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FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended July 26,1997
[ ] 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
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
170 West Tasman Drive
San Jose, California 95134
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 526-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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None Nasdaq National Market
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
As of September 15, 1997, the approximate aggregate market value of voting stock
held by non-affiliates of the registrant was $46,175,832,500 (based upon the
closing price for shares of the Registrant's Common Stock as reported by the
National Market System of the National Association of Securities Dealers
Automated Quotation System on that date). Shares of Common Stock held by each
officer, director, and holder of 5% or more of the outstanding Common Stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes. As of September 15, 1997, 672,119,249 shares of registrant's
common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of Annual Report to Shareholders for fiscal year ended July 26,
1997.
(2) Portions of the Registrant's Proxy Statement related to the 1997 Annual
Meeting of Shareholders, to be held on November 13, 1997, are
incorporated by reference into Part III of this Annual Report on 10-K
where indicated.
The table of exhibits filed appears at page 23.
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PART I
ITEM 1. BUSINESS
GENERAL
Certain Statements contained in this Annual Report on Form 10-K, 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 "Financial Risk Management" and "Future Growth
Subject to Risks" sections, of Cisco System Inc.'s 1997 Annual Report to
Shareholders, which is hereby incorporated by reference, as well as the
"Acquisition, Investment and Alliances", "Competition", "Research and
Development", "Manufacturing", "Patents, Intellectual Property and Licensing"
and "Other Risk Factors" sections contained herein, which identify important
risk factors that could cause actual results to differ from those contained in
the forward looking statements.
Cisco Systems, Inc. and its subsidiaries ("Cisco", or the "Company") operate in
one industry segment providing networking solutions that connect computing
devices and computer networks. These allow people to access or transfer
information without regard to differences in time, place or type of computer
system.
Networking is a multi-billion dollar global market whose growth is spurred by
the increasingly critical role that electronic information plays in almost every
facet of life today. While computer networking for many years has been a highly
complex science employed primarily by large enterprises, the growth in use of
the global Internet has proved beneficial to organizations of all sizes, as well
as individuals, worldwide.
The Company markets its products through its direct sales force, distributors,
value-added resellers and system integrators. This multiple-channel approach
allows customers to select the channel that addresses their specific needs and
provides the Company with broad coverage of worldwide markets.
Cisco was incorporated in California in December 1984. The Company's executive
offices are located at 170 West Tasman Drive, San Jose, California 95134, and
its telephone number at that location is (408)526-4000.
END-TO-END NETWORKING SOLUTIONS
Cisco's strategy is to provide end-to-end networking solutions that customers
can use to a) build a unified information infrastructure of their own, or b) to
connect to someone else's network. An end-to-end networking solution provides a
common technical architecture that allows network services to be consistently
provided to all users on the network.
Cisco's products are used individually or in combination to connect computing
devices to networks, or computer networks with each other - whether they are
within a building, across a campus or around the world. The Company's breadth of
product offerings enables it to configure
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hardware and software features to match customer needs. Many of the Company's
products are expandable, offering customers the option to upgrade their networks
as their needs grow.
Cisco's product offerings fall into several categories:
Routing
Routing is a foundation technology for computer communications. Routers move
information from one network to another, applying intelligence in the process to
ensure that the information reaches its destination securely and in the fastest
way possible. Cisco offers a broad range of routers, including the Cisco 7000,
4000, 2500 and 1000 families, as well as the recently introduced Cisco 12000, or
Gigabit Switch Router (GSR).
Switching
Switching is another important networking technology, used in both local-area
networks (LANs) and wide-area networks (WANs). Cisco's switching solutions
employ all widely used switching technologies -- Ethernet, Token Ring and
Asynchronous Transfer Mode (ATM). Cisco's LAN switching products are contained
in the Catalyst(TM) family. WAN switching products include the Cisco
StrataCom(R) IGX and BPX families, and the Cisco 3800 series.
Access
Computing and communications today are conducted in many locations, not just at
a company's head office. Cisco's access solutions give groups and individuals
who are remotely located the same level of connectivity and information access
they would have if they were located at the company's head office. Asynchronous
and ISDN remote-access routers and dial-up access servers are used for
supporting telecommuters and mobile workers, for Internet access and
branch-office connectivity. The Company's access products include the AS5000
family of access servers; access routers such as the Cisco 4000, 2500, and 1000
families, as well as network security and management software.
SNA/LAN
Most large organizations have existing IBM computing systems that use the System
Network Architecture (SNA) networking method, as well as LANs based on open
network architectures (such as the TCP/IP protocol). Network managers with both
types of networks increasingly want to combine them into a single network that
leverages existing investments. The Company's CiscoBlue strategy provides a
roadmap for consolidating and managing SNA and non-SNA networks. It also enables
an IBM data center to be used in Internet/intranet applications.
Internet Appliances and Software
Cisco offers products that improve a network manager's ability to cope with a
number of challenges posed by the growing popularity of the Internet, such as
security, network traffic volume, and network address shortage. These products
include: the PIX Firewall, which prevents unauthorized access to a network; the
Micro Webserver, which facilitates the set up of Web sites; IP/TV software,
which transmits audio and video to desktop PCs; IPeXchange Internet Gateways,
which are designed to provide Novell NetWare customers in small and medium-sized
businesses with easy and secure connectivity to the Internet; and LocalDirector
and
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Distributed Director, which balance the load between multiple servers to enable
timely access and response to requests.
Cisco IOS Software
Cisco Internetwork Operating System (Cisco IOS(TM)) is the common platform that
transforms a network into a strategic asset and competitive advantage. Cisco IOS
technologies include a wide variety of features that provide the intelligence of
the Internet and of private networks. They are the unifying thread that connects
otherwise disparate hardware to build a seamless, efficient infrastructure which
facilitates network growth and the deployment of new applications, which in turn
enhances reliability, and interoperability, and lowers the cost of ownership.
The Cisco IOS software platform provides important network services and enables
networked applications. Cisco IOS network services fall into two categories.
Foundation Network Services are the building blocks of a robust network. They
include connectivity, security, scalability, reliability and management.
Enabling Network Services support the deployment of applications that take
advantage of the underlying network. Enabling Network services include such
areas as multimedia, quality of service(a network management and optimization
service) and voice.
Network Management
Cisco provides applications that centralize management, automate routine tasks,
and can be integrated into customers' existing network management environments.
The CiscoWorks software is a suite of standards-based applications that allow
users to manage their Cisco devices from a single integrated console. Cisco
Enterprise Accounting is a new family of powerful and easy-to-use enterprise
network management accounting and billing applications that help manage and
control the cost of owning corporate networks and Internet access. The NETSYS
Enterprise/Solver family of network intelligent management tools aids in
troubleshooting, managing, and network planning.
CUSTOMERS AND MARKETS
Networking needs are influenced by a number of factors, including the size of
the organization, number and types of computer systems, geographic locations,
and the applications requiring data communications. Cisco's customer base is not
concentrated in any particular industry and in each of the past five fiscal
years no single customer has accounted for ten percent or more of the Company's
net sales. For additional information regarding the Company's customers and
markets see Note 11, "Geographic Information and Major Customers," on page 49 of
the Company's 1997 Annual Report to Shareholders, which is incorporated by
reference herein.
Cisco's market strategy addresses three customer profiles:
Enterprise
Enterprise customers generally are large organizations with complex networking
needs, usually spanning multiple locations and types of computer systems.
Enterprise customers include corporations, government agencies, utilities and
educational institutions.
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Service Providers
These customers provide data communication services, including telecommunication
carriers, Internet Service Providers, cable companies, and wireless
communication providers.
Small/Medium Business
These customers have a need for data networks of their own, as well as
connection to the Internet and/or to business partners. However, these customers
generally have limited resources; therefore, the Company attempts to provide
products which are affordable as well as easy to install and use.
The Company's worldwide direct sales organization at September 20, 1997
consisted of approximately 3,500 individuals, including managers, sales
representatives, and technical support personnel. The Company has approximately
105 U.S. field sales offices providing coverage in the following metropolitan
areas: Atlanta, Boston, Chicago, Cincinnati, Cleveland, Dallas, Denver, Durham,
Honolulu, Houston, Indianapolis, Los Angeles, Miami, New Orleans, New York,
Orlando, Phoenix, Pittsburgh, Portland (Oregon), Princeton, Salt Lake City, San
Antonio, San Diego, San Francisco, San Jose, Seattle, St. Louis, and Washington,
D.C., among others.
The Company's international sales are currently being made through multiple
channels including approximately 90 international distributors and resellers
throughout the world. These international distributors provide system
installation, technical support, and follow-up services to end-customers.
Generally, the Company's international distributors have nonexclusive,
country-wide agreements. International sales through the various channels,
including the Company's subsidiaries, accounted for approximately 43.5% of total
sales in fiscal 1997, 48.2% in fiscal 1996, and 41.7% in fiscal 1995. Sales to
international customers and distributors generally have been made in United
States dollars. During fiscal 1997, the Company established its European
Operations Center (EOC). On an ongoing basis, substantially all European orders
will be fulfilled from the EOC.
The Company has sales support subsidiaries worldwide. New subsidiaries formed in
fiscal 1997 include Greece, India, Israel, Poland, Taiwan, and Turkey.
ACQUISITIONS, INVESTMENTS AND ALLIANCES
The end-to-end strategy pursued by Cisco requires a wide variety of
technologies, products and capabilities. Additionally, the pace of change in the
industry is very rapid. The combination of complexity and rapid change make it
difficult for one company, no matter how large, to develop all technological
solutions alone. Acquisitions, investments and alliances are tools used by the
Company to fill gaps in its offerings and enable it to deliver complete
solutions to its customers and prospects in target markets. Satisfying
customers' networking needs requires a constant monitoring of market and
technology trends, plus an ability to act quickly. Cisco has a four-part
approach to satisfy the need for new or enhanced networking products and
solutions. In order of preference, this approach is to: develop new technologies
and products internally; enter into joint-development efforts with other
companies; resell another company's product; and acquire all or part of another
company. Acquisitions involve numerous risks, including difficulties in
assimilation of the operations, technologies, and products of the acquired
companies; the risk of diverting management's attention from normal daily
operations of the business; 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.
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Since 1993, the Company has acquired a number of companies. The Company expects
to make future acquisitions where it believes that it can acquire new products
and channels of distribution or otherwise rapidly enter new or emerging markets.
Mergers and acquisitions of high-technology companies are inherently risky, and
no assurance can be given that the Company's previous or future acquisitions
will be successful and will not adversely affect the Company's financial
condition or results of operations.
Each of the Company's acquisitions has furthered the Company's commitment to
providing an end-to-end solution. The Company now has a broad set of product
offerings and technologies, which include Ethernet, Token Ring, Asynchronous
Transfer Mode (ATM) switching, Synchronous Optical Network/Synchronous Digit
Hierarchy (SONET/SDH), xDSL, and also network management software solutions,
among others.
Minority Investments
The Company makes minority investments in companies whose technologies or
expertise appear strategic to Cisco's interests and merit monitoring, but where
there is not yet a compelling need to have those capabilities in house.
Strategic Alliances
The Company pursues strategic alliances with other industry leaders in areas
where collaboration can produce mutual benefits. The motivation for a strategic
alliance can include: technology exchange, product development, joint marketing
and sales, and new-market creation. Cisco has strategic alliances with
Microsoft, Intel, Hewlett-Packard, GTE, and Alcatel, among others.
BACKLOG
The Company's backlog on September 20, 1997 was approximately $442.9 million
compared with an approximate backlog of $292.3 million at September 21, 1996.
The Company includes in its backlog only orders confirmed with a purchase order
for products to be shipped within six months to customers with approved credit
status. Because of the generally short cycle between order and shipment, and
occasional customer changes in delivery schedules or cancellation of orders
(which are made without significant penalty), the Company does not believe that
its backlog, as of any particular date, is necessarily indicative of actual net
sales for any future period.
COMPETITION
Cisco competes in the networking market, providing solutions for Internet,
intranet, and extranet connectivity. The networking market is characterized by
rapid growth, technological change, and a
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convergence of technologies. These market factors represent both an opportunity
and a competitive threat to Cisco. The Company competes with numerous vendors in
each product category. Cisco expects that the overall number of vendors will
increase in these markets due to its attractive growth opportunities.
Cisco's traditional competitors include 3Com, Ascend, Bay Networks, Cabletron,
Fore, and IBM. As the Company focuses on new market opportunities, such as
transporting voice, video, and data traffic across the same network, it will
increasingly compete with large telecommunications equipment suppliers such as
Lucent, Ericsson and Nortel. Some of the Company's competitors compete across
all of Cisco's product lines, while others do not offer as wide a breadth of
networking solutions. Several of the Company's current and potential competitors
have greater financial, marketing and technical resources than the Company.
The principal competitive factors in the markets in which the Company presently
competes and may compete in the future are: price; performance; the ability to
provide end-to-end solutions and support; conformance to standards; the ability
to provide added value features such as security, reliability, and investment
protection; and market presence.
The Company also faces competition from customers it licenses technology to and
suppliers from whom it transfers technology. Networking's inherent nature is
such that the Company must compete, and at the same time cooperate, with these
companies. The Company's inability to effectively manage these complicated
relationships with customers and suppliers could have a material adverse effect
on the Company's business, operating results, and financial condition.
RESEARCH AND DEVELOPMENT
The Company is engaged in research and development efforts to develop customer
solutions for each of its three primary lines of business: Enterprise, Service
Provider, and Small/Medium Business. The Company focuses its product development
activities on networking products that are responsive to customer requirements
and that provide end-to-end networking solutions. The Company's research and
development investments are made either internally or through acquisition, and
in addition, the Company makes minority equity investments in early stage
technology development entities.
The Company has recently announced several new products, including the Gigabit
Switch Router, known as the GSR12000, and the Company's next-generation
universal access server, the AS5300. However, the industry in which Cisco
competes is subject to rapid technological developments, evolving industry
standards, changes in customer requirements and frequent new product
introductions and enhancements. As a result, the Company's success, in part,
depends upon its ability, on a cost-effective and timely basis, to continue to
enhance its existing solutions and to develop and introduce new solutions that
improve performance and reduce total cost of ownership. In order to achieve
these objectives, the Company's management and engineering personnel work
closely with customers, to identify and respond to customer needs, as well as
with other innovators of internetworking products, including universities,
laboratories, and corporations. The Company will also continue to make strategic
acquisitions and equity investments where appropriate. The Company intends to
remain dedicated to industry standards and to continue to support important
protocol standards as
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they emerge. Still, there can be no assurance that Cisco will be able to
successfully develop new products to address new customer requirements and
technological changes, or that such products will achieve market acceptance.
In fiscal 1997, 1996, and 1995, the Company's research and development
expenditures were approximately $698.2 million, $399.3 million, and $210.8
million, respectively. All of the Company's expenditures for research and
development costs, and purchased research and development of approximately
$508.4 million in fiscal 1997 and $95.8 million in fiscal 1995, have been
expensed as incurred.
MANUFACTURING
The Company's manufacturing operations consist primarily of quality assurance of
materials, components and subassemblies. Additionally, the Company performs
final assembly and test. The Company presently uses a variety of independent
third-party companies to perform printed circuit board assembly, in circuit
test, and product repair. The Company and single enterprise partners install
proprietary software on electronically programmable memory chips installed in
its systems in order to configure products to customer needs and to maintain
quality control and security. The manufacturing process enables the Company to
configure the hardware and software in unique combinations to meet a wide
variety of individual customer requirements. The Company and single enterprise
partners use automated testing equipment and "burn-in" procedures, as well as
comprehensive inspection, testing, and statistical process control to assure the
quality and reliability of its products. The Company's and its partners'
manufacturing processes and procedures are ISO 9001 certified. To date, the
Company has not experienced significant customer returns of its products.
PATENTS, INTELLECTUAL PROPERTY AND LICENSING
Cisco's success is dependent upon its proprietary technology. Cisco generally
relies upon patents, copyrights, trademarks and trade secret laws to establish
and maintain its proprietary rights in its technology and products. Cisco has a
program to file applications for and obtain patents in the United States and in
selected foreign countries where a potential market for Cisco's products exists.
Cisco has been issued a number of patents; other patent applications are
currently pending. There can be no assurance that any of these patents will not
be challenged, invalidated or circumvented, or that any rights granted
thereunder will provide competitive advantages to Cisco. In addition, there can
be no assurance that patents will be issued from pending applications, or that
claims allowed on any future patents will be sufficiently broad to protect
Cisco's technology. In addition, the laws of some foreign countries may not
permit the protection of Cisco's proprietary rights to the same extent as do the
laws of the United States. Although Cisco believes the protection afforded by
its patents, patent applications, copyrights and trademarks has value, the
rapidly changing technology in the networking industry makes Cisco's future
success dependent primarily on the innovative skills, technological expertise
and management abilities of its employees rather than on patent, copyright and
trademark protection.
Many of Cisco's products are designed to include software or other intellectual
property licensed from third parties. While it may be necessary in the future to
seek or renew licenses relating to various aspects of its products, Cisco
believes that based upon past experience
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and standard industry practice, such licenses generally could be obtained on
commercially reasonable terms. Because of the existence of a large number of
patents in the networking field and the rapid rate of issuance of new patents,
it is not economically practical to determine in advance whether a product or
any of its components infringe patent rights of others. From time to time, Cisco
receives notices from or is sued by third parties regarding patent claims. If
infringement is alleged, Cisco believes that, based upon industry practice, any
necessary license or rights under such patents may be obtained on terms that
would not have a material adverse effect on Cisco's business, operating results
and financial condition. Nevertheless, there can be no assurance that the
necessary licenses would be available on acceptable terms, if at all, or that
Cisco would prevail in any such challenge. The inability to obtain certain
licenses or other rights or to obtain such licenses or rights on favorable
terms, or the need to engage in litigation could have a material adverse effect
on Cisco's business, operating results and financial condition.
OTHER RISK FACTORS
The Company's business and stock is subject to a number of risks. Some of those
risks are described below. Other risks are presented in the "Financial Risk
Management," and "Future Growth Subject to Risks" sections on pages 25-29 of the
Company's Annual Report to Shareholders for the year ended July 26, 1997, which
is hereby incorporated by reference.
Potential Fluctuations in Quarterly Results
The Company's operating results have in the past been, and may continue to be,
subject to quarterly fluctuations as a result of a number of factors. These
factors include the introduction and market acceptance of new technologies,
including Gigabit Switch Routing and Tag Switching; the timing of orders and
manufacturing lead times; variations in sales channels, product costs or mix of
products sold; increased competition in the networking industry; the overall
trend toward industry consolidation; the integration of people, operations and
products from acquired businesses and technologies; and changes in general
economic conditions and specific economic conditions in the computer and
networking industries, any of which could have an adverse impact on operations
and financial results. For example, the Company from time to time has made
acquisitions that result in purchased research and development expenses being
charged in an individual quarter. These charges may occur in any particular
quarter resulting in variability in the Company's quarterly earnings.
Additionally, the dollar amounts of large orders for the Company's products have
been increasing, and therefore the operating results for a quarter could be
materially adversely affected if a number of large orders are either not
received or are delayed, due for example, to cancellations, delays or deferrals
by customers.
Dependence on New Product Development; Rapid Technological and Market Change
The Company's operating results will depend to a significant extent on its
ability to reduce the costs to produce existing products. In particular, the
Company broadened its product line by introducing network access products. Sales
of these products, which are generally lower priced and carry lower margins than
the Company's core products, have increased more rapidly than sales of the
Company's core products. The success of these and other
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new products is dependent on several factors, including proper new product
definition, product cost, timely completion and introduction of new products,
differentiation of new products from those of the Company's competitors and
market acceptance of these products. The Company has addressed the need to
develop new products through its internal development effort, joint development
with other companies and acquisitions. There can be no assurance that the
Company will successfully identify new product opportunities, develop and bring
new products to market in a timely manner, and achieve market acceptance of its
products or that products and technologies developed by others will not render
the Company's products or technologies obsolete or noncompetitive.
Strategic Alliances
The Company has a number of strategic alliances with companies including
Microsoft, Intel, Hewlett-Packard, GTE, and Alcatel, among others. These
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 and
result in industry growth. However, these alliances carry an element of risk
because, in most cases, the Company must compete in some business areas with a
Company with which it has strategic alliances and, at the same time, cooperate
with such companies in other business areas. Also, if these companies fail to
perform, or if these relationships fail to materialize as expected, Cisco could
suffer delays in product development or other operational difficulties.
Industry Consolidation
There has been a trend toward industry consolidation for several years. During
fiscal 1997, the Company saw this trend continue, with the completion of two
significant industry mergers. In June 1997, 3Com completed its acquisition of
U.S. Robotics and Ascend Communications, Inc. completed its acquisition of
Cascade Communications Corporation. The Company expects this trend toward
industry consolidation to continue as companies attempt to strengthen or hold
their market positions in an evolving industry. 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 and could have a material adverse effect on the Company's business,
operating results and financial condition.
Organizational Changes
The Company has realigned its business around three key customer groups or lines
of business. The Company believes this realignment of resources enables it to
better meet the needs of its customers. During fiscal 1997, the Company also
reorganized its sales management teams to better serve customers' needs. There
are risks inherent in any business realignment or reorganization, and the
Company can give no assurance that these organizational changes will meet their
intended objectives.
Entering New or Developing Markets
As the Company focuses on new market opportunities, such as transporting voice,
video and data traffic across the same network, it will increasingly compete
with a variety of large telecommunications equipment suppliers such as Lucent,
Ericsson, and Nortel, among others. Many of these companies have substantially
greater financial, marketing and technical resources than the Company. If the
Company cannot successfully compete with these and other potential competitors,
it
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could have a material adverse effect on the Company's business, operating
results and financial condition.
Variability in Service Provider Sales
Although sales to the service provider market have continued to grow, this
market is characterized by large, and often 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 service
providers are affected by regulatory and 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 business, operating results and
financial condition.
Manufacturing Risks
Although the Company generally uses standard parts and components for its
products, certain components are presently available only from a single source
or limited sources. The Company has generally been able to obtain adequate
supplies of all components in a timely manner from existing sources, or where
necessary, from alternative sources of supply. A reduction or interruption in
supply or a significant increase in the price of one or more components would
adversely affect the Company's business, operating results and financial
condition and could damage customer relationships.
Changes in Telecommunications Laws and Tariffs
Changes in domestic and international telecommunication requirements could
affect the Company's sales of its products. In particular, the Company believes
it is possible that there may be significant changes in domestic
telecommunications regulations in the near future that could slow the expansion
of the service providers' network infrastructures and adversely affect the
Company's business, operating results and financial condition. 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 by the Company to obtain timely approval of products could
have a material adverse effect on the Company's business, operating results and
financial condition.
International Operations
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 fiscal 1997, the
Company experienced slower sales growth in Japan, France and Germany, as well as
in certain other parts of Asia and Europe. Any or all of these factors could
have a material adverse impact on the Company's future international business in
these or other countries.
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Risks Associated With Internet Infrastructure
The Company's management believes that there will be performance problems with
Internet communications in the future 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 networking products,
may be adversely affected, regardless of whether or not these problems are due
to the performance of Cisco's products. 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, operating results and financial condition.
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 or
anticipated 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 that
have often been unrelated to the operating performance of these companies. 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.
EMPLOYEES
As of September 20, 1997, the Company employed approximately 11,000 persons,
including 2,200 in manufacturing, service and support, 4,500 in sales and
marketing, 3,400 in engineering, and 900 in finance and administration.
Approximately 2,000 employees were in international locations.
None of the employees is represented by a labor union, and the Company considers
its relations with its employees to be positive. The Company has experienced no
work stoppages.
Competition for technical personnel in the Company's industry is intense. The
Company believes that its future success depends in part on its continued
ability to hire, assimilate, and retain qualified personnel. To date, the
Company believes that it has been successful in recruiting qualified employees,
but there is no assurance that it will continue to be successful in the future.
ITEM 2. PROPERTIES
The Company's principal corporate offices are located at sites in Santa Clara
and San Jose, California. The Santa Clara facilities are leased through June
1998 and have approximately .1 million square feet of office space. The
Company's main headquarters are situated on 221 acres of leased land in San
Jose, California. There are 15 buildings located at this site, one of which is a
manufacturing facility. The San Jose headquarters consist of approximately 1.6
million square feet of leased office space at the present time. A new site is
under construction that is located near its present corporate offices in San
Jose, California. The Company expects that initial construction on the site will
be completed in April 1998, with total leased office space of
12
<PAGE> 13
approximately 1.1 million square feet.
As part of the StrataCom acquisition, the Company also assumed certain operating
leases for buildings. The buildings, including an additional manufacturing
facility, are located at various sites in San Jose, California and total
approximately .5 million square feet.
In addition to the California facilities, the Company leases approximately 45
acres of land in Research Triangle Park, North Carolina, where the InterWorks
Business Unit, as well as a Technical Assistance Center, telesales, and various
other support functions, are located. Three buildings of approximately .3
million square feet have been constructed and are currently occupied under a
lease that expires in July 1999. A fourth building of .1 million square feet is
currently under construction with completion expected in the second quarter of
fiscal 1998.
The Company also leases various small offices throughout the U.S. and on a
worldwide basis. For additional information regarding the Company's obligations
under leases, see Note 7 "Commitments and Contingencies" on page 43 of the
Company's 1997 Annual Report to Shareholders, which is hereby incorporated by
reference.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
13
<PAGE> 14
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
POSITION
NAME AGE POSITION HELD SINCE
---------------------------- ------ ------------------------------------------------------ -----------
<S> <C> <C> <C>
Larry R. Carter 54 Senior Vice President, Finance and Administration, 1995
Chief Financial Officer, and Secretary
Mr. Carter joined the Company in January 1995 in
his present position. From July 1992 to January
1995, he was Vice President and Corporate
Controller for Advanced Micro Devices. Prior to
that, he was with V.L.S.I. Technology, Inc. for
four years where he held the position of Vice
President, Finance and Chief Financial Officer.
John T. Chambers 48 President, Chief Executive Officer and Director 1995
Mr. Chambers has been a member of the Board of
Directors since November 1993. He joined the
Company as Senior Vice President in January 1991
and became Executive Vice President in June 1994.
Mr. Chambers became President and Chief Executive
Officer of the Company as of January 31, 1995.
Prior to his services at Cisco, he was with Wang
Laboratories for eight years, most recently as
Senior Vice President of U.S. Operations.
Gary Daichendt 47 Senior Vice President, Worldwide Operations 1997
Mr. Daichendt joined the Company in October 1994 as
Vice President for Intercontinental Operations,
covering Asia, Pacific Rim, Canada, Central and
South America and Mexico. In October 1997,
Mr. Daichendt became Sr. Vice President, Worldwide
Operations at Cisco Systems. He is responsible for
managing the sales and distribution operations of
Cisco offices worldwide. Prior to his services at
Cisco, he spent eight years at Wang Laboratories,
most recently as Vice President of Central
Operations and Vice President of Worldwide
Marketing. Mr. Daichendt also spent ten years
with IBM in various sales, marketing, and management
positions.
Edward R. Kozel 42 Senior Vice President and Chief Technical Officer 1996
Mr. Kozel, has been a member of the Board of
Directors since November 1996. He joined the
Company as Director, Program Management in
March 1989. In April 1992, became Director of
Field Operations and in February 1993, he became Vice
President of Business Development. Since January
1996, he has been Chief Technology Officer of the
Company. Mr. Kozel currently serves on the Board
of Directors of Cybercash, Inc. and
NetFrame Systems, Inc.
Donald J. Listwin 38 Senior Vice President, Service Provider Line of Business 1997
Mr. Listwin joined the Company in 1990 as a Product
Marketing Manager. He held various positions within
the marketing department before being promoted to
Vice President of Marketing in September 1993.
Mr. Listwin was promoted to Vice President and
General Manager of the Access Business Unit in
September of 1995. He became Senior Vice President
of Cisco IOS Development and Marketing in August of
1996. Since April 1997, Mr. Listwin has been the
Senior Vice President of the Service Provider Line
of Business. Mr. Listwin currently serves on the
Board of Directors of Software.com.
