure does not materially interfere with
Tenant's use and enjoyment of the Premises), exclude and restrain anyone from
any part thereof, except the bona fide customers, employees and invitees of
Tenant who use the Common Area in accordance with the reasonable rules and
regulations as Landlord may from time to time promulgate. Landlord shall have
the right to reconfigure or modify the Common Area and parking areas and
ingress and egress to and from the parking area, and to modify the directional
flow of traffic in the parking area or construct or install improvements
therein, provided such changes or improvements to the Common Area shall not
decrease the number of parking spaces on the site (unless reduction is
necessary to comply with governmental laws, rules, codes or ordinances),
materially impair access to the Premises or materially interfere with Tenant's
use and enjoyment of the Premises.
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<PAGE> 10
In the event Landlord fails to properly maintain the Common Areas in
accordance with the terms set forth above, and such failure continues for a
period of at least thirty (30) days following the receipt of written notice
from Tenant to Landlord, Tenant shall have the right, so long as there are no
other tenants under lease of all or any part of Building A, Building B,
Building C or Building D, to cure Landlord's default in the maintenance of the
Common Area. Landlord agrees to reimburse Tenant, within thirty (30) days
following receipt of written invoices or statements from Tenant, for the
reasonable costs incurred by Tenant in curing Landlord's default in the
maintenance of the Common Areas. If Landlord fails to reimburse Tenant within
the time period set forth in the immediately preceding sentence, then Tenant's
sole remedy for such failure is to bring an action against Landlord for damages
and Tenant shall have no right to offset or deduct such costs reasonably
incurred in curing Landlord's default against the Monthly Installment of rent
or any Additional Rent.
(b) Tenant to Pay Common Area Expenses. Tenant shall
pay, as Additional Rent, Tenant's Proportionate Share (defined below) of all
costs and expenses as may be paid or incurred by Landlord in maintaining,
operating and repairing the entire Common Area situated on the Land (the
"Common Area Expenses") during the Term.
(c) Monthly Payments. From and after the Rent
Commencement Date, Tenant shall pay to Landlord on the first day of each
calendar month of the Term an amount reasonably estimated by Landlord to be
Tenant's Proportionate Share of the monthly Common Area Expenses. The
foregoing estimated monthly charge may be adjusted by Landlord at the end of
each calendar year on the basis of Landlord's experience and reasonably
anticipated costs. At Tenant's written request, Landlord shall provide
reasonable evidence of how Landlord estimated the monthly Common Area Expenses
and/or how Landlord made any adjustment of said estimate. Any such adjustment
shall be effective as of the calendar month next succeeding receipt by Tenant
of written notice of such adjustment.
(d) Accounting. Within one hundred twenty (120) days
following the end of each calendar year Landlord shall furnish Tenant a
statement of the actual Common Area Expenses for the calendar year and the
payments made by Tenant with respect to such period. If Tenant's payments of
its Proportionate Share of Common Area Expenses do not equal the amount of the
actual Common Area Expenses, Tenant shall pay Landlord the deficiency within
thirty (30) days after receipt of such statement. If Tenant's payments of
Tenant's Proportionate Share of Common Area Expenses exceed Tenant's
Proportionate Share of the actual Common Area Expenses, Landlord shall either
offset the excess against the Common Area Expenses next thereafter to become
due to Landlord or shall refund the amount of the overpayments to Tenant.
There shall be appropriate adjustments of the Common Area Expenses as of the
Commencement Date and expiration of the Term. Tenant shall have the right, at
its own expense and upon written notice to Landlord, but in no event more often
than once any calendar year, to audit Landlord's books and records regarding
the Common Area Expenses, provided, however, that Tenant shall keep the results
of such audits confidential except to the extent required to be disclosed by
law or to the extent necessary to be disclosed in a legal proceeding with
Landlord relating to the amount of Common Area Expenses. The preceding
sentence to the contrary
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notwithstanding, if the aforementioned audit discloses a discrepancy of two
percent (2%) or more of the Common Area Expenses owed by Tenant for the
applicable calendar year, Landlord shall pay Tenant's cost of the audit, not
to exceed Two Thousand Dollars ($2,000).
(e) Definitions. As used herein, the following terms
shall have the following definitions:
(i) "Common Area" shall mean all portions of the
Land outside of the Buildings (excluding the exterior surfaces of the
Buildings, which are to be maintained and cleaned by Landlord at Landlord's
cost), including, without limitation, the parking areas and landscaping located
on the Land; provided, however, that if the Land is subdivided in accordance
with the last paragraph of Paragraph 3 above and at any time thereafter, the
subdivided parcels comprising the Land are no longer owned by the same person
or entity, then "Common Area" shall mean all portions of the subdivided parcel
in which Building A and Building C are situated that are outside of such
Buildings (excluding the exterior surfaces of the Buildings, which are to be
maintained and cleaned by Landlord at Landlord's cost), including, without
limitation, the parking areas and landscaping located on such subdivided
parcel. Tenant shall have the non-exclusive right to use the Common Area, and
Tenant's use of the Common Area shall be in common with the owner(s) and
occupants of any Building as to which Tenant terminates this Lease pursuant to
Subparagraph 4(c) above (and the owner(s) and occupants of Building B and/or
Building D in the event Tenant terminates the Adjacent Lease as to either
Building B or Building D, or both), and their respective agents, contractors,
employees, guests and invitees. As provided above, anything herein to the
contrary notwithstanding, in the event Tenant is no longer the tenant of any
Building under this Lease, Tenant's right under this Lease to use the parking
areas within the Common Area shall be limited to the non-exclusive use of that
number of parking spaces determined by dividing the number of square feet of
Building then leased by Tenant under this Lease by 1,000 and then multiplying
that quotient by four (4) and then multiplying that product by eighty-five
percent (85%). In no event shall Tenant be entitled to the non-exclusive use
of less than the number of parking spaces required to be provided to Tenant
under City of San Jose ordinances or codes.
(ii) "Tenant's Proportionate Share" shall mean the
percentage determined by dividing the rentable area leased by Tenant in the
Buildings by the rentable area of all buildings on the Land; provided,
however, that if the Land is subdivided in accordance with the last paragraph
of Paragraph 3 above, and at any time thereafter, the subdivided parcels
comprising the Land are no longer owned by the same person or entity, then
Tenant's Proportionate Share shall mean the percentage determined by dividing
the rentable area leased by Tenant in Building A and Building C by the total
rentable area of Building A and Building C. In determining the rentable area
of a Building, Landlord and Tenant agree that such rentable area shall include
all of the areas of the applicable Building, measured from the exterior faces
of exterior walls, including roof overhangs, the inset area at each entryway,
and the inset area for glazing, but excluding any truck dock areas, courtyards
and outside decks.
For example, provided Landlord retains ownership of all of the Land and Tenant
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does not exercise any of its Termination Options under this Lease or the
Adjacent Lease, then from the Commencement Date of this Lease through the first
three and one quarter (3.25) lease years following the Substantial Completion
Date, Tenant's Proportionate Share shall be one hundred percent (100%). If
Landlord retains ownership of all of the Land and Tenant timely exercises a
Termination Option and vacates and surrenders possession of an applicable
Building and Tenant Improvements located therein in accordance with the
provisions of Paragraph 34 below, then Tenant's Proportionate Share shall be
appropriately decreased as of the effective date of each termination of this
Lease with respect to a Building pursuant to Subparagraph 4(c). (If the Land
is subdivided in accordance with the last paragraph of Paragraph 3 above and
the parcels comprising the Land are owned by two different persons or entities,
then Tenant's Proportionate Share shall be the percentage determined in
accordance with the first sentence of the preceding paragraph.)
(iii) "Common Area Expenses" shall mean all
expenses, costs and amounts of every kind and nature (subject to the exclusions
below) which Landlord shall pay or incur because of or in connection with the
ownership, maintenance, repair, replacement, restoration and operation of the
Common Area, including, without limitation, any amounts paid or incurred for:
(A) the cost of supplying all utilities, the cost of operating, maintaining,
repairing, replacing, renovating and managing any and all utility systems,
mechanical systems, sanitary and storm drainage systems, and the cost of
supplies, tools, and equipment and maintenance and service contracts in
connection therewith; (B) the cost of licenses, certificates, permits and
inspections and the cost of contesting the validity or applicability of any
governmental enactments which may affect Common Area Expenses, and the costs
incurred in connection with the implementation and operation of any
transportation system management program or similar program required by law;
(C) the cost of insurance for the Common Area carried by Landlord, in such
amounts as Landlord may reasonably determine (excluding the cost of any
insurance for which Landlord is reimbursed directly under Paragraph 10); (D)
fees, charges and other costs, including without limitation, consulting fees,
legal fees and accounting fees, of all persons engaged by Landlord or otherwise
reasonably incurred by Landlord in connection with the operation, maintenance
and repair of the Common Area (except that annual management fees shall be two
percent of the annual base or "fixed" rent payable by tenants in the Buildings,
including any buildings as to which this Lease has been terminated); (E) the
cost of parking area repair, restoration, and maintenance, including, but not
limited to, patching, repainting, restriping, and cleaning; (F) wages, salaries
and other compensation and benefits of all persons engaged in the operation,
maintenance or security of the Common Area, and employer's Social Security
taxes, unemployment taxes or insurance, and any other taxes which may be levied
on such wages, salaries, compensation and benefits (prorated for any employee
who does not devote substantially all of his or her time to the operation,
maintenance, repair, management or security or the Common Area); (G) payments
under any easement, license, operating agreement, declaration, restrictive
covenant, or instrument pertaining to the sharing of costs between the
Buildings (or the subdivided parcel containing the Buildings) and other
buildings or property; (H) amortization (including interest on the unamortized
cost at a rate equal to the floating commercial loan rate announced from time
to time by Bank of America NT+SA, as its prime rate or "reference rate", plus
2% per annum [the "Interest Rate"]) of the costs of acquiring, or the rental
expense of personal property used in, the maintenance, operation and repair of
the Common Area; (I) the cost of capital
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improvements (as determined under generally accepted accounting principles) or
other costs incurred in connection with the Common Area that are required under
any governmental law or regulation but which were not so required in connection
with the Common Area at the time that permits for the construction of the
Buildings were obtained provided, however, that each such permitted capital
expenditure shall be amortized (including interest on the unamortized cost)
over its useful life as Landlord shall reasonably determine; and (J) all
Property Taxes (as defined in Subparagraph 9(c) below) payable by Landlord with
respect to the Common Area (excluding any taxes and assessments paid by Tenant
under Paragraph 9 below).
Notwithstanding the foregoing, however, Common Area Expenses shall not
include (1) depreciation, interest and amortization on mortgages, or ground
lease payments, if any; (2) legal fees incurred in negotiating and enforcing
tenant leases; (3) real estate brokers' leasing commissions; (4) initial
improvements or alterations to tenant spaces; (5) any costs expressly excluded
from Common Area Expenses elsewhere in this Lease; (6) costs of any items to
the extent Landlord receives, or would be entitled to receive if Landlord had
obtained all insurance required to be maintained hereunder, reimbursement from
insurance proceeds (except that any deductible amount under any insurance
policy shall be included within Common Area Expenses) or from a third party;
(7) costs of capital improvements, except those set forth in this Subparagraph
8(e) (iii); (8) costs of repair and maintenance of the roof structure,
foundations and exterior walls of the Buildings; (9) cost or any repair,
maintenance or restoration arising from the negligence or willful misconduct or
breach of this Lease by Landlord or its agents, employees or contractors; (10)
costs attributable to repairing items that are covered by warranties in favor
of Landlord; (11) costs of correcting any code violations that occurred with
respect to the construction of any of the Buildings prior to the Substantial
Completion Date; and (12) costs paid directly to Landlord pursuant to this
Lease.
9. Taxes and Assessments.
(a) Tenant's Property. Tenant shall pay before
delinquency any and all taxes and assessments, license fees and public charges
levied, assessed or imposed upon or against Tenant's fixtures, equipment,
furnishings, furniture, appliances and personal property installed or located
on or within the Premises. Tenant shall use its best efforts to cause said
fixtures, equipment, furnishings, furniture, appliances and personal property
to be assessed and billed separately from the real property of Landlord. If
any of Tenant's said personal property shall be assessed with Landlord's real
property, Tenant shall pay Landlord the taxes attributable to Tenant within ten
(10) days after receipt of a written statement from Landlord setting forth the
taxes applicable to Tenant's property.
(b) Property Taxes. Tenant shall pay, as Additional
Rent, one hundred percent (100%) of all Property Taxes levied or assessed with
respect to the Premises or the Land, Buildings or Tenant Improvements which
become due or accrue during the term of this Lease. Tenant shall pay such
Property Taxes to Landlord not later than (i) ten (10) days prior to the
delinquency date of such Property Taxes, or (ii) twenty (20) days after receipt
of billing, whichever is later. If Tenant fails to do so, Tenant shall
reimburse Landlord, on demand, for all interest, late fees and penalties that
the taxing authority
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charges Landlord. In the event Landlord's Lender requires an impound for
Property Taxes, then on the first day of each month during the Lease Term,
Tenant shall pay Landlord one twelfth (1/12) of the annual Property Taxes.
Tenant's liability hereunder shall be prorated to reflect the commencement and
termination dates of this Lease. Notwithstanding anything to the contrary
herein: (i) upon a termination of this Lease with respect to a Building under
Subparagraph 4(c) above, Tenant shall pay Tenant's Proportionate Share of
Property Taxes for the Land, Buildings, Tenant Improvements and Premises
(including any Land, Building, Tenant Improvements and Premises as to which
this Lease has been terminated) together with, and in the same manner as Tenant
pays, Tenant's Proportionate Share of Common Area Expenses; and (ii) if the
Land is subdivided in accordance with the last paragraph of Section 3 above and
at any time thereafter, the subdivided parcels comprising the Land are no
longer owned by the same person or entity, then Tenant shall pay the Property
Taxes for the subdivided parcel containing the Buildings (rather than the
Property Taxes for all of the Land), and the Property Taxes for the Buildings,
Tenant Improvements and Premises.
(c) Property Taxes Defined. For the purpose of this
Lease, "Property Taxes" means and includes all taxes, assessments (including,
but not limited to, assessments for public improvements or benefits), taxes
based on vehicles utilizing parking areas, taxes based or measured by the rent
paid, payable or received under this Lease, taxes on the value, use, or
occupancy, and all other governmental impositions and charges of every kind
and nature whatsoever, whether or not customary or within the contemplation of
the parties hereto and regardless of whether the same shall be extraordinary or
ordinary, general or special, unforeseen or foreseen, or similar or dissimilar
to any of the foregoing which, at any time during the Lease Term, shall be
applicable to the Premises, the Buildings, Tenant Improvements and/or the Land,
as applicable, or assessed, levied or imposed upon the Premises, the Buildings,
Tenant Improvements and/or the Land, as applicable, or become due and payable
and a lien or charge upon the Premises, the Buildings and/or the Land, as
applicable, or any part thereof, under or by virtue of any present or future
laws, statutes, ordinances, regulations or other requirements of any
governmental authority whatsoever. The term "Property Taxes" shall not include
any federal, state or local net income, franchise, estate, gift or inheritance
tax imposed on Landlord or any interest or penalties arising from Landlord's
failure to pay any Property Taxes (unless such interest and/or penalties arise
as a result of Tenant's failure to pay such Property Taxes when due hereunder).
(d) Other Taxes. To the extent not otherwise covered
under Subparagraph 9(c) above, Tenant shall, as Additional Rent, pay or
reimburse Landlord for any tax based upon, allocable to, or measured by the
area of the Premises or the Buildings (or the Common Area, in which case
Tenant's payment and reimbursement obligations shall be limited to its
Proportionate Share of the same); or by the rent paid, payable or received
under this Lease; any tax upon or with respect to the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy of the
Premises or any portion thereof; any privilege tax, excise tax, business and
occupation tax, gross receipts tax, sales and/or use tax, water tax, sewer tax,
employee tax, occupational license tax imposed upon Landlord or Tenant with
respect to the Premises.
(e) Tenant's Right to Contest. Prior to the date Tenant
exercises any
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Termination Option under this Lease (or under the Adjacent Lease if prior to
the date the Land is parcelized or subdivided into two separate legal parcels),
Tenant shall have the right, by appropriate proceedings, to protest or contest
any assessment, reassessment or allocation of Property Taxes or other taxes
payable by Tenant in whole or in part or any change therein. In the contest or
proceedings, Tenant may act in its own name and/or the name of Landlord and
Landlord will, at Tenant's request and expense, cooperate with Tenant in any
way Tenant may reasonably require in connection with such contest. Tenant must
pay all Property Taxes as and when required by Paragraph 9(b), even those which
are the subject of such protest or contest, but Tenant may sue to recover
overpayments of Property Taxes as part of any such contest. With respect to
any contest of Property Taxes, Tenant shall indemnify and hold Landlord and the
Land, Buildings and Premises harmless from any liens or damage arising out of
such protest or contest and shall pay any judgment that may be rendered for
which Tenant would otherwise be liable under this Lease without such contest or
protest. Such indemnification and hold harmless obligation shall survive the
termination of this Lease. Any contest conducted by Tenant under this
paragraph shall be at Tenant's expense and if interest or late charges become
payable as a result of such contest or protest, Tenant shall pay the same.
10. Insurance.
(a) Indemnity. Tenant agrees to indemnify, protect and
defend Landlord against and hold Landlord harmless from any and all claims,
causes of action, judgments, obligations or liabilities, and all reasonable
expenses incurred in investigating or resisting the same (including reasonable
attorneys' fees), on account of, or arising out of, the operation, maintenance,
use or occupancy of the Premises, Buildings, Land or the Common Area by Tenant
and/or its Agents (except to the extent attributable to the negligence or
willful misconduct of, or breach of this Lease by, Landlord or its Agents).
This Lease is made on the express understanding that Landlord shall not be
liable for, or suffer loss by reason of, injury to person or property, from
whatever cause (except to the extent attributable to the negligence or willful
misconduct of Landlord or its Agents and, even then, in no event shall Landlord
be liable under this Lease for claims of loss profits or loss of business or
income), which in any way may be connected with the operation, maintenance, use
or occupancy of the Premises, Buildings, Land or the Common Area by Tenant
and/or its Agents specifically including, without limitation, any liability for
injury to the person or property of Tenant or its Agents.
Landlord agrees to indemnify, protect and defend Tenant against and
hold Tenant harmless from any and all claims, causes of action, judgments,
obligations or liabilities (including, without limitation, reasonable
attorneys' fees) on account of bodily injuries, death or property damage caused
by the negligence or willful misconduct of Landlord or its Agents; provided,
however, in no event shall Landlord be liable under any circumstances for
claims of loss profits or loss or business or income. The obligations of
Landlord under this paragraph shall not be applicable to the extent any claims,
causes of action, judgments, obligations or liabilities (including, without
limitation, reasonable attorneys' fees) arise out or, or are related to, the
negligence or willful misconduct of Tenant or its Agents.
The obligations of Landlord and Tenant under this Paragraph 10(a) shall survive
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<PAGE> 16
termination of this Lease.
(b) Liability Insurance. Tenant shall, at Tenant's
expense, obtain and keep in force during the term of this Lease a policy of
commercial general liability insurance insuring Landlord (as an additional
insured) and Tenant against claims and liabilities arising out of the
operation, maintenance, use, or occupancy of the Premises. Such insurance
shall provide combined single limit coverage of not less than Three Million
Dollars ($3,000,000.00) per occurrence. Such liability insurance shall contain
a contractual liability endorsement. Landlord shall have the right to require
Tenant to increase the amount of coverage of such commercial general liability
insurance to the extent reasonably necessary to bring such insurance coverage
into conformity with the level of coverage commonly carried by similar
businesses in California, which right Landlord may exercise no more frequently
than once every three (3) years during the lease term. The insurance shall be
provided by companies with a Best's Insurance Guide rating of at least A- VIII
or higher. Tenant shall deliver to Landlord, prior to possession, and at least
thirty (30) days prior to the expiration thereof, a certificate of insurance
evidencing the existence of the policy required hereunder and such certificate
shall certify that the policy (1) names Landlord as an additional insured, (2)
shall not be canceled without thirty (30) days prior written notice to
Landlord, (3) insures contractual liability, (4) the coverage is primary and
any coverage by Landlord is in excess thereto and (5) contains a
cross-liability endorsement.
The preceding to the contrary notwithstanding, Landlord agrees that
the original Tenant hereunder, Cisco Systems, Inc., may "self insure" against
the claims, liabilities, damages, injuries and losses described in Subparagraph
10(b) above so long as Cisco Systems, Inc. has a net worth of not less than
Five Hundred Million Dollars ($500,000,000), and the parties hereto agree that
such self-insurance shall be primary. The right to so self insure shall apply
only to the original Tenant hereunder and shall not apply to any assignee of
such original Tenant. In the event the premiums for Landlord's liability
insurance are increased by reason of Tenant's self-insurance (whether because
of the parties' agreement that the original Tenant hereunder may self-insure or
because of claims made or defense undertaken or proceeds paid under Landlord's
liability policy which would not have otherwise occurred if Tenant had
maintained a policy of liability insurance in accordance with the provisions of
Subparagraph 10(b) above), Tenant agrees to pay promptly following demand and
receipt of a statement of such increase, but in no event later than fifteen
days after such demand and as Additional Rent, the amount of any such increase.
The provisions of the immediately preceding sentence shall survive termination
of this Lease with respect to any increase in Landlord's insurance premiums
attributable to Tenant's self-insurance.
Landlord shall maintain a policy or policies of comprehensive general
liability insurance insuring Landlord (and such others as are designated by
Landlord), against liability for personal injury, bodily injury, death and
damage to property occurring or resulting from an occurrence in, on or about
the Premises and the Common Areas, with such limits of coverage as Landlord may
from time to time determine are reasonably necessary for its protection.
Tenant shall, as Additional Rent, reimburse Landlord for the cost of any such
insurance policy within thirty (30) days after receipt of billing.
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<PAGE> 17
(c) Property Insurance. Landlord shall, at Tenant's
expense, obtain and keep in force during the Lease Term a policy of insurance
covering loss or damage to the Buildings and Tenant Improvements, in the amount
of the full replacement value thereof with Agreed Amount Endorsement, providing
protection against those perils included within the classification of "all
risk" insurance, plus a policy of rental income insurance in the amount of one
hundred percent (100%) of twelve (12) months' rent (including, without
limitation, sums payable as Additional Rent), together with such additional
coverages (such as earthquake and/or flood insurance) which Landlord may elect,
in its sole discretion, to maintain from time to time or which may be required
from time to time by Landlord's Lender. Tenant shall have no interest in nor
any right to the proceeds of any insurance procured by Landlord on the
Buildings and Tenant Improvements. Tenant shall pay to Landlord, as Additional
Rent, Tenant's Proportionate Share of the cost of such insurance procured and
maintained by Landlord on an annual basis within thirty (30) days after receipt
of demand therefore from Landlord. Tenant's liability for the cost of such
insurance shall be pro rated as of the commencement and termination of the
Lease Term. Tenant acknowledges that such insurance procured by Landlord shall
contain a deductible which reduces Tenant's cost for such insurance and, in the
event of loss or damage, Tenant shall be required to pay to Landlord Tenant's
Proportionate Share of the amount of such deductible. Landlord agrees that
during the Lease Term, Landlord's deductible under its earthquake insurance
policy shall not be less than ten percent of the then replacement value of the
Improvements.
(d) Tenant's Personal Property Insurance. Tenant
acknowledges that the insurance to be maintained Landlord on the Premises
pursuant to Paragraph 10(c) above will not insure any of Tenant's property.
Accordingly, Tenant, at Tenant's own expense, shall maintain in full force and
effect on all of its fixtures, equipment and personal property in the Premises,
a policy of "All Risk" coverage insurance to the extent of at least ninety
percent (90%) of their insurable value.
(e) Mutual Waiver of Subrogation. Tenant and Landlord
hereby mutually waive their respective rights of recovery against each other of
any loss of or damage to the property of either party, to the extent such loss
or damage is insured by any insurance policy required to be maintained by this
Lease or otherwise in force at the time of such loss or damage. Each party
shall obtain any special endorsements, if required by the insurer, whereby the
insurer waives its right of subrogation against the other party hereto. The
provisions of this Subparagraph 10(e) shall not apply in those instances in
which the waiver of subrogation would cause either party's insurance coverage
to be voided or otherwise made uncollectible.
11. Utilities. Tenant shall pay for all water, gas, light, heat,
power, electricity, telephone, trash pick-up, sewer charges, and all other
services supplied to or consumed on the Premises, and all taxes and surcharges
thereon.
12. Repairs and Maintenance.
(a) Landlord's Repairs. Subject to the provisions of
Paragraph 16, Landlord, at its expense, shall keep and maintain the
foundations, roof structure (excluding
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roof membrane) and exterior walls of the Buildings in good order and repair.
Landlord shall not, however, be required to maintain, repair or replace the
interior surface of exterior walls, nor shall Landlord be required to maintain,
repair or replace windows, doors, skylights or plate glass. Landlord shall
have no obligation to make repairs under this Subparagraph 12(a) until a
reasonable time after receipt of written notice from Tenant of the need for
such repairs.
(b) Tenant's Repairs. Except as expressly provided in
Subparagraph 12(a) above and Paragraph 16 below, Tenant shall, at its sole
cost, keep and maintain the entire Premises and every part thereof, including
without limitation, the windows, window frames, plate glass, glazing,
skylights, truck doors, doors and all door hardware, the interior walls and
partitions, interior surfaces of exterior walls, carpets, flooring, roof
membrane and the electrical, plumbing, lighting, heating, ventilating and air
conditioning systems and equipment in good order, condition and repair. The
term "repair" shall include replacements, restorations and/or renewals when
necessary as well as painting. Tenant's obligation shall extend to all
alterations, additions and improvements to the Premises, and all fixtures and
appurtenances therein and thereto. Tenant shall, at all times during the Lease
Term, have in effect a service contract for the maintenance of the heating,
ventilating and air conditioning ("HVAC") equipment serving the Premises with
an HVAC repair and maintenance contractor reasonably approved by Landlord.
The HVAC service contract shall provide for periodic inspection and servicing
at least once every three (3) months during the term hereof, and Tenant shall
provide Landlord with a copy of such contract and all periodic service reports.
Landlord shall assign to Tenant for the term of this Lease the benefit of all
warranties available to Landlord which would reduce the cost of performing the
obligations of Tenant to make repairs under this Subparagraph 12(b). Landlord
shall cooperate with Tenant in the enforcement of such warranties.
Should Tenant fail to commence to make repairs required of Tenant
hereunder within fifteen (15) days after notice from Landlord or should Tenant
fail thereafter to diligently complete the repairs, Landlord, in addition to
all other remedies available hereunder or by law and without waiving any
alternative remedies, may make the same, and in that event, Tenant shall
reimburse Landlord as additional rent for the cost of such maintenance or
repairs within thirty (30) days of written demand by Landlord.
Landlord shall have no maintenance or repair obligations whatsoever
with respect to the Premises except as expressly provided in Subparagraph 12(a)
and Paragraph 16. Tenant hereby expressly waives the provisions of Subsection
1 of Section 1932 and Sections 1941 and 1942 of the Civil Code of California
and all rights to make repairs at the expense of Landlord as provided in
Section 1942 of said Civil Code.
13. Alterations.
(a) Limitations. Tenant shall not make, or suffer to be
made, any alterations, improvements or additions in, on, about or to the
Premises or any part thereof, without the prior written consent of Landlord
(which consent shall not be unreasonably withheld) and without a valid building
permit issued by the appropriate governmental authority; provided, however,
Landlord's consent shall not be required for interior non-
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structural alterations which (i) with respect to each Building covered by this
Lease, cost less than Fifty Thousand Dollars ($50,000) per work of improvement
and less than Two Hundred Thousand Dollars ($200,000) in the aggregate for all
alterations made with respect to each Building covered by this Lease during the
entire Lease Term, (ii) will not adversely affect the building systems or
structural integrity of the Buildings, and (iii) will not affect the exterior
of the Buildings. Tenant shall give written notice to Landlord five (5) days
prior to employing any laborer or contractor to perform services related to, or
receiving materials for use upon the Premises, and prior to the commencement of
any work of improvement on the Premises. All alterations or improvements made
to the Premises by Tenant shall be made in accordance with applicable Laws and
in a first-class workmanlike manner.
At the time Tenant requests Landlord's consent to any alterations or
improvements, Tenant shall request a decision from Landlord in writing as to
whether Landlord will require Tenant, at Tenant's expense, to remove any such
alterations or improvements and restore the Premises to their prior condition
at the expiration or earlier termination of this Lease. If Tenant so requests
such a decision from Landlord and Landlord does not require, at the time
Landlord's consent is given to such alterations or improvements, that Tenant
remove such alterations or improvements at expiration or earlier termination of
this Lease, then such alterations or improvements to which Landlord consented
shall become the property of Landlord upon the expiration or earlier
termination of this Lease. If Tenant fails, at the time it requests Landlord's
consent to any alteration or improvement, to request a decision from Landlord
as to whether such alteration or improvement will be required to be removed by
Tenant, at Tenant's cost, prior to the expiration or earlier termination of
this Lease, or if Tenant makes any alterations or improvements to the Premises
for which Landlord's consent is not required under this Lease, then no less
than ninety (90) nor more than one hundred twenty (120) days prior to the
expiration or earlier termination of the Lease term, Tenant by written notice
to Landlord shall request Landlord to inform Tenant whether or not Landlord
desires to have any alterations or improvements made to the Premises by Tenant
as described in this sentence removed by Tenant, at Tenant's cost, prior to the
expiration or earlier termination of this Lease. Following receipt of such
notice, Landlord may elect to have all or a portion of Tenant's alterations or
improvements removed from the Premises at the expiration or earlier termination
of the Lease term, and Tenant shall, at its sole cost, remove at the expiration
or earlier termination of this Lease such alterations or improvements
designated by Landlord for removal and repair all damage to the Premises and
Common Areas arising from such removal. In the event Tenant fails to so
request Landlord's decision or fails to remove any alterations or improvements
designated by Landlord for removal, Landlord may remove any such alterations or
improvements made to the Premises by Tenant and repair all damage to the
Premises and Common Areas arising from such removal, any recover from Tenant
all costs and expenses incurred thereby. Tenant's obligation to pay such costs
and expenses to Landlord shall survive the expiration or termination of this
Lease. Unless Landlord requires that Tenant remove any such alteration,
improvement or addition, any alteration, addition or improvement to the
Premises, except movable furniture and trade fixtures not affixed to the
Premises, shall become the property of Landlord upon termination of the Lease
and shall remain upon and be surrendered with the Premises at the termination
of this Lease. Without limiting the generality of the foregoing, all heating,
lighting, electrical (including all wiring, conduit, outlets, drops, buss
ducts, main and subpanels), air conditioning, partitioning, drapery, and
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carpet installations made by Tenant regardless of how affixed to the Premises,
together with all other additions, alterations and improvements that have
become an integral part of the Buildings, shall be and become the property of
the Landlord upon termination of the Lease, and shall not be deemed trade
fixtures, and shall remain upon and be surrendered with the Premises at the
termination of this Lease.
(b) Alterations Required by Law. If, during the term
hereof, any alteration, addition or change of any sort to all or any portion of
the Premises or Buildings is required by Law, Tenant shall promptly make the
same at its sole cost and expense.