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
POSITION
NAME AGE POSITION HELD SINCE
---------------------------- ------ ------------------------------------------------------ -----------
<S> <C> <C> <C>
Mario Mazzola 50 Senior Vice President, Enterprise Line of Business 1997
Mr. Mazzola was the President and CEO of Crescendo
Communications, Inc. which he founded in 1990.
Crescendo was acquired by Cisco Systems in September
1993. At that time, Mr. Mazzola joined Cisco as the
Vice President and General Manager of the
Workgroup Business Unit. Mr. Mazzola became
Senior Vice President of the Enterprise Line of
Business in April 1997. Mr. Mazzola was
the VP of Engineering of David Systems which he
co-founded in June 1982. Mr. Mazzola holds several
patents on high-speed transmission techniques
on unshielded twisted-pair wiring.
Carl Redfield 50 Senior Vice President, Manufacturing 1993
Mr. Redfield joined the Company in August 1993 as
Director, Supply/Demand of Manufacturing and became
Vice President of Manufacturing in September 1993.
Prior to joining Cisco, he spent eighteen years at
Digital Equipment Company, most recently as Group
Manufacturing and Logistics Manager of the PC Group.
</TABLE>
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to page 51 of
the Company's 1997 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to page 21 of
the Company's 1997 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated by reference to pages
22-30 of the Company's 1997 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item is incorporated by reference to pages
25-27 of the Company's 1997 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to pages
31-51 of the Company's 1997 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information regarding Directors appearing under the
caption "Election of Directors" in the Company's proxy statement mailed to
Shareholders on or about October 1, 1997, which information is incorporated
herein by reference; and to the information under the heading "Executive
Officers of the Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing at the end of Part I and under the caption "Executive
Compensation and Related Information" in the Company's proxy statement mailed to
Shareholders on or about October 1, 1997, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the captions "Election of Directors" and
"Ownership of Securities" in the Company's proxy statement mailed to
Shareholders on or about October 1, 1997, is incorporated herein by reference.
16
<PAGE> 17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the caption "Ownership of Securities" and
"Certain Relationships and Related Transactions" in the Company's proxy
statement mailed to Shareholders on or about October 1, 1997, is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in Item 14(a) are filed or
incorporated by reference as part of this annual report. See
Index to Financial Statements and Financial Statement Schedule
on Page 20.
2. Financial Statement Schedule
The financial statement schedule listed in Item 14(a) is filed
as part of this annual report. See Index to Financial Statements
and Financial Statement Schedule on Page 20.
3. Exhibits
The exhibits listed in the accompanying Index to Exhibits on
pages 23-25 are filed or incorporated by reference as part of
this annual report.
(b) Reports on Form 8-K
The Company filed one report on form 8-K during the fourth
quarter ended July 26, 1997. The date of the filing was July 1,
1997. The item reported on was the acquisition of Global
Internet Software Group.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California on this 17th day of October, 1997.
Cisco Systems, Inc.
/s/ John T. Chambers
----------------------------------------
(John T. Chambers, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Report on Form
10-K has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
President and Chief
Executive Officer
/s/ John T. Chambers (Principal Executive October 17, 1997
- ------------------------------------------ Officer and Director)
John T. Chambers
Senior Vice President,
Finance and Administration,
Chief Financial Officer and
/s/ Larry R. Carter Secretary October 17, 1997
- ------------------------------------------ (Principal Financial and
Larry R. Carter Accounting Officer)
/s/ John P. Morgridge Chairman of the October 17, 1997
- ------------------------------------------ Board and Director
John P. Morgridge
/s/ Donald T. Valentine Vice Chairman of the October 17, 1997
- ------------------------------------------ Board and Director
Donald T. Valentine
/s/ Carol A. Bartz Director October 17, 1997
- ------------------------------------------
Carol A. Bartz
/s/ James F. Gibbons Director October 17, 1997
- ------------------------------------------
Dr. James F. Gibbons
/s/ Edward R. Kozel Senior Vice President, October 17, 1997
- ------------------------------------------ Chief Technical Officer
Edward R. Kozel and Director
/s/ Richard M. Moley Director October 17, 1997
- ------------------------------------------
Richard M. Moley
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Robert L. Puette Director October 17, 1997
- ------------------------------------------
Robert L. Puette
Director October , 1997
- ------------------------------------------
Masayoshi Son
/s/ Steven M. West Director October 17, 1997
- ------------------------------------------
Steven M. West
</TABLE>
19
<PAGE> 20
CISCO SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
ITEM 14(a)
<TABLE>
<CAPTION>
Page
------------------------------
1997 Annual
Report to
Form 10-K Shareholders
<S> <C> <C>
Data incorporated by reference from the 1997
Annual Report to Shareholders of
Cisco Systems, Inc.:
Financial Statements:
Consolidated statements of operations for each
of the three years in the period
ended July 26, 1997 ............................ 31
Consolidated balance sheets at July 26, 1997
and July 28, 1996 ............................... 32
Consolidated statements of cash flows for each of
the three years in the period ended July 26, 1997 33
Consolidated statements of shareholders' equity
for each of the three years in the period
ended July 26, 1997.............................. 34-35
Notes to consolidated financial statements.......... 36-49
Report of Independent Accountants................... 50
Supplementary financial data:
Fiscal years 1997 and 1996 by quarter (unaudited) 51
Data submitted herewith:
Financial Statement Schedule:
Report of independent accountants................. 21
II Valuation and qualifying accounts............ 22
</TABLE>
All other schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedules, or because
the information required is included in the consolidated financial statements or
notes thereto.
With the exception of the consolidated financial statements and the independent
accountants' report thereon listed in the above index, the information referred
to in Items 1, 5, 6, 7 and 7A and the supplementary quarterly financial
information referred to in Item 8, all of which is included in the Company's
Annual Report to Shareholders incorporated by reference into this Form 10-K
Annual Report, the 1997 Annual Report to Shareholders is not to be deemed
"filed" as part of this report.
20
<PAGE> 21
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
Cisco Systems, Inc.
San Jose, California
Our report on the consolidated financial statements of Cisco Systems, Inc. and
its subsidiaries has been incorporated by reference in this Form 10-K from Page
50 of the 1997 Annual Report to Shareholders of Cisco Systems, Inc. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 20 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
San Jose, California
August 4, 1997
21
<PAGE> 22
CISCO SYSTEMS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Balance at Balance at
Beginning Charged to End of
of Period Expenses Deductions Period
------------ ------------ -------------- -----------
<S> <C> <C> <C> <C>
Year ended July 30, 1995:
Allowance for doubtful accounts 9,882 15,213 6,668 18,427
Allowance for excess and obsolete
inventory 19,531 55,783 29,072 (1) 46,242
Year ended July 28, 1996:
Allowance for doubtful accounts 18,427 18,548 15,901 21,074
Allowance for excess and obsolete
inventory 46,242 53,025 37,481 (1) 61,786
Year ended July 26, 1997:
Allowance for doubtful accounts 21,074 13,318 12,052 22,340
Allowance for excess and obsolete
inventory 61,786 123,431 104,404 (1) 80,813
</TABLE>
(1) Deductions principally relate to charges for standards changes.
22
<PAGE> 23
INDEX TO EXHIBITS
(Item 14 (a))
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
2.01** Agreement and Plan of Reorganization dated as of September 20, 1993
among the Company, Crescendo Communications Inc., and Co Acquisition
Corporation
2.02** Agreement of Merger among the Company, Crescendo Communications Inc.,
and Co Acquisition Corporation
2.03# Agreement and Plan of Reorganization dated as of July 11, 1994 among the
Company, Newport Systems Solutions, Inc. and New Acquisition Corporation
2.04@ Agreement and Plan of Reorganization dated as of October 21, 1994 among
the Company, Kalpana, Inc. and Pan Acquisition Corporation
2.05@@ Asset Purchase Agreement dated as of December 8, 1994 among the Company
and LightStream Corporation
2.06& Agreement and Plan of Reorganization by and among the Company, Jet
Acquisition Corporation, and StrataCom, Inc., dated as of April 21, 1996
3.01* The Company's Restated Articles of Incorporation, as currently in effect
3.02* The Company's Bylaws, as currently in effect
4.01## The Company's 1987 Stock Option Plan, as currently in effect
4.02* Form of Incentive Stock Option Agreement for granting incentive stock
options under the Company's 1987 Stock Option Plan
4.03* Series A Preferred Stock Purchase Agreement between the Company and
certain investors dated December 22, 1987, as amended
10.05* Form of Restricted Stock Purchase Agreement for sales of Common Stock to
employees, officers, directors and consultants
10.10* License Agreement between the Company and Network Equipment Technologies
Inc dated February 14, 1989
10.12* License Agreement between the Company and The Board of Trustees of
Leland Stanford Junior University dated April 15, 1987, as amended
10.13* 1989 Employee Stock Purchase Plan
10.14 Cisco Systems, Inc. Senior Management Incentive Plan- President, Vice
President & Director Fiscal Year 1997
10.16* Agreement between the Company and American Telephone and Telegraph
Company dated February 1, 1990
10.19* Letter of Employment between the Company and John T. Chambers dated
January 9, 1991
10.23* Lease Agreement between the Company and SGA Development Partnership,
Ltd., dated February 19, 1993, for the Company's site in San Jose,
California
10.24* Lease Agreement between the Company and Sumitomo Bank Leasing and
Finance, Inc., dated May 13, 1993 for the Company's facilities in San
Jose, California
10.25* Lease Agreement between the Company and SGA Development Partnership,
Ltd., dated February 19, 1993, for the Company's site in San Jose,
California
10.26* Lease Agreement between the Company and the State of California Public
Employees' Retirement System dated March 11, 1993, for the Company's
facilities at 3100 Smoketree Court
10.27* Lease Agreement between the Company and Sumitomo Bank Leasing and
Finance, Inc., dated July 11, 1994 for the Company's site in Wake
County, North Carolina
10.28* Lease Agreement between the Company and Sumitomo Bank Leasing and
Finance, Inc., dated August 12, 1994 for the Company's facilities in
Wake County, North Carolina
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
10.29&& Lease (Buildings "I" and "J") by and between Sumitomo Bank of New
York Trust Company ("SBNYTC"), as trustee under that certain Trust
Agreement dated May 22, 1995 between Sumitomo Bank Leasing and Finance,
Inc. and SBNYTC ("SB Trust"), as Landlord, and the Company, as tenant,
dated May 22, 1995
10.30&& First Amendment to Lease (Buildings "I" and "J") between SB Trust and
the Company, dated July 18, 1995
10.31&& Lease (Buildings "K" and "L") by and between SB Trust and the
Company, dated May 22, 1995
10.32&& First Amendment to Lease (Buildings "K" and "L") between SB Trust and
the Company, dated July 18, 1995
10.33&& Lease (Improvements Phase "C") by and between SB Trust and the
Company, dated May 22, 1995
10.34&& First Amendment to Lease (Improvements Phase "C") between SB Trust
and the Company, dated July 18, 1995
10.35&& Ground Lease (Parcel 2 and Lot 54) by and between Irish Leasing
Corporation ("Irish"), as Landlord, and the Company, as Tenant, dated
February 28, 1995 for the Company's site in San Jose, California
10.36&& First Amendment to Lease (Parcel 2 and Lot 54) by and between Irish
and the Company dated as of May 1, 1995
10.37&& Second Amendment to Lease (Parcel 2 and Lot 54) by and between Irish
and the Company dated as of May 22, 1995
10.38&& Ground Lease (Lots 58 and 59) by and between Irish and the Company
dated February 28, 1995 for the Company's site in San Jose, California
10.39&& First Amendment to Lease (Lots 58 and 59) by and between Irish and
the Company dated as of May 1, 1995
10.40&& Second Amendment to Lease (Lots 58 and 59) by and between Irish and
the Company dated as of May 22, 1995
10.41&& Ground Lease (Tasman Phase C) by and between Irish and the Company
dated April 12, 1995 for the Company's site in San Jose, California
10.42&& First Amendment to Lease (Tasman Phase C) by and between Irish and
the Company dated as of May 1, 1995
10.43&& Second Amendment to Lease (Tasman Phase C) by and between Irish and
the Company dated as of May 22, 1995
10.44&& Credit Agreement between the Company, the Banks Listed Herein, Bank
of America National Trust and Savings Association, as Administrative
Agent, Morgan Guaranty Trust Company of New York, as Documentation Agent
and Bank of America National Trust and Savings Association, as Issuing
Bank dated as of May 22, 1995
10.45(1) Employment Agreement with Don LeBeau
10.46(2) 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(2) 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(2) 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(2) Lease (Buildings "B" and "D") by and between SBC&D Co., Inc. and the
Company, dated November 26, 1996, located in San Jose, California
10.50 Lease agreement between the Company and Lincoln-Whitehall Realty(West)
L.L.C., dated December 12, 1996, for the Company's site in San Jose, CA
10.51 Lease agreement between the Company and Lincoln-Whitehall Realty(West)
L.L.C., dated December 18, 1996, for the Company's site in San Jose, CA
10.52 Master Lease between the Company, as the Lessee, and UBS MORTGAGE
FINANCE INC. as the Lessor, dated December 27, 1996
10.53 Credit Agreement dated as of July 2, 1997 among Cisco Systems, Inc., and
Citicorp USA, Inc., as Administrative Agent, Morgan Guaranty Trust
Company of New York, as Documentation Agent, Bank of America National
Trust and Savings Association, the Chase Manhattan Bank, as Co-Agents,
and Citicorp Securities, Inc., and J.P. Morgan Securities Inc. Arrangers
ll.01 Statement Regarding Computation of Net Income Per Share
13.01 Pages 21 through 51 of the Registrant's 1997 Annual Report to
Shareholders
21.01 Subsidiaries of the Company
23.02 Consent of Independent Accountants
27 Financial Data Schedule
</TABLE>
* Previously filed with registrant's registration statements (File
#33-32778)
** Previously filed with registrant's Form 8-K dated October 8, 1993
@ Previously filed with registrant's Form 8-K dated December 9, 1994
@@ Previously filed with registrant's Form 8-K dated January 25, 1995
# Previously filed with registrant's Form 8-K dated August 19, 1994
## Previously filed with registrant's Proxy statement dated October 2, 1995
& Previously filed with registrant's Form S-4 dated June 7, 1996
&& Previously filed with registrant's Form 10-K dated October 26, 1995
(1) Previously filed with registrant's Form 10-Q dated January 25, 1997
(2) Previously filed with registrant's Form 10-Q dated April 26, 1997
24
<PAGE> 1
EXHIBIT 10.14
CISCO CONFIDENTIAL
CISCO SYSTEMS, INC.
SENIOR MANAGEMENT INCENTIVE PLAN
FY 1997
I. INTRODUCTION
A. THE OBJECTIVE OF THE SENIOR MANAGEMENT INCENTIVE PLAN is to financially
reward Senior Managers for their contributions to the success and
profitability of Cisco Systems, Inc.
B. PARTICIPANTS: This plan applies solely to Cisco Systems, Inc. senior
management staff in the following positions:
POSITION
President
Vice Presidents
Directors (excluding Operations Directors)
Managers, Grade 12 , Individual Contributors, Grade 13
Any exceptions to the above will need to be approved in writing by the
President. The participant must be employed in a bonus eligible position
on or before the first day of the last fiscal quarter of Fiscal Year
1997 and must be employed on the last working day of that year and may
not be concurrently enrolled in any other bonus, sales, or incentive
plan. Participants in the Plan with less than one year of service will
be eligible for a prorated bonus amount. In no event will any individual
accrue any right or entitlement to a bonus under this Plan unless that
individual is employed by Cisco Systems on the last working day of
Fiscal Year 1997.
C. EFFECTIVE DATE: The Plan is effective for the Fiscal Year 1997,
beginning July 29, 1996 through July 26, 1997.
D. CHANGES IN PLAN: The Company presently has no plan to change the Senior
Management Incentive Plan during the fiscal year. However, the Company
reserves the right to modify the Senior Management Bonus Plan in total
or in part, at any time. Any such change must be in writing and signed
by the President. The President or plan designers reserve the right to
interpret the plan document as needed.
E. ENTIRE AGREEMENT: This Plan is the entire agreement between Cisco
Systems, Inc. and the employee regarding the subject matter of this Plan
and supersedes all prior compensation or incentive plans or any written
or verbal representations regarding the subject matter of this Plan.
II. BONUS PLAN ELEMENTS
A. BASE SALARY is determined by the participant's manager, on the Focal
review date scheduled for either August 1, April 1, or October 1 of each
year. The annual base salary in effect at the end of the Fiscal Year
1997 represents the basis for the bonus calculation.
B. BONUS BASIS PERCENTAGE is a percentage level of base salary determined
by the position.
POSITION BONUS %
-------- -------
President 75%
Vice President 50%
Directors (excluding Operations Directors) 40%
Managers, Grade 12 & Individual Contributors, Grade 13 30%
CISCO CONFIDENTIAL
<PAGE> 2
Sr. Management Incentive Plan FY'97 Page 2 of 4
C. INDIVIDUAL PERFORMANCE FACTOR is based upon the manager's evaluation of
performance and contribution for the fiscal year. This factor may range
from .9 - 1.3. The assigned factor may also be a zero resulting in no
bonus based on the manager's evaluation of performance and contribution.
A written performance evaluation is required in conjunction with any
assigned factor of zero.
Employees who are on a Written Warning or Performance Improvement Plan
and/or are performing at a level of "Not Satisfactory" (N) at the end of
the fiscal year are not eligible to receive a bonus. Any exceptions to
this must be in writing and approved by the Vice President of Human
Resources.
D. COMPANY PERFORMANCE FACTOR consists of two elements: 50% based upon
achieving an established worldwide Revenue target and 50% based upon
achieving a worldwide Profit Before Interest and Tax (PBIT) target per
the current Plan. 80% of each objective must be achieved for any bonus
to be paid. The applicable targets for Fiscal Year 1997 are approved by
the Cisco Board of Directors within the first 90 days of each fiscal
year.
<TABLE>
<CAPTION>
COMPANY
REVENUE PBIT PERFORMANCE FACTOR MULTIPLIER
------- ---- ------------------ ----------
<S> <C> <C> <C>
<80% <80% <80% 0 (no bonus paid)
80-100% 80-100% 80-100% .8 - 1.0
>100% >100% 101%+ 4% for each 1% above 100%
5% for each 1% above 120%
</TABLE>
COMPANY PERFORMANCE FACTOR = (REVENUE + PBIT)/2
Example:
Actual Revenue Performance is 105% of goal
Actual PBIT Performance is 115% of goal
105% + 115% = 110%
-----------
2
COMPANY PERFORMANCE MULTIPLIER: = 1.40
E. CUSTOMER SATISFACTION FACTOR is based upon achievement of an overall
worldwide customer satisfaction survey score. This factor may range from
.95 - 1.20.
<TABLE>
<CAPTION>
WORLDWIDE SATISFACTION SCORE FACTOR
---------------------------- ------
<S> <C> <C>
<3.95 .95
3.95 - 4.07 1.05
4.08 - 4.14 1.10
4.15+ 1.20
</TABLE>
CISCO CONFIDENTIAL
<PAGE> 3
Sr. Management Incentive Plan FY'97 Page 3 of 4
F. PRORATION FACTOR accounts for the number of calendar days or hours
within the day during the fiscal year that the employee was in the
bonus-eligible position. For example, the Proration Factor for an
employee who has been on the Plan the entire year will be "1.00". For an
employee who has been on the plan for 6 months, this factor will be
".50". Employees in the following situations will have a proration
factor of less than "1.00":
o Participants in the Plan who transferred to a new position not
governed by any incentive plan.
o Employees who transferred from one bonus-eligible position to
another bonus-eligible position. Employees in this situation
will have their bonus prorated based on length of time in each
position.
o Employees who have been on the Plan less than 12 months (such as
a new hire).
o Employees who have been on a leave of absence of any length
during the fiscal year.
o Employees who have been on the Plan, terminated their
employment, and returned to a bonus-eligible position all in the
same fiscal year.
o Employees working less than a 40-hour week will receive bonuses
prorated according to the following schedule:
20 - 39 hours/week: prorated according to the average number
of hours worked
<20 hours/week: not bonus eligible
Any modification to the above schedule must be approved by the
next-level Manager and Compensation in advance of the year-end close
date.
G. BONUS FORMULA AND CALCULATION EXAMPLE: Assume a Director-level
participant with a base salary of $130,000 at the 40% level, individual
performance factor of 1.10, company performance of 110%, a customer
satisfaction factor of 1.05 and a proration factor of 1.00.
SAMPLE CALCULATION:
<TABLE>
<CAPTION>
BONUS INDIVIDUAL COMPANY CUSTOMER
BASE BASIS PERFORMANCE PERFORMANCE SATISFACTION PRORATION TOTAL
SALARY PERCENTAGE FACTOR FACTOR FACTOR FACTOR BONUS
-------- ---------- ----------- ----------- ------------ --------- -----
<S> <C> <C> <C> <C> <C>
$130,000 x .40 x 1.10 x 1.40 x 1.05 x
1.00 = $84,084
</TABLE>
In this example, the total bonus equals 64.7% of base salary.
CISCO CONFIDENTIAL
<PAGE> 4
Sr. Management Incentive Plan FY'97 Page 4 of 4
H. BONUS PAYMENTS: If company performance is at a minimum of 100% of mid-year
revenue and PBIT targets, a partial payment will be distributed to active
employees midway through the fiscal year. This advance will be 50% of the
bonus target by level net of any advances, draws, or prorations. The bonuses
will go to employees who have met job expectations and were hired on or
before the first day of the second quarter of Fiscal Year 1997 and are
active on the day of distribution. For example, a director would receive an
advance equal to 20% of base salary. In no event, however, will any right or
entitlement to such a partial payment accrue to any eligible participant
unless that individual is employed by Cisco Systems on the distribution
date. The balance (if any) will be paid after the close of the fiscal year,
typically in mid to late August.
III. PROCEDURES AND PRACTICES
A. PROCEDURE:
1. A list of eligible employees will be sent by Human Resources to the
Executive Staff for review at the beginning of the fiscal year.
Additions, deletions or other changes to the list will be made and
the approved list will be returned to Human Resources.
2. Once the list is confirmed, a copy of the Plan will be sent to each
participant.
3. Each eligible new hire and employees promoted into eligible
positions will receive a copy of the plan during the fiscal year.
4. A month before fiscal year end, a list of eligible employees with
all changes made during the year will again be sent to the Executive
Staff for final review and approval.
5. All bonus payments will be made net of applicable withholding taxes.
B. BUSINESS CONDUCT: It is the established policy of Cisco Systems, Inc. to
conduct business with the highest standards of business ethics. Cisco
employees may not offer, give, solicit or receive any payment that could
appear to be a bribe, kickback or other irregular type of payment from
anyone involved in any way with an actual or potential business
transaction. Gifts, favors and entertainment are allowed such that they
are consistent with our business practice, do not violate any applicable
laws, are of limited value ($50.00 or less) and would not embarrass
Cisco if publicly disclosed.
C. TRANSFERS AND TERMINATIONS: Employees who are participants in the Senior
Management Incentive Plan and who transfer to a new position not
governed by this Plan will be eligible on a pro-rata basis for the
applicable period and paid as defined by the Plan. Any exceptions to the
Plan must be designated in writing and approved by the President.
A participant must be employed as of the last working day of the fiscal
year to be eligible for the bonus and must be employed on the
distribution date in order to be eligible to receive a partial payment
under paragraph II-H. If an employee terminates prior to the applicable
date, the employee will not be eligible for such bonus or partial
payment.
D. EMPLOYMENT AT WILL: The employment of all Plan participants at Cisco
Systems, Inc. is for an indefinite period of time and is terminable at
any time by either party, with or without cause being shown or advance
notice by either party. This Plan shall not be construed to create a
contract of employment for a specified period of time between Cisco
Systems, Inc. and any Plan participant.
FY'97 SENIOR MGMT INCENTIVE PLAN 9/26/96
CISCO CONFIDENTIAL
<PAGE> 1
EXHIBIT 10.50
LEASE AGREEMENT
(NNN)
BASIC LEASE INFORMATION
<TABLE>
<S> <C>
LEASE DATE: December 12, 1996
LANDLORD: Lincoln-Whitehall Realty (West), L.L.C.,
a Delaware limited liability company
LANDLORD'S ADDRESS: c/o Lincoln Property Company Management Services, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404-1167
TENANT: Cisco Systems, Inc., a California corporation
TENANT'S ADDRESS: 170 W. Tasman Drive
San Jose, California 95124
Attention: Chris Hampton, Director, Real Estate Worldwide
PREMISES: Approximately 103,890 rentable square feet as shown on Exhibit A
PREMISES ADDRESSES: Building A: 110 Baytech Drive, San Jose, California 95134
Building B: 120 Baytech Drive, San Jose, California 95134
BUILDINGS (A & B): Approximately 103,890 rentable square feet
LOT (PARK'S TAX PARCEL): APN 015-30-093
PARK (LINCOLN BAY TECH PARK): Approximately 188,825 rentable square feet
TERM: July 1, 1997 ("Commencement Date"), through December 31, 2000
("Expiration Date"), subject to the provisions of Section 2 hereof
BASE RENT (Paragraph 3): One hundred fifty thousand six hundred forty and 50/100 dollars
($150,640.50) per month ($1.45 per rentable square foot), commencing on the
Commencement Date through June 30, 1998.
ADJUSTMENTS TO BASE RENT: Effective July 1, 1998 through June 30, 1999, Base Rent shall increase to
$155,835.50 per month ($1.50 per rentable square foot).
Effective July 1, 1999 through June 30, 2000, Base Rent shall increase to
$161,029.50 per month ($1.55 per rentable square foot).
Effective July 1, 2000 through December 31, 2000, Base Rent shall increase
to $166,224.00 per month ($1.60 per rentable square foot).
SECURITY DEPOSIT (Paragraph 4): Waived
*TENANT'S SHARE OF OPERATING EXPENSES (Paragraph 6.1): 55% of the Park
*TENANT'S SHARE OF TAX EXPENSES (Paragraph 6.2): 55% of the Park
*TENANT'S SHARE OF COMMON AREA UTILITY COSTS (Paragraph 7): 55% of the Park
*TENANT'S SHARE OF UTILITY EXPENSES (Paragraph 7): 55% of the Park
*The amount of Tenant's Share of the expenses as referenced above shall be subject to modification as set forth
in this Lease.
PERMITTED USES (Paragraph 9): General office, industrial, assembly, light manufacturing and distribution of
computer products, but only to the extent permitted by the City of San Jose
and all agencies and governmental authorities having jurisdiction thereof
UNRESERVED
PARKING SPACES: Four hundred sixteen (416) non-exclusive and undesignated spaces
BROKERS (Paragraph 38): Dennis Chambers of CPS for Tenant
Wayne Mascia Associates for Landlord
EXHIBITS: Exhibit A - Premises, Building, Lot and/or Park
Exhibit B - Tenant Improvements
Exhibit C - Rules and Regulations
Exhibit D - Covenants, Conditions and Restrictions (Intentionally Omitted)
Exhibit E - Hazardous Materials Disclosure Certificate - Example
Exhibit F - Change of Commencement Date - Example
Exhibit G - Tenant's Initial Hazardous Materials Disclosure Certificate
Exhibit H - Sign Criteria
ADDENDA: Addendum 1: First Option to Extend the Lease
Addendum 2: Second Option to Extend the Lease
</TABLE>
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. PREMISES...................................................................3
2. ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES.................3
3. RENT.......................................................................3
4. SECURITY DEPOSIT...........................................................4
5. TENANT IMPROVEMENTS........................................................4
6. ADDITIONAL RENT............................................................4
7. UTILITIES..................................................................6
8. LATE CHARGES...............................................................7
9. USE OF PREMISES............................................................7
10. ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES.......................8
11. REPAIRS AND MAINTENANCE....................................................9
12. INSURANCE.................................................................10
13. WAIVER OF SUBROGATION.....................................................10
14. LIMITATION OF LIABILITY AND INDEMNITY.....................................11
15. ASSIGNMENT AND SUBLEASING.................................................12
16. AD VALOREM TAXES..........................................................13
17. SUBORDINATION.............................................................13
18. RIGHT OF ENTRY............................................................13
19. ESTOPPEL CERTIFICATE......................................................14
20. TENANT'S DEFAULT..........................................................14
21. REMEDIES FOR TENANT'S DEFAULT.............................................15
22. HOLDING OVER..............................................................16
23. LANDLORD'S DEFAULT........................................................16
24. PARKING...................................................................16
25. SALE OF PREMISES..........................................................16
26. WAIVER....................................................................16
27. CASUALTY DAMAGE...........................................................17
28. CONDEMNATION..............................................................17
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS.................................17
30. FINANCIAL STATEMENTS......................................................19
31. GENERAL PROVISIONS........................................................19
32. SIGNS.....................................................................21
33. MORTGAGEE PROTECTION......................................................21
34. QUITCLAIM.................................................................21
35. MODIFICATIONS FOR LENDER..................................................22
36. WARRANTIES OF TENANT......................................................22
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT...........................22
38. BROKERAGE COMMISSION......................................................22
39. QUIET ENJOYMENT...........................................................23
40. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS............23
41. TENANT'S ABILITY TO PERFORM LANDLORD'S UNPERFORMED OBLIGATIONS............24
</TABLE>
2
<PAGE> 3
LEASE AGREEMENT
DATE: This Lease is made and entered into as of the Lease Date set forth on
Page 1. The Basic Lease Information set forth on Page 1 and this Lease
are and shall be construed as a single instrument.
1. PREMISES: Landlord hereby leases the Premises to Tenant upon the terms and
conditions contained herein. Landlord hereby grants to Tenant a license for the
right to use, on a non-exclusive basis, parking areas and ancillary facilities
located within the Common Areas of the Park, subject to the terms of this Lease;
provided, however, such license shall only be revocable (i) if Tenant is in
default of its obligations under this Lease beyond applicable cure periods, or
(ii) upon the expiration or earlier termination of this Lease. For purposes of
this Lease, the term "Premises" shall mean and refer to the entirety of both of
the Buildings, namely, Building A and Building B situated within the Park.
Landlord and Tenant hereby agree that for purposes of this Lease, as of the
Lease Date, the rentable square footage area of the Premises, the Buildings, the
Lot and the Park shall be deemed to be the number of rentable square feet as set
forth in the Basic Lease Information on Page 1; provided, however, within
fifteen (15) days after the date on which Landlord causes the Buildings to be
Substantially Completed (as such term is defined in Exhibit B hereto), Tenant
may have its architect verify the actual rentable square feet contained within
the Premises (i.e. the Buildings), provided that the basis of such measurement
shall be measured from drip line to drip line and not in accordance with BOMA
standards. Tenant hereby acknowledges that the rentable square footage of the
Premises may include a proportionate share of certain areas used in common by
all occupants of the Buildings (for example an electrical room or telephone
room). Landlord and Tenant hereby acknowledge and agree that as of the Lease
Date the Buildings have not been constructed on the Lot. After Landlord has
Substantially Completed (as such term is defined in Exhibit B hereto) the Shell
Improvements, Landlord and Tenant shall execute a written amendment to this
Lease, substantially in the form of Exhibit F hereto, wherein the parties shall
specify the (i) actual approximate rentable square footage of each of the
Premises, the Buildings and the Park, (ii) actual amount of Base Rent to be paid
by Tenant, which shall be based upon the amount of base rent per rentable square
foot as set forth in the Basic Lease Information, (iii) actual amount of
Tenant's Share of the expenses set forth in the Basic Lease Information, which
share shall be based upon such approximate rentable square footages, and (iv)
the Premises Addresses. Tenant further agrees that the number of rentable square
feet of the Buildings, the Lot and the Park may subsequently change after the
Lease Date commensurate with any modifications to any of the foregoing by
Landlord due to any casualty to, or condemnation of, any portion of the
Premises, and Tenant's Share shall accordingly change.
2. ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES:
2.1 If on the Commencement Date (a) Landlord has not delivered
possession of the Premises with only the Shell Improvements (defined in Exhibit
B hereto) Substantially Completed, and (b) Tenant has not Substantially
Completed the Tenant Improvements, Landlord shall not be subject to any
liability nor shall the validity of the Lease be affected; provided, subject to
the provisions set forth below, the Lease Term and the obligation to pay Rent
shall commence on the date which is the earlier to occur of (i) the date on
which Tenant has Substantially Completed the Tenant Improvements (defined in
Exhibit B hereto), or (ii) the date which is ninety (90) business days after
Landlord has Substantially Completed the Shell Improvements (provided, said
90-business day period may be extended by a maximum of an additional period of
30 days if Tenant is delayed from Substantially Completing the Tenant
Improvements wholly due either to delays attributable to Landlord's failure to
timely perform its obligations with respect to the Shell Improvements because of
events within Landlord's control (the "Landlord Delays") or events considered to
be Force Majeure Delays (defined in Exhibit B hereto). The Expiration Date shall
also be extended commensurately therewith. In addition to the foregoing and
notwithstanding anything to the contrary contained herein or in Exhibit B
hereto, if Landlord does not tender possession to Tenant of the Premises with
the Shell Improvements Substantially Complete by November 15, 1997 (the "Outside
Date") (subject to any Force Majeure Delays or Tenant Delays, in which event the
date of November 15, 1997 shall be extended commensurately by the period of time
attributable to such delays), then either Tenant or Landlord may terminate this
Lease by delivering written notice thereof to the other party no later than the
date which is ten (10) business days after the Outside Date, as extended by the
period of time attributable to any Force Majeure Delays and/or Tenant Delays. In
addition to the foregoing and notwithstanding anything to the contrary contained
herein or in Exhibit B hereto, if Landlord does not tender possession to Tenant
of the Premises with the Shell Improvements Substantially Complete by March 1,
1998 (the "Ultimate Outside Date") (subject to any Tenant Delays, in which event
the date of March 1, 1998 shall be extended commensurately by the period of time
attributable to such delays), then either Tenant or Landlord may terminate this
Lease by delivering written notice thereof to the other party no later than the
date which is ten (10) business days after the Ultimate Outside Date, as
extended by the period of time attributable to any Tenant Delays. If either
party fails to timely terminate the Lease as and when provided herein, or if
Landlord delivers to Tenant possession of the Premises with the Tenant
Improvements Substantially Complete at any time earlier than the Outside Date
(as such date may be extended due to Force Majeure Delays or Tenant Delays, as
the case may be) or the Ultimate Outside Date (as such date may be extended due
to Tenant Delays), as applicable, then upon the occurrence of any such events
the foregoing right given to Tenant and Landlord to terminate this Lease as
provided herein shall lapse and be null and void upon the earlier occurrence of
such event and the Lease shall remain in full force and effect with Tenant and
Landlord having no further right to terminate this Lease pursuant to the
foregoing provisions. If Landlord does so timely deliver to Tenant possession of
the Premises with the Shell Improvements Substantially Complete, Tenant shall
promptly deliver
3
<PAGE> 4
written notice to Landlord confirming same. In the event the commencement date
and/or the expiration date of this Lease is other than the Commencement Date
and/or Expiration Date provided on Page 1 in the Basic Lease Information, as the
case may be, Landlord and Tenant shall execute a written amendment to this
Lease, substantially in the form of Exhibit F hereto, wherein the parties shall
specify the actual commencement date, expiration date, the date on which Tenant
is to commence paying Rent and the other matters referred to in Section 1 above.
The word "Term" whenever used herein refers to the initial term of this Lease
and any extension thereof. Except as otherwise expressly set forth below with
regard to Punchlist Items, by taking possession of the Premises with only the
Shell Improvements Substantially Completed, Tenant shall be deemed to have
accepted the Premises in a good, clean and completed condition and state of
repair. Notwithstanding the foregoing, within three (3) business days after the
Substantial Completion (as such term is defined in Exhibit B hereto) of the
Shell Improvements representatives of Landlord and Tenant shall make a joint
inspection of the Shell Improvements and the results of each such inspection
shall be set forth in a written list specifying the incomplete items as well as
those items for which corrections need to be made (the "Punchlist Items").
Landlord and Tenant shall promptly (by no later than three (3) business days
thereafter) and in good faith approve the written list of Punchlist Items.
Landlord, at its sole cost and expense, shall use commercially reasonable
efforts to cause the Punchlist Items to be promptly completed and/or corrected,
as applicable. The performance of the work associated with the Punchlist Items
shall be performed in such a manner so as not to preclude or substantially
prevent Tenant's ability to construct the Tenant Improvements in the Premises.
Upon the completion of the Punchlist Items to Tenant's reasonable satisfaction
Tenant shall immediately notify Landlord in writing that such items have been
completed to Tenant's reasonable satisfaction. In addition to the Punchlist
Items, Landlord shall also use commercially reasonable efforts to cause the
general contractor to correct any other patent deficiencies or defects in the
Shell Improvements during the thirty (30) day period following Substantial
Completion of the Shell Improvements. If Tenant fails to timely deliver to
Landlord any such written notice of the aforementioned patent defects or
deficiencies within said 30-day period, Landlord shall have no obligation to
perform any such work thereafter, except as otherwise specifically provided in
Sections 5 and 14 of this Lease. Tenant hereby acknowledges and agrees that
neither Landlord nor Landlord's agents or representatives has made any
representations or warranties as to the suitability, safety or fitness of the
Premises for the conduct of Tenant's business, Tenant's intended use of the
Premises or for any other purpose.
2.2 Landlord shall permit Tenant to enter and occupy the Premises prior
to the Commencement Date for purposes of installing a portion of the Tenant
Improvements and to perform Tenant's Pre-Occupancy Work (as such term is defined
in Exhibit B hereto). Landlord shall consult with its general contractor and
shall notify Tenant, in writing, of the date on which Tenant may commence such
limited purpose occupancy. In no event may Tenant conduct its business or
operations from the Premises until after the Commencement Date. Such limited
purpose occupancy by Tenant shall be at Tenant's sole risk and shall also be
subject to all of the provisions of this Lease other than the requirement to pay
Rent (other than any Utility Expenses incurred during the time period Tenant is
constructing the Tenant Improvements), including, but not limited to, the
requirement to obtain the insurance required pursuant to this Lease (including
without limitation, the provisions of Exhibit B hereto) and to deliver insurance
certificates as required herein, and to pay for all utilities and Utility
Expenses to the extent incurred during the time period Tenant is constructing
the Tenant Improvements. In addition to the foregoing and the provisions of
Exhibit B hereto regarding such early occupancy, Landlord shall have the right
to impose such additional conditions on Tenant's early entry as Landlord shall
deem reasonably appropriate. If, at any time, Tenant is in default of any term,
condition or provision of this Lease, any such waiver by Landlord of Tenant's
requirement to pay rental payments shall be null and void and Tenant shall
immediately pay to Landlord all rental payments so waived by Landlord.
3. RENT: On the date that Tenant executes this Lease, Tenant shall deliver to
Landlord the original executed Lease, the Base Rent (which shall be applied
against the Rent payable for the first month Tenant is required to pay Base
Rent), and all insurance certificates or, alternatively, the letter required
pursuant to Section 12.5 hereof, evidencing the insurance required to be
obtained by Tenant under Section 12 of this Lease and under the provisions of
Exhibit B hereto. Tenant agrees to pay Landlord, without prior notice or demand,
or abatement (except as otherwise set forth in Sections 27 and 41 hereof),
offset, deduction or claim, the Base Rent described on Page 1, payable in
advance at Landlord's address shown on Page 1 on the Commencement Date and
thereafter on the first (1st) day of each month throughout the Term of the
Lease. In addition to the Base Rent set forth on Page 1, Tenant shall pay
Landlord in advance, on the Commencement Date and thereafter on the first (1st)
day of each month throughout the Term of this Lease, as Additional Rent,
Tenant's Share of Operating Expenses, Tax Expenses, Common Area Utility Costs,
and Utility Expenses. The term "Rent" whenever used herein refers to the
aggregate of all these amounts. If Landlord permits Tenant to occupy the
Premises to conduct business operations therein without requiring Tenant to pay
rental payments for a period of time, the waiver of the requirement to pay
rental payments shall only apply to waiver of the Base Rent and Tenant shall
otherwise perform all other obligations of Tenant required hereunder. The Rent
for any fractional part of a calendar month at the commencement or termination
of the Lease term shall be a prorated amount of the Rent for a full calendar
month based upon a thirty (30) day month. The prorated Rent shall be paid on the
Commencement Date and the first day of the calendar month in which the date of
termination occurs, as the case may be.
4. SECURITY DEPOSIT: Intentionally omitted.
5. TENANT IMPROVEMENTS: Upon Substantial Completion by Landlord of the Shell
Improvements and the completion by Landlord of any Punchlist Items, Tenant
hereby agrees to accept the Premises in its then current
4
<PAGE> 5
"AS IS" condition. Subject to the provisions of Exhibit B hereto, Tenant shall
install the improvements ("Tenant Improvements") in the Premises in accordance
with the terms, conditions, criteria and provisions set forth in Exhibit B
hereto. Tenant acknowledges that neither Landlord nor any of Landlord's agents,
representatives or employees has made any representations as to the suitability
or fitness of the Premises for the conduct of Tenant's business, including
without limitation, any storage incidental thereto, or for any other purpose,
and that neither Landlord nor any of Landlord's agents, representatives or
employees has agreed to undertake any alterations or construct any Tenant
Improvements to the Premises except for the construction of the Shell
Improvements as expressly provided in Exhibit B to this Lease. Notwithstanding
the foregoing, Landlord shall allow Tenant to, concurrently with Landlord (if
Landlord so desires, otherwise separately), make a claim against Landlord's
general contractor for any patent or latent defects in the initial design or
construction of the Shell Improvements for a period of five (5) years after the
date on which the Shell Improvements are Substantially Completed. In addition to
the foregoing, Tenant shall be entitled to enforce, concurrently with Landlord,
any warranties made or given to Landlord from the general contractor and any
major subcontractors with respect to the Shell Improvements. Notwithstanding
anything to the contrary contained herein, Tenant shall allow Landlord to,
concurrently with Tenant (if Tenant so desires, otherwise separately), or after
the expiration or earlier termination of this Lease, individually, make a claim
against Tenant's general contractor, namely Devcon Construction Inc. (the
"Tenant's General Contractor") for any patent or latent defects in the initial
design or construction of the Tenant Improvements for a period of five (5) years
after the date on which the Tenant Improvements are substantially completed. In
addition to the foregoing, Landlord shall be entitled to enforce, concurrently
with Tenant, or after the expiration or earlier termination of this Lease,
individually, any warranties made or given to Tenant from the Tenant's General
Contractor and any major subcontractors with respect to the Tenant Improvements.
Each of Landlord and Tenant shall be third party beneficiaries of the other
party's construction agreements, and accordingly, each party hereby agrees to
include a provision in their respective construction contracts to effectuate
same.
6. ADDITIONAL RENT : It is intended by Landlord and Tenant that this Lease be
a "triple net lease". The costs and expenses described in this Section 6 and all
other sums, charges, costs and expenses specified in this Lease other than Base
Rent are to be paid by Tenant to Landlord as additional rent (collectively,
"Additional Rent").
6.1 OPERATING EXPENSES: In addition to the Base Rent set forth in
Section 3, Tenant shall pay Tenant's Share, which is defined on Page 1, of all
Operating Expenses as Additional Rent. The term "Operating Expenses" as used
herein shall mean the total actual amounts paid or payable by Landlord in
connection with the ownership, maintenance, repair and operation of the
Premises, the Buildings and the Lot, and where applicable, of the Park referred
to on Page 1. The amount of Tenant's Share of Operating Expenses shall be
reviewed from time to time by Landlord and shall be subject to modification by
Landlord if there is a change in the rentable square footage of the Premises,
the Buildings and/or the Park due to any casualty or condemnation of any portion
of the Premises. These Operating Expenses may include, but are not limited to:
6.1.1 Landlord's cost of repairs to, and maintenance of, the
non-structural portions of the roof, the roof membrane and the
non-structural portions of the exterior walls of the Buildings;
6.1.2 Landlord's cost of maintaining the outside paved area,
landscaping and other common areas for the Park. The term "Common Areas"
shall mean all areas and facilities within the Park exclusive of the
Premises and the other portions of the Park leased exclusively to other
tenants. The Common Areas include, but are not limited to, parking areas,
access and perimeter roads, sidewalks, landscaped areas and similar areas
and facilities;
6.1.3 Landlord's annual cost of insurance insuring against fire and
extended coverage (including, if Landlord elects, "all risk" or "special
purpose" coverage) and all other insurance, including, but not limited to,
earthquake, flood and/or surface water endorsements for the Buildings, the
Lot and the Park (including the Common Areas), rental value insurance
against loss of Rent in an amount equal to the amount of Rent for a period
of no more than twelve (12) months commencing on the date of loss, and
subject to the provisions of Section 27 below, any commercially reasonable
deductible;
6.1.4 Landlord's cost of: (i) modifications and/or new improvements
to the Buildings, the Common Areas and/or the Park occasioned by any
rules, laws or regulations effective subsequent to the date on which the
Buildings are Substantially Completed; (ii) reasonably necessary
replacement improvements to the Buildings, the Common Areas and the Park
after the Commencement Date; and (iii) new improvements to the Buildings,
the Common Areas and/or the Park that reduce operating costs or improve
life/safety conditions, all as reasonably determined by Landlord, in its
sole discretion; provided, however, if any of the foregoing are in the
nature of capital improvements, then the cost of such capital improvements
shall be amortized on a straight-line basis over a reasonable period,
which shall not be less than the lesser of fifteen (15) years or the
reasonably estimated useful life of such modifications, new improvements
or replacement improvements in question (at an interest rate as reasonably
determined by Landlord), and Tenant shall pay Tenant's Share of the
monthly amortized portion of such costs (including interest charges) as
part of the Operating Expenses herein;
6.1.5 If Landlord elects to so procure, Landlord's cost of
preventative maintenance, and repair contracts including, but not limited
to, contracts for elevator systems and heating, ventilation and air
conditioning systems, lifts for disabled persons, and trash or refuse
collection in the Buildings only;
5
<PAGE> 6
6.1.6 Landlord's cost of security and fire protection services for
the Buildings and/or the Park, as the case may be, if in Landlord's
reasonable discretion such services are provided;
6.1.7 Landlord's cost for the creation and negotiation of, and
pursuant to, any licenses, easements or other similar undertakings
benefitting the Buildings or Tenant's use of portions of the Park to the
extent incurred after the Commencement Date;
6.1.8 Landlord's cost of supplies, equipment, rental equipment and
other similar items used in the operation and/or maintenance of the Park;
6.1.9 Landlord's cost for the repairs and maintenance items set
forth in Section 11.2 below; and
6.1.10 Landlord's cost for the management and administration of the
Premises, the Buildings, the Common Areas and the Park, including without
limitation, a property management fee, accounting, auditing, billing,
salaries for clerical and supervisory employees (whether located within
the Park or off-site) and all fees, licenses and permits related to the
ownership, operation and management of any portion of the Park in an
amount not to exceed three percent (3%) of the Base Rent.
Notwithstanding anything to the contrary contained herein, for
purposes of this Lease, the term "Operating Expenses" shall not include the
following:
(a) Costs (including permit, license, and inspection fees)
incurred in renovating, improving, decorating, painting, or redecorating
vacant space or space for other tenants within the Park;
(b) Costs incurred because Landlord or another tenant actually
violated the terms of any lease for premises within the Buildings and/or
Park;
(c) Legal and auditing fees (other than those fees reasonably
incurred in connection with the maintenance and operation of the Buildings
and/or Park), leasing commissions, advertising expenses, and other costs
incurred in connection with the original development or original leasing
of the Buildings and/or Park or future re-leasing of the Buildings and/or
Park;
(d) Depreciation of the Buildings or any other improvements
situated within the Park;
(e) Any items for which Landlord is actually reimbursed by
insurance or by direct reimbursement by any other tenant of the Buildings
or Park;
(f) Costs of repairs or other work necessitated by fire, windstorm
or other casualty (excluding any commercially reasonable deductibles)
and/or costs of repair or other work necessitated by the exercise of the
right of eminent domain to the extent insurance proceeds or a condemnation
award, as applicable, is actually received by Landlord for such purposes;
provided such costs of repairs or other work shall be paid by the parties
in accordance with the provisions of Sections 27 and 28 below;
(g) Other than any interest charges for capital improvements
referred to in Section 6.1.4 hereinabove, any interest or payments on any
financing for the Buildings or the Park, interest and penalties incurred
as a result of Landlord's late payment of any invoice (provided that
Tenant pays Tenant's Share of Operating Expenses and Tax Expenses to
Landlord when due as set forth herein), and any bad debt loss, rent loss
or reserves for same;
(h) Costs associated with the investigation and/or remediation of
Hazardous Materials (hereafter defined) present in, on or about the
Premises, the Buildings or the Park, unless such costs and expenses are
the responsibility of Tenant as provided in Section 29 of this Lease, in
which event such costs and expenses shall be paid solely by Tenant in
accordance with the provisions of Section 29 of this Lease;
(i) Costs of correcting defects in the initial design or
construction of the Shell Improvements or the repair or replacement of any
original materials and equipment as a result of such defects, as long as
such defects are covered by warranties from the contractors performing
such work and Landlord has actually received compensation therefor; and
(j) Landlord's cost for the repairs and maintenance items set
forth in Section 11.3 below.
6.2 TAX EXPENSES: In addition to the Base Rent set forth in Section 3,
Tenant shall pay its share, which is defined on Page 1, of all real property
taxes applicable to the land and improvements included within the Lot on which
the Premises are situated and one hundred percent (100%) of all personal
property taxes now or hereafter assessed or levied against the Premises or
Tenant's personal property. The amount of Tenant's Share of Tax Expenses shall
be reviewed from time to time by Landlord and shall be subject to modification
by Landlord if there is a change in the rentable square footage of the Premises,
the Buildings and/or the Park. Tenant shall also pay one hundred percent (100%)
of any increase in real property taxes attributable, in Landlord's sole
discretion, to any and all alterations, Tenant Improvements or other
improvements of any kind, which are above standard improvements customarily
installed for similar buildings located within the Buildings or the Park (as
applicable), whatsoever placed in, on or about the Premises for the benefit of,
at the request
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of, or by Tenant. The term "Tax Expenses" shall mean and include, without
limitation, any form of tax and assessment (general, special, supplemental,
ordinary or extraordinary), commercial rental tax, payments under any
improvement bond or bonds, license fees, license tax, business license fee,
rental tax, transaction tax, levy, or penalty imposed by authority having the
direct or indirect power of tax (including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other improvement
district thereof) as against any legal or equitable interest of Landlord in the
Premises, the Buildings, the Lot or the Park, as against Landlord's right to
rent, or as against Landlord's business of leasing the Premises or the occupancy
of Tenant or any other tax, fee, or excise, however described, including, but
not limited to, any value added tax, or any tax imposed in substitution
(partially or totally) of any tax previously included within the definition of
real property taxes, or any additional tax the nature of which was previously
included within the definition of real property taxes. The term "Tax Expenses"
shall not include any (i) franchise, estate, inheritance, net income, or excess
profits tax imposed upon Landlord, or (ii) any interest or penalties resulting
solely from Landlord's failure to pay any Tax Expenses (excluding any failure on
the part of Landlord to so timely make such payments due to Tenant's failure to
timely make such payments to Landlord).
6.3 PAYMENT OF EXPENSES: Landlord shall estimate Tenant's Share of the
Operating Expenses and Tax Expenses for the calendar year in which the Lease
commences. Commencing on the Commencement Date, one-twelfth (1/12th) of this
estimated amount shall be paid by Tenant to Landlord, as Additional Rent, on the
first (1st) day of each month and throughout the remaining months of such
calendar year. Thereafter, Landlord may reasonably estimate such expenses as of
the beginning of each calendar year and Tenant shall pay one-twelfth (1/12th) of
such estimated amount as Additional Rent hereunder on the first day of each
month during such calendar year and for each ensuing calendar year throughout
the Term of this Lease. Tenant's obligation to pay Tenant's Share of Operating
Expenses and Tax Expenses shall survive the expiration or earlier termination of
this Lease.
6.4 ANNUAL RECONCILIATION: By June 30th of each calendar year, or as
soon thereafter as reasonably possible, Landlord shall endeavor to furnish
Tenant with an accounting prepared with reasonable detail of actual Operating
Expenses and Tax Expenses. Within thirty (30) days of Landlord's delivery of
such accounting, Tenant shall pay to Landlord the amount of any underpayment.
Notwithstanding the foregoing, failure by Landlord to give such accounting by
such date shall not constitute a waiver by Landlord of its right to collect any
of Tenant's underpayment at any time. Landlord shall credit the amount of any
overpayment by Tenant toward the next Base Rent falling due, or where the Term
of the Lease has expired, refund the amount of overpayment to Tenant. If the
Term of the Lease expires prior to the annual reconciliation of expenses
Landlord shall have the right to reasonably estimate Tenant's Share of such
expenses, and if Landlord determines that an underpayment is due, Tenant hereby
agrees to pay to Landlord the amount of such underpayment within thirty (30)
days after Landlord's delivery of a demand therefor. If Landlord reasonably
determines that an overpayment has been made by Tenant, Landlord shall refund
said overpayment to Tenant within thirty (30) days after Landlord has made such
determination. Notwithstanding the foregoing, failure of Landlord to accurately
estimate Tenant's Share of such expenses or to otherwise perform such
reconciliation of expenses, including without limitation, Landlord's failure to
make a written demand for any underpayment from Tenant, shall not constitute a
waiver of Landlord's right to collect any of Tenant's underpayment at any time
during the Term of the Lease during the one (1) year period following the last
day of the period to which such underpayment relates or at any time during the
one (1) year period following the expiration or earlier termination of this
Lease.
6.5 AUDIT: After delivery to Landlord of at least thirty (30) days prior
written notice, Tenant, at its sole cost and expense, shall have the right to
examine and/or audit the books and records evidencing such costs and expenses
for the previous one (1) calendar year, during Landlord's reasonable business
hours but not more frequently than once during any calendar year.
Notwithstanding the foregoing, Tenant may only audit the books and records of
Landlord with respect to the Premises and/or the Lease so long as Tenant fully
complies with all of the following requirements: (i) any audit by Tenant shall
be conducted by an accounting or audit firm or financial officer of Tenant; (ii)
any audit shall be conducted in Landlord's offices during reasonable business
hours, and after delivery to Landlord of at least thirty (30) days' prior
written notice; (iii) Tenant may only audit the books and records for the
previous one (1) year period in question and after the lapse of one (1) year
from the date on which Landlord delivers to Tenant any accounting or statement
regarding any rental payments to be made by Tenant under this Lease, Tenant
shall not have any right or ability to audit Landlord's books and records with
respect to such rental payments or charges; and (iv) if it is determined through
such audit that the amount of the expenses actually paid by Tenant to Landlord
for the period in question have not been overstated by an amount that is more
than seven percent (7%) of the aggregate of such expenses, then Tenant shall
immediately pay to Landlord, and reimburse Landlord for, the costs and expenses
incurred by Landlord in connection with such audit, including without
limitation, costs attributable to the time spent by Landlord's or Landlord's
property management company's staff in connection with such audit, as such costs
are reasonably determined by Landlord. Landlord and Tenant shall use their best
efforts to cooperate in such negotiations and to promptly resolve any
discrepancies between Landlord and Tenant in the accounting of such costs and
expenses.
7. UTILITIES: Utility Expenses, Common Area Utility Costs and all other sums
or charges set forth in this Section 7 are considered part of Additional Rent.