14. Acceptance of the Premises. By entry and taking possession of
the Premises pursuant to this Lease, Tenant accepts the Premises, the Buildings
and the Common Area as being in good and sanitary order, condition and repair
(subject to punch list items and reservation of claims of latent defects and
claims under any warranties given under the Improvement Agreement attached
hereto as EXHIBIT "C") and accepts the Premises and Common Area in their
condition existing as of the date of such entry and Tenant further accepts the
Tenant Improvements to be constructed by Landlord, if any, as being completed
in accordance with the plans and specifications for such Tenant Improvements,
except for punch list items and reservation of claims of latent defects and
claims under any warranties given under the Improvement Agreement referred to
above. If any of the Improvements to be constructed by Landlord do not comply
with applicable Building Codes, regulations or ordinances in effect as of the
Commencement Date of this Lease, then to the extent the applicable governmental
agency having jurisdiction over such non-compliance requires the same to be
cured or rectified, Landlord agrees to promptly cure or rectify such non-
compliance item(s) at no cost to Tenant. (unless Tenant's or any of its
agents', employees', contractors', architects', or other representatives' acts,
failure to act, negligence or willful misconduct cause such non-compliance, in
which event Landlord shall have no obligation hereunder to cure or rectify such
non-compliance item(s), but if Landlord does so cure or rectify such item(s),
then Tenant shall reimburse Landlord, within fifteen days following receipt of
written invoices or statements, for Tenant's equitable share (as reasonably
determined by Landlord) of the cost of curing or rectifying such non-compliance
item(s) to the extent attributable to Tenant or any of its agents, employees,
contractors, architects or other representatives. Tenant acknowledges that
neither the Landlord nor Landlord's agents has made any representation or
warranty as to the suitability of the Premises, Buildings or the Common Area to
the conduct of Tenant's business Any agreements, warranties or representations
not expressly contained herein (or in the Exhibits attached hereto) shall in no
way bind either Landlord or Tenant, and Landlord and Tenant expressly waive all
claims for damages by reason of any statement, representation, warranty,
promise or agreement, if any, not contained in this Lease. This Lease
constitutes the entire understanding between the parties hereto and no addition
to, or modification of, any term or provision of this Lease shall be effective
until set forth in a writing signed by both Landlord and Tenant.
15. Default.
(a) Events of Default. A breach of this Lease by Tenant
shall exist if any of the following events (hereinafter referred to as "Event
of Default") shall occur:
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(i) Default in the payment when due of any
installment of rent or other payment required to be made by Tenant hereunder,
where such default shall not have been cured within five (5) days after written
notice of such default is given to Tenant;
(ii) Tenant's failure to perform any other term,
covenant or condition contained in this Lease (or in any of the Exhibits
attached hereto) where such failure shall have continued for twenty (20) days
after written notice of such failure is given to Tenant; provided, however,
Tenant shall not be deemed in default if Tenant commences to cure such failure
within said twenty (20) day period and thereafter diligently prosecutes such
cure to completion;
(iii) Tenant's abandonment of any Building;
(iv) Tenant's assignment of its assets for the
benefit of its creditors;
(v) The sequestration of, attachment of, or
execution on, any substantial part of the property of Tenant or on any property
essential to the conduct of Tenant's business, shall have occurred and Tenant
shall have failed to obtain a return or release of such property within sixty
(60) days thereafter, or prior to sale pursuant to such sequestration,
attachment or levy, whichever is earlier;
(vi) Tenant hereunder shall commence any case,
proceeding or other action seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seek appointment of a receiver, trustee, custodian, or other similar official
for it or for all or any substantial part of its property;
(vii) Tenant shall take any corporate action to
authorize any of the actions set forth in clause (vi) above;
(viii) Any case, proceeding or other action against
Tenant shall be commenced seeking to have an order for relief entered against
it as debtor, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, and such case, proceeding
or other action (a) results in the entry of an order for relief against it
which is not fully stayed within ten (10) business days after the entry thereof
or (b) remains undismissed for a period of sixty (60) days; or
(ix) An Event of Default shall have occurred under
the Adjacent Lease.
(b) Remedies. Upon any Event of Default, Landlord shall
have the following remedies, in addition to all other rights and remedies
provided by law, to which Landlord may resort cumulatively, or in the
alternative:
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(i) Recovery of Rent. Landlord shall be entitled
to keep this Lease in full force and effect (whether or not Tenant shall have
abandoned the Premises) and to enforce all of its rights and remedies under
this Lease, including the right to recover rent and other sums as they become
due, plus interest at the Permitted Rate (as defined in Paragraph 33 below)
from the due date of each installment of rent or other sum until paid.
(ii) Termination. Landlord may terminate this
Lease by giving Tenant written notice of termination. On the giving of the
notice all of Tenant's rights in the Premises shall terminate. Upon the giving
of the notice of termination, Tenant shall surrender and vacate the Premises in
the condition required by Paragraph 34, and Landlord may re-enter and take
possession of the Premises and all the remaining improvements or property and
eject Tenant or any of Tenant's subtenants, assignees or other person or
persons claiming any right under or through Tenant or eject some and not others
or eject none. This Lease may also be terminated by a judgment specifically
providing for termination. Any termination under this paragraph shall not
release Tenant from the payment of any sum then due Landlord or from any claim
for damages or rent previously accrued or then accruing against Tenant. In no
event shall any one or more of the following actions by Landlord constitute a
termination of this Lease:
(A) Maintenance and preservation of the
Premises;
(B) Efforts to relet the Premises;
(C) Appointment of a receiver in order
to protect Landlord's interest hereunder;
(D) Consent to any subletting of the
Premises or assignment of this Lease by Tenant, whether pursuant to provisions
hereof concerning subletting and assignment or otherwise; or
(E) Any other action by Landlord or
Landlord's agents intended to mitigate the adverse effects from any breach of
this Lease by Tenant.
(iii) Damages. In the event this Lease is
terminated pursuant to Subparagraph 15.B(2) above, or otherwise, Landlord shall
be entitled to damages in the following sums:
(A) The worth at the time of award of
the unpaid rent which has been earned at the time of termination; plus
(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; plus
(C) The worth at the time of award of
the amount by which the unpaid rent for the balance of the term after the time
of award exceeds the amount of
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such rental loss that Tenant proves could be reasonably avoided; and
(D) Any other amount necessary to
compensate Landlord for all 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, without limitation,
the following: (i) expenses for cleaning, repairing or restoring the Premises;
(ii) real estate broker's fees, advertising costs and other expenses of
reletting the Premises which are reasonably incurred by Landlord; (iii)
reasonable costs of carrying the Premises such as taxes and insurance premiums
thereon, utilities and security precautions; (iv) reasonable expenses in
retaking possession of the Premises; and (v) reasonable attorneys' fees and
court costs.
(E) The "worth at the time of award" of
the amounts referred to in Subparagraphs (A) and (B) of this Paragraph
15(b)(iii), is computed by allowing interest at the Permitted Rate. The "worth
at the time of award" of the amounts referred to in Subparagraph (C) of this
Paragraph 15(b)(iii) is computed by discounting such amount at the discount
rate of the Federal Reserve Board of San Francisco at the time of award plus
one percent (1%). The term "rent" as used in this Paragraph 15 shall include
all sums required to be paid by Tenant to Landlord pursuant to the terms of
this Lease.
16. Destruction.
(a) Landlord's Duty to Restore. If the Improvements are
damaged by any peril after the Commencement Date of this Lease, Landlord shall
restore the Premises unless the Lease is terminated by Landlord pursuant to
Paragraph 16(b) or by Tenant pursuant to Paragraph 16(c). All insurance
proceeds available from the property damage insurance carried by Landlord
pursuant to Paragraph 10(c) shall be paid to and become the property of
Landlord. If this Lease is terminated pursuant to either Paragraphs 16(b) or
16(c), then all insurance proceeds available from the insurance required to be
carried by Tenant which covers loss to property that is Landlord's property or
would become Landlord's property on the termination of this Lease shall be paid
to and become the property of Landlord. If this Lease is not so terminated,
then upon receipt of the insurance proceeds (if the loss is covered by
insurance) and the issuance of all necessary governmental permits, Landlord
shall commence and diligently prosecute to completion the restoration of the
Premises, to the extent then allowed by Law, to substantially the same
condition in which the Premises were immediately prior to such damage.
Landlord's obligation to restore shall be limited to the Buildings and Tenant
Improvements constructed by Landlord as they existed as of the Commencement
Date, excluding any trade fixtures and/or personal property and/or alterations
constructed or installed by Tenant in the Premises. Tenant shall forthwith
replace or fully repair all trade fixtures installed by Tenant and existing at
the time of such damage or destruction.
(b) Landlord's Right to Terminate. Landlord shall have
the option to terminate this Lease in the event any of the following occurs,
which option may be exercised only by delivery to Tenant of a written notice of
election to terminate within thirty (30) days after the date of such damage:
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(i) The Improvements are damaged by any peril
either (i) covered by the type of insurance Landlord is required to carry
pursuant to Paragraph 10(c) or (ii) covered by valid and collectible insurance
actually carried by Landlord and in force at the time of such damage or
destruction, to such an extent that the estimated restoration cost exceeds
fifty percent (50%) of the then actual replacement cost thereof; provided,
however, that Landlord may not terminate this Lease pursuant to this
subparagraph if (1) the Improvements are damaged during the first two years of
the initial Lease Term, (2) Tenant exericises its Extension Option to extend
the Lease Term for one (1) three (3) year extended term as set forth in
Subparagraph 4(d) below by delivering written notice of such Extension Option
within thirty (30) days after Landlord has notified Tenant with its election to
terminate this Lease pursuant to this subparagraph, and (3) Tenant agrees in
writing to pay the amount of Landlord's deductible and deposits with Landlord
an amount equal to the same within thirty (30) days after Landlord has notified
Tenant with its election to terminate this Lease pursuant to this subparagraph.
(ii) The Improvements are damaged by any peril
both (i) not covered by the type of insurance Landlord is required to carry
pursuant to Paragraph 10(c) and (ii) not covered by valid and collectible
insurance actually carried by Landlord and in force at the time of such damage
or destruction, to such an extent that the estimated restoration cost exceeds
five percent (5%) of the then actual replacement cost thereof; provided,
however, that Landlord may not terminate this Lease pursuant to this
subparagraph if Tenant agrees in writing to pay the amount by which the
restoration cost exceed five percent (5%) of the replacement cost of the
Improvements and deposits with Landlord an amount equal to the estimated amount
of such excess within thirty (30) days after Landlord has notified Tenant with
its election to terminate this Lease pursuant to this subparagraph.
(iii) The Improvements are damaged by any peril
during the last twelve (12) months of the Lease Term to such an extent that the
estimated cost to restore equals or exceeds an amount equal to six (6) times
the Monthly Installment of rent then due; provided, however, that Landlord may
not terminate this Lease pursuant to this subparagraph if Tenant, at the time
of such damage, has an express written option to further extend the term of
this Lease and Tenant exercises such option to so further extend the Lease Term
for a period of three years within fifteen (15) days following the date of such
damage.
(iv) The Improvements are damaged by any peril
and, because of the Laws then in force, (i) may not be restored at reasonable
costs to substantially the same condition in which it was prior to such damage,
or (ii) if restored, may not be used for the same use being made thereof before
such damage.
(c) Tenant's Right to Terminate. If the Improvements are
damaged by any peril and Landlord does not elect to terminate this Lease or is
not entitled to terminate this Lease pursuant to Paragraph 16(b), then as soon
as reasonably practicable, Landlord shall furnish Tenant with the written
opinion of Landlord's architect or construction consultant
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as to when the restoration work required of Tenant may be completed. Tenant
shall have the option to terminate this Lease in the event any of the following
occurs, which option may be exercised only by delivery to Landlord of a written
notice of election to terminate within fifteen (15) days after Tenant receives
from Landlord the estimate of the time needed to complete such restoration:
(i) The Improvements are damaged by any peril
and, in the reasonable opinion of Landlord's architect or construction
consultant, the restoration of the Premises cannot be substantially completed
within one hundred eighty (180) days after the issuance of necessary building
permits for such restoration.
(ii) The Improvements are damaged by any peril
within twelve (12) months of the last day of the Lease Term, and, in the
reasonable opinion of Landlord's architect or construction consultant, the
restoration of the Premises cannot be substantially completed within the
earlier of (1) ninety (90) days after the date of such damage, or (2) thirty
(30) days prior to the expiration of the Lease Term.
(d) Abatement of Rent. In the event of damage to the
Premises which does not result in the termination of this Lease, the Monthly
Installment of rent and Additional Rent shall be temporarily abated during the
period of restoration in proportion to the degree to which Tenant's use of the
Premises is impaired by such damage. Tenant shall not be entitled to any
compensation from Landlord for loss of Tenant's property caused by such damage
or restoration (unless such loss was caused by the negligence or willful
misconduct of Landlord or its Agents and is not covered by insurance maintained
or required to be maintained by Tenant under this Lease). Under no
circumstances, however, shall Landlord be liable to Tenant for claims of lost
profits or loss of business or income. business caused by such damage or
restoration. Tenant hereby waives the provisions of Section 1932, Subdivision
2, and Section 1933, Subdivision 4, of the California Civil Code, and the
provisions of any similar law, hereinafter enacted.
17. Condemnation.
(a) Definition of Terms. For the purposes of this Lease,
the term (1) "Taking" means a taking of the Premises or damage to the Premises
related to the exercise of the power of eminent domain and includes a voluntary
conveyance, in lieu of court proceedings, to any agency, authority, public
utility, person or corporate entity empowered to condemn property; (2) "Total
Taking" means the taking of the entire Premises or so much of the Premises as
to prevent or substantially impair the use thereof by Tenant for the uses
herein specified; (3) "Partial Taking" means a Taking which does not constitute
a Total Taking; (4) "Date of Taking" means the date upon which the title to the
Premises, or a portion thereof, passes to and vests in the condemnor or the
effective date of any order for possession if issued prior to the date title
vests in the condemnor; and (5) "Award" means the amount of any award made,
consideration paid, or damages ordered as a result of a Taking.
(b) Rights. The parties agree that in the event of a
Taking all rights between them or in and to an Award shall be as set forth
herein and Tenant shall have no
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right to any Award except as set forth herein.
(c) Total Taking. In the event of a Total Taking during
the term hereof (1) the rights of Tenant under the Lease and the leasehold
estate of Tenant in and to the Premises shall cease and terminate as of the
Date of Taking; (2) Landlord shall refund to Tenant any prepaid rent; (3)
Tenant shall pay Landlord any rent or charges due Landlord under the Lease,
each prorated as of the Date of Taking; (4) Tenant shall receive from the Award
those portions of the Award attributable to trade fixtures of Tenant and for
moving expenses of Tenant; and (5) the remainder of the Award shall be paid to
and be the property of Landlord.
(d) Partial Taking. In the event of a Partial Taking
during the term hereof (1) the rights of Tenant under the Lease and the
leasehold estate of Tenant in and to the portion of the Premises taken shall
cease and terminate as of the Date of Taking; (2) from and after the Date of
Taking the Monthly Installment of rent shall be an amount equal to the product
obtained by multiplying the Monthly Installment of rent immediately prior to
the Taking by a fraction, the numerator of which is the number of square feet
contained in the Buildings after the Taking and the denominator of which is the
number of square feet contained in the Buildings prior to the Taking; (3)
Tenant shall receive from the Award the portions of the Award attributable to
trade fixtures of Tenant; and (4) the remainder of the Award shall be paid to
and be the property of Landlord.
18. Mechanics' Liens. Tenant shall (A) pay for all labor and
services performed for, materials used by or furnished to, Tenant or any
contractor employed by Tenant with respect to the Premises; (B) indemnify,
defend, protect and hold Landlord and the Premises harmless and free from any
liens, claims, liabilities, demands, encumbrances, or judgments created or
suffered by reason of any labor or services performed for, materials used by or
furnished to, Tenant or any contractor employed by Tenant with respect to the
Premises; (C) give notice to Landlord in writing five (5) days prior to
employing any laborer or contractor to perform services related to, or
receiving materials for use upon the Premises; and (D) permit Landlord to post
a notice of nonresponsibility in accordance with the statutory requirements of
California Civil Code Section 3094 or any amendment thereof. In the event
Tenant is required to post an improvement bond with a public agency in
connection with the above, Tenant agrees to include Landlord as an additional
obligee.
19. Inspection of the Premises. Tenant shall permit Landlord and
its agents to enter the Premises at any reasonable time for the purpose of
inspecting the same, performing Landlord's maintenance and repair
responsibilities (upon 24 hour prior notice except in an emergency), and
posting a notice of non-responsibility for alterations, additions or repairs.
20. Compliance with Laws. Tenant shall, at its own cost, comply
with all of the requirements of all municipal, county, state and federal
authorities now in force, or which may hereafter be in force, pertaining to
Tenant's use and occupancy of the Premises, and shall faithfully observe all
municipal, county, state and federal law, statutes or ordinances now in force
or which may hereafter be in force pertaining to the use and occupancy of the
Premises. The judgment of any court of competent jurisdiction or the admission
of Tenant
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in any action or proceeding against Tenant, whether Landlord be a party thereto
or not, that Tenant has violated any such ordinance or statute in the use and
occupancy of the Premises shall be conclusive of the fact that such violation
by Tenant has occurred. Tenant shall indemnify, protect, defend, and hold
Landlord harmless against any loss, expense, damage, attorneys' fees or
liability arising out of the failure of Tenant to comply with any applicable
law.
Landlord agrees to comply with all Laws applicable to the maintenance
and repair of the Common Areas; however, in the event such compliance requires
the construction or installation of any capital improvements or structural
improvements due to (i) Tenant's specific manner of use of its Premises or
change in use of its Premises, (ii) Tenant's or its Agents' negligence or
willful misconduct, (iii) any alterations, additions or improvements made or to
be made by Tenant in the Premises or in Building B or Building D, or (iv) any
applications for governmental approvals or permits requested by Tenant, Tenant
agrees to reimburse Landlord for the costs of such compliance within thirty
(30) days following receipt of a written invoice(s) by Tenant.
21. Subordination. The following provisions shall govern the
relationship of this Lease to any underlying lease, mortgage or deed of trust
which now or hereafter affects the Premises or Landlord's interest or estate
therein and any renewal, modification, consolidation, replacement, or extension
thereof (a "Security Instrument").
(a) Subsequent Security Instruments. At Landlord's
election, this Lease shall become subject and subordinate to any Security
Instrument created after the date of execution of this Lease provided that the
Lender holding such Security Agreement agrees in writing that in the event of
foreclosure of the Security Instrument in question, such Lender shall recognize
the tenancy of Tenant on the terms and conditions contained in this Lease so
long as Tenant is not in default under this Lease. Notwithstanding such
subordination, Tenant's right to quiet possession of the Premises shall not be
disturbed so long as Tenant is not in default and performs all of its
obligations under this Lease, unless this Lease is otherwise terminated
pursuant to its terms. However, if any Lender (as defined in Paragraph 31(h)
below) of Landlord so requires, this Lease shall become prior and superior to
any Security Instrument.
(b) Documents. Tenant shall execute any reasonable
document or instrument required by Landlord or any Lender to make this Lease
either prior or subordinate to a Security Instrument, which may include such
other matters as the Lender reasonably and customarily requires in connection
with such agreements, including provisions that the Lender not be liable for
(1) the return of any deposit or prepayment, unless the Lender receives it from
Landlord, and (2) any defaults on the part of Landlord occurring prior to the
time that the Lender takes possession of the Premises in connection with the
enforcement of its Security Instrument. Tenant's failure to execute any such
document or instrument within ten (10) days after written demand therefor shall
constitute a default by Tenant. Tenant's obligation to execute and deliver any
subordination agreement to any future Lender shall be conditioned upon such
Lender agreeing that in the event of foreclosure of the mortgage or termination
of the ground lease in question, such Lender shall recognize the tenancy of
Tenant on the terms and conditions contained in this
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Lease so long as Tenant is not in default under this Lease.
(c) Tenant's Attornment. Tenant shall attorn (1) to any
purchaser of the Premises at any foreclosure sale or private sale conducted
pursuant to any Security Instrument encumbering the Premises; (2) to any
grantee or transferee designated in any deed given in lieu of foreclosure; or
(3) to the lessor under any underlying ground lease should such ground lease be
terminated; provided such purchaser, transferee or lessor assumes Landlord's
obligations under the Lease..
22. Holding Over. This Lease shall terminate without further
notice at the expiration of the Lease Term. Any holding over by Tenant after
expiration (or any holding over by Tenant in a Building after the termination
of this Lease with respect to such Building under Subparagraph 4(c) hereof)
shall not constitute a renewal or extension or give Tenant any rights in or to
the Premises (or any such Building) except as expressly provided in this Lease.
Any holding over after the expiration with the consent of Landlord shall,
unless otherwise expressly agreed, be construed to be a tenancy from month to
month, at one hundred fifty percent (150%) of the monthly rent for the last
month of the Lease Term, and shall otherwise be on the terms and conditions
herein specified insofar as applicable.
23. Notices. Any notice required or desired to be given under
this Lease shall be in writing with copies directed as indicated below and
shall be personally served or given by mail. Any notice given by mail shall be
deemed to have been given when seventy-two (72) hours have elapsed from the
time such notice was deposited in the United States mails, certified and
postage prepaid, return receipt requested, addressed to the party to be served
with a copy as indicated herein at the last address given by that party to the
other party under the provisions of this paragraph. At the date of execution
of this Lease, the address of Landlord is:
SB&D CO., INC.
511 Division Street
Campbell, California 95008
ATTN: Mr. Scott Trobbe
and the address of Tenant is:
CISCO SYSTEMS, INC.
170 West Tasman Drive
San Jose, CA. 95124
ATTN: Chris Hampton
24. Attorneys' Fees. In the event either party shall bring any
action or legal proceeding for damages for any alleged breach of any provision
of this Lease, to recover rent or possession of the Premises, to terminate this
Lease, or to enforce, protect or establish any term or covenant of this Lease
or right or remedy of either party, the
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prevailing party shall be entitled to recover as a part of such action or
proceeding, reasonable attorneys' fees and court costs, including attorneys'
fees and costs for appeal, as may be fixed by the court or jury. The term
"prevailing party" shall mean the party who received substantially the relief
requested, whether by settlement, dismissal, summary judgment, judgment, or
otherwise.
25. Subleasing and Assignment.
(a) Landlord's Consent Required. Tenant's interest in
this Lease is not assignable, by operation of law or otherwise, nor shall
Tenant have the right to sublet the Premises, transfer any interest of Tenant
therein or permit any use of the Premises by another party, without the prior
written consent of Landlord to each such assignment, subletting, transfer or
use, which consent Landlord agrees not to withhold unreasonably subject to the
provisions of Subparagraph 25(c) below. A consent to one assignment,
subletting, occupancy or use by another party shall not be deemed to be a
consent to any subsequent assignment, subletting, occupancy or use by another
party. Any assignment or subletting without such consent shall be void and
shall, at the option of Landlord, terminate this Lease.
Landlord's waiver or consent to any assignment or subletting hereunder
shall not relieve Tenant from any obligation under this Lease unless the
consent shall so provide.
(b) Transferee Information Required. If Tenant desires
to assign its interest in this Lease or sublet the Premises, or transfer any
interest of Tenant therein, or permit the use of the Premises by another party
(hereinafter collectively referred to as a "Transfer"), Tenant shall give
Landlord at least fifteen (15) days prior written notice of the proposed
Transfer and of the terms of such proposed Transfer, including, but not limited
to, the name and legal composition of the proposed transferee, a financial
statement of the proposed transferee, the nature of the proposed transferee's
business to be carried on in the Premises (including a list of the type and
quantities of all Hazardous Materials to be used by the transferee on the
Premises), the payment to be made or other consideration to be given to Tenant
on account of the Transfer, and such other pertinent information as may be
requested by Landlord, all in sufficient detail to enable Landlord to evaluate
the proposed Transfer and the prospective transferee.
(c) Landlord's Rights. In the event Tenant seeks to
Transfer its interest in this Lease or the Premises, Landlord shall have the
following options, which may be exercised at its sole choice without limiting
Landlord in the exercise of any other right or remedy which Landlord may have
by reason of such proposed Transfer:
(i) [Intentionally Omitted]
(ii) Landlord may consent to the proposed Transfer
on the condition that Tenant agrees to pay to Landlord, as additional rent,
fifty percent (50%) of any and all rents or other consideration (including key
money) received by Tenant from the transferee by reason of such Transfer in
excess of the rent (prorated in the event of any sublease by Tenant) payable by
Tenant to Landlord under this Lease (less any brokerage commissions,
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costs of tenant improvements installed by Tenant for the transferee, attorneys'
fees and advertising expenses incurred by Tenant in connection with the
Transfer). Tenant expressly agrees that the foregoing is a reasonable
condition for obtaining Landlord's consent to any Transfer; or
(iii) Landlord may reasonably withhold its consent
to the proposed Transfer.
(d) Permitted Transfers. Notwithstanding the foregoing,
Tenant may, without Landlord's prior written consent, assign its interest in
the Lease or sublet the Premises or a portion thereof to (i) a subsidiary,
affiliate, division or corporation controlled by or under common control with
Tenant; (ii) a successor corporation related to Tenant by merger,
consolidation, non-bankruptcy reorganization or government action; or (iii) a
purchaser of substantially all of the Tenant's assets; provided that, in each
instance described above, (a) the transferee assumes the obligations of the
Tenant under this Lease in a written instrument delivered to Landlord; (b) the
transferor tenant remains liable as a primary obligor for the obligations of
Tenant under this Lease; and (c) the financial strength of the transferee
tenant is sufficient to meet its obligations under this Lease as reasonably
determined by Landlord. Any permitted transferee of Tenant's interest in this
Lease or the Premises, or portion thereof, pursuant to the terms of this
Subparagraph 25(d) is referred to herein as an "Affiliate" of Tenant.
26. Successors. The covenants and agreements contained in this
Lease shall be binding on the parties hereto and on their respective heirs,
successors and assigns (to the extent the Lease is assignable).
27. Mortgagee Protection. In the event of any default on the part
of Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage encumbering the
Premises, whose address shall have been previously furnished to Tenant. So
long as such beneficiary or mortgagee is making reasonable efforts to cure the
default, including, but not limited to, obtaining possession of the Premises by
power of sale or judicial foreclosure, if such should prove necessary to effect
a cure, Tenant shall not have the right to terminate this Lease.
28. Estoppel Certificate. Tenant agrees within five (5) business
days following reasonable request by Landlord to (A) execute and deliver to
Landlord any documents, including estoppel certificates presented to Tenant by
Landlord, (1) certifying that this Lease is unmodified and in full force and
effect and the date to which the rent and other charges are paid in advance, if
any, and (2) acknowledging that there are not, to Tenant's knowledge, any
uncured defaults on the part of Landlord hereunder, or specifying the defaults,
if any, and (3) evidencing the status of the Lease as may be required either by
a Lender making a loan to Landlord to be secured by a deed of trust or mortgage
covering the Premises or a purchaser of the Premises from Landlord and (B) to
deliver to Landlord the financial statement of Tenant with an opinion of a
certified public accountant, including a balance sheet and profit and loss
statement, for the last completed fiscal year all prepared in accordance with
generally accepted accounting principles consistently applied. Tenant's
failure to deliver an estoppel certificate within ten (10) days following such
request shall be
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an Event of Default under this Lease.
Landlord agrees within five (5) business days following reasonable
request by Tenant to execute and deliver to Tenant any documents, including
estoppel certificates presented to Landlord by Tenant, (1) certifying that this
Lease is unmodified and in full force and effect and the date to which the rent
and other charges are paid in advance, if any, and (2) acknowledging that there
are not, to Landlord's knowledge, any uncured defaults on the part of Tenant
hereunder, or specifying the defaults, if any, and (3) evidencing the status of
the Lease as may be required either by a Lender making a loan to Tenant to be
secured by this Lease (if permitted hereunder) or an assignee or sublessee of
Tenant. Landlord's failure to deliver an estoppel certificate within ten (10)
days following such request shall be an event of default under this Lease (and
Landlord shall have ten(10) days following written notice of such event of
default within which to cure the same).
29. Surrender of Lease Not Merger. The voluntary or other
surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not
work a merger and shall, at the option of Landlord, terminate all or any
existing subleases or subtenants, or operate as an assignment to Landlord of
any or all such subleases or subtenants.
30. Waiver. The waiver by Landlord or Tenant of any breach of any
term, covenant or condition herein contained shall not be deemed to be a waiver
of such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. Any waiver shall be in
writing and signed by both Landlord and Tenant.
31. General.
(a) Captions. The captions and paragraph headings used
in this Lease are for the purposes of convenience only. They shall not be
construed to limit or extend the meaning of any part of this Lease, or be used
to interpret specific sections. The word(s) enclosed in quotation marks shall
be construed as defined terms for purposes of this Lease. As used in this
Lease, the masculine, feminine and neuter and the singular or plural number
shall each be deemed to include the other whenever the context so requires.
(b) Definition of Landlord. The term Landlord as used in
this Lease, so far as the covenants or obligations on the part of Landlord are
concerned, shall be limited to mean and include only the owner at the time in
question of the fee title of the Premises, and in the event of any transfer or
transfers of the title of such fee, the Landlord herein named (and in case of
any subsequent transfers or conveyances, the then grantor) shall be
automatically freed and relieved of all liability with respect to performance
of any covenants or obligations on the part of Landlord contained in this Lease
to be performed after the date of such transfer or conveyance; provided that
any funds in the hands of Landlord or the then grantor at the time of such
transfer, in which Tenant has an interest, shall be turned over to the grantee.
It is intended that the covenants and obligations contained in this Lease on
the part of Landlord shall, subject as aforesaid, be binding upon each
Landlord, its heirs, personal representatives, successors and assigns only
during its respective period of ownership.
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(c) Time of Essence. Time is of the essence for the
performance of each term, covenant and condition of this Lease.
(d) Severability. In case any one or more of the
provisions contained herein, except for the payment of rent, shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Lease, but this Lease shall be construed as if such invalid, illegal or
unenforceable provision had not been contained herein. This Lease shall be
construed and enforced in accordance with the laws of the State of California.
(e) Quite Enjoyment. Upon Tenant paying the rent for the
Premises and observing and performing all of the covenants, conditions and
provisions on Tenant's part to be observed and performed hereunder, Tenant
shall have quiet possession of the Premises for the entire term hereof subject
to all of the provisions of this Lease.
(f) Law. As used in this Lease, the term "Law" or "Laws"
shall mean any judicial decision, statute, constitution, ordinance, resolution,
regulation, rule, administrative order, or other requirement of any government
agency or authority having jurisdiction over the parties to this Lease or the
Premises or both, in effect at the Commencement Date of this Lease or any time
during the Lease Term, including, without limitation, any regulation, order, or
policy of any quasi-official entity or body (e.g., board of fire examiners,
public utility or special district).
(g) Agent. As used in this Lease, the term "Agent" shall
mean, with respect to either Landlord or Tenant, its respective agents,
employees, contractors (and their subcontractors), and invitees (and in the
case of Tenant, its subtenants).
(h) Lender. As used in this Lease, the term "Lender"
shall mean any beneficiary, mortgagee, secured party or other holder of any
deed of trust, mortgage or other written security device or agreement affecting
Landlord's interest in the Premises.