Tenant shall pay the cost of all water, sewer use, sewer discharge fees and
sewer connection fees, gas, heat, electricity, refuse pickup, janitorial
service, telephone and other utilities billed or metered separately to the
Premises and/or Tenant. Tenant shall also pay its share of any assessments or
charges for utility or similar purposes included within any tax bill for the Lot
on which the Premises are situated, including, without limitation, entitlement
fees related to Tenant's particular use of the
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Premises, allocation unit fees, and/or any similar fees or charges, and any
penalties related thereto to the extent any such penalties result from Tenant's
failure to so timely make such payments. For any such utility fees or use
charges that are not billed or metered separately to Tenant, Tenant shall pay to
Landlord, as Additional Rent, without prior notice or demand, on the
Commencement Date and thereafter on the first (1st) day of each month throughout
the balance of the Term of this Lease the amount which is attributable to
Tenant's use of the utilities or similar services, as reasonably estimated and
determined by Landlord based upon factors such as size of the Premises and
intensity of use of such utilities by Tenant such that Tenant shall pay the
portion of such charges reasonably consistent with Tenant's use of such
utilities and similar services ("Utility Expenses"). In addition, Tenant shall
pay to Landlord Tenant's Share, which is set forth on Page 1, as Additional
Rent, without prior notice or demand, on the Commencement Date and thereafter on
the first (1st) day of each month throughout the balance of the Term of this
Lease, of any Common Area utility costs, fees, charges or expenses ("Common Area
Utility Costs"). Tenant shall pay to Landlord one-twelfth (1/12th) of the
estimated amount of Tenant's Share of the Common Area Utility Costs in the same
manner and time periods as specified in Section 6.3 above and any reconciliation
thereof shall also be in the same manner as specified in Sections 6.3 and 6.4
above. The amount of Tenant's Share of Common Area Utility Costs shall be
reviewed from time to time by Landlord and shall be subject to modification by
Landlord if there is a change in the rentable square footage of the Premises,
the Buildings and/or the Park due to any casualty or condemnation of any portion
of the Premises. Tenant acknowledges that the Premises may become subject to the
rationing of utility services or restrictions on utility use as required by a
public utility company, governmental agency or other similar entity having
jurisdiction thereof. Notwithstanding any such rationing or restrictions on use
of any such utility services, Tenant acknowledges and agrees that its tenancy
and occupancy hereunder shall be subject to such rationing restrictions as may
be imposed upon Landlord, Tenant, the Premises, the Buildings or the Park, and
Tenant shall in no event be excused or relieved from any covenant or obligation
to be kept or performed by Tenant by reason of any such rationing or
restrictions. Tenant further agrees to timely and faithfully pay, prior to
delinquency, any amount, tax, charge, surcharge, assessment or imposition
levied, assessed or imposed upon the Premises, or Tenant's use and occupancy
thereof. Notwithstanding anything to the contrary contained herein, if due to
incidents, events or occurrences other than those arising from Tenant's or
Tenant's Representatives' negligent or intentional acts or omissions essential
utility services for the conduct of Tenant's operations in the Premises are
discontinued or interrupted for a consecutive period of one hundred eighty (180)
days or more, then such discontinuance or interruption of essential utility
services shall be considered to be a casualty and the provisions of Section 27
shall apply thereto.
8. LATE CHARGES: Any and all sums or charges set forth in this Section 8 are
considered part of Additional Rent. Tenant acknowledges that late payment (the
second day after Landlord's delivery of written notice that any sum has not been
paid when due or any time thereafter) by Tenant to Landlord of Base Rent,
Tenant's Share of Operating Expenses, Tax Expenses, Common Area Utility Costs,
and Utility Expenses or other sums due hereunder, 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 note secured by any encumbrance against
the Premises, and late charges and penalties due to the late payment of real
property taxes on the Premises. Therefore, if any installment of Rent or any
other sum due from Tenant is not received by Landlord within two (2) days after
Landlord's delivery of written notice that such sum is otherwise due, Tenant
shall promptly pay to Landlord all of the following, as applicable: (a) an
additional sum equal to seven percent (7%) of such delinquent amount as a late
charge for every month or portion thereof that such sums remain unpaid, and (b)
the amount of fifty dollars ($50) relating to checks for which there are not
sufficient funds; provided, however, the foregoing late charges shall only be
required to be paid by Tenant if Tenant has been late in making such payments
more than three (3) times during the Term of this Lease. If Tenant delivers to
Landlord a check for which there are not sufficient funds, Landlord may, at its
sole option, require Tenant to replace such check with a cashier's check for the
amount of such check and all other charges payable hereunder. The parties agree
that this late charge and the other charges referenced above represent a fair
and reasonable estimate of the costs that Landlord will incur by reason of late
payment by Tenant. Acceptance of any late charge or other charges shall not
constitute a waiver by Landlord of Tenant's default with respect to the
delinquent amount, nor prevent Landlord from exercising any of the other rights
and remedies available to Landlord for any other breach of Tenant under this
Lease. If a late charge or other charge becomes payable for any three (3)
installments of Rent within any twelve (12) month period, then Landlord, at
Landlord's sole option, can either require the Rent be paid quarterly in
advance, or be paid monthly in advance by cashier's check or by electronic funds
transfer.
9. USE OF PREMISES:
9.1 COMPLIANCE WITH LAWS, RECORDED MATTERS, AND RULES AND REGULATIONS:
The Premises are to be used solely for the uses stated on Page 1 and for no
other uses or purposes without Landlord's prior written consent, which consent
shall not be unreasonably withheld or delayed so long as the proposed use (i)
does not involve the use of Hazardous Materials other than as expressly
permitted under the provisions of Section 29 below, (ii) does not require any
additional parking in excess of the parking spaces already licensed to Tenant
pursuant to the provisions of Section 24 of this Lease, and (iii) is compatible
and consistent with the other uses then being made in the Park and in other
similar type of buildings in the vicinity of the Park, as reasonably determined
by Landlord. The use of the Premises by Tenant and its employees,
representatives, agents, invitees, licensees, subtenants, customers or
contractors (collectively, "Tenant's Representatives") shall be subject to, and
at all times in compliance with, (a) any and all applicable laws, ordinances,
statutes, orders and regulations as same exist from time to time (collectively,
the "Laws"), (b) any and all documents, matters or instruments,
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including without limitation, any declarations of covenants, conditions and
restrictions, and any supplements thereto, each of which has been or hereafter
is recorded in any official or public records with respect to the Premises, the
Buildings, the Lot and/or the Park, or any portion thereof (collectively, the
"Recorded Matters"), provided, if any of the Recorded Matters which are
subsequently recorded after the Lease Date materially affect Tenant's rights and
obligations under this Lease (excluding any liens related to any mortgage, deed
of trust or similar type of security interest, and any easements, liens and
other recorded matters required or imposed in connection with the development
and construction of the Buildings and the other improvements to be made as part
of the Park), then Landlord shall obtain Tenant's prior written consent to same,
which consent shall not be unreasonably withheld or delayed, and (c) any and all
rules and regulations set forth in Exhibit C, attached to and made a part of
this Lease, and any other reasonable rules and regulations promulgated by
Landlord now or hereafter enacted relating to parking and the operation of the
Premises, the Buildings and the Park, provided same are enforced on a
non-discriminatory basis (collectively, the "Rules and Regulations"). Tenant
agrees to, and does hereby, assume full and complete responsibility to ensure
that the Premises are adequate to fully meet the needs and requirements of
Tenant's intended operations of its business within the Premises, and Tenant's
use of the Premises and that same are in compliance with all applicable Laws
throughout the Term of this Lease. Additionally, Tenant shall be solely
responsible for the payment of all costs, fees and expenses associated with any
modifications to the Premises, Buildings, the Common Areas and/or the Park
occasioned by the enactment of, or changes to, any Laws arising from Tenant's
particular use of, or alterations to, the Premises regardless of when such Laws
become effective.
9.2 PROHIBITION ON USE: Tenant shall not use the Premises or permit
anything to be done in or about the Premises nor keep or bring anything therein
which will in any way conflict with any of the requirements of the Board of Fire
Underwriters or similar body now or hereafter constituted or in any way increase
the existing rate of or affect any policy of fire or other insurance upon the
Buildings or any of its contents, or cause a cancellation of any insurance
policy. No auctions may be held or otherwise conducted in, on or about the
Premises, the Buildings, the Lot or the Park without Landlord's written consent
thereto, which consent may be given or withheld in Landlord's sole discretion.
Tenant shall not do or permit anything to be done in or about the Premises which
will in any way obstruct or interfere with the rights of Landlord, other tenants
or occupants of the Buildings, other buildings in the Park, or other persons or
businesses in the area, or injure or annoy other tenants or use or allow the
Premises to be used for any unlawful or objectionable purpose, as determined by
Landlord, in its reasonable discretion, for the benefit, quiet enjoyment and use
by Landlord and all other tenants or occupants of the Buildings or other
buildings in the Park; nor shall Tenant cause, maintain or permit any private or
public nuisance in, on or about the Premises, Buildings, Park and/or the Common
Areas, including, but not limited to, any offensive odors, noises, fumes or
vibrations. Tenant shall not damage or deface or otherwise commit or suffer to
be committed any waste in, upon or about the Premises. Except as may be
permitted under applicable Laws and as Landlord may otherwise approve in
writing, Tenant shall not place or store, nor permit any other person or entity
to place or store, any property, equipment, materials, supplies, personal
property or any other items or goods outside of the Premises for any period of
time except in outside enclosures that are fully fenced and screened in
compliance with all Recorded Matters and Laws, and which enclosures are designed
for such purpose, and which have been approved by Landlord for such use. Other
than seeing-eye dogs for the blind, Tenant shall not permit any animals,
including, but not limited to, any household pets, to be brought or kept in or
about the Premises. Tenant shall place no loads upon the floors, walls, or
ceilings in excess of the maximum designed load permitted by the applicable
Uniform Building Code or which may damage the Buildings or outside areas; nor
place any harmful liquids in the drainage systems; nor dump or store waste
materials, refuse or other such materials, or allow such to remain outside the
Building area, except for any non-hazardous or non-harmful materials which may
be stored in refuse dumpsters or in any enclosed trash areas provided. Tenant
shall honor the terms of all Recorded Matters relating to the Premises, the
Buildings, the Lot and/or the Park. Tenant shall honor the Rules and
Regulations. If Tenant fails to comply with such Laws, Recorded Matters, Rules
and Regulations or the provisions of this Lease, Landlord shall have the right
to collect from Tenant Landlord's costs and expenses, if any, to cure any of
such failures of Tenant, if Landlord, at its sole option, elects to undertake
such cure.
10. ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES:
10.1 ALTERATIONS AND ADDITIONS: Tenant shall be permitted to make, at its
sole cost and expense, non-structural alterations and additions to the Premises
without obtaining Landlord's prior written consent provided the cost of same
does not exceed $75,000 cumulatively in any twelve-month period (the "Permitted
Improvements"). Tenant, however, shall first notify Landlord of such alterations
or additions comprising the Permitted Improvements so that Landlord may post a
Notice of Non-Responsibility on the Premises. Within ten (10) business days of
Landlord's receipt of Tenant's written notice of any item comprising the
Permitted Improvements, Landlord shall notify Tenant whether or not Landlord
will require Tenant to remove such item(s) from the Premises upon the expiration
or earlier termination of this Lease. Except for the Permitted Improvements,
Tenant shall not install any signs, fixtures (excluding trade fixtures),
improvements, nor make or permit any other alterations or additions to the
Premises without the prior written consent of Landlord. If any such alteration
or addition is expressly permitted by Landlord, including without limitation,
the Permitted Improvements, Tenant shall deliver at least twenty (20) days prior
notice to Landlord, from the date Tenant intends to commence construction,
sufficient to enable Landlord to post a Notice of Non-Responsibility. At the
time that Landlord notifies Tenant of its approval or disapproval of any such
request, Landlord shall advise Tenant in writing of those fixtures (excluding
trade fixtures), improvements, alterations and additions which Landlord will
require Tenant to remove upon the expiration or earlier termination of the
Lease. In all events, Tenant shall obtain all permits or other governmental
approvals prior to commencing any of such work and deliver a copy of same to
Landlord. All alterations and additions shall be installed by a licensed
contractor
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reasonably approved by Landlord (except with regard to any Permitted
Improvements the licensed contractor employed by Tenant therefor shall not be
subject to Landlord's prior approval), at Tenant's sole expense in compliance
with all applicable Laws (including, but not limited to, the ADA as defined
herein), Recorded Matters, and Rules and Regulations. Tenant shall keep the
Premises and the property on which the Premises are situated free from any liens
arising out of any work performed, materials furnished or obligations incurred
by or on behalf of Tenant. All alterations and additions performed by Tenant are
subject to Tenant obtaining all necessary building permits and shall be
performed in a first-class workmanlike manner by licensed and insured
contractors. As a condition to Landlord's consent to the installation of any
fixtures, additions or other improvements the cost of which exceeds $100,000 and
solely in the event that there has been a material change in the financial
condition of Tenant such that Tenant's net worth has fallen below
$100,000,000.00, Landlord may require Tenant to post and obtain a completion and
indemnity bond or a letter of credit in form reasonably acceptable to Landlord
for up to one hundred ten percent (110%) of the cost of the work. With respect
to the Tenant Improvements, except for any cafeteria and related items that are
part of the Tenant Improvements for which Landlord will require Tenant, at its
sole cost and expense, to demolish and/or remove from the Premises upon the
expiration or earlier termination of this Lease, Landlord shall not require
Tenant to demolish and/or remove any other items comprising the Tenant
Improvements from the Premises upon the expiration or earlier termination of
this Lease.
10.2 SURRENDER OF PREMISES: Upon the termination of this Lease, whether
by forfeiture, lapse of time or otherwise, or upon the termination of Tenant's
right to possession of the Premises, Tenant will at once surrender and deliver
up the Premises, together with the fixtures (other than trade fixtures),
furnishings, additions and improvements which Landlord has not notified Tenant,
in writing, that Landlord will require Tenant to remove (including without
limitation, any items comprising the Tenant Improvements), to Landlord in good
condition and repair subject to Tenant's compliance with its obligations under
Sections 9, 29 and 37 hereof, including, but not limited to, replacing all light
bulbs and ballasts not in good working condition, except for reasonable wear and
tear, casualty damage and repairs which are Landlord's obligations pursuant to
the provisions of Sections 11.2 and 11.3 below. Reasonable wear and tear shall
not include any damage or deterioration to the floors of the Premises arising
from the use of forklifts in, on or about the Premises (including, without
limitation, any marks or stains of any portion of the floors), and any damage or
deterioration that would have been prevented by proper maintenance by Tenant or
Tenant otherwise performing all of its obligations under this Lease. Upon such
termination of this Lease, Tenant shall remove any cafeteria and related items
that are part of the Tenant Improvements, all tenant signage, trade fixtures,
furniture, furnishings, equipment, personal property, additions, and such other
improvements Landlord requests, in writing, at the time of Landlord's delivery
of its consent to such installation, that Tenant remove some or all of such
additions or improvements installed by, or on behalf of Tenant or situated in or
about the Premises; provided, however, such requirement is reasonably based upon
the nature and type of additions, improvements or alterations being
substantially different than that improved or altered thereby. Tenant shall
repair any damage caused by the installation or removal of any cafeteria and
related items that are part of the Tenant Improvements, and such signs, trade
fixtures, furniture, furnishings, fixtures (other than trade fixtures),
equipment, personal property, additions and improvements which are to be removed
from the Premises by Tenant hereunder. Tenant shall ensure that the removal of
such items and the repair of the Premises will be completed prior to such
termination of this Lease.
11. REPAIRS AND MAINTENANCE:
11.1 TENANT'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for those
portions of the Buildings to be maintained by Landlord as provided in Sections
11.2 and 11.3 below, Tenant shall, at Tenant's sole cost and expense, keep and
maintain the interior non-structural portions of the Premises and the adjacent
dock and staging areas (including, without limitation, any portion of the Common
Areas used by Tenant or Tenant's Representatives) in good, clean and safe
condition and repair to the reasonable satisfaction of Landlord, reasonable wear
and tear and casualty excepted, including, but not limited to, repairing any
damage caused by Tenant or Tenant's Representatives and replacing any property
so damaged by Tenant or Tenant's Representatives. Without limiting the
generality of the foregoing, Tenant shall be solely responsible for maintaining,
repairing and replacing (a) all mechanical systems, heating, ventilation and air
conditioning systems serving the Premises, (b) all plumbing, electrical wiring
and equipment serving the Premises, (c) all interior lighting (including,
without limitation, light bulbs and/or ballasts) and exterior lighting serving
the Premises or immediately adjacent to the Premises, (d) all interior glass,
windows, window frames, window casements, skylights, interior and exterior
doors, door frames and door closers, (e) all roll-up doors, ramps and dock
equipment, including without limitation, dock bumpers, dock plates, dock seals,
dock levelers and dock lights, (f) all tenant signage, (g) lifts for disabled
persons serving the Premises, (h) sprinkler systems, fire protection systems and
security systems, (i) all partitions, fixtures, equipment, interior painting,
and interior walls and floors of the Premises and every part thereof (including,
without limitation, any demising walls contiguous to any portion of the
Premises), and (j) all interior lobbies and any mezzanines.
11.2 REIMBURSABLE REPAIRS AND MAINTENANCE OBLIGATIONS: Subject to the
provisions of Sections 6 and 9 of this Lease and except for (i) the obligations
of Tenant set forth in Section 11.1 above, (ii) the repairs rendered necessary
by the intentional or negligent acts or omissions of Tenant or Tenant's
Representatives, and (iii) the obligations of Landlord set forth in Section 11.3
below, Landlord agrees, at Landlord's expense, subject to reimbursement pursuant
to Section 6 above, to keep in good repair the Common Areas, plumbing and
mechanical systems exterior to the Premises, the roof, roof membranes, exterior
walls of the Buildings, signage (exclusive of tenant signage), and exterior
electrical wiring and equipment, exterior lighting, exterior glass, exterior
doors/entrances and door closers, exterior window casements, exterior painting
of the Buildings
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(exclusive of the Premises), and underground utility and sewer pipes outside the
exterior walls of the Buildings. For purposes of this Section 11.2, the term
"exterior" shall mean exterior to, and not serving the Premises. Unless
otherwise notified by Landlord, in writing, that Landlord has elected to procure
and maintain the following described contract(s), Tenant shall procure and
maintain (a) the heating, ventilation and air conditioning systems preventative
maintenance and repair contract(s); such contract(s) to be on a quarterly basis,
as reasonably determined by Landlord, and (b) the fire and sprinkler protection
services and preventative maintenance and repair contract(s) (including, without
limitation, monitoring services); such contract(s) to be on a quarterly basis.
Landlord reserves the right, but without the obligation to do so, to procure and
maintain, on similar terms with the foregoing requirements, (i) the heating,
ventilation and air conditioning systems preventative maintenance and repair
contract(s), and/or (ii) the fire and sprinkler protection services and
preventative maintenance and repair contract(s) (including, without limitation,
monitoring services). If Landlord so elects to procure and maintain any such
contract(s), Tenant will reimburse Landlord for the cost thereof in accordance
with the provisions of Section 6 above. If Tenant procures and maintains any of
such contract(s), Tenant will promptly deliver to Landlord a true and complete
copy of each such contract and any and all renewals or extensions thereof, and
each service report or other summary received by Tenant pursuant to or in
connection with such contract(s).
11.3 LANDLORD'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for repairs
rendered necessary by the intentional or negligent acts or omissions of Tenant
or Tenant's Representatives, Landlord agrees, at Landlord's sole cost and
expense, to (a) keep in good repair the structural portions of the floors,
foundations and exterior perimeter walls of the Buildings (exclusive of glass
and exterior doors), and (b) replace and repair the structural portions of the
roof of the Buildings (excluding the roof membrane) as, and when, Landlord
determines such replacement to be necessary in Landlord's reasonable discretion,
all of the foregoing to be performed in such a manner as is substantially
consistent with maintenance and repair of comparable buildings of similar type
and nature of construction in the San Jose area.
11.4 TENANT'S FAILURE TO PERFORM REPAIRS AND MAINTENANCE OBLIGATIONS:
Except for normal maintenance and repair of the items described above, Tenant
shall have no right of access to or right to install any device on the roof of
the Buildings nor make any penetrations of the roof of the Buildings without the
express prior written consent of Landlord. If Tenant refuses or neglects to
repair and maintain the Premises and the adjacent areas properly as required
herein and to the reasonable satisfaction of Landlord, Landlord may, but without
obligation to do so, at any time make such repairs and/or maintenance without
Landlord having any liability to Tenant for any loss or damage that may accrue
to Tenant's merchandise, fixtures or other property, or to Tenant's business by
reason thereof, except to the extent any damage is caused by the willful
misconduct or negligence of Landlord or its authorized agents and
representatives. In the event Landlord makes such repairs and/or maintenance,
upon completion thereof Tenant shall pay to Landlord, as additional rent, the
Landlord's costs for making such repairs and/or maintenance, plus ten percent
(10%) for overhead, upon presentation of a bill therefor. The obligations of
Tenant hereunder shall survive the expiration of the Term of this Lease or the
earlier termination thereof. Subject to the provisions of Section 41 hereof,
Tenant hereby waives any right to repair at the expense of Landlord under any
applicable Laws now or hereafter in effect respecting the Premises.
12. INSURANCE:
12.1 TYPES OF INSURANCE: Tenant shall maintain in full force and effect
at all times during the Term of this Lease, at Tenant's sole cost and expense,
for the protection of Tenant and Landlord, as their interests may appear,
policies of insurance issued by a carrier or carriers with an A.M. Best's rating
(or similar publication) of A-:VIII or better which afford the following
coverages: (i) worker's compensation: statutory limits; (ii) employer's
liability, as required by law, with a minimum limit of $100,000 per employee and
$500,000 per occurrence; (iii) commercial general liability insurance
(occurrence form) providing coverage against claims for bodily injury and
property damage occurring in, on or about the Premises arising out of Tenant's
and Tenant's Representatives' use and/or occupancy of the Premises. Such
insurance shall include coverage for blanket contractual liability, fire damage,
premises, personal injury, completed operations, and products liability. Such
insurance shall have a combined single limit of not less than One Million
Dollars ($1,000,000) per occurrence with at least a Three Million Dollar
($3,000,000) aggregate limit. If the aggregate limit is exhausted, then so long
as Tenant satisfies the requirements of Section 12.5 below Tenant shall be
deemed to have self-insured all of such risks. If the aggregate limit is
exhausted but Tenant does not satisfy the requirements of Section 12.5 below,
Tenant shall provide for restoration of the aggregate limit, as reasonably
determined by Landlord; (iv) comprehensive automobile liability insurance: a
combined single limit of not less than $2,000,000 per occurrence and insuring
Tenant against liability for claims arising out of the ownership, maintenance,
or use of any owned, hired or non-owned automobiles; (v) "all risk" or "special
purpose" property insurance, including without limitation, sprinkler leakage,
boiler and machinery comprehensive form, if applicable, covering damage to or
loss of any personal property, trade fixtures, inventory, fixtures and equipment
located in, on or about the Premises, and in addition, coverage for flood, and
business interruption of Tenant, together with, if the property of Tenant's
invitees is to be kept in the Premises, warehouser's legal liability or bailee
customers insurance for the full replacement cost of the property belonging to
invitees and located in the Premises. Such insurance shall be written on a
replacement cost basis (without deduction for depreciation) in an amount equal
to one hundred percent (100%) of the full replacement value of the aggregate of
the items referred to in this subparagraph (v); and (vi) such other insurance as
Landlord deems reasonably necessary and prudent or as may otherwise be required
by any of Landlord's lenders.
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12.2 INSURANCE POLICIES: Insurance required to be maintained by Tenant
shall be written by companies (i) licensed to do business in the State of
California, (ii) domiciled in the United States of America, and (iii) having a
"General Policyholders Rating" of at least A-:VIII as set forth in the most
current issue of "A.M. Best's Rating Guides" or similar publication. Any
deductible amounts under any of the insurance policies actually procured by
Tenant and as required hereunder is not in substitution of the limits of
insurance coverage which must be maintained by Tenant, rather such deductibles
are Tenant's self-insured retention for which Tenant shall be wholly
responsible. Tenant shall deliver to Landlord certificates of insurance together
with a true and complete copy of any waiver of subrogation endorsement required
herein for the insurance required to be maintained by Tenant hereunder at the
time of execution of this Lease by Tenant. If at any time Tenant is in default
of its obligations under this Lease beyond any applicable cure periods, Tenant
will deliver to Landlord a copy of any other endorsements to the insurance
policies obtained by Tenant upon Landlord's request therefor. Tenant shall, at
least five (5) days prior to expiration of each policy, furnish Landlord with
certificates of renewal or "binders" thereof. Each certificate shall expressly
provide that such policies shall not be cancelable or otherwise subject to
material reduction of coverage except after thirty (30) days prior written
notice to the parties named as additional insureds as required in this Lease
(except for cancellation for nonpayment of premium, in which event cancellation
shall not take effect until at least ten (10) days' notice has been given to
Landlord), as such certificates are reasonably acceptable to the insurers
issuing such policies and as is customarily provided to landlords in the general
vicinity of the Premises. Tenant shall have the right to provide insurance
coverage which it is obligated to carry pursuant to the terms of this Lease
under a blanket insurance policy.
12.3 ADDITIONAL INSUREDS AND COVERAGE: Landlord, any property management
company and/or agent of Landlord for the Premises, the Buildings, the Lot or the
Park, and any lender(s) of Landlord having a lien against the Premises, the
Buildings, the Lot or the Park shall be named as additional insureds under all
of the policies required in Section 12.1(iii) above, as each of such parties'
interests may appear. Additionally, such policies shall provide for severability
of interest. All insurance to be maintained by Tenant shall, except for workers'
compensation and employer's liability insurance, be primary, without right of
contribution from insurance maintained by Landlord. The limits of insurance
maintained by Tenant shall not limit Tenant's liability under this Lease. It is
the parties' intention that the insurance to be procured and maintained by
Tenant as required herein shall provide coverage for damage or injury arising
from or related to Tenant's operations of its business and/or Tenant's or
Tenant's Representatives' use of the Premises and/or any of the areas within the
Park, whether such events occur within the Premises (as described in Exhibit A
hereto) or in any other areas of the Park. It is not contemplated or anticipated
by the parties that the aforementioned risks of loss be borne by Landlord's
insurance carriers, rather it is contemplated and anticipated by Landlord and
Tenant that such risks of loss be borne by Tenant's insurance carriers pursuant
to the insurance policies procured and maintained by Tenant as required herein,
except to the extent of Landlord's or its authorized representatives' negligence
or willful misconduct.
12.4 FAILURE OF TENANT TO PURCHASE AND MAINTAIN INSURANCE: Subject to
Tenant's ability to self-insure such risks in accordance with the provisions of
Section 12.5 below, in the event Tenant does not purchase the insurance required
in this Lease or keep the same in full force and effect throughout the Term of
this Lease (including any renewals or extensions), Landlord may, but without
obligation to do so, purchase the necessary insurance and pay the premiums
therefor. If Landlord so elects to purchase such insurance, Tenant shall
promptly pay to Landlord as Additional Rent, the amount so paid by Landlord,
upon Landlord's demand therefor. In addition, Landlord may recover from Tenant
and Tenant agrees to pay, as Additional Rent, any and all damages which Landlord
may sustain by reason of Tenant's failure to so obtain and maintain such
insurance. If Tenant fails to maintain any insurance required in this Lease or
otherwise fails to comply with the provisions of Section 12.5 below regarding
Tenant's ability to self-insure such risks, Tenant shall be liable for all
losses, damages and costs resulting from such failure.
12.5 TENANT'S RIGHT TO SELF-INSURE: Notwithstanding anything to the
contrary contained herein, only with respect to the Tenant named herein as of
the Lease Date and provided that said Tenant has and maintains a net worth in
excess of One Hundred Million Dollars ($100,000,000.00), such originally named
Tenant may self-insure the risks contemplated in this Section 12 to the extent
that such self-insurance is permitted by all applicable Laws and provided
further that Tenant shall be fully and completely responsible and liable, at its
sole cost and expense, (1) to fully repair, restore, and replace any and all
items described above which may be damaged due to such risks contemplated
herein, (2) for all injuries to persons or property for which such risks would
otherwise have been insured against under any of the policies described above,
(3) for any losses experienced by Tenant or in Tenant's business which would
have otherwise been covered by business interruption insurance, and (4) for any
and all claims, damages, losses and other liabilities incurred by, or made
against, Tenant, Landlord, Landlord's property management company and/or lenders
arising from Tenant's election to self-insure the risks contemplated in this
Section 12.5, including without limitation, any and all costs of defense,
litigation or other similar proceeding. If the Tenant named herein as of the
Lease Date does so elect to self-insure such risks, then in lieu of delivering
to Landlord a certificate of insurance, Tenant shall deliver to Landlord
(annually) a letter certified by an authorized officer of its company that such
risks are being self-insured and that Tenant has complied with the financial
criteria set forth herein, and such letter shall also contain such other
information as Landlord's lender(s) may reasonably require (the "Self-Insurance
Certificate").
13. WAIVER OF SUBROGATION: Landlord and Tenant hereby mutually waive their
respective rights of recovery against each other for any loss of, or damage to,
either parties' property to the extent that such loss or damage is insured by an
insurance policy required to be in effect at the time of such loss or damage.
Each party shall obtain any special endorsements, if required by its insurer
whereby the insurer waives its rights of subrogation
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against the other party. This provision is intended to waive fully, and for the
benefit of the parties hereto, any rights and/or claims which might give rise to
a right of subrogation in favor of any insurance carrier. The coverage obtained
by Tenant pursuant to Section 12 of this Lease shall include, without
limitation, a waiver of subrogation endorsement attached to the certificate of
insurance. The provisions of this Section 13 shall not apply in those instances
in which such waiver of subrogation would invalidate such insurance coverage or
would cause either party's insurance coverage to be voided or otherwise
uncollectible.
14. LIMITATION OF LIABILITY AND INDEMNITY: Except to the extent of damage
resulting from the negligence or willful misconduct of Landlord or its
authorized representatives, Tenant agrees to protect, defend (with counsel
acceptable to Landlord) and hold Landlord and Landlord's lender(s), members,
partners, employees, representatives, legal representatives, successors and
assigns (collectively, the "Indemnitees") harmless and indemnify the Indemnitees
from and against all liabilities, damages, claims, losses, judgments, charges
and expenses (including reasonable attorneys' fees, costs of court and expenses
necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to, directly
or indirectly, (i) Tenant's or Tenant's Representatives' use of the Premises,
Buildings and/or the Park, (ii) the failure by Tenant to perform its obligations
under this Lease or any breach on the part of Tenant of any of the provisions of
this Lease, or (iii) the conduct of Tenant's business, or from any activity,
work or thing done, permitted or suffered by Tenant in or about the Premises,
including, but not limited to, any liability for injury to person or property of
Tenant, Tenant's Representatives, or third party persons. Tenant agrees that the
obligations of Tenant herein shall survive the expiration or earlier termination
of this Lease.
Except to the extent of damage resulting from the negligence or willful
misconduct of Landlord or its authorized representatives, Landlord shall not be
liable to Tenant for any loss or damage to Tenant or Tenant's property, for any
injury to or loss of Tenant's business or for any damage or injury to any person
from any cause whatsoever, including, but not limited to, any acts, errors or
omissions by or on behalf of any other tenants or occupants of the Buildings
and/or the Park. Tenant shall not, in any event or circumstance, be permitted to
offset or otherwise credit against any payments of Rent required herein for
matters for which Landlord may be liable hereunder. Landlord and its authorized
representatives shall not be liable for any interference with light or air, or,
subject to the provisions of Section 5 above, for any latent defect in the
Premises or the Buildings. To the fullest extent permitted by law and except to
the extent of damage resulting from the negligence or willful misconduct of
Landlord or its authorized representatives, Tenant agrees that neither Landlord
nor any of Landlord's lender(s), members, partners, employees, representatives,
legal representatives, successors and assigns shall at any time or to any extent
whatsoever be liable, responsible or in any way accountable for any loss,
liability, injury, death or damage to persons or property which at any time may
be suffered or sustained by Tenant or by any person(s) whomsoever who may at any
time be using, occupying or visiting the Premises, the Buildings or the Park.
Except to the extent of damage resulting from the negligence or willful
misconduct of Tenant or any of Tenant's Representatives, Landlord agrees to
protect, defend (with counsel acceptable to Tenant) and hold Tenant and Tenant's
employees and representatives (collectively, the "Tenant Indemnitees") harmless
and indemnify the Tenant Indemnitees from and against all liabilities, damages,
claims, losses, judgments, charges and expenses (including reasonable attorneys'
fees, costs of court and expenses necessary in the prosecution or defense of any
litigation including the enforcement of this provision) resulting from
Landlord's or its authorized agents' negligence or willful misconduct. Landlord
agrees that the obligations of Landlord herein shall survive the expiration or
earlier termination of this Lease.
15. ASSIGNMENT AND SUBLEASING:
15.1 PROHIBITION: Except as expressly set forth herein with respect to a
Related Entity, Tenant shall not assign, mortgage, hypothecate, encumber, grant
any license or concession, pledge or otherwise transfer this Lease
(collectively, "assignment"), in whole or in part, whether voluntarily or
involuntarily or by operation of law, nor sublet or permit occupancy by any
person other than Tenant of all or any portion of the Premises without first
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Tenant hereby agrees that Landlord may withhold its
consent to any proposed sublease or assignment if the proposed sublessee or
assignee or its business is subject to compliance with additional requirements
of the ADA (defined below) beyond those requirements which are applicable to
Tenant, unless the proposed sublessee or assignee shall (a) first deliver plans
and specifications for complying with such additional requirements and obtain
Landlord's written consent thereto, which consent shall not be unreasonably
withheld, and (b) comply with all Landlord's conditions for or contained in such
consent, including without limitation, requirements for security to assure the
lien-free completion of such improvements. If Tenant seeks to sublet or assign
all or any portion of the Premises, Tenant shall deliver to Landlord at least
thirty (30) days prior to the proposed commencement of the sublease or
assignment (the "Proposed Effective Date") the following: (i) the name of the
proposed assignee or sublessee; (ii) such information as to such assignee's or
sublessee's financial responsibility and standing as Landlord may reasonably
require; and (iii) the aforementioned plans and specifications, if any. Within
ten (10) days after Landlord's receipt of a written request from Tenant that
Tenant seeks to sublet or assign all or any portion of the Premises, Landlord
shall deliver to Tenant a copy of Landlord's standard form of sublease or
assignment agreement (as applicable), which instrument shall be utilized for
each proposed sublease or assignment (as applicable), and such instrument shall
include a provision whereby the assignee or sublessee assumes all of Tenant's
obligations hereunder, but with respect to a sublease only, to the extent
applicable to the subleased portion of the Premises, and agrees to be bound by
the terms hereof. As Additional Rent hereunder, Tenant shall pay to Landlord a
fee in the amount of five hundred dollars ($500) plus Tenant
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shall reimburse Landlord for actual legal and other expenses incurred by
Landlord in connection with any actual or proposed assignment or subletting.
Notwithstanding anything to the contrary contained herein, if (I) the Term of
the Second Lease has expired or the Second Lease has been earlier terminated for
any reason whatsoever, in whole or in part, and (II) Tenant proposes to sublease
or assign this Lease to a party other than a Related Entity, then for the time
period during which there is any vacancy in Building C and/or Building D (as
referred to in the Second Lease) Landlord shall have the right, to be exercised
by giving written notice to Tenant, to either (1) recapture the space described
in the proposed sublease or assignment, or (2) consent to such proposed sublease
or assignment, in which event Tenant shall pay Landlord monthly, as Additional
Rent, at the same time as the monthly installments of Rent are payable
hereunder, fifty percent (50%) of the excess of each such payment of rent or
other consideration in excess of the Rent called for hereunder, after deduction
of the actual brokerage commission (if any) paid by Tenant in connection with
such proposed sublease or assignment, where the rent or other consideration
provided for in the proposed sublease or assignment either initially or over the
term of the sublease or assignment exceeds the Rent or pro rata portion of the
Rent, as the case may be, for such space reserved in the Lease. If such
recapture notice is given, it shall serve to terminate this Lease with respect
to the proposed sublease or assignment space, or, if the proposed sublease or
assignment space covers all the Premises, it shall serve to terminate the entire
term of this Lease in either case, as of the Proposed Effective Date, with
respect to such space. However, no termination of this Lease with respect to
part or all of the Premises shall become effective without the prior written
consent, where necessary, of the holder of each deed of trust encumbering the
Premises or any part thereof. If this Lease is terminated pursuant to the
foregoing with respect to less than the entire Premises, the Rent shall be
adjusted on the basis of the proportion of square feet retained by Tenant to the
square feet originally demised and this Lease as so amended shall continue
thereafter in full force and effect. Each permitted assignee or sublessee,
including without limitation, a Related Entity, shall assume and be deemed to
assume this Lease and shall be and remain liable jointly and severally with
Tenant for payment of Rent and for the due performance of, and compliance with
all the terms, covenants, conditions and agreements herein contained on Tenant's
part to be performed or complied with, for the term of this Lease. No assignment
or subletting shall affect the continuing primary liability of Tenant (which,
following assignment, shall be joint and several with the assignee), and Tenant
shall not be released from performing any of the terms, covenants and conditions
of this Lease. Tenant hereby acknowledges and agrees that it understands that
Landlord's accounting department may process and accept Rent payments without
verifying that such payments are being made by Tenant, a permitted sublessee or
a permitted assignee in accordance with the provisions of this Lease. Although
such payments may be processed and accepted by such accounting department
personnel, any and all actions or omissions by the personnel of Landlord's
accounting department shall not be considered as acceptance by Landlord of any
proposed assignee or sublessee nor shall such actions or omissions be deemed to
be a substitute for the requirement that Tenant obtain Landlord's prior written
consent to any such subletting or assignment, and any such actions or omissions
by the personnel of Landlord's accounting department shall not be considered as
a voluntary relinquishment by Landlord of any of its rights hereunder nor shall
any voluntary relinquishment of such rights be inferred therefrom. For purposes
hereof, and except with respect to a Related Entity, in the event Tenant is a
corporation, partnership, joint venture, trust or other entity other than a
natural person, any change in the direct or indirect ownership of Tenant
(whether pursuant to one or more transfers other than publicly traded stock
which does not confer upon any party or parties control over Tenant) which
results in a change of more than fifty percent (50%) in the direct or indirect
ownership of Tenant shall be deemed to be an assignment within the meaning of
this Section 15 and shall be subject to all the provisions hereof. Except for a
permissible assignment to a Related Entity, any and all options, first rights of
refusal, tenant improvement allowances and other similar rights granted to
Tenant in this Lease, if any, shall not be assignable by Tenant unless expressly
authorized in writing by Landlord, at Landlord's reasonable discretion.
Notwithstanding anything to the contrary contained herein, so long as Tenant
delivers to Landlord (x) at least fifteen (15) business days prior written
notice of its intention to assign or sublease the Premises to any Related
Entity, which notice shall set forth the name of the Related Entity, (y) a copy
of the proposed agreement pursuant to which such assignment or sublease shall be
effectuated, and (z) such other information concerning the Related Entity as
Landlord may reasonably require, including without limitation, information
regarding any change in the proposed use of any portion of the Premises and any
financial information with respect to such Related Entity, and so long as
Landlord approves, in writing, of any change in the proposed use of the subject
portion of the Premises, then Tenant may assign this Lease or sublease any
portion of the Premises (X) to any Related Entity, or (Y) in connection with any
merger, consolidation or sale of substantially all of the assets of Tenant,
without having to obtain the prior written consent of Landlord thereto. For
purposes of this Lease the term "Related Entity" shall mean and refer to any
corporation or entity which controls, is controlled by or is under common
control with Tenant, as all of such terms are customarily used in the industry,
and with an equal or greater net worth as Tenant has as of the proposed transfer
date.
15.2 EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION: Notwithstanding
anything to the contrary contained herein, the provisions of this Section 15.2
are subject to the provisions of Section 15.1 above and in the event of any
conflict between such provisions, the terms and provisions of Section 15.1
hereof shall control and prevail. During the initial term of this Lease only, in
the event of any sublease or assignment of all or any portion of the Premises to
a party other than a Related Entity, which sublease or assignment only relates
to the initial term of this Lease and is expressly
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approved by Landlord, and where the rent or other consideration provided for in
the sublease or assignment either initially or over the term of the sublease or
assignment exceeds the Rent or pro rata portion of the Rent, as the case may be,
for such space reserved in the Lease, Tenant shall pay the Landlord monthly, as
Additional Rent, at the same time as the monthly installments of Rent are
payable hereunder, fifty percent (50%) of the excess of each such payment of
rent or other consideration in excess of the Rent called for hereunder, after
deduction of the actual brokerage commission (if any) paid by Tenant in
connection with such proposed sublease or assignment. During any renewal or
option terms of this Lease, in the event of any sublease or assignment of all or
any portion of the Premises to a party other than a Related Entity, which
sublease or assignment relates to such renewal or option term of this Lease and
is expressly approved by Landlord, and where the rent or other consideration
provided for in the sublease or assignment either initially or over the term of
the sublease or assignment exceeds the Rent or pro rata portion of the Rent, as
the case may be, for such space reserved in the Lease, Tenant shall pay the
Landlord monthly, as Additional Rent, at the same time as the monthly
installments of Rent are payable hereunder, fifty percent (50%) of the excess of
each such payment of rent or other consideration in excess of the Rent called
for hereunder, after deduction of the actual brokerage commission (if any) paid
by Tenant in connection with such proposed sublease or assignment.
15.3 WAIVER: Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Landlord to any assignee
or sublessee, or failure by Landlord to take action against any assignee or
sublessee, Tenant agrees that Landlord may, at its option, proceed against
Tenant without having taken action against or joined such assignee or sublessee,
except that Tenant shall have the benefit of any indulgences, waivers and
extensions of time granted to any such assignee or sublessee.
16. AD VALOREM TAXES: Prior to delinquency, Tenant shall pay all taxes and
assessments levied upon trade fixtures, alterations, additions, improvements,
inventories and personal property located and/or installed on or in the Premises
by, or on behalf of, Tenant; and if requested by Landlord, Tenant shall promptly
deliver to Landlord copies of receipts for payment of all such taxes and
assessments. To the extent any such taxes are not separately assessed or billed
to Tenant, Tenant shall pay the amount thereof as invoiced by Landlord.
17. SUBORDINATION: Landlord hereby represents to Tenant that as of the Lease
Date there does not exist a lien of a mortgage or deed of trust on all or any
portion of the Premises. Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, and at the
election of Landlord or any bona fide mortgagee or deed of trust beneficiary
with a lien on all or any portion of the Premises or any ground lessor with
respect to the land of which the Premises are a part, the rights of Tenant under
this Lease and this Lease shall be subject and subordinate at all times to: (i)
all ground leases or underlying leases which may now exist or hereafter be
executed affecting the Buildings or the land upon which the Buildings are
situated or both provided such ground lease includes a provision that Tenant's
use, occupancy or quiet enjoyment of the Premises will not be disturbed so long
as Tenant is not in default of the terms and provisions of this Lease, and (ii)
the lien of any mortgage or deed of trust which may now exist or hereafter be
executed in any amount for which the Buildings, the Lot, ground leases or
underlying leases, or Landlord's interest or estate in any of said items is
specified as security. Notwithstanding the foregoing, Landlord or any such
ground lessor, mortgagee, or any beneficiary shall have the right to subordinate
or cause to be subordinated any such ground leases or underlying leases or any
such liens to this Lease. If any ground lease or underlying lease terminates for
any reason or any mortgage or deed of trust is foreclosed or a conveyance in
lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination and upon the request of such successor to Landlord, attorn to and
become the Tenant of the successor in interest to Landlord, provided such
successor in interest will not disturb Tenant's use, occupancy or quiet
enjoyment of the Premises so long as Tenant is not in default of the terms and
provisions of this Lease. The successor in interest to Landlord following
foreclosure, sale or deed in lieu thereof shall not be (a) liable for any act or
omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership; (b) subject to any offsets or defenses which Tenant
might have against any prior lessor; or (c) bound by prepayment of more than one
(1) month's Rent. Tenant covenants and agrees to execute (and acknowledge if
required by Landlord, any lender or ground lessor) and deliver, within ten (10)
business days of a demand or request by Landlord and in the form requested by
Landlord, ground lessor, mortgagee or beneficiary, any additional documents
evidencing the priority or subordination of this Lease with respect to any such
ground leases or underlying leases or the lien of any such mortgage or deed of
trust. Tenant's failure to timely execute and deliver such additional documents
shall, at Landlord's option, constitute a material default hereunder. Tenant's
agreement to subordinate this Lease to any future ground or underlying lease or
any future deed of trust or mortgage pursuant to the foregoing provisions of the
Section 17 is conditioned upon Landlord delivering to Tenant from the lessor
under such future ground or underlying lease or the holder of any such mortgage
or deed of trust, a non-disturbance agreement agreeing, among other things, that
Tenant's right to possession of the Premises pursuant to the terms and
conditions of this Lease shall not be disturbed provided Tenant is not in
default under this Lease beyond the applicable notice and cure periods
hereunder.
18. RIGHT OF ENTRY: Tenant grants Landlord or its agents the right to enter
the Premises at all reasonable times, upon 24 hours advance notice to Tenant,
for purposes of inspection, exhibition, posting of notices, repair or
alteration. At Landlord's option, Landlord shall at all times have and retain a
key with which to unlock all the doors not conspicuously designated as
restricted access areas for security reasons in, upon and about the Premises,
excluding Tenant's vaults and safes. It is further agreed that Landlord shall
have the right to use any and all means Landlord deems necessary to enter the
Premises in an emergency. Landlord shall also have the right to place "for sale"
signs in the Common Areas at any time during the Term of this Lease. Landlord
shall also have the right to place "for rent" or "for lease" signs (which
signage shall include a phrase to the effect that Tenant is moving to larger
quarters) on the outside of the Premises and/or in the Common Areas at any time
during the last nine (9) months of the Term or the earlier termination thereof.
Tenant hereby waives any claim from damages or for any injury or inconvenience
to or interference with Tenant's business, or any other loss occasioned thereby
except for any claim for any of the foregoing arising out of the negligence or
willful misconduct of Landlord or its authorized representatives.
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19. ESTOPPEL CERTIFICATE: Tenant shall execute (and acknowledge if required by
any lender or ground lessor) and deliver to Landlord, within not less than ten
(10) business days after Landlord provides such to Tenant, 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), the date to which
the Rent and other charges are paid in advance, if any, acknowledging that there
are not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder or specifying such defaults as are claimed, and such other matters as
Landlord may reasonably require. Any such statement may be conclusively relied
upon by Landlord and any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such statement within such time shall be conclusive
upon the Tenant that (a) this Lease is in full force and effect, without
modification except as may be represented by Landlord; (b) there are no uncured
defaults in Landlord's performance; and (c) not more than one month's Rent has
been paid in advance, except in those instances when Tenant pays Rent quarterly
in advance pursuant to Section 8 hereof, then not more than three month's Rent
has been paid in advance. Failure by Tenant to so deliver such certified
estoppel certificate shall be a material default of the provisions of this
Lease. Tenant shall be liable to Landlord, and shall indemnify Landlord from and
against any loss, cost, damage or expense, incidental, consequential, or
otherwise, resulting from any failure of Tenant to execute or deliver to
Landlord any such certified estoppel certificate.
20. TENANT'S DEFAULT: The occurrence of any one or more of the following
events shall, at Landlord's option, constitute a material default by Tenant of
this Lease:
20.1 The abandonment of the Premises by Tenant or the vacation of the
Premises by Tenant which would cause any insurance policy to be invalidated or
otherwise lapse. Tenant agrees to notice and service of notice as provided for
in this Lease and waives any right to any other or further notice or service of
notice which Tenant may have under any statute or law now or hereafter in
effect;
20.2 The failure by Tenant to make any payment of Rent, Additional Rent
or any other payment required hereunder within three (3) days of Landlord's
delivery of written notice that said payment is due. Tenant agrees to notice and
service of notice as provided for in this Lease and waives any right to any
other or further notice or service of notice which Tenant may have under any
statute or law now or hereafter in effect;
20.3 The failure by Tenant to observe, perform or comply with any of the
conditions, covenants or provisions of this Lease (except failure to make any
payment of Rent and/or Additional Rent) and such failure is not cured within (i)
thirty (30) days of the date on which Landlord delivers written notice of such
failure to Tenant, complying with the notice requirements of Section 31.10
hereof, for all failures other than with respect to Hazardous Materials, and
(ii) ten (10) days of the date on which Landlord delivers written notice of such
failure to Tenant for all failures in any way related to Hazardous Materials.
However, Tenant shall not be in default of its obligations hereunder if such
failure cannot reasonably be cured within such thirty (30) or ten (10) day
period, as applicable, and Tenant promptly commences, and thereafter diligently
proceeds with same to completion, all actions necessary to cure such failure as
soon as is reasonably possible, but in no event shall the completion of such
cure be later than sixty (60) days after the date on which Landlord delivers to
Tenant written notice of such failure, unless Landlord, acting reasonably and in
good faith, otherwise expressly agrees in writing to a longer period of time
based upon the circumstances relating to such failure as well as the nature of
the failure and the nature of the actions necessary to cure such failure;
20.4 The making of a general assignment by Tenant for the benefit of
creditors, the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant's creditors seeking the rehabilitation,
liquidation, or reorganization of Tenant under any law relating to bankruptcy,
insolvency or other relief of debtors and, in the case of an involuntary action,
the failure to remove or discharge the same within sixty (60) days of such
filing, the appointment of a receiver or other custodian to take possession of
substantially all of Tenant's assets or this leasehold, Tenant's insolvency or
inability to pay Tenant's debts or failure generally to pay Tenant's debts when
due, any court entering a decree or order directing the winding up or
liquidation of Tenant or of substantially all of Tenant's assets, Tenant taking
any action toward the dissolution or winding up of Tenant's affairs, the
cessation or suspension of Tenant's use of the Premises, or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets or
this leasehold;
20.5 Tenant's use or storage of Hazardous Materials in, on or about the
Premises, the Buildings, the Lot and/or the Park other than as expressly
permitted by the provisions of Section 29 below;
20.6 The intentional making of any material misrepresentation or omission
by Tenant in any materials delivered by or on behalf of Tenant to Landlord
pursuant to this Lease; or
20.7 A material default by Tenant of any of the terms, provisions or
conditions of that certain Lease Agreement, of even date herewith, by and
between Landlord and Tenant for the leasing by Tenant of those two (2) certain
buildings situated within the Park and referred to as Buildings C and D (the
"Second Lease").
21. REMEDIES FOR TENANT'S DEFAULT:
21.1 LANDLORD'S RIGHTS: In the event of Tenant's material default or
breach of the Lease, Landlord may, after expiration of any applicable cure
period, terminate Tenant's right to possession of the Premises by any lawful
means in which case upon delivery of written notice by Landlord this Lease shall
terminate on the date specified by Landlord in such notice and Tenant shall
immediately surrender possession of the Premises
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to Landlord. In addition, the Landlord shall have the immediate right of
re-entry whether or not this Lease is terminated, and if this right of re-entry
is exercised following abandonment of the Premises by Tenant, Landlord may
consider any personal property belonging to Tenant and left on the Premises to
also have been abandoned. No re-entry or taking possession of the Premises by
Landlord pursuant to this Section 21 shall be construed as an election to
terminate this Lease unless a written notice of such intention is given to
Tenant. If Landlord relets the Premises or any portion thereof, (i) Tenant shall
be liable immediately to Landlord for all costs Landlord incurs in reletting the
Premises or any part thereof, including, without limitation, broker's
commissions, expenses of cleaning, redecorating, and further improving the
Premises and other similar costs (collectively, the "Reletting Costs"), and (ii)
the rent received by Landlord from such reletting shall be applied to the
payment of, first, any indebtedness from Tenant to Landlord other than Base
Rent, Operating Expenses, Tax Expenses, Common Area Utility Costs, and Utility
Expenses; second, all costs including maintenance, incurred by Landlord in
reletting; and, third, Base Rent, Operating Expenses, Tax Expenses, Common Area
Utility Costs, Utility Expenses, and all other sums due under this Lease. Any
and all of the Reletting Costs shall be fully chargeable to Tenant and shall not
be prorated or otherwise amortized in relation to any new lease for the Premises
or any portion thereof. After deducting the payments referred to above, any sum
remaining from the rental Landlord receives from reletting shall be held by
Landlord and applied in payment of future Rent as Rent becomes due under this
Lease. In no event shall Tenant be entitled to any excess rent received by
Landlord. Reletting may be for a period shorter or longer than the remaining
term of this Lease. No act by Landlord other than giving written notice to
Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the
Premises or the appointment of a receiver on Landlord's initiative to protect
Landlord's interest under this Lease shall not constitute a termination of
Tenant's right to possession. So long as this Lease is not terminated, Landlord
shall have the right to remedy any default of Tenant, to maintain or improve the
Premises, to cause a receiver to be appointed to administer the Premises and new
or existing subleases and to add to the Rent payable hereunder all of Landlord's
reasonable costs in so doing, with interest at the maximum rate permitted by law
from the date of such expenditure.
21.2 DAMAGES RECOVERABLE: If Tenant breaches this Lease and abandons the
Premises before the end of the Term, or if Tenant's right to possession is
terminated by Landlord because of a breach or default of the Lease, then in
either such case, Landlord may recover from Tenant all damages suffered by
Landlord as a result of Tenant's failure to perform its obligations hereunder,
including, but not limited to, the unamortized portion of any broker's or
leasing agent's commission incurred with respect to the leasing of the Premises
to Tenant for the balance of the Term of the Lease remaining after the date on
which Tenant is in default of its obligations hereunder to the extent such sums
are not already included as part of the calculation of damages, and all
Reletting Costs, and the worth at the time of the award (computed in accordance
with paragraph (3) of Subdivision (a) of Section 1951.2 of the California Civil
Code) of the amount by which the Rent then unpaid hereunder for the balance of
the Lease Term exceeds the amount of such loss of Rent for the same period which
Tenant proves could be reasonably avoided by Landlord and in such case, Landlord
prior to the award, may relet the Premises for the purpose of mitigating damages
suffered by Landlord because of Tenant's failure to perform its obligations
hereunder; provided, however, that even though Tenant has abandoned the Premises
following such breach, this Lease shall nevertheless continue in full force and
effect for as long as Landlord does not terminate Tenant's right of possession,
and until such termination, Landlord shall have the remedy described in Section
1951.4 of the California Civil Code (Landlord may continue this Lease in effect
after Tenant's breach and abandonment and recover Rent as it becomes due, if
Tenant has the right to sublet or assign, subject only to reasonable
limitations) and may enforce all its rights and remedies under this Lease,
including the right to recover the Rent from Tenant as it becomes due hereunder.
The "worth at the time of the award" within the meaning of Subparagraphs (a)(1)
and (a)(2) of Section 1951.2 of the California Civil Code shall be computed by
allowing interest at the rate of ten percent (10%) per annum. Tenant waives
redemption or relief from forfeiture under California Code of Civil Procedure
Sections 1174 and 1179, or under any other present or future law, in the event
Tenant is evicted or Landlord takes possession of the Premises by reason of any
default of Tenant hereunder.
21.3 RIGHTS AND REMEDIES CUMULATIVE: The foregoing rights and remedies of
Landlord are not exclusive; they are cumulative in addition to any rights and
remedies now or hereafter existing at law, in equity by statute or otherwise, or
to any equitable remedies Landlord may have, and to any remedies Landlord may
have under bankruptcy laws or laws affecting creditor's rights generally.
21.4 WAIVER OF A DEFAULT: The waiver by Landlord of any material default
or breach of any provision of this Lease shall not be deemed or construed a
waiver of any other material breach or default by Tenant hereunder or of any
subsequent material breach or default of this Lease, except for the default
specified in the waiver.
22. HOLDING OVER: If Tenant holds possession of the Premises after the
expiration of the Term of this Lease with Landlord's consent, Tenant shall
become a tenant from month-to-month upon the terms and provisions of this Lease,
provided the monthly Base Rent during such hold over period shall be 125% of the
Base Rent due on the last month of the Lease Term, payable in advance on or
before the first day of each month. Acceptance by Landlord of the monthly Base
Rent without the additional twenty-five percent (25%) increase of Base Rent
shall not be deemed or construed as a waiver by Landlord of any of its rights to
collect the increased amount of the Base Rent as provided herein at any time.