32. Sign. Tenant shall not place or permit to be placed any sign
or decoration on the Land or the exterior of the Building without the prior
written consent of Landlord, which shall not be unreasonably withheld. Any
sign or declaration placed on the Land or the exterior of the Building by or
for Tenant shall be in compliance with all applicable laws, ordinances, rules
and regulations. Tenant, upon written notice by Landlord, shall immediately
remove any sign or decoration that Tenant has placed or permitted to be placed
on the Parcel or the exterior of the Building without the prior written consent
of Landlord, and if Tenant fails to so remove such sign or decoration within
five (5) days after Landlord's written notice, Landlord may enter upon the
Premises and remove said sign or decoration and Tenant agrees to pay Landlord,
as additional rent upon demand, the cost of such removal. At the expiration or
any earlier termination of this Lease, Tenant shall remove any sign which it
has placed on the Land or applicable Building and shall repair any damage
caused by the installation or removal of such sign.
33. Interest on Past Due Obligations. Any Monthly Installment of
rent due from Tenant, or any other sum due under this Lease from Tenant, which
is received by Landlord
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after the date ten (10) days following the date written notice is given by
Landlord to Tenant that such sum has not been paid when due, shall bear
interest from said due date until paid, at an annual rate equal to the greater
of (the "Permitted Rate"): (1) ten percent (10%); or (2) five percent (5%) plus
the rate established by the Federal Reserve Bank of San Francisco, as of the
twenty-fifth (25th) day of the month immediately preceding the due date, on
advances to member banks under Sections 13 and 13(a) of the Federal Reserve
Act, as now in effect or hereafter from time to time amended. Payment of such
interest shall not excuse or cure any default by Tenant. In addition, Tenant
shall pay all costs and attorneys' fees incurred by Landlord in collection of
such amounts.
34. Surrender of the Premises. On the last day of the term
hereof, or on the sooner termination of this Lease (or any termination of this
Lease with respect to a particular Building under Subparagraph 4(c) hereof),
Tenant shall surrender the Premises (or such Building) to Landlord in their/its
condition existing as of the Commencement Date of this Lease (subject to
approved alterations and improvements which Tenant shall not be required under
this Lease to remove on or prior to the expiration or earlier termination of
this Lease), ordinary wear and tear excepted, the air conditioning and heating
equipment serviced and repaired by a reputable and licensed service firm, all
floors cleaned and waxed, all to the reasonable satisfaction of Landlord.
Tenant shall remove all of Tenant's personal property and trade fixtures from
the Premises (or such Building), and all property not so removed shall be
deemed abandoned by Tenant. Tenant, at its sole cost, shall repair any damage
to the Premises (or such Building) caused by the removal of Tenant's personal
property, machinery and equipment, which repair shall include, without
limitation, the patching and filling of holes and repair of structural damage.
If the Premises (or such Building) are not so surrendered at the termination of
this Lease, Tenant shall indemnify, defend, protect and hold Landlord harmless
from and against loss or liability resulting from delay by Tenant in so
surrendering the Premises (or such Building) including without limitation, any
claims made by any succeeding tenant or losses to Landlord due to lost
opportunities to lease to succeeding tenants.
35. Authority. The undersigned parties hereby warrant that they
have proper authority and are empowered to execute this Lease on behalf of
Landlord and Tenant, respectively.
36. CC&R's. This Lease is made subject to all matters of public
record affecting title to the property of which the Premises are a part.
Tenant shall abide by and comply with all private conditions, covenants and
restrictions of public record hereafter affecting the Premises or the Land and
any amendment thereof (the "CC&R's). All assessments and charges which are
imposed, levied or assessed against the Premises pursuant to the
above-described covenants, conditions and restrictions shall be paid by Tenant
as Additional Rent. Tenant acknowledges that CC&R's or a reciprocal parking
and access easement agreement (the "REA") may be executed by Landlord in
connection with a possible division of the Land into two (2) approximately
equal sized parcels and that Tenant shall subordinate this Lease to such CC&R's
or REA so long as the same does not materially increase Tenant's obligations
under this Lease or materially impair Tenant's use and enjoyment of the
Premises or the Adjacent Premises (to the extent Tenant has a leasehold
interest in the same).
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37. Brokers. Tenant represents and warrants to Landlord that it
has not dealt with any broker respecting this transaction other than CPS
Associates and hereby agrees to indemnify and hold Landlord harmless from and
against any brokerage commission or fee, obligation, claim or damage (including
attorneys' fees) paid or incurred respecting any broker claiming through Tenant
or with which/whom Tenant has dealt.
38. Limitation on Landlord's Liability. Tenant, for itself and
its successors and assigns (to the extent this Lease is assignable), hereby
agrees that in the event of any actual, or alleged, breach or default by
Landlord under this Lease that:
(a) Tenant's sole and exclusive remedy and recourse
against Landlord shall be as against Landlord's interest in the Premises;
(b) No partner, shareholder, officer or director of
Landlord shall be sued or named as a party in a suit or action (except as may
be necessary to secure jurisdiction of the Landlord);
(c) No service of process shall be made against any
partner, shareholder, officer or director of Landlord (except as may be
necessary to secure jurisdiction of the Landlord);
(d) No partner, shareholder, officer or director of
Landlord shall be required to answer or otherwise plead to any service of
process;
(e) No judgment will be taken against any partner,
shareholder, officer or director of Landlord;
(f) Any judgment taken against any partner, shareholder,
officer, or director of Landlord may be vacated and set aside at any time nunc
pro tunc;
(g) No writ of execution will ever be levied against the
assets of any partner, shareholder, officer or director of Landlord; and
(h) The covenants and agreements of Tenant set forth in
this Paragraph 38 shall be enforceable by Landlord and any partner,
shareholder, officer or director of Landlord.
39. Hazardous Material.
(a) Definitions. As used herein, the term "Hazardous
Material" shall mean any substance: (i) the presence of which requires
investigation or remediation under any federal, state or local statute,
regulation, ordinance, order, action, policy or common law; (ii) which is or
becomes defined as a "hazardous waste," "hazardous substance," pollutant or
contaminant under any federal, state or local statute, regulation, rule or
ordinance or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.) and/or the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.); (iii)
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which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, the State of California or any political
subdivision thereof; (iv) the presence of which on the Premises causes a
nuisance upon the Premises or to adjacent properties or poses a hazard to the
health or safety of persons on or about the Premises; (v) the presence of which
on adjacent properties could constitute a trespass by Landlord or Tenant; (vi)
without limitation which contains gasoline, diesel fuel or other petroleum
hydrocarbons; (vii) without limitation which contains polychlorinated biphenyls
(PCBs), asbestos or urea formaldehyde foam insulation; or (viii) without
limitation radon gas.
For purposes of this Lease, the term "Hazardous Materials" shall not include
hazardous or toxic materials used in connection with general office uses (such
as toner, white out, office cleaning supplies) so long as the same are used in
compliance with applicable environmental laws, rules and regulations.
(b) Permitted Use. Subject to the compliance by Tenant
with the provisions of Subparagraphs c, d, e, f, g, h, i and j below, Tenant
shall be permitted to use and store on the Premises those Hazardous Materials
listed in EXHIBIT "D" attached hereto, in the quantities set forth in EXHIBIT
"D".
(c) Hazardous Materials Management Plan.
(i) Prior to Tenant using, handling, transporting
or storing any Hazardous Material at or about the Premises (including, without
limitation, those listed in EXHIBIT "D"), Tenant shall submit to Landlord a
Hazardous Materials Management Plan ("HMMP") for Landlord's review and
approval, which approval shall not be unreasonably withheld. The HMMP shall
describe: (aa) the quantities of each material to be used, (bb) the purpose for
which each material is to be used, (cc) the method of storage of each material,
(dd) the method of transporting each material to and from the Premises and
within the Premises, (ee) the methods Tenant will employ to monitor the use of
the material and to detect any leaks or potential hazards, and (ff) any other
information any department of any governmental entity (city, state or federal)
requires prior to the issuance of any required permit for the Premises or
during Tenant's occupancy of the Premises. Landlord may, but shall have no
obligation to review and approve the foregoing information and HMMP, and such
review and approval or failure to review and approve shall not act as an
estoppel or otherwise waive Landlord's rights under this Lease or relieve
Tenant of its obligations under this Lease. If Landlord determines reasonably
and in good faith by inspection of the Premises or review of the HMMP that the
methods in use or described by Tenant are not adequate in Landlord's good faith
judgment to prevent or eliminate the existence of environmental hazards, then
Tenant shall not use, handle, transport, or store such Hazardous Materials at
or about the Premises unless and until such methods are approved by Landlord
reasonably and in good faith and added to an approved HMMP. Once approved by
Landlord, Tenant shall strictly comply with the HMMP and shall not change its
use, operations or procedures with respect to Hazardous Materials without
submitting an amended HMMP for Landlord's review and approval as provided
above.
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(ii) Tenant shall pay to Landlord when Tenant
submits an HMMP (or amended HMMP) the amount reasonably determined by Landlord
to cover all Landlord's reasonable costs and expenses reasonably incurred in
connection with Landlord's review of the HMMP which costs and expenses shall
include, among other things, all reasonable out-of-pocket fees of attorneys,
architects, or other consultants incurred by Landlord in connection with
Landlord's review of the HMMP. Landlord shall have no obligation to consider a
request for consent to a proposed HMMP unless and until Tenant has paid all
such costs and expenses to Landlord, and Tenant shall pay all such costs and
expenses to Landlord irrespective of whether Landlord consents to such proposed
HMMP. Tenant shall pay to Landlord on demand the excess, if any, of such costs
and expenses actually incurred by Landlord over the amount of such costs and
expenses actually paid by Tenant, and Landlord shall promptly refund to Tenant
the excess, if any, of such costs and expenses actually paid by Tenant over the
amount of such costs and expenses actually incurred by Landlord.
(d) Use Restriction. Except as specifically allowed in
Subparagraph (c) above, Tenant shall not cause or permit any Hazardous Material
to be used, stored, generated, discharged, transported to or from, or disposed
of in or about the Premises, or any other land or improvements in the vicinity
of the Premises. Without limiting the generality of the foregoing, Tenant, at
its sole cost, shall comply with all Laws relating to the storage, use,
generation, transport, discharge and disposal by Tenant or its Agents of any
Hazardous Material. If the presence of any Hazardous Material on the Premises
caused or permitted by Tenant or its Agents results in contamination of the
Premises or any soil, air, ground or surface waters under, through, over, on,
in or about the Premises, Tenant, at its expense, shall promptly take all
actions necessary to return the Premises and/or the surrounding real property
to the condition existing prior to the appearance of such Hazardous Material.
(e) Tenant Indemnity. Tenant shall defend, protect, hold
harmless and indemnify Landlord and its Agents and Lenders with respect to all
actions, claims, losses (including, diminution in value of the Premises),
fines, penalties, fees (including, but not limited to, attorneys' and
consultants' fees) costs, damages, liabilities, remediation costs,
investigation costs, response costs and other expenses arising out of,
resulting from, or caused by any Hazardous Material used, generated,
discharged, transported to or from, stored, or disposed of by Tenant or its
Agents in, on, under, over, through or about the Premises and/or the
surrounding real property. Tenant shall not suffer any lien to be recorded
against the Premises as a consequence of the disposal of any Hazardous Material
on the Premises by Tenant or its Agents, including any so called state, federal
or local "super fund" lien related to the "clean up" of any Hazardous Material
in, over, on, under, through, or about the Premises.
(f) Compliance. Tenant shall immediately notify Landlord
of any inquiry, test, investigation, enforcement proceeding by or against
Tenant or the Premises concerning any Hazardous Material. Any remediation plan
prepared by or on behalf of Tenant must be submitted to Landlord prior to
conducting any work pursuant to such plan and prior to submittal to any
applicable government authority and shall be subject to Landlord's consent.
Tenant acknowledges that Landlord, as the owner of the Land and the Premises,
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at its election, shall have the sole right to negotiate, defend, approve and
appeal any action taken or order issued with regard to any Hazardous Material
by any applicable governmental authority.
(g) Assignment and Subletting. It shall not be
unreasonable for Landlord to withhold its consent to any proposed assignment or
subletting if (i) the proposed assignee's or subtenant's anticipated use of the
Premises involves the storage, generation, discharge, transport, use or
disposal of any Hazardous Material; (ii) if the proposed assignee or subtenant
has been required by any prior landlord, lender or governmental authority to
"clean up" or remediate any Hazardous Material; (iii) if the proposed assignee
or subtenant is subject to investigation or enforcement order or proceeding by
any governmental authority in connection with the use, generation, discharge,
transport, disposal or storage of any Hazardous Material.
(h) Surrender. Upon the expiration or earlier
termination of the Lease, Tenant, at its sole cost, shall remove all Hazardous
Materials from the Premises that Tenant or its Agents introduced to the
Premises. If Tenant fails to so surrender the Premises, Tenant shall
indemnify, protect, defend and hold Landlord harmless from and against all
damages resulting from Tenant's failure to surrender the Premises as required
by this Paragraph, including, without limitation, any actions, claims, losses,
liabilities, fees (including, but not limited to, attorneys' and consultants'
fees), fines, costs, penalties, or damages in connection with the condition of
the Premises including, without limitation, damages occasioned by the inability
to relet the Premises or a reduction in the fair market and/or rental value of
the Premises by reason of the existence of any Hazardous Material in, on, over,
under, through or around the Premises.
(i) Right to Appoint Consultant. Landlord shall have the
right to appoint a consultant, at Tenant's expense, to conduct an investigation
to determine whether any Hazardous Material is being used, generated,
discharged, transported to or from, stored or disposed of in, on, over,
through, or about the Premises, in an appropriate and lawful manner. If Tenant
has violated any Law or covenant in this Lease regarding the use, storage or
disposal of Hazardous Materials on or about the Premises, Tenant shall
reimburse Landlord for the cost of such investigation. Tenant, at its expense,
shall comply with all reasonable recommendations of the consultant required to
conform Tenant's use, storage or disposal of Hazardous Materials to the
requirements of applicable Law or to fulfill the obligations of Tenant
hereunder.
(j) Holding Over. If any action of any kind is required
or requested to be taken by any governmental authority to clean- up, remove,
remediate or monitor any Hazardous Material (the presence of which is the
result of the acts or omissions of Tenant or its Agents) and such action is not
completed prior to the expiration or earlier termination of the Lease, Tenant
shall be deemed to have impermissibly held over with respect to such portion of
the Premises affected by the Hazardous Materials or the clean up, remediation
or monitoring activities until such time as such required action is completed,
and Landlord shall be entitled to all damages directly or indirectly incurred
in connection with such holding over, including without limitation, damages
occasioned by the inability to re-let the Premises or a reduction of the fair
market and/or rental value of the Premises.
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(k) Existing Environmental Reports. Tenant hereby
acknowledges that it has received, read and reviewed the reports and test
results described in EXHIBIT "E" attached hereto and made a part hereof (the
"Existing Environmental Reports") The Hazardous Materials, if any, currently
present in, on or under the Premises as described in the Existing Environmental
Reports are referred to herein as the "Existing Environmental Conditions").
Tenant shall not be responsible for remediating any Existing Environmental
Condition unless Tenant exacerbates any Existing Environmental Condition.
(l) Provisions Survive Termination. The provisions of
this Paragraph 39 shall survive the expiration or termination of this Lease.
(m) Controlling Provisions. The provisions of this
Paragraph 39 are intended to govern the rights and liabilities of the Landlord
and Tenant hereunder respecting Hazardous Materials to the exclusion of any
other provisions in this Lease that might otherwise be deemed applicable. The
provisions of this Paragraph 39 shall be controlling with respect to any
provisions in this Lease that are inconsistent with this Paragraph 39.
40. Cooperation. Tenant shall reasonably cooperate with Landlord
in granting such consents, easements and licenses to Landlord and third parties
as may be necessary or convenient for Landlord to demolish, develop, repair,
lease, subdivide or operate the Common Area or any Building as to which Tenant
terminates this Lease under Subparagraph 4(c) above, provided that Tenant's use
of, and access to, the Premises are not materially impaired.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth below.
TENANT:
CISCO SYSTEMS, INC.,
a California corporation
DATED: November 26, 1996 By: /s/Nancy Bareilles
Name: Nancy Bareilles
Title: Vice President of Worldwide
Real Estate and Workplace
Resources
LANDLORD:
. SBC&D CO., INC.,
a California corporation
DATED: November 26, 1996 By: /s/Scott R. Trobbe
Name: Scott R. Trobbe
Title: EVP
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EXHIBIT "A"
SCHEDULE C
LEGAL DESCRIPTION
All that certain real property situate in the City of San Jose, County of Santa
Clara, State of California described as follows:
PARCEL ONE:
Beginning at an iron pipe found one foot below the surface of the ground in the
Northerly line of the Alviso and Milpitas Road at the Southwesterly corner of
that certain 35.75 acre tract (designated as Parcel Three) conveyed by San Jose
Abstract & Title Insurance Co., a corporation, to Birger E. Williamson, et ux,
by deed dated May 20, 1948 and recorded June 9, 1948 in Book 1628 of Official
Records, page 274, Santa Clara County Records, and running thence Easterly
along said Northerly line of said Alviso and Milpitas Road N. 89 deg. 50' E.
996.63 feet to an iron pipe set in the bottom of a drainage ditch; thence
leaving said road and running Northerly and parallel with the Westerly line of
said 35.75 acre tract, N. 0 deg. 06' E. 783.00 feet to an iron pipe; thence
Westerly and along a line parallel with and distant 15 feet at right angles
Northerly from the Northernmost row of pear trees, S. 89 deg. 56' 30" W. 996.63
feet to an iron pipe set one foot below the surface of the ground in the said
Westerly line of said 35.75 acre tract; and thence Southerly and along said
Westerly line of said 35.75 acre tract, S. 0 deg. 06' W. 784.91 feet to the
point of beginning.
Being a part of said 35.75 acre tract and a part of that certain 35.75 acre
tract (designated as Parcel Two) conveyed by said San Jose Abstract & Title
Insurance Co., to said Birger E. Williamson, et ux, by the above mentioned deed
and being located in the Esteros Rancho, as patented. Course True, Surveyed
August 17, 1948 by F.A. Herrmann, Registered Civil Engineer No. 1616.
Excepting therefrom that certain parcel of land conveyed to the City of San
Jose, a municipal corporation, by deed dated September 20, 1984 and recorded
December 31, 1984 in Book J 150 of Official Records, page 718, described as
follows:
Beginning at a point on the Northerly line of the above described 17.945 acre
parcel of land, distant thereon S. 89 deg. 57' 27" W. 77.51 feet from the
Northeasterly corner of said parcel; thence along said Northerly line N. 89
deg. 57' 27" E. 77.51 feet to said Northeasterly corner; thence leaving said
corner along the Easterly line of said parcel S. deg. 06' 57" W. 75.07 feet to
a point; thence leaving said Easterly line N. 45 deg. 53' 03" W. 107.76 feet to
the point of beginning.
PARCEL TWO:
A portion of that certain 61.326, more or less, acre parcel of land shown on
the Record of Survey filed for record in the office of the Recorder of the
County of Santa Clara in Book 445 of Maps, at pages 31 and 32, more
particularly described as follows:
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Beginning at a point on the general Westerly line of the above described 61.326
acre parcel of land, said point being the Northwesterly corner of that certain
17.945 acre parcel shown as the "Lands of Wong, et al." on said point of
beginning and running along said general Westerly line N.0 deg. 06' 57" E.
30.00 feet; thence leaving said general Westerly line Easterly along the arc of
a curve to the right from a tangent which bears N. 89 deg. 57' 27" E. having a
radius of 330.00 feet, a central angle of 18 deg. 11' 42" for a arc distance of
104.79 feet to a point of reverse curvature; thence Easterly along the arc of a
curve to the left, tangent to the preceding curve having a radius of 270.00
feet, a central angle of 18 deg. 11' 42" for an arc distance of 85.74 feet to a
point on the Northerly line of said 17.945, more or less, acre parcel; thence
along said Northerly line S. 89 deg. 57' 27" W. 187.43 feet to the point of
beginning.
ARB No: 015-30-006.01, 007
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EXHIBIT "B"
SITE PLAN
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EXHIBIT "C"
IMPROVEMENT AGREEMENT
This Improvement Agreement is made part of that Lease Agreement dated
November 26, 1996 (the "Lease"), by and between SBC&D CO., INC., a California
corporation ("Landlord") and CISCO SYSTEMS, INC., a California corporation
("Tenant").
Except as otherwise provided herein, all defined or capitalized terms
used herein shall have the same meaning as ascribed to such terms in the Lease.
A default by either party under this Improvement Agreement shall also
constitute a default by that party under the Lease.
1. Landlord's Obligation to Construct the Buildings and Improve
the Land. The parties hereto acknowledge that the Land is presently
unimproved. Landlord shall improve the Land with two (2) building shells (the
"Building Shells") as described in ATTACHMENT 1 attached hereto, and with
general utility tenant improvements within such Building Shells (the "Tenant
Improvements") as generally shown on the schematic plan attached hereto as
ATTACHMENT 2 (the "Schematic Plan"). The Building Shells and the Tenant
Improvements are collectively referred to herein as the "Improvements". (Under
the terms of the Adjacent Lease (as defined in the Lease to which this
Improvement Agreement is attached), Landlord shall also improve the Land with
an additional two (2) building shells and with general utility tenant
improvements with such additional two building shells.) The Improvements shall
be constructed substantially in accordance with the site plan attached to the
Lease as EXHIBIT "B" (the "Site Plan"), the Definition of Building Shells
attached hereto as ATTACHMENT 1 (the "Building Shell Definition"), and the
schematic plans for the
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Tenant Improvements attached to the Lease as ATTACHMENT 2 (the "Schematic
Plan"), as applicable, subject to the approval of and any changes required by
any appropriate governmental authority or Landlord's Lender. The Improvements
shall be constructed in accordance with the following:
(a) The Improvements will be constructed according to the
Approved Final Plans developed according to subparagraph (b) below, and the two
(2) Buildings shall be approximately 150,000 square feet as designated by
Landlord, in its sole and absolute discretion, and as permitted by the
appropriate governmental authorities and Landlord's Lender. Promptly after the
completion of the Buildings, Landlord shall cause its architect to certify that
the Buildings have been completed substantially in accordance with the Final
Building Plans, as altered by any changes approved by Landlord and Tenant under
paragraph 4 below.
(b) Landlord and Tenant acknowledge that each has
reviewed and approved preliminary plans for the Building Shells as are
described on ATTACHMENT 3 attached hereto (the "Preliminary Building Plans").
Such Preliminary Building Plans have been submitted to the appropriate
governmental agencies for review and approval. Landlord has commenced
preparation of final plans, specifications and working drawings for the
Buildings (the "Final Building Plans") which shall substantially conform to or
represent logical developments from the Preliminary Building Plans. Landlord
shall submit such Final Building Plans to Tenant for approval, and within five
days following delivery of the same, Tenant shall review them and either (i)
approve them, which approval shall not be unreasonably withheld, or (ii)
specify in writing its objections to the Final Building Plans and all changes
that must be made to the Final Building Plans to satisfy such objections;
provided, however that Tenant may only object to the Final Building Plans on
the basis that
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they do not substantially conform to the Preliminary Building Plans. If Tenant
does not deliver any written objections to the Final Building Plans within the
specified period, then Tenant shall be deemed to have approved the Final
Building Plans. If Tenant does deliver such written objections within such
time period, then the parties shall confer and use their best efforts to
resolve such objections by Tenant within ten (10) days after Landlord has
received notice thereof. If the parties are unable to resolve such objections
by Tenant within said time period, then such objections shall be resolved by
arbitration conducted according to the procedures described in paragraph 11
hereof. Upon Tenant's approval of the Final Building Plans, Landlord shall
submit the Final Building Plans to the appropriate governmental agencies for
approval. Immediately after all such governmental approvals have been
obtained, and after such Final Building Plans have been approved by Landlord's
Lender providing financing for the construction of the Improvements, then such
approved Final Building Plans shall be initialed and dated by Landlord and
Tenant. Such approved and initialed Final Building Plans, together with the
Final TI Plans described in paragraph (c) below and any and all change orders
approved by Landlord, Tenant and, if applicable, Landlord's Lender, are
hereinafter collectively referred to as the "Approved Final Plans".
(c) Tenant shall, in accordance with the schedule
attached hereto as ATTACHMENT 4, complete and deliver to Landlord preliminary
plans for the Tenant Improvements (the "Preliminary TI Plans") which
substantially conform to or represent logical developments from the Schematic
Plan, and Landlord and Tenant shall submit, review and approve such Preliminary
TI Plans in accordance with the applicable schedule set forth in ATTACHMENT 4.
As soon as the Preliminary TI Plans are completed and approved by Landlord and
Tenant, Tenant shall develop final plans, specifications and working drawings
(the "Final TI Plans") which substantially conform to or represent logical
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developments from the Preliminary TI Plans and shall submit them to Tenant for
approval, and the applicable procedures and time periods for plan submission,
review and approval set forth in ATTACHMENT 4 shall govern the Final TI Plans.
If the Final TI Plans are not approved by Landlord and Tenant by April 30,
1997, then any delays by Tenant beyond any of the deadlines for Tenant set
forth in ATTACHMENT 4 shall constitute "Tenant Plan Delays"; except that
Tenant Plan Delays shall not include reasonable delays by Tenant beyond a
deadline for Tenant set forth in ATTACHMENT 4 to the extent the delay by
Tenant shall have been caused by Landlord's unreasonable disapproval of the
Preliminary TI Plans, Final TI Plans or revisions thereto, as applicable. Upon
Landlord's approval of the Final TI Plans, Landlord shall submit the Final TI
Plans to all appropriate governmental agencies for approval. Immediately after
all such governmental approvals have been obtained, and after such Final TI
Plans have been approved by Landlord's Lender providing financing for the
construction of the Tenant Improvements, then such approved Final TI Plans
shall be initialed and dated by Landlord and Tenant. Such approved and
initialed Final TI Plans, together with the Final Building Plans described in
paragraph (b) above and any and all change orders approved by Landlord, Tenant
and, if applicable, Landlord's Lender, are collectively referred to as the
"Approved Final Plans".
2. Tenant Improvements. Tenant hereby acknowledges and agrees
that the Tenant Improvements shall consist only of general utility interior
improvements which may be of use to a subsequent user of the Premises (e.g.,
non-load bearing permanent partitions; windows; wall and floor coverings;
standard HVAC equipment and wiring, standard electrical distribution facilities
and wiring; standard lighting and utility fixtures). Landlord shall have no
obligation to construct or pay for any special purpose improvements needed by
Tenant for the conduct of its business or which might not be of use to a
subsequent user
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of the Premises (e.g., demountable partitions, special building service
equipment, trade fixtures of Tenant, special utility requirements, special
security requirements, special structural supports, or other special or unusual
interior improvements required by Tenant because of the use it intends to make
of the Premises). In determining whether any interior improvement is a
"general utility interior improvement" or a "special purpose improvement", the
parties shall take into account the kind, quality, and amount of such
improvements, their location in the Premises, and their relationship to the
other improvements, in determining its general utility to subsequent users of
the Premises.
3. Construction Contracts. Landlord shall retain South Bay
Construction Company (the "General Contractor") as general contractor to
construct the Improvements. The contract entered into by Landlord with the
General Contractor for the Tenant Improvements shall be in a form reasonably
approved by Landlord and Tenant and on a "cost plus 2.5%" basis so that the
General Contractor is paid a fee for profit and overhead equal to two and one
half percent (2.5%) of the Project Costs (as hereinafter defined). "Project
Costs" shall mean:
(i) All "hard" construction costs for the construction of the
Improvements according to the Approved Final Plans and all approved changes
thereto, including, but not limited to, the following:
(A) All labor, supervision and benefit
costs therefore, including, without limitation, costs of a project manager and
project superintendents;
(B) Costs of all materials;
(C) Value of all tools and equipment
consumed on the job and rental of all equipment used in the construction;
(D) Contract price for all construction
work undertaken by
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general contractors and sub-contractors, including grading and site
preparation;
(E) [Intentionally Omitted];
(F) The cost of all equipment and
fixtures, including the cost of installation;
(G) Engineering and architectural fees
for the preparation of all plans, specifications and working drawings;
(H) The cost of all other on-site and
off-site improvements made to the Land, including grading and filling portions
of the Land, and the installation of paved parking and driveways, sidewalks,
curbs, landscaping, irrigation and underground drainage systems;
(I) [Intentionally Omitted];
(J) the cost of bringing utilities from
the street to the Buildings, including, without limitation, service connection
fees;
(K) [Intentionally Omitted];
(L) Costs of machinery and equipment
rented for the construction of the Improvements, or which are owned by General
Contractor but are purchased for the construction and would not ordinarily be
owned by General Contractor;
(M) Costs of reasonable transportation
and travel expenses incurred in connection with the construction of the
Improvements;
(N) Cots of minor repairs and
replacements (including, without limitation, dismantling and removal thereof);
(O) Costs of removal of debris;
(P) Costs of telephone calls, postage
and delivery charges and reasonably petty cash expenses at the construction
site office;
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<PAGE> 48
(Q) Costs of insurance required to be
maintained by General Contractor under the construction contract;
(R) Sales, use or similar taxes related
to the construction and for which General Contractor is liable;
(S) Costs of preventing damage or loss
in the event of an emergency (provided the emergency is not caused by the
negligence of General Contractor);
(T) Costs of repairing work damaged or
improperly executed, provided the damage or improper execution did not result
from the negligence of General Contractor (except that such costs shall be
included in Project Costs notwithstanding the cause of such costs to the extent
such costs are not covered by insurance);
(U) Such other costs as reasonably may
be incurred by the General Contractor in connection with the construction of
the Improvements on the Land (including, without limitation, any and all "soft
costs").
4. Changes to Approved Final Plans. Once the Approved Final
Plans have been finally approved by Landlord and Tenant and the general
construction contract has been signed with the General Contractor, neither
Landlord nor Tenant shall have the right to order extra work or change orders
with respect to the construction of the Improvements without the prior written
consent of the other, which consent shall not be unreasonably withheld or
delayed. All extra work or change orders requested by either Landlord or
Tenant shall be made in writing, shall specify the amount of delay or the time
saved resulting therefrom, shall estimate any added or reduced cost resulting
therefrom, and shall become effective and a part of the Approved Final Plans
once approved in writing by both parties.
5. Commencement and Completion of the Improvements. As soon as
(i) the
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Approved Final Building Plans or Approved Final TI Plans, as applicable, have
been developed as provided above, (ii) all necessary governmental approvals
have been obtained, and (iii) Landlord has entered into a general construction
contract with General Contractor for the construction of the Building Shells or
Tenant Improvements, as applicable, then Landlord shall thereafter commence
construction of the Building Shells or Tenant Improvements, as applicable, and
shall diligently prosecute such construction to completion.