Such month-to-month tenancy shall not constitute a renewal or extension for any
further term. All options, if any, granted under the terms of this Lease shall
be deemed automatically terminated and be of no force or effect during said
month-to-month tenancy. Tenant shall continue in possession until such tenancy
shall be terminated by either Landlord or Tenant giving written notice of
termination to the other party at least thirty (30) days prior to the effective
date of termination.
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This paragraph shall not be construed as Landlord's permission for Tenant to
hold over. Acceptance of Base Rent by Landlord following expiration or
termination of this Lease shall not constitute a renewal of this Lease. If
Tenant provides Landlord with at least twelve (12) months advance written notice
of Tenant's intention to hold over and the anticipated hold over period of time,
Landlord shall not be entitled to any consequential damages arising from such
hold over for the hold over period specified in such written notice; provided,
however, the foregoing shall not be considered as Landlord's waiver of the
requirement for Tenant to pay such additional twenty-five percent (25%) increase
of Base Rent during such holdover period as contemplated above.
23. LANDLORD'S DEFAULT: Landlord shall not be deemed in breach or default of
this Lease unless Landlord fails within a reasonable time to perform an
obligation required to be performed by Landlord hereunder. For purposes of this
provision, a reasonable time shall not be less than thirty (30) days after
receipt by Landlord of written notice specifying the nature of the obligation
Landlord has not performed (except for any items of repair or maintenance for
which a prompter response would be reasonably necessary or appropriate given the
then existing circumstances); provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days, after receipt of
written notice, is reasonably necessary for its performance, then Landlord shall
not be in breach or default of this Lease if performance of such obligation is
commenced within such thirty (30) day period and thereafter diligently pursued
to completion.
24. PARKING: Tenant shall have a license to use the number of undesignated and
nonexclusive parking spaces set forth on Page 1. Landlord shall exercise
reasonable efforts to insure that such spaces are available to Tenant for its
use, but Landlord shall not be required to enforce Tenant's right to use the
same. Tenant shall have the exclusive right to use up to ten (10) parking
spaces, in locations designated by Landlord, in close proximity to the entrance
of each of the Buildings for Tenant's exclusive use for visitor parking;
provided, Tenant shall be solely responsible for the payment of all costs
associated with such striping and designation and Tenant's General Contractor
shall perform the work associated therewith as part of the Tenant Improvements.
25. SALE OF PREMISES: In the event of any sale of the Premises by Landlord or
the cessation otherwise of Landlord's interest therein, Landlord shall be and is
hereby entirely released from any and all of its obligations to perform or
further perform under this Lease and from all liability hereunder accruing or
arising from and after the date of such sale; and the purchaser, at such sale or
any subsequent sale of the Premises shall be deemed, without any further
agreement between the parties or their successors in interest or between the
parties and any such purchaser, to have assumed and agreed to carry out any and
all of the covenants and obligations of the Landlord under this Lease except for
those obligations of Landlord which have accrued prior to the date of such
transfer. For purposes of this Section 25, the term "Landlord" means only the
owner and/or agent of the owner as such parties exist as of the date on which
Tenant executes this Lease. A ground lease or similar long term lease by
Landlord of the entire Buildings, of which the Premises are a part, shall be
deemed a sale within the meaning of this Section 25. Tenant agrees to attorn to
such new owner provided such new owner does not disturb Tenant's use, occupancy
or quiet enjoyment of the Premises so long as Tenant is not in default of any of
the provisions of this Lease.
26. WAIVER: No delay or omission in the exercise of any right or remedy of
Landlord on any default by Tenant shall impair such a right or remedy or be
construed as a waiver. The subsequent acceptance of Rent by Landlord after
breach by Tenant of any covenant or term of this Lease shall not be deemed a
waiver of such breach, other than a waiver of timely payment for the particular
Rent payment involved, and shall not prevent Landlord from maintaining an
unlawful detainer or other action based on such breach. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly Rent and other sums due
hereunder shall be deemed to be other than on account of the earliest Rent or
other sums due, nor shall any endorsement or statement on any check or
accompanying any check or payment be deemed an accord and satisfaction; and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance of such Rent or other sum or pursue any other remedy
provided in this Lease. No failure, partial exercise or delay on the part of the
Landlord in exercising any right, power or privilege hereunder shall operate as
a waiver thereof.
27. CASUALTY DAMAGE: If either of the Buildings or any part thereof shall be
damaged by fire or other casualty, Tenant shall give prompt written notice
thereof to Landlord. In case either of the Buildings shall be so damaged by fire
or other casualty that fifty percent (50%) or more of the affected Building(s)
requires substantial alteration or reconstruction, in Landlord's reasonable
opinion, Landlord may, at its option, terminate this Lease with respect only to
the affected Building by notifying Tenant in writing of such termination within
ninety (90) days after the date of such damage, in which event the Rent shall be
abated as of the date of such damage but only to the extent Tenant is not able
to conduct its operations in the affected Building(s). If either of the
Buildings or any part thereof shall be damaged by fire or other casualty such
that the reparation of such damage or casualty shall require more than one
hundred eighty (180) days to complete (subject to extension for Force Majeure
Delays or Tenant Delays), then either Tenant or Landlord may terminate this
Lease with respect only to the affected Building by notifying the other party of
such election to terminate this Lease within thirty (30) days after the date on
which it is determined by Landlord of the length of time necessary to
substantially complete such repairs, in which event the Rent shall be abated as
of the date of such damage but only to the extent Tenant is not able to conduct
its operations in the affected Building(s). If neither party exercises their
rights to so elect to terminate this Lease with respect only to the affected
Building in accordance with the aforesaid provisions, and provided insurance
proceeds are available to fully repair the damage (excluding any
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deductible), Landlord shall within ninety (90) days after the date of such
damage commence to repair and restore the affected Building(s) and shall proceed
with reasonable diligence to restore the affected Building(s) (except that
Landlord shall not be responsible for delays outside its control) to
substantially the same condition in which it was immediately prior to the
happening of the casualty; provided, Landlord shall not be required to rebuild,
repair, or replace any part of Tenant's furniture, furnishings or fixtures and
equipment removable by Tenant or any improvements, alterations or additions
installed by or for the benefit of Tenant under the provisions of this Lease.
Landlord shall not in any event be required to spend for such work an amount in
excess of the insurance proceeds (excluding any deductible) actually received by
Landlord as a result of the fire or other casualty. Landlord shall not be liable
for any inconvenience or annoyance to Tenant, injury to the business of Tenant,
loss of use of any part of the Premises by the Tenant or loss of Tenant's
personal property resulting in any way from such damage or the repair thereof,
except that, subject to the provisions of the next sentence, Landlord shall
allow Tenant a fair diminution of Rent during the time and to the extent the
affected Building(s) is unfit for occupancy. Notwithstanding anything to the
contrary contained herein, if either of the Buildings or any other portion
thereof be damaged by fire or other casualty resulting from the intentional or
negligent acts or omissions of Tenant or any of Tenant's Representatives, (i)
the Rent shall not be diminished during the repair of such damage, (ii) Tenant
shall not have any right to terminate this Lease with respect only to the
affected Building due to the occurrence of such casualty or damage, and (iii)
Tenant shall be liable to Landlord for the cost and expense of the repair and
restoration of all or any portion of the affected Building(s) caused thereby
(including, without limitation, any deductible) to the extent such cost and
expense is not covered by insurance proceeds. In the event the holder of any
indebtedness secured by the affected Building(s) requires that the insurance
proceeds be applied to such indebtedness, then Landlord shall have the right to
terminate this Lease with respect only to the affected Building by delivering
written notice of termination to Tenant within thirty (30) days after the date
of notice to Tenant of any such event, whereupon all rights and obligations
shall cease and terminate hereunder with respect only to the affected Building
except for those obligations expressly intended to survive any such termination
of this Lease. Any notices required to be delivered pursuant to the provisions
of this Section 27 shall be in compliance with the notice requirements of
Section 31.10 of this Lease. Except as otherwise provided in this Section 27,
Tenant hereby waives the provisions of Sections 1932(2.), 1933(4.), 1941 and
1942 of the California Civil Code.
28. CONDEMNATION: If twenty-five percent (25%) or more of the Premises is
condemned by eminent domain, inversely condemned or sold in lieu of condemnation
for any public or quasi-public use or purpose ("Condemned"), then Tenant or
Landlord may terminate this Lease as of the date when physical possession of the
Premises is taken and title vests in such condemning authority, and Rent shall
be adjusted to the date of termination. Tenant shall not because of such
condemnation assert any claim against Landlord or the condemning authority for
any compensation because of such condemnation, and Landlord shall be entitled to
receive the entire amount of any award without deduction for any estate of
interest or other interest of Tenant; provided, however, the foregoing
provisions shall not preclude Tenant, at Tenant's sole cost and expense, from
obtaining any separate award to Tenant for loss of or damage to Tenant's trade
fixtures and removable personal property or for damages for cessation or
interruption of Tenant's business provided such award is separate from
Landlord's award and provided further such separate award does not diminish nor
impair the award otherwise payable to Landlord. In addition to the foregoing,
Tenant shall be entitled to seek compensation for the relocation costs
recoverable by Tenant pursuant to the provisions of California Government Code
Section 7262. If a substantial portion of the Premises, Buildings or the Lot is
so Condemned, Landlord or Tenant may terminate this Lease. If neither party
elects to terminate this Lease, Landlord shall, if necessary, promptly proceed
to restore the Premises or the Buildings to substantially its same condition
prior to such partial condemnation, allowing for the reasonable effects of such
partial condemnation, and a proportionate allowance shall be made to Tenant, as
reasonably determined by Landlord, for the Rent corresponding to the time during
which, and to the part of the Premises of which, Tenant is deprived on account
of such partial condemnation and restoration. Landlord shall not be required to
spend funds for restoration in excess of the amount received by Landlord as
compensation awarded.
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS:
29.1 HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE: Prior to executing this
Lease, Tenant has completed, executed and delivered to Landlord Tenant's initial
Hazardous Materials Disclosure Certificate (the "Initial HazMat Certificate"), a
copy of which is attached hereto as Exhibit G and incorporated herein by this
reference. Tenant covenants, represents and warrants to Landlord that the
information on the Initial HazMat Certificate is true and correct, to the best
of Tenant's knowledge, and accurately describes the use(s) of Hazardous
Materials which will be made and/or used on the Premises by Tenant. Commencing
with the date which is one year from the Commencement Date and continuing every
year thereafter, Tenant shall complete, execute, and deliver to Landlord, a
Hazardous Materials Disclosure Certificate ("the "HazMat Certificate")
describing Tenant's present use of Hazardous Materials on the Premises, and any
other reasonably necessary documents as requested by Landlord. The HazMat
Certificate required hereunder shall be in substantially the form as that which
is attached hereto as Exhibit E. Landlord hereby acknowledges and agrees that as
of the date on which both parties execute and deliver this Lease, Landlord has
approved the Initial HazMat Certificate; however, any such approval by Landlord
shall not be construed to relieve Tenant from its obligations and/or any
liabilities under the provisions of this Section 29.
29.2 DEFINITION OF HAZARDOUS MATERIALS: As used in this Lease, the term
Hazardous Materials shall mean and include (a) any hazardous or toxic wastes,
materials or substances, and other pollutants or contaminants, which are or
become regulated by any Environmental Laws; (b) petroleum, petroleum by
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products, gasoline, diesel fuel, crude oil or any fraction thereof; (c) asbestos
and asbestos containing material, in any form, whether friable or non-friable;
(d) polychlorinated biphenyls; (e) radioactive materials; (f) lead and
lead-containing materials; (g) any other material, waste or substance displaying
toxic, reactive, ignitable or corrosive characteristics, as all such terms are
used in their broadest sense, and are defined or become defined by any
Environmental Law (defined below); or (h) any materials which cause or threatens
to cause a nuisance upon or waste to any portion of the Premises, the Buildings,
the Lot, the Park or any surrounding property; or poses or threatens to pose a
hazard to the health and safety of persons on the Premises or any surrounding
property.
29.3 PROHIBITION; ENVIRONMENTAL LAWS: Except for and to the extent of the
type and quantities of Hazardous Materials specified in the Initial HazMat
Certificate, Tenant shall not be entitled to use nor store any Hazardous
Materials on, in, or about the Premises, the Buildings, the Lot and the Park, or
any portion of the foregoing, without, in each instance, obtaining Landlord's
prior written consent thereto. If Landlord consents to any such usage or
storage, then Tenant shall be permitted to use and/or store only those Hazardous
Materials that are necessary for Tenant's business and to the extent disclosed
in the HazMat Certificate and as expressly approved by Landlord in writing,
provided that such usage and storage is only to the extent of the quantities of
Hazardous Materials as specified in the then applicable HazMat Certificate as
expressly approved by Landlord and provided further that such usage and storage
is in full compliance with any and all local, state and federal environmental,
health and/or safety-related laws, statutes, orders, standards, courts'
decisions, ordinances, rules and regulations (as interpreted by judicial and
administrative decisions), decrees, directives, guidelines, permits or permit
conditions, currently existing and as amended, enacted, issued or adopted in the
future which are or become applicable to Tenant or all or any portion of the
Premises (collectively, the "Environmental Laws"). Tenant agrees that any
changes to the type and/or quantities of Hazardous Materials specified in the
most recent HazMat Certificate may be implemented only with the prior written
consent of Landlord, which consent may be given or withheld in Landlord's
reasonable discretion. Tenant shall not be entitled nor permitted to install any
tanks under, on or about the Premises for the storage of Hazardous Materials
without the express written consent of Landlord, which may be given or withheld
in Landlord's sole discretion. Landlord shall have the right at all times during
the Term of this Lease, upon reasonable advance notice to Tenant, to (i) inspect
the Premises, (ii) conduct tests and investigations to determine whether Tenant
is in compliance with the provisions of this Section 29, and (iii) request lists
of all Hazardous Materials used, stored or otherwise located on, under or about
the Premises, the Common Areas and/or the parking lots. The cost of all such
inspections, tests and investigations shall be borne solely by Tenant, if
Landlord reasonably determines that Tenant or any of Tenant's Representatives
are directly or indirectly responsible in any manner for any contamination
revealed by such inspections, tests and investigations. The aforementioned
rights granted herein to Landlord and its representatives shall not create (a) a
duty on Landlord's part to inspect, test, investigate, monitor or otherwise
observe the Premises or the activities of Tenant and Tenant's Representatives
with respect to Hazardous Materials, including without limitation, Tenant's
operation, use and any remediation related thereto, or (b) liability on the part
of Landlord and its representatives for Tenant's use, storage, disposal or
remediation of Hazardous Materials, it being understood that Tenant shall be
solely responsible for all liability in connection therewith.
29.4 TENANT'S ENVIRONMENTAL OBLIGATIONS: Tenant shall give to Landlord
immediate verbal and follow-up written notice of any spills, releases,
discharges, disposals, emissions, migrations, removals or transportation of
Hazardous Materials by Tenant, Tenant's Representatives or by any other party in
the event Tenant or Tenant's Representatives has actual knowledge thereof, on,
under or about the Premises, or in any Common Areas or parking lots. Tenant, at
its sole cost and expense, covenants and warrants to promptly investigate, clean
up, remove, restore and otherwise remediate (including, without limitation,
preparation of any feasibility studies or reports and the performance of any and
all closures) any spill, release, discharge, disposal, emission, migration or
transportation of Hazardous Materials arising from or related to the intentional
or negligent acts or omissions of Tenant or Tenant's Representatives such that
the affected portions of the Park and any adjacent property are returned to the
condition existing prior to the appearance of such Hazardous Materials. Any such
investigation, clean up, removal, restoration and other remediation shall only
be performed after Tenant has obtained Landlord's prior written consent, which
consent shall not be unreasonably withheld so long as such actions would not
potentially have a material adverse long-term or short-term effect on the
Premises, the Buildings, the Lot or the Park, or any portion of any of the
foregoing. Notwithstanding the foregoing, Tenant shall be entitled to respond
immediately to an emergency without first obtaining Landlord's prior written
consent. Tenant, at its sole cost and expense, shall conduct and perform, or
cause to be conducted and performed, all closures as required by any
Environmental Laws or any agencies or other governmental authorities having
jurisdiction thereof. If Tenant fails to so promptly investigate, clean up,
remove, restore, provide closure or otherwise so remediate, Landlord may, but
without obligation to do so, take any and all steps necessary to rectify the
same and Tenant shall promptly reimburse Landlord, upon demand, for all
reasonable costs and expenses to Landlord of performing investigation, clean up,
removal, restoration, closure and remediation work. All such work undertaken by
Tenant, as required herein, shall be performed in such a manner so as to enable
Landlord to make full economic use of the Premises, the Buildings, the Lot and
the Park after the satisfactory completion of such work.
29.5 ENVIRONMENTAL INDEMNITY: In addition to Tenant's obligations as set
forth hereinabove but subject to the provisions of Section 29.7 below, Tenant
agrees to, and shall, protect, indemnify, defend (with counsel reasonably
acceptable to Landlord) and hold Landlord and Landlord's lenders, members,
partners, property management company (if other than Landlord), agents,
directors, officers, employees, representatives, contractors, shareholders,
successors and assigns and each of their respective partners, directors,
employees, representatives, agents, contractors, shareholders, successors and
assigns harmless from and against any and all claims, judgments, damages,
penalties, fines, liabilities, losses (including, without limitation, diminution
in value
20
<PAGE> 21
of the Premises, the Buildings, the Lot, the Park, or any portion of any of the
foregoing, damages for the loss of or restriction on the use of rentable or
usable space, and from any adverse impact of Landlord's marketing of any space
within the Buildings and/or Park), suits, administrative proceedings and costs
(including, but not limited to, reasonable attorneys' and consultant fees and
court costs) arising at any time during or after the Term of this Lease in
connection with or related to, directly or indirectly, the use, presence,
transportation, storage, disposal, migration, removal, spill, release or
discharge of Hazardous Materials on, in or about the Premises, or in any Common
Areas or parking lots as a result (directly or indirectly) of the intentional or
negligent acts or omissions of Tenant or Tenant's Representatives. Neither the
written consent of Landlord to the presence, use or storage of Hazardous
Materials in, on, under or about any portion of the Premises, the Buildings, the
Lot and the Park, nor the strict compliance by Tenant with all Environmental
Laws shall excuse Tenant from its obligations of indemnification pursuant
hereto. Tenant shall not be relieved of its indemnification obligations under
the provisions of this Section 29.5 as a result of Landlord's status as either
an "owner" or "operator" under any Environmental Laws.
29.6 SURVIVAL: Tenant's obligations and liabilities pursuant to the
provisions of this Section 29 shall survive the expiration or earlier
termination of this Lease. If it is determined by Landlord that the condition of
all or any portion of the Premises, the Buildings, the Lot and/or the Park is
not in compliance with the provisions of this Lease with respect to Hazardous
Materials, including without limitation all Environmental Laws at the expiration
or earlier termination of this Lease, then at Landlord's sole option, Landlord
may require Tenant to hold over possession of the Premises until Tenant can
surrender the Premises to Landlord in the condition in which the Premises
existed as of the Commencement Date and prior to the appearance of such
Hazardous Materials except for reasonable wear and tear, including without
limitation, the conduct or performance of any closures as required by any
Environmental Laws. For purposes hereof, the term "reasonable wear and tear"
shall not include any deterioration in the condition or diminution of the value
of any portion of the Premises, the Buildings, the Lot and/or the Park in any
manner whatsoever related to directly, or indirectly, Hazardous Materials. Any
such holdover by Tenant will be with Landlord's consent, will not be terminable
by Tenant in any event or circumstance and will otherwise be subject to the
provisions of Section 22 of this Lease.
29.7 EXCULPATION OF TENANT: Tenant shall not be liable to Landlord for
nor otherwise obligated to Landlord under any provision of the Lease with
respect to the following: (i) any claim, remediation, obligation, investigation,
obligation, liability, cause of action, attorney's fees, consultants' cost,
expense or damage resulting from any Hazardous Materials present in, on or about
the Premises or the Buildings to the extent not caused nor otherwise permitted,
directly or indirectly, by Tenant or Tenant's Representatives; or (ii) the
removal, investigation, monitoring or remediation of any Hazardous Material
present in, on or about the Premises or the Buildings directly caused by any
source, including third parties, other than Tenant or Tenant's Representatives;
provided, however, Tenant shall be fully liable for and otherwise obligated to
Landlord under the provisions of this Lease for all liabilities, costs, damages,
penalties, claims, judgments, expenses (including without limitation, attorneys'
and experts' fees and costs) and losses to the extent (a) Tenant or any of
Tenant's Representatives contributes to the presence of such Hazardous
Materials, or Tenant and/or any of Tenant's Representatives exacerbates the
conditions caused by such Hazardous Materials, or (b) Tenant and/or Tenant's
Representatives allows or permits persons over which Tenant or any of Tenant's
Representatives has control, and/or for which Tenant or any of Tenant's
Representatives are legally responsible for, to cause such Hazardous Materials
to be present in, on, under, through or about any portion of the Premises, the
Common Areas, the Buildings or the Park, or (c) Tenant and/or any of Tenant's
Representatives does not take all reasonably appropriate actions to prevent such
persons over which Tenant or any of Tenant's Representatives has control and/or
for which Tenant or any of Tenant's Representatives are legally responsible from
causing the presence of Hazardous Materials in, on, under, through or about any
portion of the Premises, the Common Areas, the Buildings or the Park.
30. FINANCIAL STATEMENTS: Tenant, for the reliance of Landlord, any lender
holding or anticipated to acquire a lien upon the Premises, the Buildings or the
Park or any portion thereof, or any prospective purchaser of the Buildings or
the Park or any portion thereof, within thirty (30) days after Landlord's
request therefor, but not more often than once annually so long as Tenant is not
in default of this Lease, shall deliver to Landlord the then current audited
financial statements of Tenant (including interim periods following the end of
the last fiscal year for which annual statements are available) which statements
shall be prepared or compiled by a certified public accountant and shall present
fairly the financial condition of Tenant at such dates and the result of its
operations and changes in its financial positions for the periods ended on such
dates. So long as Tenant is a publicly-traded entity, Tenant's publicly-filed
financial statements shall be satisfactory for the satisfaction of the foregoing
requirement. If an audited financial statement has not been prepared, Tenant
shall provide Landlord with an unaudited financial statement and/or such other
information, the type and form of which are acceptable to Landlord in Landlord's
reasonable discretion, which reflects the financial condition of Tenant. If
Landlord so requests, Tenant shall deliver to Landlord an opinion of a certified
public accountant, including a balance sheet and profit and loss statement for
the most recent prior year, all prepared in accordance with generally accepted
accounting principles consistently applied. Any and all options granted to
Tenant hereunder shall be subject to and conditioned upon Landlord's reasonable
approval of Tenant's financial condition at the time of Tenant's exercise of any
such option.
31. GENERAL PROVISIONS:
31.1 TIME. Time is of the essence in this Lease and with respect to each
and all of its provisions in which performance is a factor.
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31.2 SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
31.3 RECORDATION. Tenant shall not record this Lease or a short form
memorandum hereof without the prior written consent of the Landlord.
31.4 LANDLORD'S PERSONAL LIABILITY. The liability of Landlord (which, for
purposes of this Lease, shall include Landlord and the owner of the Buildings if
other than Landlord) to Tenant for any default by Landlord under the terms of
this Lease shall be limited to the actual interest of Landlord and its present
or future partners or members in the Park, and Tenant agrees to look solely to
the Park for satisfaction of any liability and shall not look to other assets of
Landlord nor seek any recourse against the assets of the individual members,
partners, directors, officers, shareholders, agents or employees of Landlord; it
being intended that Landlord and the individual partners, members, directors,
officers, shareholders, agents or employees of Landlord shall not be personally
liable in any manner whatsoever for any judgment or deficiency. The liability of
Landlord under this Lease is limited to its actual period of ownership of title
to the Buildings, and Landlord shall be automatically released from further
performance under this Lease and from all further liabilities and expenses
accruing hereunder after the date of such transfer of Landlord's interest in the
Buildings. The foregoing shall not in any way limit or impair Tenant's right, if
any, to recover proceeds of insurance or any condemnation award in accordance
with the provisions of this Lease.
31.5 SEPARABILITY. Any provisions of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provisions hereof and such other provision shall remain in full force and
effect.
31.6 CHOICE OF LAW. This Lease shall be governed by the laws of the State
of California.
31.7 ATTORNEYS' FEES. In the event any dispute between the parties
results in litigation or other proceeding or any other litigation involving the
parties arises from this Lease, the prevailing party shall be reimbursed by the
party not prevailing for all reasonable costs and expenses, including, without
limitation, reasonable attorneys' and experts' fees and costs incurred by the
prevailing party in connection with such litigation or other proceeding, and any
appeal thereof. Such costs, expenses and fees shall be included in and made a
part of the judgment recovered by the prevailing party, if any.
31.8 ENTIRE AGREEMENT. This Lease supersedes any prior agreements,
representations, negotiations or correspondence between the parties, and
contains the entire agreement of the parties on matters covered. No other
agreement, statement or promise made by any party, that is not in writing and
signed by all parties to this Lease, shall be binding.
31.9 WARRANTY OF AUTHORITY. On the date that Tenant executes this Lease,
Tenant shall deliver to Landlord an original certificate of status for Tenant
issued by the California Secretary of State or statement of partnership for
Tenant recorded in the county in which the Premises are located, as applicable,
and such other documents as Landlord may reasonably request with regard to the
lawful existence of Tenant. Each person executing this Lease on behalf of a
party represents and warrants that (1) such person is duly and validly
authorized to do so on behalf of the entity it purports to so bind, and (2) if
such party is a limited liability company, partnership, corporation or trustee,
that such limited liability company, partnership, corporation or trustee has
full right and authority to enter into this Lease and perform all of its
obligations hereunder.
31.10 NOTICES. Any and all notices and demands required or permitted to be
given hereunder to Landlord shall be in writing and shall be sent: (a) by United
States mail, certified and postage prepaid; or (b) by personal delivery; or (c)
by overnight courier, addressed to Landlord at 101 Lincoln Centre Drive, Fourth
Floor, Foster City, California 94404-1167. Any and all notices and demands
required or permitted to be given hereunder to Tenant shall be in writing and
shall be sent: (i) by United States mail, certified and postage prepaid; or (ii)
by personal delivery to any employee or agent of Tenant over the age of eighteen
(18) years of age; or (iii) by overnight courier, all of which shall be
addressed to Tenant at the Tenant's Address as provided on Page 1 of this Lease
or otherwise provided to Landlord. Notice and/or demand shall be deemed given
upon the earlier of actual receipt or the third day following deposit in the
United States mail. Any notice or requirement of service required by any statute
or law now or hereafter in effect, including, but not limited to, California
Code of Civil Procedure Sections 1161, 1161.1, and 1162, is hereby waived by
Tenant.
31.11 JOINT AND SEVERAL. If Tenant consists of more than one person or
entity, the obligations of all such persons or entities shall be joint and
several.
31.12 COVENANTS AND CONDITIONS. Each provision to be performed by Tenant
hereunder shall be deemed to be both a covenant and a condition.
31.13 WAIVER OF JURY TRIAL. Intentionally omitted.
31.14 COUNTERCLAIMS. In the event Landlord commences any proceedings for
nonpayment of Rent, Additional Rent, or any other sums or amounts due hereunder,
Tenant shall not interpose any counterclaim of whatever nature or description in
any such proceedings, provided, however, nothing contained herein shall be
deemed or construed as a waiver of the Tenant's right to assert such claims in
any separate action brought by Tenant or the right to offset the amount of any
final judgment owed by Landlord to Tenant.
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31.15 UNDERLINING. The use of underlining within the Lease is for
Landlord's reference purposes only and no other meaning or emphasis is intended
by this use, nor should any be inferred.
32. SIGNS: All signs and graphics of every kind visible in or from public view
or corridors or the exterior of the Premises shall be subject to Landlord's
prior written approval, which shall not be unreasonably withheld or delayed, and
shall also be subject to any applicable governmental laws, ordinances, and
regulations and in compliance with Landlord's sign criteria as same may exist
from time to time or as set forth in Exhibit H hereto and made a part hereof.
Tenant shall remove all such signs and graphics prior to the termination of this
Lease. Such installations and removals shall be made in a manner as to avoid
damage or defacement of the Premises; and Tenant shall repair any damage or
defacement, including without limitation, discoloration caused by such
installation or removal. Landlord shall have the right, at its option, to demand
payment from Tenant of such sums as are reasonably necessary to remove such
signs, including, but not limited to, the costs and expenses associated with any
repairs necessitated by such removal. Notwithstanding the foregoing, in no event
shall any: (a) neon, flashing or moving sign(s) or (b) sign(s) which shall
interfere with the visibility of any sign, awning, canopy, advertising matter,
or decoration of any kind of any other business or occupant of the Buildings or
the Park be permitted hereunder. Tenant further agrees to maintain any such
sign, awning, canopy, advertising matter, lettering, decoration or other thing
as may be approved in good condition and repair at all times.
33. MORTGAGEE PROTECTION: Upon any breach or default on the part of Landlord,
Tenant will give written notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage covering the Premises
who has provided Tenant with notice of their interest together with an address
for receiving notice, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default (which, in no event shall be more than ninety
(90) days), including time to obtain possession of the Premises by power of sale
or a judicial foreclosure, if such should prove necessary to effect a cure. If
such breach or default cannot be cured within such time period, then such
additional time as may be necessary will be given to such beneficiary or
mortgagee to effect such cure so long as such beneficiary or mortgagee has
commenced the cure within the original time period and thereafter diligently
pursues such cure to completion, in which event this Lease shall not be
terminated while such cure is being diligently pursued. Tenant agrees that each
lender to whom this Lease has been assigned by Landlord is an express third
party beneficiary hereof. Tenant shall not make any prepayment of Rent more than
one (1) month in advance without the prior written consent of each such lender,
except if Tenant is required to make quarterly payments of Rent in advance
pursuant to the provisions of Section 8 above. Tenant agrees to make all
payments under this Lease to the lender with the most senior encumbrance upon
receiving a direction, in writing, to pay said amounts to such lender. Tenant
shall comply with such written direction to pay without determining whether an
event of default exists under such lender's loan to Landlord.
34. QUITCLAIM: Upon any termination of this Lease, Tenant shall, at Landlord's
request, execute, have acknowledged and deliver to Landlord a quitclaim deed of
Tenant's interest in and to the Premises.
35. MODIFICATIONS FOR LENDER: If, in connection with obtaining financing for
the Premises or any portion thereof, Landlord's lender shall request reasonable
modification(s) to this Lease as a condition to such financing, Tenant shall not
unreasonably withhold, delay or defer its consent thereto, provided such
modifications do not materially adversely affect Tenant's rights hereunder or
the use, occupancy or quiet enjoyment of Tenant hereunder.
36. WARRANTIES OF TENANT: Tenant hereby warrants and represents to Landlord,
for the express benefit of Landlord, that Tenant has undertaken a complete and
independent evaluation of the risks inherent in the execution of this Lease and
the operation of the Premises for the use permitted hereby, and that, based upon
said independent evaluation, Tenant has elected to enter into this Lease and
hereby assumes all risks with respect thereto. Each party hereby warrants and
represents to the other party, for the express benefit of the other party, that
in entering into this Lease, the warranting party has not relied upon any
statement, fact, promise or representation (whether express or implied, written
or oral) not specifically set forth herein in writing and that any statement,
fact, promise or representation (whether express or implied, written or oral)
made at any time to it, which is not expressly incorporated herein in writing,
is hereby waived by it.
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT: Landlord and Tenant
hereby agree and acknowledge that the Premises, the Buildings and/or the Park
may be subject to the requirements of the Americans with Disabilities Act, a
federal law codified at 42 U.S.C. 12101 et seq, including, but not limited to
Title III thereof, all regulations and guidelines related thereto, together with
any and all laws, rules, regulations, ordinances, codes and statutes now or
hereafter enacted by local or state agencies having jurisdiction thereof,
including all requirements of Title 24 of the State of California, as the same
may be in effect on the date of this Lease and may be hereafter modified,
amended or supplemented (collectively, the "ADA"). The Shell Improvements to be
constructed hereunder shall be in compliance with the requirements of the ADA as
of the date on which the Shell Improvements are Substantially Completed. Any
Tenant Improvements to be constructed hereunder shall be in compliance with the
requirements of the ADA, and all costs incurred for purposes of compliance
therewith shall be a part of and included in the costs of the Tenant
Improvements. Tenant shall be solely responsible for conducting its own
independent investigation of this matter and for ensuring that the design of all
Tenant Improvements strictly comply with all requirements of the ADA. Subject to
reimbursement pursuant to Section
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6 of the Lease, if any barrier removal work or other work is required to the
Buildings, the Common Areas or the Park under the ADA, then such work shall be
the responsibility of Landlord; provided, if such work is required under the ADA
as a result of Tenant's use of the Premises or any work or alteration made to
the Premises by or on behalf of Tenant, then such work shall be performed by
Landlord at the sole cost and expense of Tenant. Except as otherwise expressly
provided in this provision, Tenant shall be responsible at its sole cost and
expense for fully and faithfully complying with all applicable requirements of
the ADA, including without limitation, not discriminating against any disabled
persons in the operation of Tenant's business in or about the Premises, and
offering or otherwise providing auxiliary aids and services as, and when,
required by the ADA. Within ten (10) days after receipt, Landlord and Tenant
shall advise the other party in writing, and provide the other with copies of
(as applicable), any notices alleging violation of the ADA relating to any
portion of the Premises or the Buildings; any claims made or threatened in
writing regarding noncompliance with the ADA and relating to any portion of the
Premises or the Buildings; or any governmental or regulatory actions or
investigations instituted or threatened regarding noncompliance with the ADA and
relating to any portion of the Premises or the Buildings. Tenant shall and
hereby agrees to protect, defend (with counsel acceptable to Landlord) and hold
Landlord and Landlord's lender(s), members, partners, employees,
representatives, legal representatives, successors and assigns (collectively,
the "Indemnitees") harmless and indemnify the Indemnitees from and against all
liabilities, damages, claims, losses, penalties, judgments, charges and expenses
(including reasonable attorneys' fees, costs of court and expenses necessary in
the prosecution or defense of any litigation including the enforcement of this
provision) arising from or in any way related to, directly or indirectly,
Tenant's or Tenant's Representatives' violation of the ADA. Tenant agrees that
the obligations of Tenant herein shall survive the expiration or earlier
termination of this Lease.
38. BROKERAGE COMMISSION: Landlord and Tenant each represents and warrants for
the benefit of the other that it has had no dealings with any real estate
broker, agent or finder in connection with the Premises and/or the negotiation
of this Lease, except for the Broker(s) (as set forth on Page 1), and that it
knows of no other real estate broker, agent or finder who is or might be
entitled to a real estate brokerage commission or finder's fee in connection
with this Lease or otherwise based upon contacts between the claimant and
Tenant. Each party shall indemnify and hold harmless the other from and against
any and all liabilities or expenses arising out of claims made for a fee or
commission by any real estate broker, agent or finder in connection with the
Premises and this Lease other than Broker(s), if any, resulting from the actions
of the indemnifying party. Any real estate brokerage commission or finder's fee
payable to the Broker(s) in connection with this Lease shall only be payable and
applicable to the extent of the initial term of the Lease and to the extent of
the Premises as same exist as of the date on which Tenant executes this Lease.
Unless expressly agreed to in writing by Landlord and Broker(s), no real estate
brokerage commission or finder's fee shall be owed to, or otherwise payable to,
the Broker(s) for any renewals or other extensions of the initial Term of this
Lease or for any additional space leased by Tenant other than the Premises as
same exists as of the date on which Tenant executes this Lease. Tenant further
represents and warrants to Landlord that Tenant will not receive (i) any portion
of any brokerage commission or finder's fee payable to the Broker(s) in
connection with this Lease or (ii) any other form of compensation or incentive
from the Broker(s) with respect to this Lease.
39. QUIET ENJOYMENT: Landlord covenants with Tenant, upon the paying of Rent
and observing and keeping the covenants, agreements and conditions of this Lease
on its part to be kept, and during the periods that Tenant is not otherwise in
default of any of the terms or provisions of this Lease, and subject to the
rights of any of Landlord's lenders, (i) that Tenant shall and may peaceably and
quietly hold, occupy and enjoy the Premises and the Common Areas during the Term
of this Lease, and (ii) neither Landlord, nor any successor or assign of
Landlord, shall disturb Tenant's occupancy or enjoyment of the Premises and the
Common Areas.
40. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS:
Notwithstanding anything to the contrary contained in this Lease, if Tenant
shall fail to perform any of the terms, provisions, covenants or conditions to
be performed or complied with by Tenant pursuant to this Lease, and/or if the
failure of Tenant relates to a matter which in Landlord's judgment reasonably
exercised is of an emergency nature and such failure shall remain uncured for a
period of time commensurate with such emergency, then Landlord may, at
Landlord's option without any obligation to do so, and in its sole discretion as
to the necessity therefor, perform any such term, provision, covenant, or
condition, or make any such payment and Landlord by reason of so doing shall not
be liable or responsible for any loss or damage thereby sustained by Tenant or
anyone holding under or through Tenant. If Landlord so performs any of Tenant's
obligations hereunder, the full amount of the cost and expense entailed or the
payment so made or the amount of the loss so sustained shall immediately be
owing by Tenant to Landlord, and Tenant shall promptly pay to Landlord upon
demand, as Additional Rent, the full amount thereof with interest thereon from
the date of payment at the greater of (i) ten percent (10%) per annum, or (ii)
the highest rate permitted by applicable law and Enforcement Expenses.
41. TENANT'S ABILITY TO PERFORM LANDLORD'S UNPERFORMED OBLIGATIONS:
Notwithstanding anything to the contrary contained in this Lease, if Landlord
shall fail to perform any of the terms, provisions, covenants or conditions to
be performed or complied with by Landlord pursuant to this Lease after
expiration of all applicable notice and cure periods for Landlord's and any
mortgagee's benefit as set forth in Sections 23 and 33, respectively, and/or if
the failure of Landlord relates to a matter which in Tenant's judgment
reasonably exercised is of an emergency nature and such failure shall remain
uncured for a period of time commensurate with such emergency, then Tenant may,
at Tenant's option without any obligation to do so, after delivery of prior
written notice to Landlord and affording Landlord an opportunity to cure such
failure, perform any such term,
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provision, covenant, or condition. If Tenant so performs any of Landlord's
obligations hereunder, the full amount of the reasonable costs and expenses
incurred shall immediately be owing by Landlord to Tenant, and Landlord shall
pay to Tenant the full amount thereof within ninety (90) days of Landlord's
receipt of Tenant's written demand and accompanying documentation therefor. If
Landlord fails to pay such sums within said 90-day period, and provided there
does not then exist a good faith dispute thereof on the part of Landlord, Tenant
may deduct such sums so demanded from the next installment of Base Rent then due
from Tenant hereunder.
IN WITNESS WHEREOF, this Lease is executed by the parties as of the Lease
Date referenced on page 1 of this Lease.
TENANT:
Cisco Systems, Inc., a California corporation
By: /s/Nancy Bareilles
----------------------------
Its: VP
----------------------------
Date: 12-19-96
----------------------------
LANDLORD:
LINCOLN-WHITEHALL REALTY (WEST), L.L.C.,
a Delaware limited liability company
By: Lincoln Property Company Management Services, Inc.,
as manager and agent for LINCOLN-WHITEHALL REALTY (WEST), L.L.C.
By: /s/Barry DiRaimondo
----------------------------
Vice President
Date: 12/23/96
----------------------------
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EXHIBIT A - PREMISES
PAGE 1 OF 1
LEASE DATED DECEMBER 12, 1996, BY AND BETWEEN
CISCO SYSTEMS, INC.,
A CALIFORNIA CORPORATION
("TENANT"),
AND
LINCOLN-WHITEHALL REALTY (WEST), L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
PREMISES:
____________________________
_____________, CA __________
Approximately _______ rentable
square feet plus ___________
rentable square feet
(proportionate share of
electrical room) equals
____________ __________ total
rentable square feet within
Phase _________ of the Park
INITIALS:
TENANT: _______________
LANDLORD: _______________
<PAGE> 27
EXHIBIT B TO LEASE AGREEMENT
TENANT IMPROVEMENTS AND SHELL IMPROVEMENTS
This exhibit, entitled "Tenant Improvements and Shell Improvements", is and
shall constitute EXHIBIT B to that certain Lease Agreement dated December 12,
1996, (the "Lease"), by and between Lincoln-Whitehall Realty (West), L.L.C., a
Delaware limited liability company ("Landlord"), and Cisco Systems, Inc., a
California corporation ("Tenant"), for the leasing of certain premises located
at Fortran Court and Baytech Drive, (Buildings A & B), San Jose, California (the
"Premises"). The terms, conditions and provisions of this EXHIBIT B are hereby
incorporated into and are made a part of the Lease. Any capitalized terms used
herein and not otherwise defined herein shall have the meaning ascribed to such
terms as set forth in the Lease.
1. TENANT TO CONSTRUCT TENANT IMPROVEMENTS. Subject to the provisions below,
Tenant shall be solely responsible for the planning, construction and completion
of the interior tenant improvements ("Tenant Improvements") to the Premises in
accordance with the terms and conditions of this Exhibit B. The Tenant
Improvements shall not include any of Tenant's personal property, trade
fixtures, furnishings, equipment or similar items.
2. TENANT IMPROVEMENT PLANS.
A. PRELIMINARY PLANS AND SPECIFICATIONS. Tenant shall retain a
licensed, insured architect ("Architect") to prepare preliminary working
architectural and engineering plans and specifications ("Preliminary Plans and
Specifications") for the Tenant Improvements. Tenant shall deliver the
Preliminary Plans and Specifications to Landlord. The Preliminary Plans and
Specifications shall be in sufficient detail to show locations, types and
requirements for all heat loads, people loads, floor loads, power and plumbing,
regular and special HVAC needs, telephone communications, telephone and
electrical outlets, lighting, lighting fixtures and related power, and
electrical and telephone switches. Landlord shall reasonably approve or
disapprove the Preliminary Plans and Specifications within five (5) days after
Landlord receives the Preliminary Plans and Specifications and, if disapproved,
Landlord shall return the Preliminary Plans and Specifications to Tenant, who
shall make all necessary revisions within ten (10) days after Tenant's receipt
thereof. This procedure shall be repeated until Landlord approves the
Preliminary Plans and Specifications. The approved Preliminary Plans and
Specifications, as modified, shall be deemed the "Final Preliminary Plans and
Specifications".
B. FINAL PLANS AND SPECIFICATIONS. After the Final Preliminary Plans
and Specifications are approved by Landlord and are deemed to be the Final
Preliminary Plans and Specifications, Tenant shall cause the Architect to
prepare in twenty (20) days following Landlord's approval of the Final
Preliminary Plans and Specifications the final working architectural and
engineering plans, specifications and drawings, ("Final Plans and
Specifications") for the Tenant Improvements. Tenant shall then deliver the
Final Plans and Specifications to Landlord. Landlord shall reasonably approve or
disapprove the Final Plans and Specifications within five (5) days after
Landlord receives the Final Plans and Specifications and, if disapproved,
Landlord shall return the Final Plans and Specifications to Tenant who shall
make all necessary revisions within ten (10) days after Tenant's receipt
thereof. This procedure shall be repeated until Landlord approves, in writing,
the Final Plans and Specifications. The approved Final Plans and Specifications,
as modified, shall be deemed the "Construction Documents".
C. MISCELLANEOUS. All deliveries of the Preliminary Plans and
Specifications, the Final Preliminary Plans and Specifications, the Final Plans
and Specifications, and the Construction Documents shall be delivered by
messenger service, by personal hand delivery or by overnight parcel service.
While Landlord has the right to approve the Preliminary Plans and
Specifications, the Final Preliminary Plans and Specifications, the Final Plans
and Specifications, and the Construction Documents, Landlord's interest in doing
so is to protect the Premises, the Buildings and Landlord's interest.
Accordingly, Tenant shall not rely upon Landlord's approvals and Landlord shall
not be the guarantor of, nor responsible for, the adequacy and correctness or
accuracy of the Preliminary Plans and Specifications, the Final Preliminary
Plans and Specifications, the Final Plans and Specifications, and the
Construction Documents, or the compliance thereof with applicable laws, and
Landlord shall incur no liability of any kind by reason of granting such
approvals.
D. BUILDING STANDARD WORK. The Construction Documents shall provide
that the Tenant Improvements to be constructed in accordance therewith must be
at least equal, in quality, to Landlord's building standard materials,
quantities and procedures then in use by Landlord ("Building Standards")
attached hereto as Exhibit B-2. Notwithstanding the foregoing, so long as the
Construction Documents are consistent with Tenant's Tasman buildings, the
Construction Documents shall be considered to be in accordance with Landlord's
Building Standards.
3. PERMITS. Tenant, at its sole cost and expense (subject to the provisions
of Paragraph 5 below), shall obtain all governmental approvals of the
Construction Documents to the full extent necessary for the issuance of a
building permit for the Tenant Improvements based upon such Construction
Documents. Tenant, at its sole cost and expense, shall also cause to be obtained
all other necessary approvals and permits from all governmental agencies having
jurisdiction or authority for the construction and installation of the Tenant
Improvements in accordance with the approved Construction Documents. Tenant at
its sole cost and expense (subject to the provisions of Paragraph 5 below) shall
undertake all steps necessary to insure that the construction of the Tenant
Improvements is accomplished in strict compliance with all statutes, laws,
ordinances, codes, rules, and regulations applicable to the construction of the
Tenant Improvements and the requirements and standards of
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any insurance underwriting board, inspection bureau or insurance carrier
insuring the Premises and/or the Buildings.
4. CONSTRUCTION.
A. Tenant shall be solely responsible for the construction,
installation and completion of the Tenant Improvements in accordance with the
Construction Documents approved by Landlord and is solely responsible for the
payment of all amounts when payable in connection therewith without any cost or
expense to Landlord, except for Landlord's obligation to contribute the Tenant
Improvement Allowance in accordance with the provisions of Paragraph 5 below.
Tenant shall diligently proceed with the construction, installation and
completion of the Tenant Improvements in accordance with the Construction
Documents and the completion schedule reasonably approved by Landlord. No
material changes shall be made to the Construction Documents and the completion
schedule approved by Landlord without Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed.
B. Tenant at its sole cost and expense (subject to the provisions of
Paragraph 5 below) shall employ a licensed, insured and bondable general
contractor ("Contractor") to construct the Tenant Improvements in accordance
with the Construction Documents. The construction contracts between Tenant and
the Contractor and between the Contractor and subcontractors shall be subject to
Landlord's prior written approval, which approval shall not be unreasonably
withheld. In addition to the foregoing, each of such construction contracts
shall include a provision that Landlord shall be a third party beneficiary in,
to and under such construction contracts. Proof that the Contractor is licensed
in California, is bondable as required under California law, and has the
insurance specified in Exhibit B-1, attached hereto and incorporated herein by
this reference, shall be provided to Landlord at the time that Tenant requests
approval of the Contractor from Landlord. Tenant shall comply with or cause the
Contractor to comply with all other terms and provisions of Exhibit B-1.
Notwithstanding anything to the contrary contained herein, Landlord hereby
approves of Devcon Construction Inc. to be selected by Tenant as the Contractor
under this Exhibit B. Tenant shall keep the Premises and the property on which
the Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by or on behalf of Tenant with
regard to the Tenant Improvements. Additionally, Tenant shall promptly
discharge, bond or otherwise cause the release of any and all liens arising out
of any work performed, materials furnished or obligations incurred by or on
behalf of Tenant with regard to the Tenant Improvements regardless of any
dispute Tenant or its Contractor may have regarding any such liens. In addition
to the foregoing and in consideration for Landlord not requiring the Contractor
to procure a bond with respect to the construction of the Tenant Improvements,
Tenant agrees to protect, defend (with counsel acceptable to Landlord) and hold
Landlord and the Indemnitees harmless and indemnify the Indemnitees from and
against all liabilities, damages, claims, losses, judgments, charges and
expenses (including reasonable attorneys' fees, costs of court and expenses
necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to, directly
or indirectly, the construction of the Tenant Improvements, including without
limitation, the costs to complete the Tenant Improvements and all other matters
for which a payment and performance bond would have otherwise provided coverage.
C. Prior to the commencement of the construction and installation of
the Tenant Improvements, Tenant shall provide the following to Landlord, all of
which shall be to Landlord's reasonable satisfaction:
(i) An estimated budget and cost breakdown for the Tenant
Improvements.
(ii) Estimated completion schedule for the Tenant Improvements.
(iii) Copies of all required approvals and permits from governmental
agencies having jurisdiction or authority for the construction and installation
of the Tenant Improvements; provided, however, if prior to commencement of the
construction and installation of Tenant Improvements Tenant has not received the
electrical, plumbing or mechanical permits, Tenant shall only be required to
provide Landlord with evidence that Tenant has made application therefor, and,
upon receipt by Tenant of such permits, Tenant shall promptly provide Landlord
with copies thereof.
(iv) Evidence of Tenant's procurement of insurance required to be
obtained pursuant to the provisions of Paragraphs 4.B and 4.G.
D. Landlord shall at all reasonable times have a right to inspect the
Tenant Improvements (provided Landlord does not materially interfere with the
work being performed by the Contractor or its subcontractors) and Tenant shall
immediately cease work upon written notice from Landlord if the Tenant
Improvements are not in compliance with the Construction Documents approved by
Landlord. If Landlord shall give notice of faulty construction or any other
material deviation from the Construction Documents, Tenant shall cause the
Contractor to make corrections promptly. However, neither the privilege herein
granted to Landlord to make such inspections, nor the making of such inspections
by Landlord, shall operate as a waiver of any rights of Landlord to require good
and workmanlike construction and improvements constructed in accordance with the
Construction Documents.
E. Subject to Landlord complying with its obligations in Paragraph 5
below, Tenant shall pay and discharge promptly and fully all claims for labor
done and materials and services furnished in connection with the Tenant
Improvements. The Tenant Improvements shall not be commenced until five (5)
business days after Landlord has received notice from Tenant stating the date
the construction of the Tenant Improvements is to commence so that Landlord can
post and record any appropriate Notice of Non-Responsibility.
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F. Tenant acknowledges and agrees that the agreements and covenants of
Tenant in Sections 10 and 37 of the Lease shall be fully applicable to Tenant's
construction of the Tenant Improvements.
G. Tenant shall maintain, and cause to be maintained, during the
construction of the Tenant Improvements, at its sole cost and expense, insurance
of the types and in the amounts specified in Exhibit B-1 and in Section 12 of
the Lease, together with builders' risk insurance for the amount of the
completed value of the Tenant Improvements on an all-risk non-reporting form
covering all improvements under construction, including building materials, and
other insurance in amounts and against such risks as the Landlord shall
reasonably require in connection with the Tenant Improvements.
H. No materials, equipment or fixtures shall be delivered to or
installed upon the Premises pursuant to any agreement by which another party has
a security interest or rights to remove or repossess such items, without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld.
I. Landlord reserves the right to establish reasonable rules and
regulations for the use of the Buildings during the course of construction of
the Tenant Improvements, including, but not limited to, construction parking,
storage of materials, hours of work, use of elevators, and clean-up of
construction related debris.
J. Upon completion of the Tenant Improvements, Tenant shall deliver to
Landlord the following, all of which shall be to Landlord's reasonable
satisfaction:
(i) Any certificates required for occupancy, including a permanent
and complete Certificate of Occupancy issued by the City of San Jose.
(ii) A Certificate of Completion signed by the Architect who
prepared the Construction Documents, reasonably approved by Landlord.
(iii) A cost breakdown itemizing all expenses for the Tenant
Improvements, together with invoices and receipts for the same or other evidence
of payment.
(iv) Final and unconditional mechanic's lien waivers for all the
Tenant Improvements.
(v) A Notice of Completion for execution by Landlord, which
certificate once executed by Landlord shall be recorded by Tenant in the
official records of Santa Clara County, and Tenant shall then deliver to
Landlord a true and correct copy of the recorded Notice of Completion.
(vi) A true and complete copy of all as-built plans and drawings
for the Tenant Improvements.
K. The Tenant Improvements shall be deemed substantially complete on
the date that the building officials of the applicable governmental agency(s)
issues its final approval of the construction of the Tenant Improvements whether
in the form of the issuance of a final permit, certificate of occupancy or the
written approval evidencing its final inspection on the building permits, or the
date on which Tenant first takes occupancy of the Premises for purposes other
than to perform the Tenant's Pre-Occupancy Work (defined below), or the date
that the Contractor issues a certificate stating that the Tenant Improvements
have been substantially completed in accordance with the Construction Drawings,
whichever first occurs ("Substantial Completion", or "Substantially Completed",
or "Substantially Complete").
5. TENANT IMPROVEMENT ALLOWANCE.
A. Subject to Tenant's compliance with the provisions of this Exhibit
B, Landlord shall provide to Tenant an allowance in the approximate amount of
one million thirty-eight thousand nine hundred and 00/100 dollars and
($1,038,900) based upon a rate of ten dollars ($10.00) per rentable square foot
of the Premises (the "Tenant Improvement Allowance") to construct and install
only the Tenant Improvements. The actual amount of the Tenant Improvement
Allowance shall be adjusted commensurately based upon the actual rentable square
feet of the Premises after Landlord's Substantial Completion of the Shell
Improvements. The Tenant Improvement Allowance shall be used to design, prepare,
plan, obtain the approval of, construct and install the Tenant Improvements and
for no other purpose. Except as otherwise expressly provided herein, Landlord
shall have no obligation to contribute the Tenant Improvement Allowance unless
and until the Construction Documents have been approved by Landlord and Tenant
has complied with all requirements set forth in Paragraph 4.C. of this Exhibit
B. The costs to be paid out of the Tenant Improvement Allowance shall include
all reasonable costs and expenses associated with the design, preparation,
approval, planning, construction and installation of the Tenant Improvements
(the "Tenant Improvement Costs"), including all of the following:
(i) All costs of the Preliminary Plans and Specifications, the
Final Plans and Specifications, and the Construction Documents, and engineering
costs associated with completion of the State of California energy utilization
calculations under Title 24 legislation:
(ii) All costs of obtaining building permits and other necessary
authorizations from local governmental authorities;
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(iii) All costs of interior design and finish schedule plans and
specifications including as-built drawings, if applicable;
(iv) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not limited
to, the construction fee for overhead and profit and the cost of all on-site
supervisory and administrative staff, office, equipment and temporary services
rendered by the Contractor in connection with the construction of the Tenant
Improvements; provided, however, that the construction fee for overhead and
profit, the cost of all on-site supervisory and administrative staff, office,
equipment and temporary services shall not exceed amounts which are reasonable
and customary for such items in the local construction industry;
(v) All fees payable to the Architect and any engineer if they are
required to redesign any portion of the Tenant Improvements following Tenant's
and Landlord's approval of the Construction Documents;
(vi) Utility connection fees;
(vii) Inspection fees and filing fees payable to local governmental
authorities, if any;
(viii) All costs of all permanently affixed equipment and non-trade
fixtures provided for in the Construction Documents, including the cost of
installation; and,
(ix) A construction management fee (the "CM Fee") payable to
Landlord in the amount of one percent (1%) of the aggregate of the hard costs
for the construction and installation of the Tenant Improvements (excluding this
CM Fee).
The Tenant Improvement Allowance shall be the maximum contribution by Landlord
for the Tenant Improvement Costs, and the disbursement of the Tenant Improvement
Allowance is subject to the terms contained hereinbelow.