6. Payment of Cost of Improvements. Landlord shall pay for all
costs of constructing the Building Shells (as defined in ATTACHMENT 1 attached
hereto). Tenant agrees that the Tenant Improvements must be of sufficient scope
that the costs of the Tenant Improvements (the "TI Costs") are not less than a
sum equal to Thirty Dollars ($30.00) multiplied by the rentable area of the
Buildings. Landlord shall make available for the payment of all TI Costs an
amount equal to Ten Dollars ($10.00) per square foot of rentable area of the
Buildings (the "Base TI Allowance"). Tenant shall pay all of the TI Costs
incurred or to be incurred by Landlord in excess of the Base TI Allowance (with
such excess referred to herein as "Tenant's TI Contribution"). Prior to the
commencement of construction of the Tenant Improvements, Landlord shall
estimate the total cost of the Tenant Improvements (the "Total TI Cost
Estimate") and Tenant's Contribution and shall deliver such estimates to
Tenant. Tenant shall pay Tenant's Contribution to Landlord in installments as
and when needed by Landlord to pay TI Costs until Tenant's TI Contribution has
been paid, with each installment to be paid within ten (10) days after Landlord
notifies Tenant that a progress payment toward TI Costs is to be made and
delivers copies of the applicable invoices to Tenant (which invoices Tenant
shall reasonably approve). The amount of the installments to be paid by Tenant
to Landlord shall equal the actual TI Costs to be paid by the applicable
progress payment (after deducting any
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<PAGE> 50
applicable retention) less the Landlord Contribution Amount (hereinafter
defined) with respect to the applicable progress payment until Landlord shall
have paid a total amount equal to the Base TI Allowance toward the TI Costs;
thereafter, Tenant's installments shall include all of the actual TI Costs to
be paid by a progress payment after deducting any applicable retention, and
Tenant shall also pay to Landlord the entire amount of any final payment and
retention within then (10) days after written notice from Landlord that such
retention is due and payable to the contractor(s). As used herein, the term
"Landlord Contribution Amount" shall mean, with respect to each progress
payment, the amount calculated by multiplying: (a) the actual TI Costs to be
paid by the applicable progress payment (after deducting any applicable
retention), by (b) the quotient obtained by dividing the Base TI Allowance by
the Total TI Cost Estimate. Prior to the commencement of construction of the
Building Shells, Tenant shall, if requested to do so by Landlord, provide
assurances to Landlord's Lender that the funds necessary to pay Tenant's TI
Contribution will be immediately available to Landlord as and when needed to
pay TI Costs, which assurances shall be reasonably satisfactory to Landlord and
Landlord's Lender. As soon as practicable following completion of the Tenant
Improvements, Landlord shall notify Tenant of the actual cost of construction
of the Tenant Improvements. Tenant shall have the right to audit the books,
records, and supporting documents of the Landlord to the extent necessary to
determine the accuracy of such notice of actual costs during normal business
hours after giving Landlord at least three (3) business days prior written
notice. Tenant shall bear the cost of such audit. Any such audit must be
conducted, if at all, within one hundred and eighty (180) days after Landlord
delivers its notice of actual costs to Tenant. In the event Tenant's payment
of Landlord's estimate of Tenant's TI Contribution shall have resulted in
either an overpayment or underpayment of the amount
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<PAGE> 51
actually due, then an adjustment shall be made such that any overpayment shall
be credited against the next Monthly Installment of rent or any underpayment
shall be paid as Additional Rent together with the next Monthly Installment of
rent.
7. Delays in Completion. The parties hereto acknowledge that the
date on which Tenant's obligation to pay the Monthly Installment of rent would
otherwise commence may be delayed because of (i) Tenant Plan Delays, (ii) the
entry by Tenant into the Premises which interferes with or delays the
completion of Landlord's work, (iii) change orders requested by Tenant and
approved by Landlord, and/or (iv) any other act or omission of Tenant. It is
the intent of the parties hereto that the Tenant's obligation to pay the
Monthly Installment of rent and Additional Rent not be delayed by any of such
causes or by any other act of Tenant, and in the event it is so delayed, then
Tenant's obligation to pay the Monthly Installment of rent and Additional Rent
shall commence as of the date it would otherwise have commenced absent said
delay(s) caused by Tenant.
8. Delivery of Possession and Punchlist. When the Improvements
are substantially completed, Landlord and Tenant shall together walk through
and inspect the Improvements so completed, using their best efforts to discover
all uncompleted or defective construction. After such inspection has been
completed, each party shall sign a list of "punch list" items which Tenant has
determined must be corrected by Landlord, and which Landlord has determined
Landlord is obligated to correct. Landlord agrees to use reasonable efforts to
complete those "punch list" items within thirty (30) days after executing such
list. Notwithstanding anything contained herein, Tenant's obligations to pay
the Monthly Installment of rent and Additional Rent shall commence as provided
in the Lease, regardless of whether Tenant completes such inspection or
executes such list.
9. Construction Warranty for the Improvements. Effective upon
completion of
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<PAGE> 52
the Improvements, Landlord does hereby warrant that the construction of the
Improvements was performed in accordance with the Approved Final Plans therefor
in a good and workmanlike manner, and that all materials and equipment
furnished conform to said plans and are new and otherwise of good quality;
provided, however, that said representation and warranty shall not extend to,
and Landlord shall not be liable for, any defect in construction or in the
operation of equipment which is discovered either (i) eleven (11) months after
the Commencement Date, or (ii) twelve (12) months after the recordation of a
notice of completion for such improvements (which periods of time are referred
to herein collectively as the "Warranty Period"). Tenant shall promptly notify
Landlord in writing of any defect in construction or the operation of equipment
discovered within the Warranty Period, and promptly thereafter Landlord shall
commence the cure of such defect and complete such cure with diligence at
Landlord's cost and expense. With respect to defects discovered after the
expiration of the Warranty Period, the parties hereto acknowledge that it is
their intention that Tenant have the benefit of any construction or equipment
warranties existing in favor of Landlord that would assist Tenant in correcting
such construction defects and in discharging its obligations regarding the
repair and maintenance of the Premises. Upon request by Tenant following the
expiration of the Warranty Period, Landlord shall inform Tenant of all written
construction and equipment warranties existing in favor of Landlord which
affect the Improvements. Landlord shall cooperate with Tenant in enforcing
such warranties and in bringing any suit that may be necessary to enforce
liability with regard to any defective construction or operation of equipment
so long as Tenant pays all costs incurred by Landlord so acting. Landlord
makes no other express or implied warranty with respect to the construction or
operation of the Improvements.
10. Ownership of the Improvements. All of the Improvements which are
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<PAGE> 53
constructed by Landlord shall become the property of Landlord upon installation
and shall not be removed or altered by Tenant except as expressly permitted by
the Lease.
11. Arbitration. Any question, dispute or controversy
specifically required to be determined by arbitration pursuant to this Work
Letter shall be determined by arbitration as provided in this paragraph, and
shall in no way delay or affect the commencement of the Lease Term and/or
Tenant's obligation to pay rent pending the outcome of such arbitration.
Neither Landlord or Tenant shall have the right and hereby waive such right, to
request or require arbitration of any other questions, dispute or controversy
arising under the Lease. Arbitrable questions, disputes or controversies shall
be arbitrated according to the following procedure. Either Landlord or Tenant
may initiate arbitration by giving written notice to the other stating an
intention to arbitrate, the issue to be arbitrated, and the relief sought.
Such arbitration shall be conducted pursuant to the provisions of the laws of
the State of California then in force and the procedural rules of the American
Arbitration Association or its successor insofar as said rules of procedure do
not conflict with said laws or this paragraph. Once notice to arbitrate has
been given, Landlord and Tenant shall within ten (10) days select one joint
arbitrator, or if they cannot agree on one joint arbitrator then each shall
select an arbitrator within fifteen (15) days of delivery of said notice and
notify the other party of its selection. The two arbitrators selected shall
designate the third arbitrator forthwith. No arbitrator may be related to or
affiliated with either Landlord or Tenant. The three arbitrators shall convene
in the county in which the Leased Premises are located as soon as practicable
and offer Landlord and Tenant the opportunity to present their cases. If any
party fails to appear, participate or produce evidence in an arbitration
proceeding, the arbitrators may make their award and decision based solely on
the evidence actually presented. The arbitrators shall, by majority vote,
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<PAGE> 54
make such award and decisions as is appropriate and in accord with the terms of
the Lease and such award and decision shall be binding upon Landlord and Tenant
and enforceable in a court of law. Said award and decision shall include an
award to the prevailing party of reasonable attorneys' fees and expenses and
costs of arbitration. In the event their party fails to appoint an arbitrator
or the two arbitrators fail to select a third arbitrator within the time
required by this paragraph, upon application of either party the arbitrator
shall be appointed by the American Arbitration Association, or if there be no
American Arbitration Association or it shall refuse to perform this function,
then by the then Presiding Judge of the Superior Court of the State of
California for the County in which the Premises are located.
LANDLORD: TENANT:
CISCO SYSTEMS, INC.,
SBC&D CO., INC., a California corporation
a California corporation
By: /s/Nancy Bareilles
By: /s/Scott R. Trobbe Name: Nancy Bareilles
Name: Scott R. Trobbe Title: Vice President of
Title: EVP Worldwide Real Estate and
Workplace Resources
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<PAGE> 55
ATTACHMENT 1 TO EXHIBIT "C"
DEFINITION OF BUILDING SHELLS
The term Building Shells shall mean the following:
1. BUILDING STRUCTURE
(a) All foundations to include footings,
piers, caissons, pilings, grade beams, foundation
walls or other building foundation components
required to support the entire building structure.
(b) Columns shall be steel box or pipe
columns.
(c) All columns, beams, joists, purlins,
headers, or other framing members to support the roof
and roofing membrane.
(d) Five inch (5") thick concrete slab
on grade with welded wire mesh and any other
reinforcing or structural connections that may be
necessary to required.
(e) Exterior walls that enclose the
perimeter of the buildings with steel reinforcing and
structural connections that may be necessary to
required.
(f) All exterior glass and glazing with
anodized aluminum frames. Glass to be tinted as
appropriate to the aesthetic design of the building.
All exterior doors, door closer and locking devices
necessary for proper functioning.
(g) Wood panel roof system to support
roofing membrane.
(h) Three (3) ply built up roofing with
cap sheet and all flashings by Owens-Corning, John
Manville, or equal.
(i) Exterior painting of all concrete
with Tex-Coat or Kel-Tex textural paint. All
caulking of exterior concrete joints in preparation
for painting.
2. PLUMBING
(a) Underground sanitary sewer laterals
connected to the city sewer main in the street and
piped into each building and under the concrete slab
on grade for the length of the buildings. Main waste
lines under the slabs will be in as close proximity
as possible to the
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<PAGE> 56
building restroom locations.
(b) Domestic water mains connected to
the city water main in the street and stubbed to the
buildings. Water mains to each building shall be not
less than two and one half inches (2.5") in size.
(c) Roof drain leaders piped and
connected to the site storm drainage system.
(d) Gas lines connected to the city
public utility mains and to gas meters adjacent to,
and in close proximity to each building. Meter
supplied by utility company.
3. ELECTRICAL
(a) All primary electrical service to
each building that is complete including underground
conduit, wire feeders from transformer pads into the
building's main switchgear electrical room. The
electrical characteristics of the secondary side of
transformers shall be 277/480 Volt. 3 phase and the
rated capacity of the transformer shall be 2,000 amps
for each building.
(b) Underground pull section, meter, and
panel(s), for site lighting and landscaping.
(c) Underground conduit from the street
to the building for telephone trunk line service by
Pacific Telephone. Conduit to each building shall be
not less than four inches (4").
(d) An electrically operated landscape
irrigation controller that is a complete and
functioning system.
(e) Underground conduit from the
building to the main fire protection system, shutoff
valve (PIV) for installation of security alarm
wiring.
(f) All parking lot and landscape
lighting to include fixtures, underground conduit,
wire, distribution panel and controller. All
exterior lighting shall be a complete and functioning
system.
4. FIRE PROTECTION (SPRINKLERS)
(a) A complete and fully functional
overhead system distributed throughout the building.
The systems shall be classified ordinary hazard group
II, and be distributed throughout the building.
(b) System shall include all sprinkler
heads that may be
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<PAGE> 57
required by building codes above the ceiling, when
ceilings are installed.
(c) Site sprinkler main to be sized
adequately to support typical office use densities.
5. SITEWORK
(a) All work outside the building
perimeter walls shall be considered site work for the
building shell and shall include grading, paving,
landscaping, landscape irrigation, storm drainage,
utility service laterals, curbs, gutters, sidewalks,
specialty paving (if required), retaining walls,
planter boxes, parking lot and landscape lighting and
other exterior lighting.
(b) Paving sections for automobile and
truck access shall be according to the Geological
Soils Report.
(c) All parking lot striping to include
handicap signage and spaces.
(d) Underground site storm drainage
system shall be connected to the city storm system
main.
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<PAGE> 58
ATTACHMENT 2 TO EXHIBIT "C"
SCHEMATIC PLAN FOR TENANT IMPROVEMENTS
-58-
<PAGE> 59
ATTACHMENT 3 TO EXHIBIT "C"
PRELIMINARY BUILDING PLANS
BAYTECH OFFICE COMPLEX
Drawing List
November 20, 1996
<TABLE>
<CAPTION>
DRAWING NAME DRAWING NUMBER DATE PREPARED BY
------------ -------------- ---- -----------
<S> <C> <C> <C>
Planning Set - 10/30/96
-----------------------
Title Sheet 1 10/30/96 The Hagman Group
Approved PD Zoning May 2 10/30/96 The Hagman Group
Site Plan 3 10/30/96 The Hagman Group
Grading/Drainage 4 (C1) 10/30/96 Mission Engineers, Inc.
Elevations 5 10/30/96 The Hagman Group
Elevations 6 10/30/96 The Hagman Group
Floor Plans 7 10/30/96 The Hagman Group
Floor Plans 8 10/30/96 The Hagman Group
Landscape Plan 9 10/30/96 Reed Associates
Details 10 10/30/96 The Hagman Group
Final Revisions - 11/20/96
--------------------------
Site Plan 1 11/20/96 The Hagman Group
Grading/Drainage 4 (C1) 11/20/96 Mission Engineers, Inc.
Floor Plans 7 11/20/96 The Hagman Group
Floor Plans 8 11/20/96 The Hagman Group
</TABLE>
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<PAGE> 60
ATTACHMENT 4 TO EXHIBIT "C"
SCHEDULES FOR PRELIMINARY TI PLANS AND FINAL TI PLANS
<TABLE>
<CAPTION>
PRELIMINARY TI PLANS DEADLINE
- -------------------- --------
<S> <C>
1.Tenant's submission of Preliminary TI Plans to February 17, 1997
Landlord.
2. Landlord's review and approval, or disapproval 5 days after receipt.
with comments.
3. Tenant's submission of revised Preliminary TI 5 days after receipt of Landlord's disapproval with
Plans. comments.
4. Repeat Steps 2 and 3 until March 5, 1997, then
submit disagreements to arbitration under paragraph
11 of the Improvement Agreement.
FINAL TI PLANS
- --------------
DEADLINE
--------
1. Tenant's submission of Final TI Plans to Landlord. 45 days following approval of Preliminary TI Plans by
Landlord, but in no event later than April 18, 1997.
2. Landlord's review and approval, or disapproval 5 days after receipt.
with comments.
3. Tenant's submission of revised Final TI Plans. 5 days after receipt of Landlord's disapproval with
comments.
4. Repeat Steps 2 and 3 until April 30, 1997, then
submit disagreements to arbitration under paragraph
11 of the Improvement Agreement.
</TABLE>
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<PAGE> 61
EXHIBIT "D"
LIST OF HAZARDOUS MATERIALS TENANT WILL USE ON THE PREMISES
NONE
-61-
<PAGE> 62
EXHIBIT "E"
DESCRIPTION OF EXISTING ENVIRONMENTAL REPORTS
<TABLE>
<CAPTION>
ITEM # DATE DESCRIPTION
------ ---- -----------
<S> <C> <C>
1 11/19/86 Letter to David A. Wollenberg, The Cortana Corporation from Chilton H.
Lee Law Offices.
2 11/11/88 Letter to Steven Speno, Gibson Speno Co. From Albert P. Ridley, Woodard-
Clyde Consultants
3 11/23/88 Letter to Steven G. Speno, Gibson Speno Co. from Chip Macdonald, CPS
4 01/15/90 Preliminary Site Assessment prepared for Union Bank by Applied
Geosciences, Inc.
5 03/05/90 Letter to Susan McCormack, Union Bank from Joseph E. Melio Jr., Applied
Geosciences, Inc.
6 09/16/94 Letter to Chip MacDonald, CPS Realty from Alex J. Gallego, Applied
Geosciences, Inc.
7 06/22/95 Letter to Valerie Howard, Orchard Properties from Kristen M. Wood,
Applied Geosciences, Inc.
8 01/05/96 Final Report, Phase 1 Site Assessment prepared for Mr. Kelly Heil,
Colliers Parrish Int'l., Inc. by Mr. Tony Lam, Construction and
Development Services.
9 10/15/96 Letter to Rich Fehler, Clayton Environmental from Scott Trobbe, South Bay
Development Co.
10 10/18/96 Letter to Scott Trobbe, South Bay Development Co. from Matthew W. Hanko,
Clayton Environmental Consultants.
11 10/28/96 Preliminary Status Report, Environmental Site Assessment prepared for
Vallerie Howard, CarrAmerica Reality Corp. by Lee Kurtzweil, ATC
Environmental, Inc.
12 10/29/96 Fax to Scott Trobbe, South Bay Development Co., from Sam Farb, Berliner &
Cohen Attorneys at Law.
13 11/04/96 Letter to Scott Trobbe, South Bay Development Co., from Matthew W. Hanks,
Clayton Environmental Consultants.
14 11/06/96 Letter to Scott Trobbe, South Bay Development Co., from Matthew W. Hanks,
Clayton Environmental Consultants.
</TABLE>
Page 1
<PAGE> 63
<TABLE>
<S> <C> <C>
15 11/08/96 Environmental Site Assessment prepared for Valerie Howard, Orchard
Properties by Lee Kurtzweil, ATC Environmental
16 11/18/96 Letter to Scott Trobbe, South Bay Development Co., from Matthew W. Hanks,
Clayton Environmental Consultants
</TABLE>
Page 2
<PAGE> 1
EXHIBIT 10.49
LEASE AGREEMENT
(BUILDING B AND BUILDING D)
1. Parties. This Lease, dated for reference purposes as of
November 26, 1996, is made by and between SBC&D CO., INC., a California
corporation ("Landlord"), and CISCO SYSTEMS, INC., a California corporation
("Tenant").
2. Demise of Premises. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord, upon the terms and conditions hereinafter set
forth, those certain premises (the "Premises") to be situated on the real
property more particularly described in Exhibit A attached hereto (the "Land")
located in the City of San Jose, County of Santa Clara, State of California,
described as follows:
(a) Those two (2) buildings to be constructed on the Land by
Landlord in accordance with the terms of the Improvement Agreement described
below and which are identified as "Building B" and "Building D" on the site plan
attached hereto as Exhibit B (hereinafter referred to as the "Buildings" or
"Building B and Building D"). Building B and Building D shall contain
approximately 150,000 square feet.
(b) The leasehold improvements to be constructed by Landlord
in Building B and Building D in accordance with the Improvement Agreement (the
"Tenant Improvements").
The Buildings and the Tenant Improvements are collectively referred
to in this Lease as the "Improvements". The Improvements are to be constructed
by Landlord in accordance with the Improvement Agreement attached hereto as
Exhibit C (the "Improvement Agreement").
Upon any termination of this Lease with respect to either Building B
or Building D and the Tenant Improvements therein pursuant to Subparagraph 4(c)
below, the term "Buildings" shall thereafter mean only the Building remaining
subject to this Lease, and the terms "Improvements" and "Premises" shall each
mean only the Building and Tenant Improvements remaining subject to this Lease.
In addition to the lease of the Premises described above, Landlord
hereby grants to Tenant the non-exclusive right to use the Common Area in
accordance with the terms of Paragraph 8 below. At such time as Tenant is
leasing both of the Buildings described under this Lease and both of the
Buildings described in the Adjacent Lease, Tenant shall be entitled to use all
of the parking spaces located on the Land (which total parking spaces shall be
equal to approximately one thousand ninety-one (1,091) parking spaces). In the
event Tenant is no longer the tenant of any Building under this Lease, Tenant's
right to use the parking areas within the Common Area under this Lease shall be
limited to the non-exclusive use of that number of parking spaces determined by
dividing the number of square feet of Building then leased by Tenant under this
Lease by 1,000 and then multiplying that quotient by four (4) and then
multiplying that product by eighty-five percent (85%). For example, if Tenant
vacates Building B covered by this Lease and continues to lease seventy-six
thousand square feet in Building D, then Tenant would be entitled to the
non-exclusive
-1-
<PAGE> 2
use of two hundred fifty-eight (258) spaces under this Lease. Such 258 spaces is
arrived at by dividing 76,000 by 1,000, then multiplying that quotient (i.e. 76)
by 4, and then multiplying that product (i.e. 304) by 85%. Landlord reserves the
right to grant to future tenants of Building B and/or Building D (following the
termination of this Lease with respect to either Building) and tenants of the
Adjacent Buildings referred to below, and to the agents, employees, invitees,
contractors, guests, customers and representatives of such tenants, or to any
other user authorized by Landlord, the non-exclusive right to use the Common
Area for pedestrian and vehicular ingress and egress and vehicular parking.
3. Conditions Precedent. The effectiveness of this Lease is
hereby conditioned upon the satisfaction of the following conditions precedent:
(i) Landlord's acquisition of the Land on or before
March 3, 1997; and
(ii) Landlord's obtaining a binding, written
commitment or agreement for the financing, joint venture development or sale of
the Premises on or before January 10, 1997, that is acceptable in form and
substance to Landlord in its sole discretion, and which commitment or agreement
is in a form and content acceptable to Landlord in its sole discretion; and
(iii) Landlord and Tenant concurrently herewith
entering into another lease agreement (the "Adjacent Lease") on terms
substantially the same as this lease covering two (2) additional buildings (and
leasehold improvements therein) to be constructed by Landlord on another portion
of the Land. Such additional two buildings are hereinafter referred to herein as
"Building A and Building C" or the "Adjacent Buildings".
With respect to the condition set forth in clause (i) above,
Landlord hereby agrees that in the event Landlord does not acquire the Land by
January 10, 1997, then, provided the seller of the Land does not breach its
obligation to sell the Land and provided further that all contingencies to
Landlord's obligation to close escrow on the Land are satisfied, Landlord (or
its successor or assign) shall acquire the Land upon the earlier of (A) the date
five (5) business days following the date such seller obtains a water quality
certification (approved by Landlord) or waiver of such certification from the
San Francisco Bay Regional Water Quality Control Board, or (B) March 3, 1997.
If any of the foregoing conditions precedent are not satisfied by
the applicable outside dates established therefor, then Landlord may terminate
this Lease by written notice to Tenant given not later than three (3) business
days following the outside date established for satisfaction of the applicable
condition precedent as set forth above. Upon any such termination of this Lease,
neither party shall have any obligations to the other in connection with or
under this Lease except for obligations accruing prior to the termination and
obligations which, by their terms, survive the termination of this Lease.
If any of the foregoing conditions precedent are not satisfied on or
before March 3, 1997, then Tenant shall have the right to terminate this Lease
by written notice to Landlord given not later than the earlier of (y) the date
such conditions are satisfied, or (z) March
-2-
<PAGE> 3
10, 1997. In the event that Tenant fails to give such notice of termination by
the earlier of the dates set forth in clause (y) and (z) of the immediately
preceding sentence, then Tenant shall be deemed to have waived its right to
terminate this Lease as provided above.
Tenant acknowledges that Landlord may subdivide or parcelize the
Land into two (2) separate legal parcels, each containing approximately the same
square footage as the other. If Landlord so subdivides or parcelizes the Land
into two (2) separate legal parcels as described above, Building B and Building
D shall be situated on one of the legal parcels and Building A and Building C
shall be located on the other legal parcel. Tenant has no objection to Landlord
subdividing or parcelizing the Land as described above and Tenant agrees to
reasonably cooperate with Landlord, at no material cost to Tenant, in any such
subdivision or parcelization of the Land as described above.
4. Lease Term.
(a) Lease Term. The term of this Lease ("Lease Term") shall be
for the period commencing on the Commencement Date (as defined below) and ending
four (4) years following the later of the Substantial Completion Date (as
defined in Subparagraph 4(a) below) under this Lease or the Substantial
Completion Date (as defined in Subparagraph 4(a) of the Adjacent Lease) under
the Adjacent Lease; provided, however, that Tenant shall have the right to
terminate this Lease as to Building B and/or Building D pursuant to Subparagraph
3(c) below and Tenant shall have the right to extend the Lease Term as to both
Buildings (but not one of the Buildings) pursuant to Subparagraph 3(d) below.
(b) Commencement Date. As used in this Lease, the term
"Commencement Date" shall mean the earlier of: (i) the date on which all
Improvements to be constructed by Landlord under the Improvement Agreement have
been substantially completed (the "Substantial Completion Date"), or (ii) the
date Tenant commences its business operations in Building B or Building D. Such
Improvements shall be deemed substantially completed upon the occurrence of the
earlier of the following:
(i) the date on which all Improvements to be constructed by
Landlord have been substantially completed except for (1) punch list items which
do not prevent Tenant from using the Buildings for their intended use, and (2)
such work as Landlord is required to perform but which is delayed because of
tenant delays as described in paragraph 7 of the Improvement Agreement attached
hereto as Exhibit C; or
(ii) the date the City of San Jose completes a final
inspection of Building B and Building D and the Tenant Improvements to be
constructed therein and the building inspector issues or gives his/her final
sign off on the applicable building permit covering such Buildings and Tenant
Improvements.
Landlord agrees to exercise diligent, good faith efforts to
substantially complete construction of the respective Buildings and the Tenant
Improvements therein (and the parking areas and common area access appurtenant
thereto ) not later than the applicable dates set forth immediately below:
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Building B (and parking areas November 30, 1997
and common area access
appurtenant thereto)
Building D (and parking areas November 30, 1997
and common area access
appurtenant thereto)
If Building B, Building D and the parking areas and common area
access appurtenant thereto to be constructed by Landlord pursuant to the terms
of Exhibit C are not substantially completed on or before the target dates set
forth above, then Landlord shall not be liable for any damage or loss incurred
by Tenant for Landlord's failure for whatever cause to deliver possession of the
Buildings by a particular date, nor shall this Lease be void or voidable on
account of such failure to deliver possession of the Buildings; provided,
however, if Landlord does not deliver possession of the Buildings to Tenant by
March 1, 1998, Tenant shall have the right to terminate this Lease by written
notice delivered to Landlord within five (5) days thereafter, and Landlord and
Tenant shall be relieved of their respective obligations hereunder; provided
further that the date of March 1, 1998 above shall be extended by the number of
days the work on the improvements to be constructed by Landlord is delayed due
to tenant delays as described in paragraph 7 of the Improvement Agreement
attached hereto as Exhibit C. In the event of any such termination by Tenant for
failure of Landlord to deliver possession of a Building to Tenant by March 1,
1998, as such date may be extended by Tenant delays as described above, Landlord
shall promptly reimburse Tenant for all costs of construction of tenant
improvements paid by Tenant solely with respect to the applicable Building or
Buildings under this Lease for which possession has not been delivered to
Tenant.
(c) Termination Options. Provided Tenant is not in default
both as of the date Tenant exercises the applicable Termination Option described
herein and as of the termination of this Lease with respect to the applicable
Building and Tenant Improvements therein, Tenant shall have the right to
terminate this Lease with respect to a single Building designated by Tenant (the
"Termination Options") as of the last day of the first, second and third
quarters of the last twelve months of the initial Lease Term (the "Termination
Dates") by giving written notice to Landlord of the applicable Building and
termination no later than ninety (90) days prior to the applicable Termination
Date and by vacating and surrendering possession of the applicable Building and
Tenant Improvements therein in accordance with the provisions of Paragraph 34
below; provided, however, if Tenant exercises its Termination Option as to
either Building A or Building C under the Adjacent Lease prior to the exercise
of any Termination Option as to Building B or Building D hereunder , then Tenant
shall not have the right to exercise the Termination Option as to Building B or
Building D until Tenant has exercised the Termination Option under the Adjacent
Lease as to both Building A and Building C. Tenant further agrees that under no
circumstances shall it be permitted to exercise the Termination Option under
this Lease and under the Adjacent Lease concurrently. If Tenant timely exercises
a Termination Option with respect to Building B or Building D and the Tenant
Improvements located therein,
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<PAGE> 5
then such termination as to such applicable Building and Tenant Improvements
located therein shall be effective as of the date Tenant vacates and surrenders
possession of the applicable Building and Tenant Improvements in accordance with
the provisions of Paragraph 34 below, but in no event earlier than the
applicable Termination Date. In the event this Lease is terminated by Tenant as
to any Building, Tenant shall be excused from obligations under this Lease with
respect to such Building which would have otherwise accrued following the
effective date of such termination. Upon the effective date of each early
termination of this Lease with respect to a Building, Tenant's Proportionate
Share (defined in Subparagraph 8(e)(ii) below) shall be appropriately reduced in
accordance with Subparagraph 8(e)(ii). Anything in this Lease to the contrary
notwithstanding, the parties hereto agree that if Tenant exercises any
Termination Option under this Subparagraph 4(c), Tenant shall have no right to
extend the Lease Term pursuant to the terms of Subparagraph 4(d) below as to
either Building B or Building D, or both Buildings, and any exercise of an
Extension Option by Tenant hereunder after any exercise of a Termination Option
hereunder shall be deemed void and of no force or effect. In addition, anything
in this Lease to the contrary notwithstanding, if Tenant exercises any Extension
Option described below, then Tenant shall have no right to terminate this Lease
early as to Building B or Building D or the Tenant Improvements therein as
provided in this Subparagraph 4(c) and any exercise of a Termination Option
hereunder by Tenant after any exercise of an Extension Option hereunder shall be
deemed void and of not force or effect.
(d) Extension Options. Subject to the terms of Subparagraph
4(c) above, Tenant shall have either two (2) options to extend the Lease Term
for a period of one (1) year each or, alternatively, one (1) option to extend
the Lease Term for a period of three (3) years (such applicable option(s)
hereinafter being referred to as the "Extension Options" and the period(s) or
term(s) of such applicable Extension Option hereinafter being referred to as the
"Extension Terms") provided that Tenant is not in default both as of the date
Tenant exercises the applicable Extension Option and as of the first day of the
applicable Extension Term, and provided, further, that Tenant gives Landlord
written notice of Tenant's exercise of the applicable Extension Option at least
one hundred and eighty (180) days prior to the end of the then-current Lease
Term. If Tenant first exercises an Extension Option for a term of one (1) year,
then Tenant shall be deemed to have waived the right to exercise the Extension
Option for a period of three (3) years. Conversely, if Tenant first exercises
the Extension Option for a period of three (3) years, then Tenant shall be
deemed to have waived the right to exercise the Extension Options for a period
of one (1) year each. If Tenant timely exercises an Extension Option in the
manner prescribed herein, then such exercise shall be with respect to both
Building B and Building D. All of the terms of this Lease shall apply to each
Extension Term, except that the Monthly Installment of rent shall be calculated
as set forth in Subparagraph 5(b) below, Tenant shall not be entitled to any
additional Extension Options or Termination Options, and the provisions of
Exhibit C shall not be applicable to the Extension Terms. If Tenant fails to
exercise, or fails to effectively exercise, the first one (1) year Extension
Option, then the second one (1) year Extension Option shall be void and of no
force or effect. The one-year Extension Options shall be personal to Cisco
Systems, Inc. and may not be assigned to, transferred to or exercised for the
benefit of any third party (other than an Affiliate of Tenant as defined in
Paragraph 25 below). Any exercise of one-year Extension Option by or on behalf
of any assignee, sublessee or transferee (other than an Affiliate of Tenant) of
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<PAGE> 6
Tenant's rights or interests in this Lease or the Premises, or any portion
thereof, shall be void and of no force and effect. Notwithstanding the
foregoing, Tenant shall have the right to assign the three-year Extension Option
to an Affiliate of Tenant or to an assignee, sublessee or transferee of the
Premises, or portion thereof, approved by Landlord under this Lease; provided,
however, in such instance, Cisco Systems, Inc. shall not be relieved or released
of Tenant's obligations under this Lease during such three-year Extension Term.
Tenant shall have no right to exercise an Extension Option if Tenant has
previously exercised a Termination Option as to Building B or Building D as
described in Subparagraph 4(c).
(e) Early Entry. Tenant may enter the Buildings prior to
the Commencement Date to install fixtures and equipment therein, provided Tenant
first obtains the prior written approval of Landlord for such entry, which
approval shall not be unreasonably withheld but which Landlord may withhold if
Landlord determines in its reasonable discretion that such entry will delay
completion of construction of the Improvements which Landlord is required to
construct pursuant to Exhibit C. If Landlord permits Tenant to so enter upon the
Premises, such entry shall be subject to all of the terms and conditions of this
Lease, excepting only the obligation to pay the Monthly Installment of rent or
Additional Rent (as defined in Subparagraph 5(d) below). Tenant shall coordinate
its entry onto the Premises with Landlord and the contractors and other
personnel employed by Landlord. Tenant shall at all times while exercising its
right of entry, refrain from interfering with the construction activities of
Landlord's personnel. In any case, Tenant shall repair any damage to the
Improvements constructed by Landlord resulting from the entry upon the Premises
by Tenant or Tenant's Agents prior to the Commencement Date or caused by the
installation of fixtures and equipment by Tenant or Tenant's Agents. If the
entry by Tenant or Tenant's Agents upon the Premises prior to the Commencement
Date interferes with Landlord's construction activities, then Landlord shall
give Tenant written notice requesting that Tenant cease such interference. If
Tenant does not immediately comply with such notice from Landlord requesting
that Tenant cease interference with Landlord's construction activities, and if
the entry by Tenant prior to the Commencement Date causes a delay in completing
the construction of the Improvements, then the Commencement Date shall be deemed
to have occurred on the date the Improvements would have been completed had
there been no such delay caused by Tenant or its a, employees, contractors or
representatives. If Tenant does not immediately comply with notice from Landlord
requesting that Tenant cease any interference with Landlord's construction
activities, Tenant shall be required to vacate the Premises and shall have no
further right to enter the Premises until the Commencement Date.
5. Rent.
(a) Time of Payment. Tenant shall pay to Landlord as rent
for the Premises the respective sums specified in Subparagraph 5(b) below (the
"Monthly Installment") each month in advance on the first day of each calendar
month, without deduction or offset, prior notice or demand, commencing on the
Rent Commencement Date (defined below) and continuing through the Lease Term (as
extended, if at all, pursuant to Subparagraph 4(d) above), together with such
additional rents as are payable by Tenant to Landlord under the terms of this
Lease. The Monthly Installment for any period during the
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<PAGE> 7
Lease Term which is less than one (1) full month shall be a pro rata portion of
the Monthly Installment based upon a thirty (30) day month. For purposes hereof,
the "Rent Commencement Date" shall mean the Substantial Completion Date as
described in Subparagraph 4(b), except that if Tenant commences its business
operations in either Building B and/or Building D prior to the Substantial
Completion Date, then the Rent Commencement Date as to the applicable
Building(s) in which Tenant has commenced its business operations shall be the
date that Tenant first commenced such business operations in the applicable
Building(s).
(b) Monthly Installment. The Monthly Installment of rent
for the period commencing on the Commencement Date of this Lease and ending on
the Substantial Completion Date (if the Commencement Date and Substantial
Completion Date are different dates) and the Monthly Installment of rent for the
first year of the lease Term, commencing on the Substantial Completion Date,
shall be equal to One Hundred Five Thousand Eight Hundred Twenty Dollars
($105,820) per month for Building B and One Hundred Eight Thousand Six Hundred
Eighty Dollars ($108,680) per month for Building D.
The Monthly Installment of rent during the Lease years following the
first year of the Lease Term (including, without limitation, during each
Extension Term) shall be the Monthly installment of rent for the immediately
preceding year plus an additional Three Thousand Seven Hundred Dollars ($3,700)
per month for Building B and Three Thousand Eight Hundred Dollars ($3,800) per
month for Building D (which totals an additional Seven Thousand Five Hundred
Dollars ($7,500) per month for Building B and Building D). Such Seven Thousand
Five Hundred Dollar ($7,5000) monthly increase on each anniversary of the
Commencement Date as provided in the immediately preceding sentence is the
equivalent of a Five Cent ($0.05) per rentable square foot per month increase in
the monthly rental rate for the Buildings on each anniversary of the
Commencement Date..
(c) Late Charges. Tenant acknowledges that late payment by
Tenant to Landlord of rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord within ten (10) days after Landlord's delivery to
Tenant of written notice stating that such amount has not been paid when due,
then Tenant shall pay to Landlord, as additional rent, a late charge equal to
six percent (6%) of such overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of Tenant's default with respect
to such overdue amount, nor prevent Landlord from exercising any of its other
rights and remedies granted hereunder.
(d) Additional Rent. All taxes, insurance premiums, Common
Area Expenses (as defined in Subparagraph 8(b)), late charges, costs, expenses
and other sums which Tenant is required to pay under this Lease, together with
all interest and penalties
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<PAGE> 8
that may accrue thereon in the event of Tenant's failure to pay such amounts,
and all reasonable damages, costs, and attorneys' fees and expenses which
Landlord may incur by reason of any default of Tenant or failure on Tenant's
part to comply with the terms of this Lease, shall be deemed to be additional
rent ("Additional Rent") and shall be paid, commencing as of the applicable Rent
Commencement Date, in addition to the Monthly Installment of rent, and, in the
event of nonpayment by Tenant, Landlord shall have all of the rights and
remedies with respect thereto as Landlord has for the nonpayment of the Monthly
Installment of rent.
(e) Place of Payment. Rent shall be payable in lawful money
of the United States of America to Landlord at 511 Division Street, Campbell,
California 95008 or to such other person(s) or at such other place(s) as
Landlord may designate in writing.
(f) Advance Payment. Not later than two (2) days following
the date the condition set forth in Paragraph 3(ii) above is satisfied and
Tenant is notified in writing of such fact, Tenant shall pay to Landlord the
Monthly Installment of Rent in the amount of Two Hundred Fourteen Thousand Five
Hundred Dollars ($214,500) for the first full month following the Substantial
Completion Date.
6. Security Deposit. Tenant shall not be obligated to deliver
a security deposit to Landlord.
7. Use of Premises.
(a) Restrictions on Use. Tenant shall use the Premises for
any lawful purpose provided such use is in conformance and compliance with all
applicable governmental laws, regulations, rules and ordinances including,
without limitation, all applicable environmental and zoning and land use laws,
regulations, rules, and ordinances (collectively, "Laws"). Tenant shall
indemnify, defend and hold Landlord harmless against any loss, expense, damage,
attorneys' fees or liabilities arising out of the failure of Tenant to comply
with any Law applicable to Tenant's use and occupancy of the Premises. Tenant
shall not commit or suffer to be committed, any waste upon the Premises, or any
nuisance, or other acts or things which may disturb the quiet enjoyment of any
other tenant in Building B or Building D (in the event Tenant exercises its
Termination Option with respect to Building B and/or Building D) or in Building
A or Building C , or allow any sale by auction upon the Premises, or allow the
Premises to be used for any unlawful purpose, or place any loads upon the floor,
walls or ceiling which would endanger the structure, or place any harmful
liquids in the drainage system of the Premises. No waste materials or refuse
shall be dumped upon or permitted to remain upon any part of the Premises
outside of the Buildings, except in trash containers placed inside exterior
enclosures designated for that purpose by Landlord. No materials, supplies,
equipment, finished products or semifinished products, raw materials or articles
of any nature shall be stored upon or permitted to remain on any portion of the
Parcel outside of the Buildings. Tenant shall strictly comply with the
provisions of Paragraph 39 below.
(b) Wetlands. Tenant acknowledges that certain wetlands
areas, consisting of approximately 5.3 acres, currently exist on the Land and
that the current owner of the
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<PAGE> 9
Land has been authorized, under 33 CFR 330 Appendix A, Department of the Army
Nationwide Permit 26, Headwaters and Isolated Waters pursuant to Section 404 of
the Clean Water Act (33 U. S. C. 1344) to fill such wetlands areas. Such
authorization to fill the wetlands areas is subject to compliance of the
Nationwide Permit Conditions attached to the Nationwide Permit referred to above
and the special condition attached to such Nationwide Permit authorization. A
copy of such Nationwide Permit authorization dated September 11, 1996 (File No.
17991S) has been provided to Tenant for its information. Tenant agrees on behalf
of itself and its agents, employees, contractors, representatives, invitees,
licensees, assignees and sublessees, not to violate any of the terms or
conditions of the Nationwide Permit authorization referred to above and not to
modify any portion of the wetlands areas to be filled, or caused to be filled,
by Landlord. Tenant further agrees that if it assigns or sublets any portion of
the Premises as permitted by the terms of this Lease, Tenant shall, prior to the
effective date of such assignment or subletting, disclose in writing to such
assignee or sublessee that the Nationwide Permit authorization referred to above
exists (and provide a copy of the same to such permitted assignee or sublessee)
and require that such assignee or sublessee (and any of its assignees or
sublessees) agree in writing not to violate any of the terms or conditions of
the Nationwide Permit authorization referred to above.
(c) Initial Occupancy. Tenant shall be obligated to take
possession and enter into occupancy of the Premises within thirty (30) days
following the Substantial Completion Date; provided, however, that Landlord's
sole remedy for breach of this covenant alone, at Landlord's election by written
notice to Tenant, shall be to terminate this Lease. In the event of such
termination under this clause (c), neither party shall have any further
obligations under this Lease except Landlord's and Tenant's respective
indemnification obligations under this Lease shall survive such termination of
this Lease.
8. Common Area.
(a) Landlord's Obligations. Landlord shall maintain the
Common Area (defined below) in a manner consistent with the maintenance of
common areas at comparable Buildings in North San Jose. Landlord shall at all
times have exclusive control of the Common Area and may at any time, for
purposes of repair, replacement, maintenance, security, operation, or management
of the Common Area, or any portion thereof, or to cut off any prescriptive
rights in any portion of the Common Area, temporarily close any part thereof (so
long as such closure does not materially interfere with Tenant's use and
enjoyment of the Premises), exclude and restrain anyone from any part thereof,
except the bona fide customers, employees and invitees of Tenant who use the
Common Area in accordance with the reasonable rules and regulations as Landlord
may from time to time promulgate. Landlord shall have the right to reconfigure
or modify the Common Area and parking areas and ingress and egress to and from
the parking area, and to modify the directional flow of traffic in the parking
area or construct or install improvements therein, provided such changes or
improvements to the Common Area shall not decrease the number of parking spaces
on the site (unless reduction is necessary to comply with governmental laws,
rules, codes or ordinances), materially impair access to the Premises or
materially interfere with Tenant's use and enjoyment of the Premises.
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In the event Landlord fails to properly maintain the Common Areas in
accordance with the terms set forth above, and such failure continues for a
period of at least thirty (30) days following the receipt of written notice from
Tenant to Landlord, Tenant shall have the right, so long as there are no other
tenants under lease of all or any part of Building A, Building B, Building C or
Building D, to cure Landlord's default in the maintenance of the Common Area.
Landlord agrees to reimburse Tenant, within thirty (30) days following receipt
of written invoices or statements from Tenant, for the reasonable costs incurred
by Tenant in curing Landlord's default in the maintenance of the Common Areas.
If Landlord fails to reimburse Tenant within the time period set forth in the
immediately preceding sentence, then Tenant's sole remedy for such failure is to
bring an action against Landlord for damages and Tenant shall have no right to
offset or deduct such costs reasonably incurred in curing Landlord's default
against the Monthly Installment of rent or any Additional Rent.
(b) Tenant to Pay Common Area Expenses. Tenant shall pay,
as Additional Rent, Tenant's Proportionate Share (defined below) of all costs
and expenses as may be paid or incurred by Landlord in maintaining, operating
and repairing the entire Common Area situated on the Land (the "Common Area
Expenses") during the Term.
(c) Monthly Payments. From and after the Rent Commencement
Date, Tenant shall pay to Landlord on the first day of each calendar month of
the Term an amount reasonably estimated by Landlord to be Tenant's Proportionate
Share of the monthly Common Area Expenses. The foregoing estimated monthly
charge may be adjusted by Landlord at the end of each calendar year on the basis
of Landlord's experience and reasonably anticipated costs. At Tenant's written
request, Landlord shall provide reasonable evidence of how Landlord estimated
the monthly Common Area Expenses and/or how Landlord made any adjustment of said
estimate. Any such adjustment shall be effective as of the calendar month next
succeeding receipt by Tenant of written notice of such adjustment.
(d) Accounting. Within one hundred twenty (120) days
following the end of each calendar year Landlord shall furnish Tenant a
statement of the actual Common Area Expenses for the calendar year and the
payments made by Tenant with respect to such period. If Tenant's payments of its
Proportionate Share of Common Area Expenses do not equal the amount of the
actual Common Area Expenses, Tenant shall pay Landlord the deficiency within
thirty (30) days after receipt of such statement. If Tenant's payments of
Tenant's Proportionate Share of Common Area Expenses exceed Tenant's
Proportionate Share of the actual Common Area Expenses, Landlord shall either
offset the excess against the Common Area Expenses next thereafter to become due
to Landlord or shall refund the amount of the overpayments to Tenant. There
shall be appropriate adjustments of the Common Area Expenses as of the
Commencement Date and expiration of the Term. Tenant shall have the right, at
its own expense and upon written notice to Landlord, but in no event more often
than once any calendar year, to audit Landlord's books and records regarding the
Common Area Expenses, provided, however, that Tenant shall keep the results of
such audits confidential except to the extent required to be disclosed by law or
to the extent necessary to be disclosed in a legal proceeding with Landlord
relating to the amount of Common Area Expenses. The preceding sentence to the
contrary
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notwithstanding, if the aforementioned audit discloses a discrepancy of two
percent (2%) or more of the Common Area Expenses owed by Tenant for the
applicable calendar year, Landlord shall pay Tenant's cost of the audit, not to
exceed Two Thousand Dollars ($2,000).
(e) Definitions. As used herein, the following terms shall
have the following definitions:
(i) "Common Area" shall mean all portions of the Land
outside of the Buildings (excluding the exterior surfaces of the Buildings,
which are to be maintained and cleaned by Landlord at Landlord's cost),
including, without limitation, the parking areas and landscaping located on the
Land; provided, however, that if the Land is subdivided in accordance with the
last paragraph of Paragraph 3 above and at any time thereafter, the subdivided
parcels comprising the Land are no longer owned by the same person or entity,
then "Common Area" shall mean all portions of the subdivided parcel in which
Building B and Building D are situated that are outside of such Buildings
(excluding the exterior surfaces of the Buildings, which are to be maintained
and cleaned by Landlord at Landlord's cost), including, without limitation, the
parking areas and landscaping located on such subdivided parcel. Tenant shall
have the non-exclusive right to use the Common Area, and Tenant's use of the
Common Area shall be in common with the owner(s) and occupants of any Building
as to which Tenant terminates this Lease pursuant to Subparagraph 4(c) above
(and the owner(s) and occupants of Building A and/or Building C in the event
Tenant terminates the Adjacent Lease as to either Building A or Building C, or
both), and their respective agents, contractors, employees, guests and invitees.
As provided above, anything herein to the contrary notwithstanding, in the event
Tenant is no longer the tenant of any Building under this Lease, Tenant's right
under this Lease to use the parking areas within the Common Area shall be
limited to the non-exclusive use of that number of parking spaces determined by
dividing the number of square feet of Building then leased by Tenant under this
Lease by 1,000 and then multiplying that quotient by four (4) and then
multiplying that product by eighty-five percent (85%). In no event shall Tenant
be entitled to the non-exclusive use of less than the number of parking spaces
required to be provided to Tenant under City of San Jose ordinances or codes.
(ii) "Tenant's Proportionate Share" shall mean the
percentage determined by dividing the rentable area leased by Tenant in the
Buildings by the rentable area of all buildings on the Land; provided, however,
that if the Land is subdivided in accordance with the last paragraph of
Paragraph 3 above, and at any time thereafter, the subdivided parcels comprising
the Land are no longer owned by the same person or entity, then Tenant's
Proportionate Share shall mean the percentage determined by dividing the
rentable area leased by Tenant in Building B and Building D by the total
rentable area of Building B and Building D. In determining the rentable area of
a Building, Landlord and Tenant agree that such rentable area shall include all
of the areas of the applicable Building, measured from the exterior faces of
exterior walls, including roof overhangs, the inset area at each entryway, and
the inset area for glazing, but excluding any truck dock areas, courtyards and
outside decks.
For example, provided Landlord retains ownership of all of the Land
and Tenant
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does not exercise any of its Termination Options under this Lease or the
Adjacent Lease, then from the Commencement Date of this Lease through the first
three and one quarter (3.25) lease years following the Substantial Completion
Date, Tenant's Proportionate Share shall be one hundred percent (100%). If
Landlord retains ownership of all of the Land and Tenant timely exercises a
Termination Option and vacates and surrenders possession of an applicable
Building and Tenant Improvements located therein in accordance with the
provisions of Paragraph 34 below, then Tenant's Proportionate Share shall be
appropriately decreased as of the effective date of each termination of this
Lease with respect to a Building pursuant to Subparagraph 4(c). (If the Land is
subdivided in accordance with the last paragraph of Paragraph 3 above and the
parcels comprising the Land are owned by two different persons or entities, then
Tenant's Proportionate Share shall be the percentage determined in accordance
with the first sentence of the preceding paragraph.)
(iii) "Common Area Expenses" shall mean all expenses,
costs and amounts of every kind and nature (subject to the exclusions below)
which Landlord shall pay or incur because of or in connection with the
ownership, maintenance, repair, replacement, restoration and operation of the
Common Area, including, without limitation, any amounts paid or incurred for:
(A) the cost of supplying all utilities, the cost of operating, maintaining,
repairing, replacing, renovating and managing any and all utility systems,
mechanical systems, sanitary and storm drainage systems, and the cost of
supplies, tools, and equipment and maintenance and service contracts in
connection therewith; (B) the cost of licenses, certificates, permits and
inspections and the cost of contesting the validity or applicability of any
governmental enactments which may affect Common Area Expenses, and the costs
incurred in connection with the implementation and operation of any
transportation system management program or similar program required by law; (C)
the cost of insurance for the Common Area carried by Landlord, in such amounts
as Landlord may reasonably determine (excluding the cost of any insurance for
which Landlord is reimbursed directly under Paragraph 10); (D) fees, charges and
other costs, including without limitation, consulting fees, legal fees and
accounting fees, of all persons engaged by Landlord or otherwise reasonably
incurred by Landlord in connection with the operation, maintenance and repair of
the Common Area (except that annual management fees shall be two percent of the
annual base or "fixed" rent payable by tenants in the Buildings, including any
buildings as to which this Lease has been terminated); (E) the cost of parking
area repair, restoration, and maintenance, including, but not limited to,
patching, repainting, restriping, and cleaning; (F) wages, salaries and other
compensation and benefits of all persons engaged in the operation, maintenance
or security of the Common Area, and employer's Social Security taxes,
unemployment taxes or insurance, and any other taxes which may be levied on such
wages, salaries, compensation and benefits (prorated for any employee who does
not devote substantially all of his or her time to the operation, maintenance,
repair, management or security or the Common Area); (G) payments under any
easement, license, operating agreement, declaration, restrictive covenant, or
instrument pertaining to the sharing of costs between the Buildings (or the
subdivided parcel containing the Buildings) and other buildings or property; (H)
amortization (including interest on the unamortized cost at a rate equal to the
floating commercial loan rate announced from time to time by Bank of America
NT+SA, as its prime rate or "reference rate", plus 2% per annum [the "Interest
Rate"]) of the costs of acquiring, or the rental expense of personal property
used in, the maintenance, operation and repair of the Common Area; (I) the cost
of capital
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improvements (as determined under generally accepted accounting principles) or
other costs incurred in connection with the Common Area that are required under
any governmental law or regulation but which were not so required in connection
with the Common Area at the time that permits for the construction of the
Buildings were obtained provided, however, that each such permitted capital
expenditure shall be amortized (including interest on the unamortized cost) over
its useful life as Landlord shall reasonably determine; and (J) all Property
Taxes (as defined in Subparagraph 9(c) below) payable by Landlord with respect
to the Common Area (excluding any taxes and assessments paid by Tenant under
Paragraph 9 below).
Notwithstanding the foregoing, however, Common Area Expenses shall
not include (1) depreciation, interest and amortization on mortgages, or ground
lease payments, if any; (2) legal fees incurred in negotiating and enforcing
tenant leases; (3) real estate brokers' leasing commissions; (4) initial
improvements or alterations to tenant spaces; (5) any costs expressly excluded
from Common Area Expenses elsewhere in this Lease; (6) costs of any items to the
extent Landlord receives, or would be entitled to receive if Landlord had
obtained all insurance required to be maintained hereunder, reimbursement from
insurance proceeds (except that any deductible amount under any insurance policy
shall be included within Common Area Expenses) or from a third party; (7) costs
of capital improvements, except those set forth in this Subparagraph 8(e) (iii);
(8) costs of repair and maintenance of the roof structure, foundations and
exterior walls of the Buildings; (9) cost or any repair, maintenance or
restoration arising from the negligence or willful misconduct or breach of this
Lease by Landlord or its agents, employees or contractors; (10) costs
attributable to repairing items that are covered by warranties in favor of
Landlord; (11) costs of correcting any code violations that occurred with
respect to the construction of any of the Buildings prior to the Substantial
Completion Date; and (12) costs paid directly to Landlord pursuant to this
Lease.
9. Taxes and Assessments.
(a) Tenant's Property. Tenant shall pay before delinquency
any and all taxes and assessments, license fees and public charges levied,
assessed or imposed upon or against Tenant's fixtures, equipment, furnishings,
furniture, appliances and personal property installed or located on or within
the Premises. Tenant shall use its best efforts to cause said fixtures,
equipment, furnishings, furniture, appliances and personal property to be
assessed and billed separately from the real property of Landlord. If any of
Tenant's said personal property shall be assessed with Landlord's real property,
Tenant shall pay Landlord the taxes attributable to Tenant within ten (10) days
after receipt of a written statement from Landlord setting forth the taxes
applicable to Tenant's property.
(b) Property Taxes. Tenant shall pay, as Additional Rent,
one hundred percent (100%) of all Property Taxes levied or assessed with respect
to the Premises or the Land, Buildings or Tenant Improvements which become due
or accrue during the term of this Lease. Tenant shall pay such Property Taxes to
Landlord not later than (i) ten (10) days prior to the delinquency date of such
Property Taxes, or (ii) twenty (20) days after receipt of billing, whichever is
later. If Tenant fails to do so, Tenant shall reimburse Landlord, on demand, for
all interest, late fees and penalties that the taxing authority
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charges Landlord. In the event Landlord's Lender requires an impound for
Property Taxes, then on the first day of each month during the Lease Term,
Tenant shall pay Landlord one twelfth (1/12) of the annual Property Taxes.
Tenant's liability hereunder shall be prorated to reflect the commencement and
termination dates of this Lease. Notwithstanding anything to the contrary
herein: (i) upon a termination of this Lease with respect to a Building under
Subparagraph 4(c) above, Tenant shall pay Tenant's Proportionate Share of
Property Taxes for the Land, Buildings, Tenant Improvements and Premises
(including any Land, Building, Tenant Improvements and Premises as to which this
Lease has been terminated) together with, and in the same manner as Tenant pays,
Tenant's Proportionate Share of Common Area Expenses; and (ii) if the Land is
subdivided in accordance with the last paragraph of Section 3 above and at any
time thereafter, the subdivided parcels comprising the Land are no longer owned
by the same person or entity, then Tenant shall pay the Property Taxes for the
subdivided parcel containing the Buildings (rather than the Property Taxes for
all of the Land), and the Property Taxes for the Buildings, Tenant Improvements
and Premises.
(c) Property Taxes Defined. For the purpose of this Lease,
"Property Taxes" means and includes all taxes, assessments (including, but not
limited to, assessments for public improvements or benefits), taxes based on
vehicles utilizing parking areas, taxes based or measured by the rent paid,
payable or received under this Lease, taxes on the value, use, or occupancy, and
all other governmental impositions and charges of every kind and nature
whatsoever, whether or not customary or within the contemplation of the parties
hereto and regardless of whether the same shall be extraordinary or ordinary,
general or special, unforeseen or foreseen, or similar or dissimilar to any of
the foregoing which, at any time during the Lease Term, shall be applicable to
the Premises, the Buildings, Tenant Improvements and/or the Land, as applicable,
or assessed, levied or imposed upon the Premises, the Buildings, Tenant
Improvements and/or the Land, as applicable, or become due and payable and a
lien or charge upon the Premises, the Buildings and/or the Land, as applicable,
or any part thereof, under or by virtue of any present or future laws, statutes,
ordinances, regulations or other requirements of any governmental authority
whatsoever. The term "Property Taxes" shall not include any federal, state or
local net income, franchise, estate, gift or inheritance tax imposed on Landlord
or any interest or penalties arising from Landlord's failure to pay any Property
Taxes (unless such interest and/or penalties arise as a result of Tenant's
failure to pay such Property Taxes when due hereunder).
(d) Other Taxes. To the extent not otherwise covered under
Subparagraph 9(c) above, Tenant shall, as Additional Rent, pay or reimburse
Landlord for any tax based upon, allocable to, or measured by the area of the
Premises or the Buildings (or the Common Area, in which case Tenant's payment
and reimbursement obligations shall be limited to its Proportionate Share of the
same); or by the rent paid, payable or received under this Lease; any tax upon
or with respect to the possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy of the Premises or any portion thereof; any
privilege tax, excise tax, business and occupation tax, gross receipts tax,
sales and/or use tax, water tax, sewer tax, employee tax, occupational license
tax imposed upon Landlord or Tenant with respect to the Premises.
(e) Tenant's Right to Contest. Prior to the date Tenant
exercises any
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Termination Option under this Lease (or under the Adjacent Lease if prior to the
date the Land is parcelized or subdivided into two separate legal parcels),
Tenant shall have the right, by appropriate proceedings, to protest or contest
any assessment, reassessment or allocation of Property Taxes or other taxes
payable by Tenant in whole or in part or any change therein. In the contest or
proceedings, Tenant may act in its own name and/or the name of Landlord and
Landlord will, at Tenant's request and expense, cooperate with Tenant in any way
Tenant may reasonably require in connection with such contest. Tenant must pay
all Property Taxes as and when required by Paragraph 9(b), even those which are
the subject of such protest or contest, but Tenant may sue to recover
overpayments of Property Taxes as part of any such contest. With respect to any
contest of Property Taxes, Tenant shall indemnify and hold Landlord and the
Land, Buildings and Premises harmless from any liens or damage arising out of
such protest or contest and shall pay any judgment that may be rendered for
which Tenant would otherwise be liable under this Lease without such contest or
protest. Such indemnification and hold harmless obligation shall survive the
termination of this Lease. Any contest conducted by Tenant under this paragraph
shall be at Tenant's expense and if interest or late charges become payable as a
result of such contest or protest, Tenant shall pay the same.
10. Insurance.
(a) Indemnity. Tenant agrees to indemnify, protect and
defend Landlord against and hold Landlord harmless from any and all claims,
causes of action, judgments, obligations or liabilities, and all reasonable
expenses incurred in investigating or resisting the same (including reasonable
attorneys' fees), on account of, or arising out of, the operation, maintenance,
use or occupancy of the Premises, Buildings, Land or the Common Area by Tenant
and/or its Agents (except to the extent attributable to the negligence or
willful misconduct of, or breach of this Lease by, Landlord or its Agents). This
Lease is made on the express understanding that Landlord shall not be liable
for, or suffer loss by reason of, injury to person or property, from whatever
cause (except to the extent attributable to the negligence or willful misconduct
of Landlord or its Agents and, even then, in no event shall Landlord be liable
under this Lease for claims of loss profits or loss of business or income),
which in any way may be connected with the operation, maintenance, use or
occupancy of the Premises, Buildings, Land or the Common Area by Tenant and/or
its Agents specifically including, without limitation, any liability for injury
to the person or property of Tenant or its Agents.
Landlord agrees to indemnify, protect and defend Tenant against and
hold Tenant harmless from any and all claims, causes of action, judgments,
obligations or liabilities (including, without limitation, reasonable attorneys'
fees) on account of bodily injuries, death or property damage caused by the
negligence or willful misconduct of Landlord or its Agents; provided, however,
in no event shall Landlord be liable under any circumstances for claims of loss
profits or loss or business or income. The obligations of Landlord under this
paragraph shall not be applicable to the extent any claims, causes of action,
judgments, obligations or liabilities (including, without limitation, reasonable
attorneys' fees) arise out or, or are related to, the negligence or willful
misconduct of Tenant or its Agents.
The obligations of Landlord and Tenant under this Paragraph 10(a)
shall survive
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<PAGE> 16
termination of this Lease.
(b) Liability Insurance. Tenant shall, at Tenant's
expense, obtain and keep in force during the term of this Lease a policy of
commercial general liability insurance insuring Landlord (as an additional
insured) and Tenant against claims and liabilities arising out of the operation,
maintenance, use, or occupancy of the Premises. Such insurance shall provide
combined single limit coverage of not less than Three Million Dollars
($3,000,000.00) per occurrence. Such liability insurance shall contain a
contractual liability endorsement. Landlord shall have the right to require
Tenant to increase the amount of coverage of such commercial general liability
insurance to the extent reasonably necessary to bring such insurance coverage
into conformity with the level of coverage commonly carried by similar
businesses in California, which right Landlord may exercise no more frequently
than once every three (3) years during the lease term. The insurance shall be
provided by companies with a Best's Insurance Guide rating of at least A- VIII
or higher. Tenant shall deliver to Landlord, prior to possession, and at least
thirty (30) days prior to the expiration thereof, a certificate of insurance
evidencing the existence of the policy required hereunder and such certificate
shall certify that the policy (1) names Landlord as an additional insured, (2)
shall not be canceled without thirty (30) days prior written notice to Landlord,
(3) insures contractual liability, (4) the coverage is primary and any coverage
by Landlord is in excess thereto and (5) contains a cross-liability endorsement.
The preceding to the contrary notwithstanding, Landlord agrees that
the original Tenant hereunder, Cisco Systems, Inc., may "self insure" against
the claims, liabilities, damages, injuries and losses described in Subparagraph
10(b) above so long as Cisco Systems, Inc. has a net worth of not less than Five
Hundred Million Dollars ($500,000,000), and the parties hereto agree that such
self-insurance shall be primary. The right to so self insure shall apply only to
the original Tenant hereunder and shall not apply to any assignee of such
original Tenant. In the event the premiums for Landlord's liability insurance
are increased by reason of Tenant's self-insurance (whether because of the
parties' agreement that the original Tenant hereunder may self-insure or because
of claims made or defense undertaken or proceeds paid under Landlord's liability
policy which would not have otherwise occurred if Tenant had maintained a policy
of liability insurance in accordance with the provisions of Subparagraph 10(b)
above), Tenant agrees to pay promptly following demand and receipt of a
statement of such increase, but in no event later than fifteen days after such
demand and as Additional Rent, the amount of any such increase. The provisions
of the immediately preceding sentence shall survive termination of this Lease
with respect to any increase in Landlord's insurance premiums attributable to
Tenant's self-insurance.
Landlord shall maintain a policy or policies of comprehensive
general liability insurance insuring Landlord (and such others as are designated
by Landlord), against liability for personal injury, bodily injury, death and
damage to property occurring or resulting from an occurrence in, on or about the
Premises and the Common Areas, with such limits of coverage as Landlord may from
time to time determine are reasonably necessary for its protection. Tenant
shall, as Additional Rent, reimburse Landlord for the cost of any such insurance
policy within thirty (30) days after receipt of billing.
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<PAGE> 17
(c) Property Insurance. Landlord shall, at Tenant's
expense, obtain and keep in force during the Lease Term a policy of insurance
covering loss or damage to the Buildings and Tenant Improvements, in the amount
of the full replacement value thereof with Agreed Amount Endorsement, providing
protection against those perils included within the classification of "all risk"
insurance, plus a policy of rental income insurance in the amount of one hundred
percent (100%) of twelve (12) months' rent (including, without limitation, sums
payable as Additional Rent), together with such additional coverages (such as
earthquake and/or flood insurance) which Landlord may elect, in its sole
discretion, to maintain from time to time or which may be required from time to
time by Landlord's Lender. Tenant shall have no interest in nor any right to the
proceeds of any insurance procured by Landlord on the Buildings and Tenant
Improvements. Tenant shall pay to Landlord, as Additional Rent, Tenant's
Proportionate Share of the cost of such insurance procured and maintained by
Landlord on an annual basis within thirty (30) days after receipt of demand
therefore from Landlord. Tenant's liability for the cost of such insurance shall
be pro rated as of the commencement and termination of the Lease Term. Tenant
acknowledges that such insurance procured by Landlord shall contain a deductible
which reduces Tenant's cost for such insurance and, in the event of loss or
damage, Tenant shall be required to pay to Landlord Tenant's Proportionate Share
of the amount of such deductible. Landlord agrees that during the Lease Term,
Landlord's deductible under its earthquake insurance policy shall not be less
than ten percent of the then replacement value of the Improvements.
(d) Tenant's Personal Property Insurance. Tenant
acknowledges that the insurance to be maintained Landlord on the Premises
pursuant to Paragraph 10(c) above will not insure any of Tenant's property.
Accordingly, Tenant, at Tenant's own expense, shall maintain in full force and
effect on all of its fixtures, equipment and personal property in the Premises,
a policy of "All Risk" coverage insurance to the extent of at least ninety
percent (90%) of their insurable value.
(e) Mutual Waiver of Subrogation. Tenant and Landlord
hereby mutually waive their respective rights of recovery against each other of
any loss of or damage to the property of either party, to the extent such loss
or damage is insured by any insurance policy required to be maintained by this
Lease or otherwise in force at the time of such loss or damage. Each party shall
obtain any special endorsements, if required by the insurer, whereby the insurer
waives its right of subrogation against the other party hereto. The provisions
of this Subparagraph 10(e) shall not apply in those instances in which the
waiver of subrogation would cause either party's insurance coverage to be voided
or otherwise made uncollectible.
11. Utilities. Tenant shall pay for all water, gas, light,
heat, power, electricity, telephone, trash pick-up, sewer charges, and all other
services supplied to or consumed on the Premises, and all taxes and surcharges
thereon.
12. Repairs and Maintenance.
(a) Landlord's Repairs. Subject to the provisions of
Paragraph 16, Landlord, at its expense, shall keep and maintain the foundations,
roof structure (excluding
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roof membrane) and exterior walls of the Buildings in good order and repair.
Landlord shall not, however, be required to maintain, repair or replace the
interior surface of exterior walls, nor shall Landlord be required to maintain,
repair or replace windows, doors, skylights or plate glass. Landlord shall have
no obligation to make repairs under this Subparagraph 12(a) until a reasonable
time after receipt of written notice from Tenant of the need for such repairs.
(b) Tenant's Repairs. Except as expressly provided in
Subparagraph 12(a) above and Paragraph 16 below, Tenant shall, at its sole cost,
keep and maintain the entire Premises and every part thereof, including without
limitation, the windows, window frames, plate glass, glazing, skylights, truck
doors, doors and all door hardware, the interior walls and partitions, interior
surfaces of exterior walls, carpets, flooring, roof membrane and the electrical,
plumbing, lighting, heating, ventilating and air conditioning systems and
equipment in good order, condition and repair. The term "repair" shall include
replacements, restorations and/or renewals when necessary as well as painting.
Tenant's obligation shall extend to all alterations, additions and improvements
to the Premises, and all fixtures and appurtenances therein and thereto. Tenant
shall, at all times during the Lease Term, have in effect a service contract for
the maintenance of the heating, ventilating and air conditioning ("HVAC")
equipment serving the Premises with an HVAC repair and maintenance contractor
reasonably approved by Landlord. The HVAC service contract shall provide for
periodic inspection and servicing at least once every three (3) months during
the term hereof, and Tenant shall provide Landlord with a copy of such contract
and all periodic service reports. Landlord shall assign to Tenant for the term
of this Lease the benefit of all warranties available to Landlord which would
reduce the cost of performing the obligations of Tenant to make repairs under
this Subparagraph 12(b). Landlord shall cooperate with Tenant in the enforcement
of such warranties.
Should Tenant fail to commence to make repairs required of Tenant
hereunder within fifteen (15) days after notice from Landlord or should Tenant
fail thereafter to diligently complete the repairs, Landlord, in addition to all
other remedies available hereunder or by law and without waiving any alternative
remedies, may make the same, and in that event, Tenant shall reimburse Landlord
as additional rent for the cost of such maintenance or repairs within thirty
(30) days of written demand by Landlord.
Landlord shall have no maintenance or repair obligations whatsoever
with respect to the Premises except as expressly provided in Subparagraph 12(a)
and Paragraph 16. Tenant hereby expressly waives the provisions of Subsection 1
of Section 1932 and Sections 1941 and 1942 of the Civil Code of California and
all rights to make repairs at the expense of Landlord as provided in Section
1942 of said Civil Code.
13. Alterations.
(a) Limitations. Tenant shall not make, or suffer to be
made, any alterations, improvements or additions in, on, about or to the
Premises or any part thereof, without the prior written consent of Landlord
(which consent shall not be unreasonably withheld) and without a valid building
permit issued by the appropriate governmental authority; provided, however,
Landlord's consent shall not be required for interior non-
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structural alterations which (i) with respect to each Building covered by this
Lease, cost less than Fifty Thousand Dollars ($50,000) per work of improvement
and less than Two Hundred Thousand Dollars ($200,000) in the aggregate for all
alterations made with respect to each Building covered by this Lease during the
entire Lease Term, (ii) will not adversely affect the building systems or
structural integrity of the Buildings, and (iii) will not affect the exterior of
the Buildings. Tenant shall give written notice to Landlord five (5) days prior
to employing any laborer or contractor to perform services related to, or
receiving materials for use upon the Premises, and prior to the commencement of
any work of improvement on the Premises. All alterations or improvements made to
the Premises by Tenant shall be made in accordance with applicable Laws and in a
first-class workmanlike manner.
At the time Tenant requests Landlord's consent to any alterations or
improvements, Tenant shall request a decision from Landlord in writing as to
whether Landlord will require Tenant, at Tenant's expense, to remove any such
alterations or improvements and restore the Premises to their prior condition at
the expiration or earlier termination of this Lease. If Tenant so requests such
a decision from Landlord and Landlord does not require, at the time Landlord's
consent is given to such alterations or improvements, that Tenant remove such
alterations or improvements at expiration or earlier termination of this Lease,
then such alterations or improvements to which Landlord consented shall become
the property of Landlord upon the expiration or earlier termination of this
Lease. If Tenant fails, at the time it requests Landlord's consent to any
alteration or improvement, to request a decision from Landlord as to whether
such alteration or improvement will be required to be removed by Tenant, at
Tenant's cost, prior to the expiration or earlier termination of this Lease, or
if Tenant makes any alterations or improvements to the Premises for which
Landlord's consent is not required under this Lease, then no less than ninety
(90) nor more than one hundred twenty (120) days prior to the expiration or
earlier termination of the Lease term, Tenant by written notice to Landlord
shall request Landlord to inform Tenant whether or not Landlord desires to have
any alterations or improvements made to the Premises by Tenant as described in
this sentence removed by Tenant, at Tenant's cost, prior to the expiration or
earlier termination of this Lease. Following receipt of such notice, Landlord
may elect to have all or a portion of Tenant's alterations or improvements
removed from the Premises at the expiration or earlier termination of the Lease
term, and Tenant shall, at its sole cost, remove at the expiration or earlier
termination of this Lease such alterations or improvements designated by
Landlord for removal and repair all damage to the Premises and Common Areas
arising from such removal. In the event Tenant fails to so request Landlord's
decision or fails to remove any alterations or improvements designated by
Landlord for removal, Landlord may remove any such alterations or improvements
made to the Premises by Tenant and repair all damage to the Premises and Common
Areas arising from such removal, any recover from Tenant all costs and expenses
incurred thereby. Tenant's obligation to pay such costs and expenses to Landlord
shall survive the expiration or termination of this Lease. Unless Landlord
requires that Tenant remove any such alteration, improvement or addition, any
alteration, addition or improvement to the Premises, except movable furniture
and trade fixtures not affixed to the Premises, shall become the property of
Landlord upon termination of the Lease and shall remain upon and be surrendered
with the Premises at the termination of this Lease. Without limiting the
generality of the foregoing, all heating, lighting, electrical (including all
wiring, conduit, outlets, drops, buss ducts, main and subpanels), air
conditioning, partitioning, drapery, and
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carpet installations made by Tenant regardless of how affixed to the Premises,
together with all other additions, alterations and improvements that have become
an integral part of the Buildings, shall be and become the property of the
Landlord upon termination of the Lease, and shall not be deemed trade fixtures,
and shall remain upon and be surrendered with the Premises at the termination of
this Lease.
(b) Alterations Required by Law. If, during the term
hereof, any alteration, addition or change of any sort to all or any portion of
the Premises or Buildings is required by Law, Tenant shall promptly make the
same at its sole cost and expense.
14. Acceptance of the Premises. By entry and taking
possession of the Premises pursuant to this Lease, Tenant accepts the Premises,
the Buildings and the Common Area as being in good and sanitary order, condition
and repair (subject to punch list items and reservation of claims of latent
defects and claims under any warranties given under the Improvement Agreement
attached hereto as Exhibit C) and accepts the Premises and Common Area in their
condition existing as of the date of such entry and Tenant further accepts the
Tenant Improvements to be constructed by Landlord, if any, as being completed in
accordance with the plans and specifications for such Tenant Improvements,
except for punch list items and reservation of claims of latent defects and
claims under any warranties given under the Improvement Agreement referred to
above. If any of the Improvements to be constructed by Landlord do not comply
with applicable Building Codes, regulations or ordinances in effect as of the
Commencement Date of this Lease, then to the extent the applicable governmental
agency having jurisdiction over such non-compliance requires the same to be
cured or rectified, Landlord agrees to promptly cure or rectify such
non-compliance item(s) at no cost to Tenant, (unless Tenant's or any of its
agents', employees', contractors', architects', or other representatives' acts,
failure to act, negligence or willful misconduct cause such non-compliance, in
which event Landlord shall have no obligation hereunder to cure or rectify such
non-compliance item(s), but if Landlord does so cure or rectify such item(s),
then Tenant shall reimburse Landlord, within fifteen days following receipt of
written invoices or statements, for Tenant's equitable share (as reasonably
determined by Landlord) of the cost of curing or rectifying such non-compliance
item(s) to the extent attributable to Tenant or any of its agents, employees,
contractors, architects or other representatives. Tenant acknowledges that
neither the Landlord nor Landlord's agents has made any representation or
warranty as to the suitability of the Premises, Buildings or the Common Area to
the conduct of Tenant's business Any agreements, warranties or representations
not expressly contained herein (or in the Exhibits attached hereto) shall in no
way bind either Landlord or Tenant, and Landlord and Tenant expressly waive all
claims for damages by reason of any statement, representation, warranty, promise
or agreement, if any, not contained in this Lease. This Lease constitutes the
entire understanding between the parties hereto and no addition to, or
modification of, any term or provision of this Lease shall be effective until
set forth in a writing signed by both Landlord and Tenant.
15. Default.
(a) Events of Default. A breach of this Lease by Tenant
shall exist if any of the following events (hereinafter referred to as "Event of
Default") shall occur:
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(i) Default in the payment when due of any
installment of rent or other payment required to be made by Tenant hereunder,
where such default shall not have been cured within five (5) days after written
notice of such default is given to Tenant;
(ii) Tenant's failure to perform any other term,
covenant or condition contained in this Lease (or in any of the Exhibits
attached hereto) where such failure shall have continued for twenty (20) days
after written notice of such failure is given to Tenant; provided, however,
Tenant shall not be deemed in default if Tenant commences to cure such failure
within said twenty (20) day period and thereafter diligently prosecutes such
cure to completion;
(iii) Tenant's abandonment of any Building;
(iv) Tenant's assignment of its assets for the
benefit of its creditors;
(v) The sequestration of, attachment of, or execution
on, any substantial part of the property of Tenant or on any property essential
to the conduct of Tenant's business, shall have occurred and Tenant shall have
failed to obtain a return or release of such property within sixty (60) days
thereafter, or prior to sale pursuant to such sequestration, attachment or levy,
whichever is earlier;
(vi) Tenant hereunder shall commence any case,
proceeding or other action seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or seek
appointment of a receiver, trustee, custodian, or other similar official for it
or for all or any substantial part of its property;
(vii) Tenant shall take any corporate action to
authorize any of the actions set forth in clause (vi) above;
(viii) Any case, proceeding or other action against
Tenant shall be commenced seeking to have an order for relief entered against it
as debtor, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, and such case, proceeding or
other action (a) results in the entry of an order for relief against it which is
not fully stayed within ten (10) business days after the entry thereof or (b)
remains undismissed for a period of sixty (60) days; or
(ix) An Event of Default shall have occurred under
the Adjacent Lease.
(b) Remedies. Upon any Event of Default, Landlord shall
have the following remedies, in addition to all other rights and remedies
provided by law, to which Landlord may resort cumulatively, or in the
alternative:
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(i) Recovery of Rent. Landlord shall be entitled to
keep this Lease in full force and effect (whether or not Tenant shall have
abandoned the Premises) and to enforce all of its rights and remedies under this
Lease, including the right to recover rent and other sums as they become due,
plus interest at the Permitted Rate (as defined in Paragraph 33 below) from the
due date of each installment of rent or other sum until paid.
(ii) Termination. Landlord may terminate this Lease
by giving Tenant written notice of termination. On the giving of the notice all
of Tenant's rights in the Premises shall terminate. Upon the giving of the
notice of termination, Tenant shall surrender and vacate the Premises in the
condition required by Paragraph 34, and Landlord may re-enter and take
possession of the Premises and all the remaining improvements or property and
eject Tenant or any of Tenant's subtenants, assignees or other person or persons
claiming any right under or through Tenant or eject some and not others or eject
none. This Lease may also be terminated by a judgment specifically providing for
termination. Any termination under this paragraph shall not release Tenant from
the payment of any sum then due Landlord or from any claim for damages or rent
previously accrued or then accruing against Tenant. In no event shall any one or
more of the following actions by Landlord constitute a termination of this
Lease:
(A) Maintenance and preservation of the
Premises;
(B) Efforts to relet the Premises;
(C) Appointment of a receiver in order to
protect Landlord's interest hereunder;
(D) Consent to any subletting of the Premises or
assignment of this Lease by Tenant, whether pursuant to provisions hereof
concerning subletting and assignment or otherwise; or
(E) Any other action by Landlord or Landlord's
agents intended to mitigate the adverse effects from any breach of this Lease by
Tenant.
(iii) Damages. In the event this Lease is terminated
pursuant to Subparagraph 15.B(2) above, or otherwise, Landlord shall be entitled
to damages in the following sums:
(A) The worth at the time of award of the unpaid
rent which has been earned at the time of termination; plus
(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; plus
(C) The worth at the time of award of the amount
by which the unpaid rent for the balance of the term after the time of award
exceeds the amount of
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such rental loss that Tenant proves could be reasonably avoided; and
(D) Any other amount necessary to compensate
Landlord for all 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, without limitation, the
following: (i) expenses for cleaning, repairing or restoring the Premises; (ii)
real estate broker's fees, advertising costs and other expenses of reletting the
Premises which are reasonably incurred by Landlord; (iii) reasonable costs of
carrying the Premises such as taxes and insurance premiums thereon, utilities
and security precautions; (iv) reasonable expenses in retaking possession of the
Premises; and (v) reasonable attorneys' fees and court costs.
(E) The "worth at the time of award" of the
amounts referred to in Subparagraphs (A) and (B) of this Paragraph 15(b)(iii),
is computed by allowing interest at the Permitted Rate. The "worth at the time
of award" of the amounts referred to in Subparagraph (C) of this Paragraph
15(b)(iii) is computed by discounting such amount at the discount rate of the
Federal Reserve Board of San Francisco at the time of award plus one percent
(1%). The term "rent" as used in this Paragraph 15 shall include all sums
required to be paid by Tenant to Landlord pursuant to the terms of this Lease.
16. Destruction.
(a) Landlord's Duty to Restore. If the Improvements are
damaged by any peril after the Commencement Date of this Lease, Landlord shall
restore the Premises unless the Lease is terminated by Landlord pursuant to
Paragraph 16(b) or by Tenant pursuant to Paragraph 16(c). All insurance proceeds
available from the property damage insurance carried by Landlord pursuant to
Paragraph 10(c) shall be paid to and become the property of Landlord. If this
Lease is terminated pursuant to either Paragraphs 16(b) or 16(c), then all
insurance proceeds available from the insurance required to be carried by Tenant
which covers loss to property that is Landlord's property or would become
Landlord's property on the termination of this Lease shall be paid to and become
the property of Landlord. If this Lease is not so terminated, then upon receipt
of the insurance proceeds (if the loss is covered by insurance) and the issuance
of all necessary governmental permits, Landlord shall commence and diligently
prosecute to completion the restoration of the Premises, to the extent then
allowed by Law, to substantially the same condition in which the Premises were
immediately prior to such damage. Landlord's obligation to restore shall be
limited to the Buildings and Tenant Improvements constructed by Landlord as they
existed as of the Commencement Date, excluding any trade fixtures and/or
personal property and/or alterations constructed or installed by Tenant in the
Premises. Tenant shall forthwith replace or fully repair all trade fixtures
installed by Tenant and existing at the time of such damage or destruction.
(b) Landlord's Right to Terminate. Landlord shall have the
option to terminate this Lease in the event any of the following occurs, which
option may be exercised only by delivery to Tenant of a written notice of
election to terminate within thirty (30) days after the date of such damage:
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(i) The Improvements are damaged by any peril either (i)
covered by the type of insurance Landlord is required to carry pursuant to
Paragraph 10(c) or (ii) covered by valid and collectible insurance actually
carried by Landlord and in force at the time of such damage or destruction, to
such an extent that the estimated restoration cost exceeds fifty percent (50%)
of the then actual replacement cost thereof; provided, however, that Landlord
may not terminate this Lease pursuant to this subparagraph if (1) the
Improvements are damaged during the first two years of the initial Lease Term,
(2) Tenant exericises its Extension Option to extend the Lease Term for one (1)
three (3) year extended term as set forth in Subparagraph 4(d) below by
delivering written notice of such Extension Option within thirty (30) days after
Landlord has notified Tenant with its election to terminate this Lease pursuant
to this subparagraph, and (3) Tenant agrees in writing to pay the amount of
Landlord's deductible and deposits with Landlord an amount equal to the same
within thirty (30) days after Landlord has notified Tenant with its election to
terminate this Lease pursuant to this subparagraph.
(ii) The Improvements are damaged by any peril both (i)
not covered by the type of insurance Landlord is required to carry pursuant to
Paragraph 10(c) and (ii) not covered by valid and collectible insurance actually
carried by Landlord and in force at the time of such damage or destruction, to
such an extent that the estimated restoration cost exceeds five percent (5%) of
the then actual replacement cost thereof; provided, however, that Landlord may
not terminate this Lease pursuant to this subparagraph if Tenant agrees in
writing to pay the amount by which the restoration cost exceed five percent (5%)
of the replacement cost of the Improvements and deposits with Landlord an amount
equal to the estimated amount of such excess within thirty (30) days after
Landlord has notified Tenant with its election to terminate this Lease pursuant
to this subparagraph.
(iii) The Improvements are damaged by any peril during
the last twelve (12) months of the Lease Term to such an extent that the
estimated cost to restore equals or exceeds an amount equal to six (6) times the
Monthly Installment of rent then due; provided, however, that Landlord may not
terminate this Lease pursuant to this subparagraph if Tenant, at the time of
such damage, has an express written option to further extend the term of this
Lease and Tenant exercises such option to so further extend the Lease Term for a
period of three years within fifteen (15) days following the date of such
damage.
(iv) The Improvements are damaged by any peril and,
because of the Laws then in force, (i) may not be restored at reasonable costs
to substantially the same condition in which it was prior to such damage, or
(ii) if restored, may not be used for the same use being made thereof before
such damage.
(c) Tenant's Right to Terminate. If the Improvements are
damaged by any peril and Landlord does not elect to terminate this Lease or is
not entitled to terminate this Lease pursuant to Paragraph 16(b), then as soon
as reasonably practicable, Landlord shall furnish Tenant with the written
opinion of Landlord's architect or construction consultant
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as to when the restoration work required of Tenant may be completed. Tenant
shall have the option to terminate this Lease in the event any of the following
occurs, which option may be exercised only by delivery to Landlord of a written
notice of election to terminate within fifteen (15) days after Tenant receives
from Landlord the estimate of the time needed to complete such restoration:
(i) The Improvements are damaged by any peril and, in the
reasonable opinion of Landlord's architect or construction consultant, the
restoration of the Premises cannot be substantially completed within one hundred
eighty (180) days after the issuance of necessary building permits for such
restoration.
(ii) The Improvements are damaged by any peril within
twelve (12) months of the last day of the Lease Term, and, in the reasonable
opinion of Landlord's architect or construction consultant, the restoration of
the Premises cannot be substantially completed within the earlier of (1) ninety
(90) days after the date of such damage, or (2) thirty (30) days prior to the
expiration of the Lease Term.
(d) Abatement of Rent. In the event of damage to the Premises
which does not result in the termination of this Lease, the Monthly Installment
of rent and Additional Rent shall be temporarily abated during the period of
restoration in proportion to the degree to which Tenant's use of the Premises is
impaired by such damage. Tenant shall not be entitled to any compensation from
Landlord for loss of Tenant's property caused by such damage or restoration
(unless such loss was caused by the negligence or willful misconduct of Landlord
or its Agents and is not covered by insurance maintained or required to be
maintained by Tenant under this Lease). Under no circumstances, however, shall
Landlord be liable to Tenant for claims of lost profits or loss of business or
income. business caused by such damage or restoration. Tenant hereby waives the
provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of
the California Civil Code, and the provisions of any similar law, hereinafter
enacted.
17. Condemnation.
(a) Definition of Terms. For the purposes of this Lease, the
term (1) "Taking" means a taking of the Premises or damage to the Premises
related to the exercise of the power of eminent domain and includes a voluntary
conveyance, in lieu of court proceedings, to any agency, authority, public
utility, person or corporate entity empowered to condemn property; (2) "Total
Taking" means the taking of the entire Premises or so much of the Premises as to
prevent or substantially impair the use thereof by Tenant for the uses herein
specified; (3) "Partial Taking" means a Taking which does not constitute a Total
Taking; (4) "Date of Taking" means the date upon which the title to the
Premises, or a portion thereof, passes to and vests in the condemnor or the
effective date of any order for possession if issued prior to the date title
vests in the condemnor; and (5) "Award" means the amount of any award made,
consideration paid, or damages ordered as a result of a Taking.
(b) Rights. The parties agree that in the event of a Taking
all rights between them or in and to an Award shall be as set forth herein and
Tenant shall have no
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right to any Award except as set forth herein.
(c) Total Taking. In the event of a Total Taking during the
term hereof (1) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the Premises shall cease and terminate as of the Date of
Taking; (2) Landlord shall refund to Tenant any prepaid rent; (3) Tenant shall
pay Landlord any rent or charges due Landlord under the Lease, each prorated as
of the Date of Taking; (4) Tenant shall receive from the Award those portions of
the Award attributable to trade fixtures of Tenant and for moving expenses of
Tenant; and (5) the remainder of the Award shall be paid to and be the property
of Landlord.
(d) Partial Taking. In the event of a Partial Taking during
the term hereof (1) the rights of Tenant under the Lease and the leasehold
estate of Tenant in and to the portion of the Premises taken shall cease and
terminate as of the Date of Taking; (2) from and after the Date of Taking the
Monthly Installment of rent shall be an amount equal to the product obtained by
multiplying the Monthly Installment of rent immediately prior to the Taking by a
fraction, the numerator of which is the number of square feet contained in the
Buildings after the Taking and the denominator of which is the number of square
feet contained in the Buildings prior to the Taking; (3) Tenant shall receive
from the Award the portions of the Award attributable to trade fixtures of
Tenant; and (4) the remainder of the Award shall be paid to and be the property
of Landlord.
18. Mechanics' Liens. Tenant shall (A) pay for all labor and
services performed for, materials used by or furnished to, Tenant or any
contractor employed by Tenant with respect to the Premises; (B) indemnify,
defend, protect and hold Landlord and the Premises harmless and free from any
liens, claims, liabilities, demands, encumbrances, or judgments created or
suffered by reason of any labor or services performed for, materials used by or
furnished to, Tenant or any contractor employed by Tenant with respect to the
Premises; (C) give notice to Landlord in writing five (5) days prior to
employing any laborer or contractor to perform services related to, or receiving
materials for use upon the Premises; and (D) permit Landlord to post a notice of
nonresponsibility in accordance with the statutory requirements of California
Civil Code Section 3094 or any amendment thereof. In the event Tenant is
required to post an improvement bond with a public agency in connection with the
above, Tenant agrees to include Landlord as an additional obligee.
19. Inspection of the Premises. Tenant shall permit Landlord and
its agents to enter the Premises at any reasonable time for the purpose of
inspecting the same, performing Landlord's maintenance and repair
responsibilities (upon 24 hour prior notice except in an emergency), and posting
a notice of non-responsibility for alterations, additions or repairs.
20. Compliance with Laws. Tenant shall, at its own cost, comply with
all of the requirements of all municipal, county, state and federal authorities
now in force, or which may hereafter be in force, pertaining to Tenant's use and
occupancy of the Premises, and shall faithfully observe all municipal, county,
state and federal law, statutes or ordinances now in force or which may
hereafter be in force pertaining to the use and occupancy of the Premises. The
judgment of any court of competent jurisdiction or the admission of Tenant
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in any action or proceeding against Tenant, whether Landlord be a party thereto
or not, that Tenant has violated any such ordinance or statute in the use and
occupancy of the Premises shall be conclusive of the fact that such violation by
Tenant has occurred. Tenant shall indemnify, protect, defend, and hold Landlord
harmless against any loss, expense, damage, attorneys' fees or liability arising
out of the failure of Tenant to comply with any applicable law.
Landlord agrees to comply with all Laws applicable to the
maintenance and repair of the Common Areas; however, in the event such
compliance requires the construction or installation of any capital improvements
or structural improvements due to (i) Tenant's specific manner of use of its
Premises or change in use of its Premises, (ii) Tenant's or its Agents'
negligence or willful misconduct, (iii) any alterations, additions or
improvements made or to be made by Tenant in the Premises or in Building A or
Building C, or (iv) any applications for governmental approvals or permits
requested by Tenant, Tenant agrees to reimburse Landlord for the costs of such
compliance within thirty (30) days following receipt of a written invoice(s) by
Tenant.
21. Subordination. The following provisions shall govern the
relationship of this Lease to any underlying lease, mortgage or deed of trust
which now or hereafter affects the Premises or Landlord's interest or estate
therein and any renewal, modification, consolidation, replacement, or extension
thereof (a "Security Instrument").
(a) Subsequent Security Instruments. At Landlord's election,
this Lease shall become subject and subordinate to any Security Instrument
created after the date of execution of this Lease provided that the Lender
holding such Security Agreement agrees in writing that in the event of
foreclosure of the Security Instrument in question, such Lender shall recognize
the tenancy of Tenant on the terms and conditions contained in this Lease so
long as Tenant is not in default under this Lease. Notwithstanding such
subordination, Tenant's right to quiet possession of the Premises shall not be
disturbed so long as Tenant is not in default and performs all of its
obligations under this Lease, unless this Lease is otherwise terminated pursuant
to its terms. However, if any Lender (as defined in Paragraph 31(h) below) of
Landlord so requires, this Lease shall become prior and superior to any Security
Instrument.
(b) Documents. Tenant shall execute any reasonable document
or instrument required by Landlord or any Lender to make this Lease either prior
or subordinate to a Security Instrument, which may include such other matters as
the Lender reasonably and customarily requires in connection with such
agreements, including provisions that the Lender not be liable for (1) the
return of any deposit or prepayment, unless the Lender receives it from
Landlord, and (2) any defaults on the part of Landlord occurring prior to the
time that the Lender takes possession of the Premises in connection with the
enforcement of its Security Instrument. Tenant's failure to execute any such
document or instrument within ten (10) days after written demand therefor shall
constitute a default by Tenant. Tenant's obligation to execute and deliver any
subordination agreement to any future Lender shall be conditioned upon such
Lender agreeing that in the event of foreclosure of the mortgage or termination
of the ground lease in question, such Lender shall recognize the tenancy of
Tenant on the terms and conditions contained in this
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Lease so long as Tenant is not in default under this Lease.
(c) Tenant's Attornment. Tenant shall attorn (1) to any
purchaser of the Premises at any foreclosure sale or private sale conducted
pursuant to any Security Instrument encumbering the Premises; (2) to any grantee
or transferee designated in any deed given in lieu of foreclosure; or (3) to the
lessor under any underlying ground lease should such ground lease be terminated;
provided such purchaser, transferee or lessor assumes Landlord's obligations
under the Lease..
22. Holding Over. This Lease shall terminate without further
notice at the expiration of the Lease Term. Any holding over by Tenant after
expiration (or any holding over by Tenant in a Building after the termination of
this Lease with respect to such Building under Subparagraph 4(c) hereof) shall
not constitute a renewal or extension or give Tenant any rights in or to the
Premises (or any such Building) except as expressly provided in this Lease. Any
holding over after the expiration with the consent of Landlord shall, unless
otherwise expressly agreed, be construed to be a tenancy from month to month, at
one hundred fifty percent (150%) of the monthly rent for the last month of the
Lease Term, and shall otherwise be on the terms and conditions herein specified
insofar as applicable.
23. Notices. Any notice required or desired to be given under this
Lease shall be in writing with copies directed as indicated below and shall be
personally served or given by mail. Any notice given by mail shall be deemed to
have been given when seventy-two (72) hours have elapsed from the time such
notice was deposited in the United States mails, certified and postage prepaid,
return receipt requested, addressed to the party to be served with a copy as
indicated herein at the last address given by that party to the other party
under the provisions of this paragraph. At the date of execution of this Lease,
the address of Landlord is:
SB&D CO., INC.
511 Division Street
Campbell, California 95008
ATTN: Mr. Scott Trobbe
and the address of Tenant is:
CISCO SYSTEMS, INC.
170 West Tasman Drive
San Jose, CA. 95124
ATTN: Chris Hampton
24. Attorneys' Fees. In the event either party shall bring any
action or legal proceeding for damages for any alleged breach of any provision
of this Lease, to recover rent or possession of the Premises, to terminate this
Lease, or to enforce, protect or establish any term or covenant of this Lease or
right or remedy of either party, the
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prevailing party shall be entitled to recover as a part of such action or
proceeding, reasonable attorneys' fees and court costs, including attorneys'
fees and costs for appeal, as may be fixed by the court or jury. The term
"prevailing party" shall mean the party who received substantially the relief
requested, whether by settlement, dismissal, summary judgment, judgment, or
otherwise.
25. Subleasing and Assignment.
(a) Landlord's Consent Required. Tenant's interest in this
Lease is not assignable, by operation of law or otherwise, nor shall Tenant have
the right to sublet the Premises, transfer any interest of Tenant therein or
permit any use of the Premises by another party, without the prior written
consent of Landlord to each such assignment, subletting, transfer or use, which
consent Landlord agrees not to withhold unreasonably subject to the provisions
of Subparagraph 25(c) below. A consent to one assignment, subletting, occupancy
or use by another party shall not be deemed to be a consent to any subsequent
assignment, subletting, occupancy or use by another party. Any assignment or
subletting without such consent shall be void and shall, at the option of
Landlord, terminate this Lease.
Landlord's waiver or consent to any assignment or subletting
hereunder shall not relieve Tenant from any obligation under this Lease unless
the consent shall so provide.
(b) Transferee Information Required. If Tenant desires to
assign its interest in this Lease or sublet the Premises, or transfer any
interest of Tenant therein, or permit the use of the Premises by another party
(hereinafter collectively referred to as a "Transfer"), Tenant shall give
Landlord at least fifteen (15) days prior written notice of the proposed
Transfer and of the terms of such proposed Transfer, including, but not limited
to, the name and legal composition of the proposed transferee, a financial
statement of the proposed transferee, the nature of the proposed transferee's
business to be carried on in the Premises (including a list of the type and
quantities of all Hazardous Materials to be used by the transferee on the
Premises), the payment to be made or other consideration to be given to Tenant
on account of the Transfer, and such other pertinent information as may be
requested by Landlord, all in sufficient detail to enable Landlord to evaluate
the proposed Transfer and the prospective transferee.
(c) Landlord's Rights. In the event Tenant seeks to Transfer
its interest in this Lease or the Premises, Landlord shall have the following
options, which may be exercised at its sole choice without limiting Landlord in
the exercise of any other right or remedy which Landlord may have by reason of
such proposed Transfer:
(i) [Intentionally Omitted]
(ii) Landlord may consent to the proposed Transfer on
the condition that Tenant agrees to pay to Landlord, as additional rent, fifty
percent (50%) of any and all rents or other consideration (including key money)
received by Tenant from the transferee by reason of such Transfer in excess of
the rent (prorated in the event of any sublease by Tenant) payable by Tenant to
Landlord under this Lease (less any brokerage commissions,
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costs of tenant improvements installed by Tenant for the transferee, attorneys'
fees and advertising expenses incurred by Tenant in connection with the
Transfer). Tenant expressly agrees that the foregoing is a reasonable condition
for obtaining Landlord's consent to any Transfer; or
(iii) Landlord may reasonably withhold its consent to
the proposed Transfer.
(d) Permitted Transfers. Notwithstanding the foregoing,
Tenant may, without Landlord's prior written consent, assign its interest in the
Lease or sublet the Premises or a portion thereof to (i) a subsidiary,
affiliate, division or corporation controlled by or under common control with
Tenant; (ii) a successor corporation related to Tenant by merger, consolidation,
non-bankruptcy reorganization or government action; or (iii) a purchaser of
substantially all of the Tenant's assets; provided that, in each instance
described above, (a) the transferee assumes the obligations of the Tenant under
this Lease in a written instrument delivered to Landlord; (b) the transferor
tenant remains liable as a primary obligor for the obligations of Tenant under
this Lease; and (c) the financial strength of the transferee tenant is
sufficient to meet its obligations under this Lease as reasonably determined by
Landlord. Any permitted transferee of Tenant's interest in this Lease or the
Premises, or portion thereof, pursuant to the terms of this Subparagraph 25(d)
is referred to herein as an "Affiliate" of Tenant.
26. Successors. The covenants and agreements contained in this
Lease shall be binding on the parties hereto and on their respective heirs,
successors and assigns (to the extent the Lease is assignable).
27. Mortgagee Protection. In the event of any default on the part
of Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage encumbering the
Premises, whose address shall have been previously furnished to Tenant. So long
as such beneficiary or mortgagee is making reasonable efforts to cure the
default, including, but not limited to, obtaining possession of the Premises by
power of sale or judicial foreclosure, if such should prove necessary to effect
a cure, Tenant shall not have the right to terminate this Lease.
28. Estoppel Certificate. Tenant agrees within five (5) business
days following reasonable request by Landlord to (A) execute and deliver to
Landlord any documents, including estoppel certificates presented to Tenant by
Landlord, (1) certifying that this Lease is unmodified and in full force and
effect and the date to which the rent and other charges are paid in advance, if
any, and (2) acknowledging that there are not, to Tenant's knowledge, any
uncured defaults on the part of Landlord hereunder, or specifying the defaults,
if any, and (3) evidencing the status of the Lease as may be required either by
a Lender making a loan to Landlord to be secured by a deed of trust or mortgage
covering the Premises or a purchaser of the Premises from Landlord and (B) to
deliver to Landlord the financial statement of Tenant with an opinion of a
certified public accountant, including a balance sheet and profit and loss
statement, for the last completed fiscal year all prepared in accordance with
generally accepted accounting principles consistently applied. Tenant's failure
to deliver an estoppel certificate within ten (10) days following such request
shall be
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an Event of Default under this Lease.
Landlord agrees within five (5) business days following reasonable
request by Tenant to execute and deliver to Tenant any documents, including
estoppel certificates presented to Landlord by Tenant, (1) certifying that this
Lease is unmodified and in full force and effect and the date to which the rent
and other charges are paid in advance, if any, and (2) acknowledging that there
are not, to Landlord's knowledge, any uncured defaults on the part of Tenant
hereunder, or specifying the defaults, if any, and (3) evidencing the status of
the Lease as may be required either by a Lender making a loan to Tenant to be
secured by this Lease (if permitted hereunder) or an assignee or sublessee of
Tenant. Landlord's failure to deliver an estoppel certificate within ten (10)
days following such request shall be an event of default under this Lease (and
Landlord shall have ten(10) days following written notice of such event of
default within which to cure the same).
29. Surrender of Lease Not Merger. The voluntary or other
surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not
work a merger and shall, at the option of Landlord, terminate all or any
existing subleases or subtenants, or operate as an assignment to Landlord of any
or all such subleases or subtenants.
30. Waiver. The waiver by Landlord or Tenant of any breach of any
term, covenant or condition herein contained shall not be deemed to be a waiver
of such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. Any waiver shall be in
writing and signed by both Landlord and Tenant.
31. General.
(a) Captions. The captions and paragraph headings used in
this Lease are for the purposes of convenience only. They shall not be construed
to limit or extend the meaning of any part of this Lease, or be used to
interpret specific sections. The word(s) enclosed in quotation marks shall be
construed as defined terms for purposes of this Lease. As used in this Lease,
the masculine, feminine and neuter and the singular or plural number shall each
be deemed to include the other whenever the context so requires.
(b) Definition of Landlord. The term Landlord as used in this
Lease, so far as the covenants or obligations on the part of Landlord are
concerned, shall be limited to mean and include only the owner at the time in
question of the fee title of the Premises, and in the event of any transfer or
transfers of the title of such fee, the Landlord herein named (and in case of
any subsequent transfers or conveyances, the then grantor) shall be
automatically freed and relieved of all liability with respect to performance of
any covenants or obligations on the part of Landlord contained in this Lease to
be performed after the date of such transfer or conveyance; provided that any
funds in the hands of Landlord or the then grantor at the time of such transfer,
in which Tenant has an interest, shall be turned over to the grantee. It is
intended that the covenants and obligations contained in this Lease on the part
of Landlord shall, subject as aforesaid, be binding upon each Landlord, its
heirs, personal representatives, successors and assigns only during its
respective period of ownership.
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(c) Time of Essence. Time is of the essence for the
performance of each term, covenant and condition of this Lease.
(d) Severability. In case any one or more of the provisions
contained herein, except for the payment of rent, shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Lease, but this Lease shall be construed as if such invalid, illegal or
unenforceable provision had not been contained herein. This Lease shall be
construed and enforced in accordance with the laws of the State of California.
(e) Quite Enjoyment. Upon Tenant paying the rent for the
Premises and observing and performing all of the covenants, conditions and
provisions on Tenant's part to be observed and performed hereunder, Tenant shall
have quiet possession of the Premises for the entire term hereof subject to all
of the provisions of this Lease.
(f) Law. As used in this Lease, the term "Law" or "Laws"
shall mean any judicial decision, statute, constitution, ordinance, resolution,
regulation, rule, administrative order, or other requirement of any government
agency or authority having jurisdiction over the parties to this Lease or the
Premises or both, in effect at the Commencement Date of this Lease or any time
during the Lease Term, including, without limitation, any regulation, order, or
policy of any quasi-official entity or body (e.g., board of fire examiners,
public utility or special district).
(g) Agent. As used in this Lease, the term "Agent" shall
mean, with respect to either Landlord or Tenant, its respective agents,
employees, contractors (and their subcontractors), and invitees (and in the case
of Tenant, its subtenants).
(h) Lender. As used in this Lease, the term "Lender" shall
mean any beneficiary, mortgagee, secured party or other holder of any deed of
trust, mortgage or other written security device or agreement affecting
Landlord's interest in the Premises.
32. Sign. Tenant shall not place or permit to be placed any sign or
decoration on the Land or the exterior of the Building without the prior written
consent of Landlord, which shall not be unreasonably withheld. Any sign or
declaration placed on the Land or the exterior of the Building by or for Tenant
shall be in compliance with all applicable laws, ordinances, rules and
regulations. Tenant, upon written notice by Landlord, shall immediately remove
any sign or decoration that Tenant has placed or permitted to be placed on the
Parcel or the exterior of the Building without the prior written consent of
Landlord, and if Tenant fails to so remove such sign or decoration within five
(5) days after Landlord's written notice, Landlord may enter upon the Premises
and remove said sign or decoration and Tenant agrees to pay Landlord, as
additional rent upon demand, the cost of such removal. At the expiration or any
earlier termination of this Lease, Tenant shall remove any sign which it has
placed on the Land or applicable Building and shall repair any damage caused by
the installation or removal of such sign.
33. Interest on Past Due Obligations. Any Monthly Installment of
rent due from Tenant, or any other sum due under this Lease from Tenant, which
is received by Landlord
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after the date ten (10) days following the date written notice is given by
Landlord to Tenant that such sum has not been paid when due, shall bear interest
from said due date until paid, at an annual rate equal to the greater of (the
"Permitted Rate"): (1) ten percent (10%); or (2) five percent (5%) plus the rate
established by the Federal Reserve Bank of San Francisco, as of the twenty-fifth
(25th) day of the month immediately preceding the due date, on advances to
member banks under Sections 13 and 13(a) of the Federal Reserve Act, as now in
effect or hereafter from time to time amended. Payment of such interest shall
not excuse or cure any default by Tenant. In addition, Tenant shall pay all
costs and attorneys' fees incurred by Landlord in collection of such amounts.
34. Surrender of the Premises. On the last day of the term hereof,
or on the sooner termination of this Lease (or any termination of this Lease
with respect to a particular Building under Subparagraph 4(c) hereof), Tenant
shall surrender the Premises (or such Building) to Landlord in their/its
condition existing as of the Commencement Date of this Lease (subject to
approved alterations and improvements which Tenant shall not be required under
this Lease to remove on or prior to the expiration or earlier termination of
this Lease), ordinary wear and tear excepted, the air conditioning and heating
equipment serviced and repaired by a reputable and licensed service firm, all
floors cleaned and waxed, all to the reasonable satisfaction of Landlord. Tenant
shall remove all of Tenant's personal property and trade fixtures from the
Premises (or such Building), and all property not so removed shall be deemed
abandoned by Tenant. Tenant, at its sole cost, shall repair any damage to the
Premises (or such Building) caused by the removal of Tenant's personal property,
machinery and equipment, which repair shall include, without limitation, the
patching and filling of holes and repair of structural damage. If the Premises
(or such Building) are not so surrendered at the termination of this Lease,
Tenant shall indemnify, defend, protect and hold Landlord harmless from and
against loss or liability resulting from delay by Tenant in so surrendering the
Premises (or such Building) including without limitation, any claims made by any
succeeding tenant or losses to Landlord due to lost opportunities to lease to
succeeding tenants.
35. Authority. The undersigned parties hereby warrant that they
have proper authority and are empowered to execute this Lease on behalf of
Landlord and Tenant, respectively.
36. CC&R's. This Lease is made subject to all matters of public
record affecting title to the property of which the Premises are a part. Tenant
shall abide by and comply with all private conditions, covenants and
restrictions of public record hereafter affecting the Premises or the Land and
any amendment thereof (the "CC&R's). All assessments and charges which are
imposed, levied or assessed against the Premises pursuant to the above-described
covenants, conditions and restrictions shall be paid by Tenant as Additional
Rent. Tenant acknowledges that CC&R's or a reciprocal parking and access
easement agreement (the "REA") may be executed by Landlord in connection with a
possible division of the Land into two (2) approximately equal sized parcels and
that Tenant shall subordinate this Lease to such CC&R's or REA so long as the
same does not materially increase Tenant's obligations under this Lease or
materially impair Tenant's use and enjoyment of the Premises or the Adjacent
Premises (to the extent Tenant has a leasehold interest in the same).
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37. Brokers. Tenant represents and warrants to Landlord that it
has not dealt with any broker respecting this transaction other than CPS
Associates and hereby agrees to indemnify and hold Landlord harmless from and
against any brokerage commission or fee, obligation, claim or damage (including
attorneys' fees) paid or incurred respecting any broker claiming through Tenant
or with which/whom Tenant has dealt.
38. Limitation on Landlord's Liability. Tenant, for itself and
its successors and assigns (to the extent this Lease is assignable), hereby
agrees that in the event of any actual, or alleged, breach or default by
Landlord under this Lease that:
(a) Tenant's sole and exclusive remedy and recourse against
Landlord shall be as against Landlord's interest in the Premises;
(b) No partner, shareholder, officer or director of Landlord
shall be sued or named as a party in a suit or action (except as may be
necessary to secure jurisdiction of the Landlord);
(c) No service of process shall be made against any partner,
shareholder, officer or director of Landlord (except as may be necessary to
secure jurisdiction of the Landlord);
(d) No partner, shareholder, officer or director of Landlord
shall be required to answer or otherwise plead to any service of process;
(e) No judgment will be taken against any partner,
shareholder, officer or director of Landlord;
(f) Any judgment taken against any partner, shareholder,
officer, or director of Landlord may be vacated and set aside at any time nunc
pro tunc;
(g) No writ of execution will ever be levied against the
assets of any partner, shareholder, officer or director of Landlord; and
(h) The covenants and agreements of Tenant set forth in this
Paragraph 38 shall be enforceable by Landlord and any partner, shareholder,
officer or director of Landlord.
39. Hazardous Material.
(a) Definitions. As used herein, the term "Hazardous
Material" shall mean any substance: (i) the presence of which requires
investigation or remediation under any federal, state or local statute,
regulation, ordinance, order, action, policy or common law; (ii) which is or
becomes defined as a "hazardous waste," "hazardous substance," pollutant or
contaminant under any federal, state or local statute, regulation, rule or
ordinance or amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and/or the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 et seq.); (iii)
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which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, the State of California or any political
subdivision thereof; (iv) the presence of which on the Premises causes a
nuisance upon the Premises or to adjacent properties or poses a hazard to the
health or safety of persons on or about the Premises; (v) the presence of which
on adjacent properties could constitute a trespass by Landlord or Tenant; (vi)
without limitation which contains gasoline, diesel fuel or other petroleum
hydrocarbons; (vii) without limitation which contains polychlorinated biphenyls
(PCBs), asbestos or urea formaldehyde foam insulation; or (viii) without
limitation radon gas.
For purposes of this Lease, the term "Hazardous Materials" shall not include
hazardous or toxic materials used in connection with general office uses (such
as toner, white out, office cleaning supplies) so long as the same are used in
compliance with applicable environmental laws, rules and regulations.
(b) Permitted Use. Subject to the compliance by Tenant with
the provisions of Subparagraphs c, d, e, f, g, h, i and j below, Tenant shall be
permitted to use and store on the Premises those Hazardous Materials listed in
EXHIBIT "D" attached hereto, in the quantities set forth in EXHIBIT "D".
(c) Hazardous Materials Management Plan.
(i) Prior to Tenant using, handling, transporting or
storing any Hazardous Material at or about the Premises (including, without
limitation, those listed in EXHIBIT "D"), Tenant shall submit to Landlord a
Hazardous Materials Management Plan ("HMMP") for Landlord's review and approval,
which approval shall not be unreasonably withheld. The HMMP shall describe: (aa)
the quantities of each material to be used, (bb) the purpose for which each
material is to be used, (cc) the method of storage of each material, (dd) the
method of transporting each material to and from the Premises and within the
Premises, (ee) the methods Tenant will employ to monitor the use of the material
and to detect any leaks or potential hazards, and (ff) any other information any
department of any governmental entity (city, state or federal) requires prior to
the issuance of any required permit for the Premises or during Tenant's
occupancy of the Premises. Landlord may, but shall have no obligation to review
and approve the foregoing information and HMMP, and such review and approval or
failure to review and approve shall not act as an estoppel or otherwise waive
Landlord's rights under this Lease or relieve Tenant of its obligations under
this Lease. If Landlord determines reasonably and in good faith by inspection of
the Premises or review of the HMMP that the methods in use or described by
Tenant are not adequate in Landlord's good faith judgment to prevent or
eliminate the existence of environmental hazards, then Tenant shall not use,
handle, transport, or store such Hazardous Materials at or about the Premises
unless and until such methods are approved by Landlord reasonably and in good
faith and added to an approved HMMP. Once approved by Landlord, Tenant shall
strictly comply with the HMMP and shall not change its use, operations or
procedures with respect to Hazardous Materials without submitting an amended
HMMP for Landlord's review and approval as provided above.
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(ii) Tenant shall pay to Landlord when Tenant submits an
HMMP (or amended HMMP) the amount reasonably determined by Landlord to cover all
Landlord's reasonable costs and expenses reasonably incurred in connection with
Landlord's review of the HMMP which costs and expenses shall include, among
other things, all reasonable out-of-pocket fees of attorneys, architects, or
other consultants incurred by Landlord in connection with Landlord's review of
the HMMP. Landlord shall have no obligation to consider a request for consent to
a proposed HMMP unless and until Tenant has paid all such costs and expenses to
Landlord, and Tenant shall pay all such costs and expenses to Landlord
irrespective of whether Landlord consents to such proposed HMMP. Tenant shall
pay to Landlord on demand the excess, if any, of such costs and expenses
actually incurred by Landlord over the amount of such costs and expenses
actually paid by Tenant, and Landlord shall promptly refund to Tenant the
excess, if any, of such costs and expenses actually paid by Tenant over the
amount of such costs and expenses actually incurred by Landlord.
(d) Use Restriction. Except as specifically allowed in
Subparagraph (c) above, Tenant shall not cause or permit any Hazardous Material
to be used, stored, generated, discharged, transported to or from, or disposed
of in or about the Premises, or any other land or improvements in the vicinity
of the Premises. Without limiting the generality of the foregoing, Tenant, at
its sole cost, shall comply with all Laws relating to the storage, use,
generation, transport, discharge and disposal by Tenant or its Agents of any
Hazardous Material. If the presence of any Hazardous Material on the Premises
caused or permitted by Tenant or its Agents results in contamination of the
Premises or any soil, air, ground or surface waters under, through, over, on, in
or about the Premises, Tenant, at its expense, shall promptly take all actions
necessary to return the Premises and/or the surrounding real property to the
condition existing prior to the appearance of such Hazardous Material.
(e) Tenant Indemnity. Tenant shall defend, protect, hold
harmless and indemnify Landlord and its Agents and Lenders with respect to all
actions, claims, losses (including, diminution in value of the Premises), fines,
penalties, fees (including, but not limited to, attorneys' and consultants'
fees) costs, damages, liabilities, remediation costs, investigation costs,
response costs and other expenses arising out of, resulting from, or caused by
any Hazardous Material used, generated, discharged, transported to or from,
stored, or disposed of by Tenant or its Agents in, on, under, over, through or
about the Premises and/or the surrounding real property. Tenant shall not suffer
any lien to be recorded against the Premises as a consequence of the disposal of
any Hazardous Material on the Premises by Tenant or its Agents, including any so
called state, federal or local "super fund" lien related to the "clean up" of
any Hazardous Material in, over, on, under, through, or about the Premises.
(f) Compliance. Tenant shall immediately notify Landlord of
any inquiry, test, investigation, enforcement proceeding by or against Tenant or
the Premises concerning any Hazardous Material. Any remediation plan prepared by
or on behalf of Tenant must be submitted to Landlord prior to conducting any
work pursuant to such plan and prior to submittal to any applicable government
authority and shall be subject to Landlord's consent. Tenant acknowledges that
Landlord, as the owner of the Land and the Premises,
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at its election, shall have the sole right to negotiate, defend, approve and
appeal any action taken or order issued with regard to any Hazardous Material by
any applicable governmental authority.
(g) Assignment and Subletting. It shall not be unreasonable
for Landlord to withhold its consent to any proposed assignment or subletting if
(i) the proposed assignee's or subtenant's anticipated use of the Premises
involves the storage, generation, discharge, transport, use or disposal of any
Hazardous Material; (ii) if the proposed assignee or subtenant has been required
by any prior landlord, lender or governmental authority to "clean up" or
remediate any Hazardous Material; (iii) if the proposed assignee or subtenant is
subject to investigation or enforcement order or proceeding by any governmental
authority in connection with the use, generation, discharge, transport, disposal
or storage of any Hazardous Material.
(h) Surrender. Upon the expiration or earlier termination of
the Lease, Tenant, at its sole cost, shall remove all Hazardous Materials from
the Premises that Tenant or its Agents introduced to the Premises. If Tenant
fails to so surrender the Premises, Tenant shall indemnify, protect, defend and
hold Landlord harmless from and against all damages resulting from Tenant's
failure to surrender the Premises as required by this Paragraph, including,
without limitation, any actions, claims, losses, liabilities, fees (including,
but not limited to, attorneys' and consultants' fees), fines, costs, penalties,
or damages in connection with the condition of the Premises including, without
limitation, damages occasioned by the inability to relet the Premises or a
reduction in the fair market and/or rental value of the Premises by reason of
the existence of any Hazardous Material in, on, over, under, through or around
the Premises.
(i) Right to Appoint Consultant. Landlord shall have the
right to appoint a consultant, at Tenant's expense, to conduct an investigation
to determine whether any Hazardous Material is being used, generated,
discharged, transported to or from, stored or disposed of in, on, over, through,
or about the Premises, in an appropriate and lawful manner. If Tenant has
violated any Law or covenant in this Lease regarding the use, storage or
disposal of Hazardous Materials on or about the Premises, Tenant shall reimburse
Landlord for the cost of such investigation. Tenant, at its expense, shall
comply with all reasonable recommendations of the consultant required to conform
Tenant's use, storage or disposal of Hazardous Materials to the requirements of
applicable Law or to fulfill the obligations of Tenant hereunder.
(j) Holding Over. If any action of any kind is required or
requested to be taken by any governmental authority to clean-up, remove,
remediate or monitor any Hazardous Material (the presence of which is the result
of the acts or omissions of Tenant or its Agents) and such action is not
completed prior to the expiration or earlier termination of the Lease, Tenant
shall be deemed to have impermissibly held over with respect to such portion of
the Premises affected by the Hazardous Materials or the clean up, remediation or
monitoring activities until such time as such required action is completed, and
Landlord shall be entitled to all damages directly or indirectly incurred in
connection with such holding over, including without limitation, damages
occasioned by the inability to re-let the Premises or a reduction of the fair
market and/or rental value of the Premises.
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(k) Existing Environmental Reports. Tenant hereby
acknowledges that it has received, read and reviewed the reports and test
results described in EXHIBIT "E" attached hereto and made a part hereof (the
"Existing Environmental Reports") The Hazardous Materials, if any, currently
present in, on or under the Premises as described in the Existing Environmental
Reports are referred to herein as the "Existing Environmental Conditions").
Tenant shall not be responsible for remediating any Existing Environmental
Condition unless Tenant exacerbates any Existing Environmental Condition.
(l) Provisions Survive Termination. The provisions of this
Paragraph 39 shall survive the expiration or termination of this Lease.
(m) Controlling Provisions. The provisions of this Paragraph
39 are intended to govern the rights and liabilities of the Landlord and Tenant
hereunder respecting Hazardous Materials to the exclusion of any other
provisions in this Lease that might otherwise be deemed applicable. The
provisions of this Paragraph 39 shall be controlling with respect to any
provisions in this Lease that are inconsistent with this Paragraph 39.
40. Cooperation. Tenant shall reasonably cooperate with Landlord in
granting such consents, easements and licenses to Landlord and third parties as
may be necessary or convenient for Landlord to demolish, develop, repair, lease,
subdivide or operate the Common Area or any Building as to which Tenant
terminates this Lease under Subparagraph 4(c) above, provided that Tenant's use
of, and access to, the Premises are not materially impaired.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth below.
TENANT:
CISCO SYSTEMS, INC.,
a California corporation
DATED: November 26, 1996 By: /s/Nancy Bareilles
Name: Nancy Bareilles
Title: Vice President of Worldwide
Real Estate and Workplace Resources
LANDLORD:
. SBC&D CO., INC.,
a California corporation
DATED: November 26, 1996 By: /s/Scott R. Trobbe
Name: Scott R. Trobbe
Title: EVP
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EXHIBIT "A"
SCHEDULE C
LEGAL DESCRIPTION
All that certain real property situate in the City of San Jose, County of Santa
Clara, State of California described as follows:
PARCEL ONE:
Beginning at an iron pipe found one foot below the surface of the ground in the
Northerly line of the Alviso and Milpitas Road at the Southwesterly corner of
that certain 35.75 acre tract (designated as Parcel Three) conveyed by San Jose
Abstract & Title Insurance Co., a corporation, to Birger E. Williamson, et ux,
by deed dated May 20, 1948 and recorded June 9, 1948 in Book 1628 of Official
Records, page 274, Santa Clara County Records, and running thence Easterly along
said Northerly line of said Alviso and Milpitas Road N. 89 deg. 50' E. 996.63
feet to an iron pipe set in the bottom of a drainage ditch; thence leaving said
road and running Northerly and parallel with the Westerly line of said 35.75
acre tract, N. 0 deg. 06' E. 783.00 feet to an iron pipe; thence Westerly and
along a line parallel with and distant 15 feet at right angles Northerly from
the Northernmost row of pear trees, S. 89 deg. 56' 30" W. 996.63 feet to an iron
pipe set one foot below the surface of the ground in the said Westerly line of
said 35.75 acre tract; and thence Southerly and along said Westerly line of said
35.75 acre tract, S. 0 deg. 06' W. 784.91 feet to the point of beginning.
Being a part of said 35.75 acre tract and a part of that certain 35.75 acre
tract (designated as Parcel Two) conveyed by said San Jose Abstract & Title
Insurance Co., to said Birger E. Williamson, et ux, by the above mentioned deed
and being located in the Esteros Rancho, as patented. Course True, Surveyed
August 17, 1948 by F.A. Herrmann, Registered Civil Engineer No. 1616.
Excepting therefrom that certain parcel of land conveyed to the City of San
Jose, a municipal corporation, by deed dated September 20, 1984 and recorded
December 31, 1984 in Book J 150 of Official Records, page 718, described as
follows:
Beginning at a point on the Northerly line of the above described 17.945 acre
parcel of land, distant thereon S. 89 deg. 57' 27" W. 77.51 feet from the
Northeasterly corner of said parcel; thence along said Northerly line N. 89 deg.
57' 27" E. 77.51 feet to said Northeasterly corner; thence leaving said corner
along the Easterly line of said parcel S. deg. 06' 57" W. 75.07 feet to a point;
thence leaving said Easterly line N. 45 deg. 53' 03" W. 107.76 feet to the point
of beginning.
PARCEL TWO:
A portion of that certain 61.326, more or less, acre parcel of land shown on the
Record of Survey filed for record in the office of the Recorder of the County of
Santa Clara in Book 445 of Maps, at pages 31 and 32, more particularly described
as follows:
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Beginning at a point on the general Westerly line of the above described 61.326
acre parcel of land, said point being the Northwesterly corner of that certain
17.945 acre parcel shown as the "Lands of Wong, et al." on said point of
beginning and running along said general Westerly line N.0 deg. 06' 57" E. 30.00
feet; thence leaving said general Westerly line Easterly along the arc of a
curve to the right from a tangent which bears N. 89 deg. 57' 27" E. having a
radius of 330.00 feet, a central angle of 18 deg. 11' 42" for a arc distance of
104.79 feet to a point of reverse curvature; thence Easterly along the arc of a
curve to the left, tangent to the preceding curve having a radius of 270.00
feet, a central angle of 18 deg. 11' 42" for an arc distance of 85.74 feet to a
point on the Northerly line of said 17.945, more or less, acre parcel; thence
along said Northerly line S. 89 deg. 57' 27" W. 187.43 feet to the point of
beginning.
ARB No: 015-30-006.01, 007
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EXHIBIT "B"
SITE PLAN
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EXHIBIT "C"
IMPROVEMENT AGREEMENT
This Improvement Agreement is made part of that Lease Agreement
dated November 26, 1996 (the "Lease"), by and between SBC&D CO., INC., a
California corporation ("Landlord") and CISCO SYSTEMS, INC., a California
corporation ("Tenant").
Except as otherwise provided herein, all defined or capitalized
terms used herein shall have the same meaning as ascribed to such terms in the
Lease. A default by either party under this Improvement Agreement shall also
constitute a default by that party under the Lease.
1. Landlord's Obligation to Construct the Buildings and Improve the
Land. The parties hereto acknowledge that the Land is presently unimproved.
Landlord shall improve the Land with two (2) building shells (the "Building
Shells") as described in ATTACHMENT 1 attached hereto, and with general utility
tenant improvements within such Building Shells (the "Tenant Improvements") as
generally shown on the schematic plan attached hereto as ATTACHMENT 2 (the
"Schematic Plan"). The Building Shells and the Tenant Improvements are
collectively referred to herein as the "Improvements". (Under the terms of the
Adjacent Lease (as defined in the Lease to which this Improvement Agreement is
attached), Landlord shall also improve the Land with an additional two (2)
building shells and with general utility tenant improvements with such
additional two building shells.) The Improvements shall be constructed
substantially in accordance with the site plan attached to the Lease as EXHIBIT
"B" (the "Site Plan"), the Definition of Building Shells attached hereto as
ATTACHMENT 1 (the "Building Shell Definition"), and the schematic plans for the
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Tenant Improvements attached to the Lease as ATTACHMENT 2 (the "Schematic
Plan"), as applicable, subject to the approval of and any changes required by
any appropriate governmental authority or Landlord's Lender. The Improvements
shall be constructed in accordance with the following:
(a) The Improvements will be constructed according to the Approved
Final Plans developed according to subparagraph (b) below, and the two (2)
Buildings shall be approximately 150,000 square feet as designated by Landlord,
in its sole and absolute discretion, and as permitted by the appropriate
governmental authorities and Landlord's Lender. Promptly after the completion of
the Buildings, Landlord shall cause its architect to certify that the Buildings
have been completed substantially in accordance with the Final Building Plans,
as altered by any changes approved by Landlord and Tenant under paragraph 4
below.
(b) Landlord and Tenant acknowledge that each has reviewed and
approved preliminary plans for the Building Shells as are described on
ATTACHMENT 3 attached hereto (the "Preliminary Building Plans"). Such
Preliminary Building Plans have been submitted to the appropriate governmental
agencies for review and approval. Landlord has commenced preparation of final
plans, specifications and working drawings for the Buildings (the "Final
Building Plans") which shall substantially conform to or represent logical
developments from the Preliminary Building Plans. Landlord shall submit such
Final Building Plans to Tenant for approval, and within five days following
delivery of the same, Tenant shall review them and either (i) approve them,
which approval shall not be unreasonably withheld, or (ii) specify in writing
its objections to the Final Building Plans and all changes that must be made to
the Final Building Plans to satisfy such objections; provided, however that
Tenant may only object to the Final Building Plans on the basis that
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they do not substantially conform to the Preliminary Building Plans. If Tenant
does not deliver any written objections to the Final Building Plans within the
specified period, then Tenant shall be deemed to have approved the Final
Building Plans. If Tenant does deliver such written objections within such time
period, then the parties shall confer and use their best efforts to resolve such
objections by Tenant within ten (10) days after Landlord has received notice
thereof. If the parties are unable to resolve such objections by Tenant within
said time period, then such objections shall be resolved by arbitration
conducted according to the procedures described in paragraph 11 hereof. Upon
Tenant's approval of the Final Building Plans, Landlord shall submit the Final
Building Plans to the appropriate governmental agencies for approval.
Immediately after all such governmental approvals have been obtained, and after
such Final Building Plans have been approved by Landlord's Lender providing
financing for the construction of the Improvements, then such approved Final
Building Plans shall be initialed and dated by Landlord and Tenant. Such
approved and initialed Final Building Plans, together with the Final TI Plans
described in paragraph (c) below and any and all change orders approved by
Landlord, Tenant and, if applicable, Landlord's Lender, are hereinafter
collectively referred to as the "Approved Final Plans".
(c) Tenant shall, in accordance with the schedule attached hereto as
ATTACHMENT 4, complete and deliver to Landlord preliminary plans for the Tenant
Improvements (the "Preliminary TI Plans") which substantially conform to or
represent logical developments from the Schematic Plan, and Landlord and Tenant
shall submit, review and approve such Preliminary TI Plans in accordance with
the applicable schedule set forth in ATTACHMENT 4. As soon as the Preliminary TI
Plans are completed and approved by Landlord and Tenant, Tenant shall develop
final plans, specifications and working drawings (the "Final TI Plans") which
substantially conform to or represent logical
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developments from the Preliminary TI Plans and shall submit them to Tenant for
approval, and the applicable procedures and time periods for plan submission,
review and approval set forth in ATTACHMENT 4 shall govern the Final TI Plans.
If the Final TI Plans are not approved by Landlord and Tenant by April 30, 1997,
then any delays by Tenant beyond any of the deadlines for Tenant set forth in
ATTACHMENT 4 shall constitute "Tenant Plan Delays"; except that Tenant Plan
Delays shall not include reasonable delays by Tenant beyond a deadline for
Tenant set forth in ATTACHMENT 4 to the extent the delay by Tenant shall have
been caused by Landlord's unreasonable disapproval of the Preliminary TI Plans,
Final TI Plans or revisions thereto, as applicable. Upon Landlord's approval of
the Final TI Plans, Landlord shall submit the Final TI Plans to all appropriate
governmental agencies for approval. Immediately after all such governmental
approvals have been obtained, and after such Final TI Plans have been approved
by Landlord's Lender providing financing for the construction of the Tenant
Improvements, then such approved Final TI Plans shall be initialed and dated by
Landlord and Tenant. Such approved and initialed Final TI Plans, together with
the Final Building Plans described in paragraph (b) above and any and all change
orders approved by Landlord, Tenant and, if applicable, Landlord's Lender, are
collectively referred to as the "Approved Final Plans".
2. Tenant Improvements. Tenant hereby acknowledges and agrees that
the Tenant Improvements shall consist only of general utility interior
improvements which may be of use to a subsequent user of the Premises (e.g.,
non-load bearing permanent partitions; windows; wall and floor coverings;
standard HVAC equipment and wiring, standard electrical distribution facilities
and wiring; standard lighting and utility fixtures). Landlord shall have no
obligation to construct or pay for any special purpose improvements needed by
Tenant for the conduct of its business or which might not be of use to a
subsequent user
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of the Premises (e.g., demountable partitions, special building service
equipment, trade fixtures of Tenant, special utility requirements, special
security requirements, special structural supports, or other special or unusual
interior improvements required by Tenant because of the use it intends to make
of the Premises). In determining whether any interior improvement is a "general
utility interior improvement" or a "special purpose improvement", the parties
shall take into account the kind, quality, and amount of such improvements,
their location in the Premises, and their relationship to the other
improvements, in determining its general utility to subsequent users of the
Premises.
3. Construction Contracts. Landlord shall retain South Bay
Construction Company (the "General Contractor") as general contractor to
construct the Improvements. The contract entered into by Landlord with the
General Contractor for the Tenant Improvements shall be in a form reasonably
approved by Landlord and Tenant and on a "cost plus 2.5%" basis so that the
General Contractor is paid a fee for profit and overhead equal to two and one
half percent (2.5%) of the Project Costs (as hereinafter defined).
"Project Costs" shall mean:
(i) All "hard" construction costs for the construction of the
Improvements according to the Approved Final Plans and all approved changes
thereto, including, but not limited to, the following:
(A) All labor, supervision and benefit costs therefore,
including, without limitation, costs of a project manager and project
superintendents;
(B) Costs of all materials;
(C) Value of all tools and equipment consumed on the job and
rental of all equipment used in the construction;
(D) Contract price for all construction work undertaken by
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<PAGE> 47
general contractors and sub-contractors, including grading and site preparation;
(E) [Intentionally Omitted];
(F) The cost of all equipment and fixtures, including the
cost of installation;
(G) Engineering and architectural fees for the preparation of
all plans, specifications and working drawings;
(H) The cost of all other on-site and off-site improvements
made to the Land, including grading and filling portions of the Land, and the
installation of paved parking and driveways, sidewalks, curbs, landscaping,
irrigation and underground drainage systems;
(I) [Intentionally Omitted];
(J) the cost of bringing utilities from the street to the
Buildings, including, without limitation, service connection fees;
(K) [Intentionally Omitted];
(L) Costs of machinery and equipment rented for the
construction of the Improvements, or which are owned by General Contractor but
are purchased for the construction and would not ordinarily be owned by General
Contractor;
(M) Costs of reasonable transportation and travel expenses
incurred in connection with the construction of the Improvements;
(N) Cots of minor repairs and replacements (including,
without limitation, dismantling and removal thereof);
(O) Costs of removal of debris;
(P) Costs of telephone calls, postage and delivery charges
and reasonably petty cash expenses at the construction site office;
-47-
<PAGE> 48
(Q) Costs of insurance required to be maintained by General
Contractor under the construction contract;
(R) Sales, use or similar taxes related to the construction
and for which General Contractor is liable;
(S) Costs of preventing damage or loss in the event of an
emergency (provided the emergency is not caused by the negligence of General
Contractor);
(T) Costs of repairing work damaged or improperly executed,
provided the damage or improper execution did not result from the negligence of
General Contractor (except that such costs shall be included in Project Costs
notwithstanding the cause of such costs to the extent such costs are not covered
by insurance);
(U) Such other costs as reasonably may be incurred by the
General Contractor in connection with the construction of the Improvements on
the Land (including, without limitation, any and all "soft costs").
4. Changes to Approved Final Plans. Once the Approved Final Plans
have been finally approved by Landlord and Tenant and the general construction
contract has been signed with the General Contractor, neither Landlord nor
Tenant shall have the right to order extra work or change orders with respect to
the construction of the Improvements without the prior written consent of the
other, which consent shall not be unreasonably withheld or delayed. All extra
work or change orders requested by either Landlord or Tenant shall be made in
writing, shall specify the amount of delay or the time saved resulting
therefrom, shall estimate any added or reduced cost resulting therefrom, and
shall become effective and a part of the Approved Final Plans once approved in
writing by both parties.
5. Commencement and Completion of the Improvements. As soon as (i)
the
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<PAGE> 49
Approved Final Building Plans or Approved Final TI Plans, as applicable, have
been developed as provided above, (ii) all necessary governmental approvals have
been obtained, and (iii) Landlord has entered into a general construction
contract with General Contractor for the construction of the Building Shells or
Tenant Improvements, as applicable, then Landlord shall thereafter commence
construction of the Building Shells or Tenant Improvements, as applicable, and
shall diligently prosecute such construction to completion.
6. Payment of Cost of Improvements. Landlord shall pay for all costs
of constructing the Building Shells (as defined in ATTACHMENT 1 attached
hereto). Tenant agrees that the Tenant Improvements must be of sufficient scope
that the costs of the Tenant Improvements (the "TI Costs") are not less than a
sum equal to Thirty Dollars ($30.00) multiplied by the rentable area of the
Buildings. Landlord shall make available for the payment of all TI Costs an
amount equal to Ten Dollars ($10.00) per square foot of rentable area of the
Buildings (the "Base TI Allowance"). Tenant shall pay all of the TI Costs
incurred or to be incurred by Landlord in excess of the Base TI Allowance (with
such excess referred to herein as "Tenant's TI Contribution"). Prior to the
commencement of construction of the Tenant Improvements, Landlord shall estimate
the total cost of the Tenant Improvements (the "Total TI Cost Estimate") and
Tenant's Contribution and shall deliver such estimates to Tenant. Tenant shall
pay Tenant's Contribution to Landlord in installments as and when needed by
Landlord to pay TI Costs until Tenant's TI Contribution has been paid, with each
installment to be paid within ten (10) days after Landlord notifies Tenant that
a progress payment toward TI Costs is to be made and delivers copies of the
applicable invoices to Tenant (which invoices Tenant shall reasonably approve).
The amount of the installments to be paid by Tenant to Landlord shall equal the
actual TI Costs to be paid by the applicable progress payment (after deducting
any
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<PAGE> 50
applicable retention) less the Landlord Contribution Amount (hereinafter
defined) with respect to the applicable progress payment until Landlord shall
have paid a total amount equal to the Base TI Allowance toward the TI Costs;
thereafter, Tenant's installments shall include all of the actual TI Costs to be
paid by a progress payment after deducting any applicable retention, and Tenant
shall also pay to Landlord the entire amount of any final payment and retention
within then (10) days after written notice from Landlord that such retention is
due and payable to the contractor(s). As used herein, the term "Landlord
Contribution Amount" shall mean, with respect to each progress payment, the
amount calculated by multiplying: (a) the actual TI Costs to be paid by the
applicable progress payment (after deducting any applicable retention), by (b)
the quotient obtained by dividing the Base TI Allowance by the Total TI Cost
Estimate. Prior to the commencement of construction of the Building Shells,
Tenant shall, if requested to do so by Landlord, provide assurances to
Landlord's Lender that the funds necessary to pay Tenant's TI Contribution will
be immediately available to Landlord as and when needed to pay TI Costs, which
assurances shall be reasonably satisfactory to Landlord and Landlord's Lender.
As soon as practicable following completion of the Tenant Improvements, Landlord
shall notify Tenant of the actual cost of construction of the Tenant
Improvements. Tenant shall have the right to audit the books, records, and
supporting documents of the Landlord to the extent necessary to determine the
accuracy of such notice of actual costs during normal business hours after
giving Landlord at least three (3) business days prior written notice. Tenant
shall bear the cost of such audit. Any such audit must be conducted, if at all,
within one hundred and eighty (180) days after Landlord delivers its notice of
actual costs to Tenant. In the event Tenant's payment of Landlord's estimate of
Tenant's TI Contribution shall have resulted in either an overpayment or
underpayment of the amount
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<PAGE> 51
actually due, then an adjustment shall be made such that any overpayment shall
be credited against the next Monthly Installment of rent or any underpayment
shall be paid as Additional Rent together with the next Monthly Installment of
rent.
7. Delays in Completion. The parties hereto acknowledge that the
date on which Tenant's obligation to pay the Monthly Installment of rent would
otherwise commence may be delayed because of (i) Tenant Plan Delays, (ii) the
entry by Tenant into the Premises which interferes with or delays the completion
of Landlord's work, (iii) change orders requested by Tenant and approved by
Landlord, and/or (iv) any other act or omission of Tenant. It is the intent of
the parties hereto that the Tenant's obligation to pay the Monthly Installment
of rent and Additional Rent not be delayed by any of such causes or by any other
act of Tenant, and in the event it is so delayed, then Tenant's obligation to
pay the Monthly Installment of rent and Additional Rent shall commence as of the
date it would otherwise have commenced absent said delay(s) caused by Tenant.
8. Delivery of Possession and Punchlist. When the Improvements are
substantially completed, Landlord and Tenant shall together walk through and
inspect the Improvements so completed, using their best efforts to discover all
uncompleted or defective construction. After such inspection has been completed,
each party shall sign a list of "punch list" items which Tenant has determined
must be corrected by Landlord, and which Landlord has determined Landlord is
obligated to correct. Landlord agrees to use reasonable efforts to complete
those "punch list" items within thirty (30) days after executing such list.
Notwithstanding anything contained herein, Tenant's obligations to pay the
Monthly Installment of rent and Additional Rent shall commence as provided in
the Lease, regardless of whether Tenant completes such inspection or executes
such list.
9. Construction Warranty for the Improvements. Effective upon
completion of
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<PAGE> 52
the Improvements, Landlord does hereby warrant that the construction of the
Improvements was performed in accordance with the Approved Final Plans therefor
in a good and workmanlike manner, and that all materials and equipment furnished
conform to said plans and are new and otherwise of good quality; provided,
however, that said representation and warranty shall not extend to, and Landlord
shall not be liable for, any defect in construction or in the operation of
equipment which is discovered either (i) eleven (11) months after the
Commencement Date, or (ii) twelve (12) months after the recordation of a notice
of completion for such improvements (which periods of time are referred to
herein collectively as the "Warranty Period"). Tenant shall promptly notify
Landlord in writing of any defect in construction or the operation of equipment
discovered within the Warranty Period, and promptly thereafter Landlord shall
commence the cure of such defect and complete such cure with diligence at
Landlord's cost and expense. With respect to defects discovered after the
expiration of the Warranty Period, the parties hereto acknowledge that it is
their intention that Tenant have the benefit of any construction or equipment
warranties existing in favor of Landlord that would assist Tenant in correcting
such construction defects and in discharging its obligations regarding the
repair and maintenance of the Premises. Upon request by Tenant following the
expiration of the Warranty Period, Landlord shall inform Tenant of all written
construction and equipment warranties existing in favor of Landlord which affect
the Improvements. Landlord shall cooperate with Tenant in enforcing such
warranties and in bringing any suit that may be necessary to enforce liability
with regard to any defective construction or operation of equipment so long as
Tenant pays all costs incurred by Landlord so acting. Landlord makes no other
express or implied warranty with respect to the construction or operation of the
Improvements.
10. Ownership of the Improvements. All of the Improvements which are
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<PAGE> 53
constructed by Landlord shall become the property of Landlord upon installation
and shall not be removed or altered by Tenant except as expressly permitted by
the Lease.
11. Arbitration. Any question, dispute or controversy specifically
required to be determined by arbitration pursuant to this Work Letter shall be
determined by arbitration as provided in this paragraph, and shall in no way
delay or affect the commencement of the Lease Term and/or Tenant's obligation to
pay rent pending the outcome of such arbitration. Neither Landlord or Tenant
shall have the right and hereby waive such right, to request or require
arbitration of any other questions, dispute or controversy arising under the
Lease. Arbitrable questions, disputes or controversies shall be arbitrated
according to the following procedure. Either Landlord or Tenant may initiate
arbitration by giving written notice to the other stating an intention to
arbitrate, the issue to be arbitrated, and the relief sought. Such arbitration
shall be conducted pursuant to the provisions of the laws of the State of
California then in force and the procedural rules of the American Arbitration
Association or its successor insofar as said rules of procedure do not conflict
with said laws or this paragraph. Once notice to arbitrate has been given,
Landlord and Tenant shall within ten (10) days select one joint arbitrator, or
if they cannot agree on one joint arbitrator then each shall select an
arbitrator within fifteen (15) days of delivery of said notice and notify the
other party of its selection. The two arbitrators selected shall designate the
third arbitrator forthwith. No arbitrator may be related to or affiliated with
either Landlord or Tenant. The three arbitrators shall convene in the county in
which the Leased Premises are located as soon as practicable and offer Landlord
and Tenant the opportunity to present their cases. If any party fails to appear,
participate or produce evidence in an arbitration proceeding, the arbitrators
may make their award and decision based solely on the evidence actually
presented. The arbitrators shall, by majority vote,
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<PAGE> 54
make such award and decisions as is appropriate and in accord with the terms of
the Lease and such award and decision shall be binding upon Landlord and Tenant
and enforceable in a court of law. Said award and decision shall include an
award to the prevailing party of reasonable attorneys' fees and expenses and
costs of arbitration. In the event their party fails to appoint an arbitrator or
the two arbitrators fail to select a third arbitrator within the time required
by this paragraph, upon application of either party the arbitrator shall be
appointed by the American Arbitration Association, or if there be no American
Arbitration Association or it shall refuse to perform this function, then by the
then Presiding Judge of the Superior Court of the State of California for the
County in which the Premises are located.
LANDLORD: TENANT:
CISCO SYSTEMS, INC.,
SBC&D CO., INC., a California corporation
a California corporation
By: /s/Nancy Bareilles
By: /s/Scott R. Trobbe Name: Nancy Bareilles
Name: Scott R. Trobbe Title: Vice President of Worldwide Real
Title: EVP Estate and Workplace Resources
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<PAGE> 55
ATTACHMENT 1 TO EXHIBIT "C"
DEFINITION OF BUILDING SHELLS
The term Building Shells shall mean the following:
1. BUILDING STRUCTURE
(a) All foundations to include footings, piers, caissons,
pilings, grade beams, foundation walls or other building
foundation components required to support the entire building
structure.
(b) Columns shall be steel box or pipe columns.
(c) All columns, beams, joists, purlins, headers, or other
framing members to support the roof and roofing membrane.
(d) Five inch (5") thick concrete slab on grade with
welded wire mesh and any other reinforcing or structural
connections that may be necessary to required.
(e) Exterior walls that enclose the perimeter of the
buildings with steel reinforcing and structural connections
that may be necessary to required.
(f) All exterior glass and glazing with anodized aluminum
frames. Glass to be tinted as appropriate to the aesthetic
design of the building. All exterior doors, door closer and
locking devices necessary for proper functioning.
(g) Wood panel roof system to support roofing membrane.
(h) Three (3) ply built up roofing with cap sheet and all
flashings by Owens-Corningl, John Manville, or equal.
(i) Exterior painting of all concrete with Tex-Coat or
Kel- Tex textural paint. All caulking of exterior concrete
joints in preparation for painting.
2. PLUMBING
(a) Underground sanitary sewer laterals connected to the
city sewer main in the street and piped into each building and
under the concrete slab on grade for the length of the
buildings. Main waste lines under the slabs will be in as
close proximity as possible to the
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<PAGE> 56
building restroom locations.
(b) Domestic water mains connected to the city water main
in the street and stubbed to the buildings. Water mains to
each building shall be not less than two and one half inches
(2.5") in size.
(c) Roof drain leaders piped and connected to the site
storm drainage system.
(d) Gas lines connected to the city public utility mains
and to gas meters adjacent to, and in close proximity to each
building. Meter supplied by utility company.
3. ELECTRICAL
(a) All primary electrical service to each building that
is complete including underground conduit, wire feeders from
transformer pads into the building's main switchgear
electrical room. The electrical characteristics of the
secondary side of transformers shall be 277/480 Volt. 3 phase
and the rated capacity of the transformer shall be 2,000 amps
for each building.
(b) Underground pull section, meter, and panel(s), for
site lighting and landscaping.
(c) Underground conduit from the street to the building
for telephone trunk line service by Pacific Telephone. Conduit
to each building shall be not less than four inches (4").
(d) An electrically operated landscape irrigation
controller that is a complete and functioning system.
(e) Underground conduit from the building to the main fire
protection system, shutoff valve (PIV) for installation of
security alarm wiring.
(f) All parking lot and landscape lighting to include
fixtures, underground conduit, wire, distribution panel and
controller. All exterior lighting shall be a complete and
functioning system.
4. FIRE PROTECTION (SPRINKLERS)
(a) A complete and fully functional overhead system
distributed throughout the building. The systems shall be
classified ordinary hazard group II, and be distributed
throughout the building.
(b) System shall include all sprinkler heads that may be
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<PAGE> 57
required by building codes above the ceiling, when ceilings
are installed.
(c) Site sprinkler main to be sized adequately to support
typical office use densities.
5. SITEWORK
(a) All work outside the building perimeter walls shall be
considered site work for the building shell and shall include
grading, paving, landscaping, landscape irrigation, storm
drainage, utility service laterals, curbs, gutters, sidewalks,
specialty paving (if required), retaining walls, planter
boxes, parking lot and landscape lighting and other exterior
lighting.
(b) Paving sections for automobile and truck access shall
be according to the Geological Soils Report.
(c) All parking lot striping to include handicap signage
and spaces.
(d) Underground site storm drainage system shall be
connected to the city storm system main.
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<PAGE> 58
ATTACHMENT 2 TO EXHIBIT "C"
SCHEMATIC PLAN FOR TENANT IMPROVEMENTS
-58-
<PAGE> 59
ATTACHMENT 3 TO EXHIBIT "C"
PRELIMINARY BUILDING PLANS
BAYTECH OFFICE COMPLEX
Drawing List
November 20, 1996
<TABLE>
<CAPTION>
DRAWING NAME DRAWING NUMBER DATE PREPARED BY
- ------------ -------------- ---- -----------
<S> <C> <C> <C>
Planning Set - 10/30/96
Title Sheet 1 10/30/96 The Hagman Group
Approved PD Zoning May 2 10/30/96 The Hagman Group
Site Plan 3 10/30/96 The Hagman Group
Grading/Drainage 4 (C1) 10/30/96 Mission Engineers,
Inc.
Elevations 5 10/30/96 The Hagman Group
Elevations 6 10/30/96 The Hagman Group
Floor Plans 7 10/30/96 The Hagman Group
Floor Plans 8 10/30/96 The Hagman Group
Landscape Plan 9 10/30/96 Reed Associates
Details 10 10/30/96 The Hagman Group
Final Revisions - 11/20/96
Site Plan 1 11/20/96 The Hagman Group
Grading/Drainage 4 (C1) 11/20/96 Mission Engineers,
Inc.
Floor Plans 7 11/20/96 The Hagman Group
Floor Plans 8 11/20/96 The Hagman Group
</TABLE>
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<PAGE> 60
ATTACHMENT 4 TO EXHIBIT "C"
SCHEDULES FOR PRELIMINARY TI PLANS AND FINAL TI PLANS
<TABLE>
<CAPTION>
PRELIMINARY TI PLANS DEADLINE
- ------------------- --------
<S> <C>
1. Tenant's submission of Preliminary TI February 17, 1997
Plans to Landlord.
2. Landlord's review and approval, or 5 days after receipt.
disapproval with comments.
3. Tenant's submission of revised 5 days after receipt of Landlord's
Preliminary TI Plans. disapproval with comments.
4. Repeat Steps 2 and 3 until March 5,
1997, then submit disagreements to
arbitration under paragraph 11 of the
Improvement Agreement.
FINAL TI PLANS DEADLINE
- -------------- ---------
1. Tenant's submission of Final TI Plans 45 days following approval of Preliminary
to Landlord. TI Plans by Landlord, but in no event later
than April 18, 1997.
2. Landlord's review and approval, or 5 days after receipt.
disapproval with comments.
3. Tenant's submission of revised Final TI 5 days after receipt of Landlord's
Plans. disapproval with comments.
4. Repeat Steps 2 and 3 until April 30,
1997, then submit disagreements to
arbitration under paragraph 11 of the
Improvement Agreement.
</TABLE>
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<PAGE> 61
EXHIBIT "D"
LIST OF HAZARDOUS MATERIALS TENANT WILL USE ON THE PREMISES
NONE
-61-
<PAGE> 62
EXHIBIT "E"
DESCRIPTION OF EXISTING ENVIRONMENTAL REPORTS
<TABLE>
<CAPTION>
ITEM # DATE DESCRIPTION
- ------ ---- -----------
<S> <C> <C>
1 11/19/86 Letter to David A. Wollenberg, The Cortana Corporation
from Chilton H. Lee Law Offices.
2 11/11/88 Letter to Steven Speno, Gibson Speno Co. From Albert P.
Ridley, Woodard-Clyde Consultants
3 11/23/88 Letter to Steven G. Speno, Gibson Speno Co. from Chip
Macdonald, CPS
4 01/15/90 Preliminary Site Assessment prepared for Union Bank by
Applied Geosciences, Inc.
5 03/05/90 Letter to Susan McCormack, Union Bank from Joseph E.
Melio Jr., Applied Geosciences, Inc.
6 09/16/94 Letter to Chip MacDonald, CPS Realty from Alex J.
Gallego, Applied Geosciences, Inc.
7 06/22/95 Letter to Valerie Howard, Orchard Properties from
Kristen M. Wood, Applied Geosciences, Inc.
8 01/05/96 Final Report, Phase 1 Site Assessment prepared for
Mr. Kelly Heil, Colliers Parrish Int'l., Inc. by Mr. Tony
Lam, Construction and Development Services.
9 10/15/96 Letter to Rich Fehler, Clayton Environmental from Scott
Trobbe, South Bay Development Co.
10 10/18/96 Letter to Scott Trobbe, South Bay Development Co. from
Matthew W. Hanko, Clayton Environmental Consultants.
11 10/28/96 Preliminary Status Report, Environmental Site Assessment
prepared for Vallerie Howard, CarrAmerica Reality Corp.
by Lee Kurtzweil, ATC Environmental, Inc.
12 10/29/96 Fax to Scott Trobbe, South Bay Development Co., from
Sam Farb, Berliner & Cohen Attorneys at Law.
13 11/04/96 Letter to Scott Trobbe, South Bay Development Co., from
Matthew W. Hanks, Clayton Environmental Consultants.
14 11/06/96 Letter to Scott Trobbe, South Bay Development Co., from
Matthew W. Hanks, Clayton Environmental Consultants.
</TABLE>
Page 1
<PAGE> 63
<TABLE>
<CAPTION>
<S> <C> <C>
15 11/08/96 Environmental Site Assessment prepared for Valerie
Howard, Orchard Properties by Lee Kurtzweil, ATC
Environmental
16 11/18/96 Letter to Scott Trobbe, South Bay Development Co., from
Matthew W. Hanks, Clayton Environmental Consultants
</TABLE>
Page 2
<PAGE> 1
EXHIBIT 11.01
COMPUTATION OF NET INCOME PER SHARE
IN ACCORDANCE WITH INTERPRETIVE RELEASE NO. 34-9083
(In thousands, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
-------------------------- -------------------------
Apr. 26, Apr. 28, Apr. 26, Apr. 28,
1997 1996 1997 1996
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE (Unaudited)
Actual weighted average common shares
outstanding for the period 664,012 647,978 658,359 642,008
Weighted average shares assuming exercise
of employee stock options using average
market price 24,440 21,982 29,057 22,340
------------ ------------ ------------- -----------
Shares used in per-share calculations 688,452 669,960 687,416 664,348
============ ============ ============= ===========
Net income applicable to primary income
per share $378,321 $245,649 $897,722 $636,773
============ ============ ============= ===========
Net income per share based on SEC
Interpretive Release No. 34-9083 $ .55 $ .37 $ 1.31 $ .96
============ ============ ============= ===========
FULLY DILUTED EARNINGS PER SHARE
Actual weighted average common shares
outstanding for the period 664,012 647,978 658,359 642,008
Weighted average shares assuming exercise
of employee stock options using the
greater of ending or average market price 24,440 23,671 29,062 25,806
------------ ------------ ------------- -----------
Shares used in per-share calculations 688,452 671,649 687,421 667,814
============ ============ ============= ===========
Net income applicable to fully diluted
income per share $378,321 $245,649 $897,722 $636,773
============ ============ ============= ===========
Net income per share based on SEC
Interpretive Release No. 34-9083 $ .55 $ .37 $ 1.31 $ .95
============ ============ ============= ===========
</TABLE>
These calculations are submitted in accordance with Securities Exchange Act of
1934 Release No. 34-9083
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet, consolidated statement of operations and
consolidated statement of cash flows included in the Company's Form 10-Q for the
period ending April 26, 1997, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-26-1997
<PERIOD-START> JUL-29-1996
<PERIOD-END> APR-26-1997
<CASH> 345,492
<SECURITIES> 2,395,494
<RECEIVABLES> 1,154,447
<ALLOWANCES> 15,018
<INVENTORY> 233,505
<CURRENT-ASSETS> 2,937,467
<PP&E> 824,629
<DEPRECIATION> 364,240
<TOTAL-ASSETS> 5,064,336
<CURRENT-LIABILITIES> 1,035,381
<BONDS> 0
0
0
<COMMON> 1,276,576
<OTHER-SE> 2,711,149
<TOTAL-LIABILITY-AND-EQUITY> 5,064,336
<SALES> 4,675,074
<TOTAL-REVENUES> 4,675,074
<CGS> 1,625,338
<TOTAL-COSTS> 3,334,233
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,553,171
<INCOME-TAX> 655,449
<INCOME-CONTINUING> 897,722
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 897,722
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 0
</TABLE>