Except for payment of the CM Fee, Landlord will make payments to Tenant from the
Tenant Improvement Allowance to reimburse Tenant for Tenant Improvement Costs
paid or incurred by Tenant. Payment of the CM Fee shall be the first payment
from the Tenant Improvement Allowance and shall be made by means of a deduction
or credit against the Tenant Improvement Allowance. All other payments of the
Tenant Improvement Allowance shall be by progress payments not more frequently
than once per month and only after satisfaction of the following conditions
precedent: (a) receipt by Landlord of conditional mechanics' lien releases for
the work completed and to be paid by said progress payment, conditioned only on
the payment of the sums set forth in the mechanics' lien release, executed by
the Contractor and all subcontractors, labor suppliers and materialmen; (b)
receipt by Landlord of unconditional mechanics' lien releases from the
Contractor and all subcontractors, labor suppliers and materialmen for all work
other than that being paid by the current progress payment previously completed
by the Contractor, subcontractors, labor suppliers and materialmen and for which
Tenant has received funds from the Tenant Improvement Allowance to pay for such
work; (c) receipt by Landlord of any and all documentation reasonably required
by Landlord detailing the work that has been completed and the materials and
supplies used as of the date of Tenant's request for the progress payment,
including, without limitation, invoices, bills, or statements for the work
completed and the materials and supplies used; and (d) completion by Landlord or
Landlord's agents of any inspections of the work completed and materials and
supplies used as deemed reasonably necessary by Landlord. Except for the CM Fee
payment (credit), Tenant Improvement Allowance progress payments shall be paid
to Tenant within fourteen (14) days from the satisfaction of the conditions set
forth in the immediately preceding sentence. The preceding notwithstanding, all
Tenant Improvement Costs paid or incurred by Tenant prior to Landlord's approval
of the Construction Documents in connection with the design and planning of the
Tenant Improvements by Architect shall be paid from the Tenant Improvement
Allowance, without any retention, within fourteen (14) days following Landlord's
receipt of invoices, bills or statements from Architect evidencing such costs.
Notwithstanding the foregoing to the contrary, Landlord shall be entitled to
withhold and retain five percent (5%) of the Tenant Improvement Allowance or of
any Tenant Improvement Allowance progress payment until the lien-free expiration
of the time for filing of any mechanics' liens claimed or which might be filed
on account of any work ordered by Tenant or the Contractor or any subcontractor
in connection with the construction and installation of the Tenant Improvements.
B. Landlord shall not be obligated to pay any Tenant Improvement
Allowance progress payment or the Tenant Improvement Allowance retention if on
the date Tenant is entitled to receive the Tenant Improvement Allowance progress
payment or the Tenant Improvement Allowance retention Tenant is in material
default of this Lease. Such payments shall resume upon Tenant curing any such
default within the time periods which may be provided for in the Lease.
C. Should the total cost of constructing the Tenant Improvements be
less than the Tenant Improvement Allowance, the Tenant Improvement Allowance
shall be automatically reduced to the amount equal to said actual cost.
6. Termination. If the Lease is terminated prior to the date on which the
Tenant Improvements are completed, for any reason due to the default of Tenant
hereunder, in addition to any other remedies available to Landlord under the
Lease, Tenant shall pay to Landlord as Additional Rent under the Lease, within
five (5) days of receipt of a statement therefor, any and all costs incurred by
Landlord and not reimbursed or otherwise paid by Tenant through the date of
termination in connection with the Tenant Improvements to the extent
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<PAGE> 31
planned, installed and/or constructed as of such date of termination, including,
but not limited to, any costs related to the removal of all or any portion of
the Tenant Improvements and restoration costs related thereto. Except for any
cafeteria and related items that are part of the Tenant Improvements for which
Landlord will require Tenant, at its sole cost and expense, to demolish and/or
remove from the Premises upon the expiration or earlier termination of this
Lease, Landlord shall not require Tenant to demolish and/or remove any other
items comprising the Tenant Improvements from the Premises upon the expiration
or earlier termination of this Lease.
7. Lease Provisions; Conflict. The terms and provisions of the Lease, insofar
as they are applicable, in whole or in part, to this EXHIBIT B, are hereby
incorporated herein by reference, and specifically including all of the
provisions of Section 31 of the Lease. In the event of any conflict between the
terms of the Lease and this EXHIBIT B, the terms of this EXHIBIT B shall
prevail. Any amounts payable by Tenant to Landlord hereunder shall be deemed to
be Additional Rent under the Lease and, upon any default in the payment of same,
Landlord shall have all rights and remedies available to it as provided for in
the Lease.
8. Tenant Access. Landlord, in Landlord's reasonable discretion and upon
receipt of written confirmation from Landlord's general contractor that such
entry will be in harmony with Landlord's general contractor's work schedule with
respect to the Shell Improvements, will grant Tenant a license to have access to
the Premises prior to the Shell Improvements being Substantially Completed
(defined below) to allow Tenant to do other work required by Tenant to install a
portion of the Tenant Improvements and to otherwise make the Premises ready for
Tenant's use and occupancy (the "Tenant's Pre-Occupancy Work"). It shall be a
condition to the grant by Landlord and continued effectiveness of such license
that:
(a) Tenant shall give to Landlord a written request to have such access
not less than five (5) business days prior to the date on which such proposed
access will commence (the "Access Notice"). The Access Notice shall contain or
be accompanied by each of the following items, all in form and substance
reasonably acceptable to Landlord: (i) a detailed description of and schedule
for Tenant's Pre-Occupancy Work; (ii) the names and addresses of all
contractors, subcontractors and material suppliers and all other representatives
of Tenant who or which will be entering the Premises on behalf of Tenant to
perform Tenant's Pre-Occupancy Work or will be supplying materials for such
work, and the approximate number of individuals, itemized by trade, who will be
present in the Premises; (iii) copies of all contracts, subcontracts, material
purchase orders, plans and specifications pertaining to Tenant's Pre-Occupancy
Work; (iv) copies of all licenses and permits required in connection with the
performance of Tenant's Pre-Occupancy Work; and (v) certificates of insurance
(in amounts satisfactory to Landlord and with the parties identified in, or
required by, the Lease named as additional insureds) and instruments of
indemnification against all claims, costs, expenses, penalties, fines, and
damages which may arise in connection with Tenant's Pre-Occupancy Work.
(b) Such pre-term access by Tenant and Tenant's employees, agents,
contractors, consultants, workmen, mechanics, suppliers and invitees shall be
subject to reasonable scheduling by Landlord.
(c) Tenant's employees, agents, contractors, consultants, workmen,
mechanics, suppliers and invitees shall fully cooperate, work in harmony and
not, in any manner, unreasonably interfere with Landlord or Landlord's agents or
representatives in performing the work related to substantial completion of the
Shell Improvements (the "Work") and any additional work pursuant to approved
change orders for the Shell Improvements, Landlord's work in other areas of the
Park, or the general operation of the Buildings. If at any time any such person
representing Tenant shall not be cooperative or shall otherwise cause or
threaten to cause any such disharmony or interference, including, without
limitation, labor disharmony, and Tenant fails to immediately institute and
maintain corrective actions as directed by Landlord, then Landlord may revoke
such license upon twenty-four (24) hours' prior written notice to Tenant.
(d) Any such entry into and occupancy of the Premises or any portion
thereof by Tenant or any person or entity working for or on behalf of Tenant
shall be deemed to be subject to all of the terms, covenants, conditions and
provisions of the Lease, excluding only the covenant to pay Rent. Landlord shall
not be liable for any injury, loss or damage that may occur to any of Tenant's
Pre-Occupancy Work made in or about the Premises or to any property placed
therein prior to the commencement of the term of the Lease, the same being at
Tenant's sole risk and liability. Tenant shall be liable to Landlord for any
damage to any portion of the Premises, the Work or the additional work related
to any approved change orders caused by Tenant or any of Tenant's employees,
agents, contractors, consultants, workmen, mechanics, suppliers and invitees. In
the event that the performance of Tenant's Pre-Occupancy Work causes extra costs
to be incurred by Landlord or requires the use of other Building services, after
delivery to Tenant of prior notice that such extra costs are reasonably
anticipated by Landlord to be incurred, Tenant shall promptly reimburse Landlord
for such extra costs and/or shall pay Landlord for such other Building services
at Landlord's standard rates then in effect.
INITIALS:
TENANT: _______________
LANDLORD: _______________
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9. Shell Improvements. Subject to the conditions set forth herein, Landlord,
at its sole cost and expense, agrees to construct and install certain shell
improvements ("Shell Improvements") on the Lot, including without limitation,
the construction of the Buildings substantially in accordance with those certain
plans, specifications, and drawings prepared by Cabak Rooney Jordan Associates,
dated September 30, 1996 (collectively, the "Shell Construction Drawings"), a
copy of which is attached hereto as Schedule 1. In constructing and installing
the Shell Improvements Landlord shall not deviate from the Shell Construction
Drawings in any substantial and material manner, without first obtaining
Tenant's prior consent thereto, which consent shall not be unreasonably
withheld, conditioned or delayed; provided, however, Tenant shall not have any
approval nor consensual rights (and Landlord shall not be required to obtain
Tenant's consent therefor) concerning any changes required to be made to the
Shell Construction Drawings or the Shell Improvements by (1) the fire
department, building or planning department, building inspectors or any other
agency or official having jurisdiction over the Buildings, the work related to
the Shell Improvements and/or the Shell Improvements, and/or (2) any committee,
declarant or other persons or entities having approval or similar rights under
any Recorded Matters with respect to the Shell Improvements, and/or (3)
Landlord's lender(s) making a construction loan(s) with respect to the Shell
Improvements. The Shell Improvements shall not include the Tenant Improvements
nor any of Tenant's personal property, equipment, furnishings, trade fixtures or
fixtures. All other improvements not specified in this Section 9 shall be
considered Tenant Improvements and shall be paid for in accordance with the
provisions of Sections 8 and 10 above. Landlord shall use commercially
reasonable efforts to cause its general contractor to Substantially Complete
(defined below) the Shell Improvements by the scheduled Commencement Date
specified in the Basic Lease Information (the "Completion Date"), subject to
delays due to (a) acts or events beyond its control including, but not limited
to, acts of God, earthquakes, strikes, lockouts, boycotts, casualties,
discontinuance of any utility or other service required for performance of the
Work, moratoriums, governmental agencies and inclement weather (including, but
not limited to, rain delays), (b) the lack of availability or shortage of
specialized materials used in the construction of the Tenant Improvements, (c)
any matters beyond the control of Landlord, the general contractor or any
subcontractors, (d) any changes required by the fire department, building and/or
planning department, building inspectors or any other agency having jurisdiction
over the Buildings, the Work, the Tenant Improvements and/or the Shell
Improvements (except to the extent such changes are directly attributable to
Tenant's use or Tenant's specialized tenant improvements, in which event such
delays are considered Tenant Delays) (the events and matters set forth in
Subsections (a), (b), (c) and (d) are collectively referred to as "Force Majeure
Delays"), or (e) any delay attributable to Tenant and/or any of Tenant's
Representatives or Tenant's intended use of the Premises (collectively, "Tenant
Delays"), including, but not limited to, any of the following described events
or occurrences: (i) delays related to changes made or requested by Tenant to the
Work, and/or the approved final drawings with respect to the Tenant
Improvements; (ii) the failure of Tenant to furnish all or any plans, drawings,
specifications, finish details or other information required above; (iii) the
failure of Tenant to comply with the requirements of this Exhibit B; (iv)
Tenant's requirements for special work or materials, finishes, or installations
other than the Building Standards or Tenant's requirements for special
construction or phasing; (v) any changes required by the fire department,
building or planning department, building inspectors or any other agency having
jurisdiction over the Buildings, the Work and/or the Tenant Improvements if such
changes are directly attributable to Tenant's particular use or Tenant's
specialized tenant improvements which do not conform to Landlord's Building
Standards; (vi) the performance of any additional work pursuant to a change
request which is requested by Tenant; (vii) the performance of work in or about
the Premises by any person, firm or corporation employed by or on behalf of
Tenant, including, without limitation, any failure to complete or any delay in
the completion of such work; or (viii) any and all delays caused by or arising
from acts or omissions of Tenant and/or Tenant's Representatives, in any manner
whatsoever. Any delays in the construction of the Shell Improvements due to any
of the events described above and designated as "Tenant Delays", shall in no way
extend or affect the date on which Tenant is required to commence paying Rent
under the terms of the Lease. It is the intention of the parties that all of
such delays will be considered Tenant Delays for which Tenant shall be wholly
and completely responsible for any and all consequences related to such delays,
including, without limitation, any costs and expenses attributable to increases
in labor or materials. The Shell Improvements shall be deemed substantially
complete on the date that the building officials of the applicable governmental
agency(s) issues its final approval of the construction of the Shell
Improvements whether in the form of the issuance of a final permit, certificate
of occupancy or the written approval evidencing its final inspection on the
building permits, or the date on which Tenant first takes occupancy of the
Premises for purposes other than to perform the Tenant's Pre-Occupancy Work
(defined below), or the date that Landlord's general contractor issues a
certificate stating that the Shell Improvements have been substantially
completed in accordance with the Shell Construction Drawings, whichever first
occurs ("Substantial Completion", or "Substantially Completed", or
"Substantially Complete"). Subject to the provisions set forth below, if the
Work with respect to the Shell Improvements is not deemed to be Substantially
Completed on or before the scheduled Completion Date, (A) Landlord agrees to use
reasonable efforts to Substantially Complete the Work as soon as practicable
thereafter, (B) the Lease shall remain in full force and effect, and (C)
Landlord shall not be deemed to be in breach or default of the Lease or this
EXHIBIT B as a result thereof and, Landlord shall have no liability to Tenant as
a result of any delay in occupancy (whether for damages, abatement of all or any
portion of the Rent, or otherwise). Subject to the provisions set forth below,
the Commencement Date and the Expiration Date of the term of the Lease (as
defined in Section 2 of the Lease) shall be extended commensurately by the
amount of time attributable to any Force Majeure Delays which delay the
Substantial Completion of the Shell Improvements. In addition to the foregoing
and notwithstanding anything to the contrary contained herein or in the Lease,
if Landlord does not tender possession to Tenant of
INITIALS:
TENANT: _______________
LANDLORD: _______________
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the Premises with the Shell Improvements Substantially Complete by November 15,
1997 (the "Outside Date") (subject to any Force Majeure Delays or Tenant Delays,
in which event the date of November 15, 1997 shall be extended commensurately by
the period of time attributable to such delays), then either Tenant or Landlord
may terminate this Lease by delivering written notice thereof to the other party
no later than the date which is ten (10) business days after the Outside Date,
as extended by the period of time attributable to any Force Majeure Delays
and/or Tenant Delays. In addition to the foregoing and notwithstanding anything
to the contrary contained herein or in the Lease, if Landlord does not tender
possession to Tenant of the Premises with the Shell Improvements Substantially
Complete by March 1, 1998 (the "Ultimate Outside Date") (subject to any Tenant
Delays, in which event the date of March 1, 1998 shall be extended
commensurately by the period of time attributable to such delays), then either
Tenant or Landlord may terminate this Lease by delivering written notice thereof
to the other party no later than the date which is ten (10) business days after
the Ultimate Outside Date, as extended by the period of time attributable to any
Tenant Delays. If either party fails to timely terminate the Lease as and when
provided herein, or if Landlord delivers to Tenant possession of the Premises
with the Tenant Improvements Substantially Complete at any time earlier than the
Outside Date (as such date may be extended due to Force Majeure Delays or Tenant
Delays, as the case may be) or the Ultimate Outside Date (as such date may be
extended due to Tenant Delays), as applicable, then upon the occurrence of any
such events the foregoing right given to Tenant and Landlord to terminate this
Lease as provided herein shall lapse and be null and void upon the earlier
occurrence of such event and the Lease shall remain in full force and effect
with Tenant and Landlord having no further right to terminate this Lease
pursuant to the foregoing provisions. If Landlord does so timely deliver to
Tenant possession of the Premises with the Shell Improvements Substantially
Complete, Tenant shall promptly deliver written notice to Landlord confirming
same. In the event the commencement date and/or the expiration date of this
Lease is other than the Commencement Date and/or Expiration Date provided on
Page 1 in the Basic Lease Information, as the case may be, Landlord and Tenant
shall execute a written amendment to this Lease, substantially in the form of
Exhibit F hereto, wherein the parties shall specify the actual commencement
date, expiration date, the date on which Tenant is to commence paying Rent and
the other matters referred to in Section 1 of the Lease. Landlord's employees,
agents, contractors, consultants, workmen, mechanics, suppliers and invitees
shall fully cooperate, work in harmony and not, in any manner, unreasonably
interfere with Tenant or Tenant's contractors, agents or representatives in
performing the work related to substantial completion of the Tenant Improvements
and any additional work pursuant to approved change orders for the Tenant
Improvements. If at any time any such person representing Landlord shall not be
cooperative or shall otherwise cause or threaten to cause any such disharmony or
interference, including, without limitation, labor disharmony, and Landlord
fails to immediately institute and maintain corrective actions as requested by
Tenant, then any delays in Substantially Completing the Tenant Improvements as a
result thereof shall be considered to be Landlord Delays.
INITIALS:
TENANT: _______________
LANDLORD: _______________
7
<PAGE> 34
EXHIBIT B-1
CONSTRUCTION INSURANCE REQUIREMENTS
Before commencing work, the contractor shall procure and maintain at its sole
cost and expense until completion and final acceptance of the work, at least the
following minimum levels of insurance.
A. Workers' Compensation in statutory amounts and Employers Liability
Insurance in the minimum amounts of $100,000 each accident for bodily
injury by accident and $100,000 each employee for bodily injury by disease
with a $500,000 policy limit, covering each and every worker used in
connection with the contract work.
B. Comprehensive General Liability Insurance on an occurrence basis
including, but not limited to, protection for Premises/Operations
Liability, Broad Form Contractual Liability, Owner's and Contractor's
Protective, and Products/Completed Operations Liability*, in the following
minimum limits of liability.
Bodily Injury, Property Damage, and
Personal Injury Liability $2,000,000/each occurrence
$3,000,000/aggregate
* Products/Completed Operations Liability Insurance is to be provided
for a period of at least one (1) year after completion of work.
Coverage should include protection for Explosion, Collapse and Underground
Damage.
C. Comprehensive Automobile Liability Insurance with the following minimum
limits of liability.
Bodily Injury and Property $1,000,000/each occurrence
Damage Liability $2,000,000/aggregate
This insurance will apply to all owned, non-owned or hired automobiles to
be used by the Contractor in the completion of the work.
D. Umbrella Liability Insurance in a minimum amount of five million dollars
($5,000,000), providing excess coverage on a following-form basis over the
Employer's Liability limit in Paragraph A and the liability coverages
outlined in Paragraphs B and C.
E. Equipment and Installation coverages in the broadest form available
covering Contractor's tools and equipment and material not accepted by
Tenant. Tenant will provide Builders Risk Insurance on all accepted and
installed materials.
All policies of insurance, duplicates thereof or certificates evidencing
coverage shall be delivered to Landlord prior to commencement of any work and
shall name Landlord, and its partners and lenders as additional insureds as
their interests may appear. All insurance policies shall (1) be issued by a
company or companies licensed to be business in the state of California, (2)
provide that no cancellation, non-renewal or material modification shall be
effective without thirty (30) days prior written notice provided to Landlord,
(3) provide no deductible greater than $15,000 per occurrence, (4) contain a
waiver to subrogation clause in favor of Landlord, and its partners and lenders,
and (5) comply with the requirements of Sections 12.2, 12.3 and 12.4 of the
Lease to the extent such requirements are applicable.
INITIALS:
TENANT: _______________
LANDLORD: _______________
8
<PAGE> 35
EXHIBIT B-2
BUILDING STANDARDS
OFFICE AREA
DEMISING PARTITION AND CORRIDOR WALLS:
A. 6" 20-gauge metal studs at 24" O.C. (or as required by code for
span) framed full height from finish floor to structure above
B. One (1) layer 5/8" drywall Type "X" both sides of wall, fire taped
only
INTERIOR PARTITIONS:
A. 3 5/8" 25-gauge metal studs at 24" O.C. to bottom of T-bar ceiling
grid approximately 9' - 0' high
B. Top track to be pre-formed slotted aluminum taped in
C. One (1) layer 5/8" drywall both sides of wall, taped texture ready
for paint
D. 3 5/8" metal studs including all lateral bracing as required by code
PERIMETER DRYWALL (AT OFFICE AREAS):
A. One (1) layer 5/8" Type "X" drywall taped texture ready for paint
B. Provide alternate to texture concrete in lieu of furring walls
COLUMN FURRING:
A. Furring channel all sides
B. One (1) layer 5/8" drywall taped texture and ready for paint
C. Provide deductive alternate for texturing columns where there are no
pipes to furred out
ACOUSTICAL CEILINGS:
A. 2' x 4' standard white T-bar grid system as manufactured by Chicago
Metallic or equal
B. 2' x 4' x 5/8" white, fissured, non-directional acoustical tile to
be Cortega as manufactured by Armstrong or equal
PAINTING:
A. Sheetrock walls to receive two (2) coats of interior latex paint as
manufactured by Kelly Moore or equal. Some portions of second coat
to be single accent color.
B. Provide a deductive alternate for not painting warehouse walls
WINDOW COVERING:
A. 1" aluminum mini-blinds as manufactured by Levelor or equal, color
to be selected by Lincoln Property Company
B. Blinds to be sized to fit window module
VCT:
VCT to be 1/8" x 12" x 12" as manufactured by Armstrong - Excelon Series
or equal
LIGHT FIXTURES:
2' x 4' T-bar lay in 3-tube energy efficient fixture with cool white
fluorescent tubes with prismatic acrylic lens as manufactured by Lithonia
or equal
LIGHT SWITCHES:
A. Double switching as required by Title 24
B. Switch assembly to be Leviton, color - Ivory
ELECTRICAL OUTLET:
A. 110-v duplex outlet in demising or interior partitions only, as
manufactured by Leviton, color to be Ivory
B. Eight (8) outlets per circuit, spacing to meet code (2 per office)
1
<PAGE> 36
C. Transformers to be a minimum of 20% or over required capacity
D. Contractors to inspect electric room and to include all necessary
metering costs
E. No aluminum wiring is acceptable
TELEPHONE OUTLET:
A. One (1) single outlet box in wall with pullwire from outlet box to
area above T-bar ceiling per office
B. Cover plate for phone outlets to be included
FIRE SPRINKLERS:
As required by fire codes
TOPSET BASE:
A. 4" rubber base as manufactured by Burke or equal, standard colors
only
B. 4" rubber base at VCT areas
TOILET AREAS:
Wet walls to receive marlite up to 48". Floors to receive sheetvinyl and
cove base as required by code
CARPET:
Minimum 30 ounce, commercial grade, level loop, UM44-C. Type 1 Class 1.
100% continuous filament. 5-year wear guarantee. Glue down, no pad.
WOOD DOORS:
Shall be 3'-0" x 7'-0" x 1 3/4" (unless otherwise specified) solid core,
prefinished birch "Cal-Wood" B-3 or equal if approved by owner
DOOR FRAMES:
Shall be ACI or equal, 3 3/4" or 4 7/8" throat, aluminum, dark bronze
anodized, snap-on trim
HARDWARE:
Shall be "Schlage", a lever type "Levon" D series, dark bronze 613 finish,
2 3/4" backset. Closers (where required) shall be Duro X PA X SN-1
INSULATION:
By Title 24 insulation
PLUMBING:
A. Shall comply with all local codes and handicapped code requirements.
Fixtures shall be either "American Standard", "Koher" or "Norris".
All toilet accessories and grab bars shall be "Bobrick" or equal and
approved by owner
B. Plumbing bid shall include 5 gallon minimum, or insta hot with mixer
valve electric water heater
TOILET PARTITIONS:
Shall be as manufactured by Fiat, global or equal if approved by owner.
Color shall be chosen by tenant
HVAC:
Five (5) year warranty provided on all HVAC compressor units. All
penetrations and sleeper supports to be hot mopped to LPC standard.
Provide alternate price for electric heat pumps at conditioned spaces.
Provide time overlay switch at compressors.
WAREHOUSE AREAS:
Floor - sealed concrete
Fire Extinguishers - 2A 10 BC surface mount by code x by S.F.
Lighting - 1x8 strip lighting single tube chain hung 25 ft.
Draft stops - by code UBC 198 Edition
Service electrical outlets - HVAC or heaters at tenant cost
(400 W metal halide lighting are acceptable in lieu of strip lighting at
warehouse minimum 15 F.C.)1
<PAGE> 37
EXHIBIT C TO LEASE AGREEMENT
RULES & REGULATIONS
This exhibit, entitled "Rules & Regulations", is and shall constitute EXHIBIT C
to that certain Lease Agreement dated December 12, 1996 (the "Lease"), by and
between Lincoln-Whitehall Realty (West), L.L.C., a Delaware limited liability
company ("Landlord"), and Cisco Systems, Inc., a California corporation
("Tenant"), for the leasing of certain premises located at Fortran Court and
Baytech Drive, (Buildings A & B), San Jose, California (the "Premises"). The
terms, conditions and provisions of this EXHIBIT C are hereby incorporated into
and are made a part of the Lease. Any capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to such terms as set
forth in the Lease.
1. No advertisement, picture or sign of any sort shall be displayed on
or outside the Premises or the Buildings without the prior written
consent of Landlord. Landlord shall have the right to remove any
such unapproved item without notice and at Tenant's expense.
2. Tenant shall not regularly store motor vehicles in designated
parking areas after the conclusion of normal daily business
activity.
3. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or
delayed.
4. All window coverings installed by Tenant and visible from the
outside of the Buildings require the prior written approval of
Landlord.
5. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance or any flammable or combustible materials
on or around the Premises, the Buildings or the Park, except as
otherwise permitted pursuant to the provisions of Section 29 of the
Lease.
6. Tenant shall not alter any lock or install any new locks or bolts on
any door at the Premises without the prior consent of Landlord,
except any conspicuously designated security areas of Tenant.
7. Intentionally omitted.
8. Tenant shall park motor vehicles in those general parking areas as
designated by Landlord except for loading and unloading. During
those periods of loading and unloading, Tenant shall not
unreasonably interfere with traffic flow within the Park and loading
and unloading areas of other tenants.
9. Tenant shall not disturb, solicit or canvas any occupant of the
Buildings or Park and shall cooperate to prevent same.
10. No person shall go on the roof without Landlord's permission.
11. Business machines and mechanical equipment belonging to Tenant which
cause noise or vibration that may be transmitted to the structure of
the Buildings, to such a degree as to be objectionable to Landlord
or other Tenants, shall be placed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices
sufficient to eliminate noise or vibration.
12. All goods, including material used to store goods, delivered to the
Premises of Tenant shall be immediately moved into the Premises and
shall not be left in parking or receiving areas overnight without
the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed.
13. Tractor trailers which must be unhooked or parked with dolly wheels
beyond the concrete loading areas must use steel plates or wood
blocks under the dolly wheels to prevent damage to the asphalt
paving surfaces. No parking or storing of such trailers will be
permitted in the auto parking areas of the Park or on streets
adjacent thereto.
14. Forklifts which operate on asphalt paving areas shall not have solid
rubber tires and shall only use tires that do not damage the
asphalt.
15. Tenant is responsible for the storage and removal of all trash and
refuse. All such trash and refuse shall be contained in suitable
receptacles stored behind screened enclosures at locations approved
by Landlord.
16. Tenant shall not store or permit the storage or placement of goods,
or merchandise or pallets or equipment of any sort in or around the
Premises, the Buildings, the Park or any of the Common Areas of the
foregoing. No displays or sales of merchandise shall be allowed in
the parking lots or other Common Areas.
17. Tenant shall not permit any animals, including, but not limited to,
any household pets, to be brought or kept in or about the Premises,
the Buildings, the Park or any of the Common Areas of the foregoing.
INITIALS:
TENANT: _______________
LANDLORD: _______________
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<PAGE> 38
18. Tenant shall not permit any motor vehicles to be washed on any
portion of the Premises or in the Common Areas of the Park, nor shall
Tenant permit mechanical work or maintenance of motor vehicles to be
performed on any portion of the Premises or in the Common Areas of
the Park.
INITIALS:
TENANT: _______________
LANDLORD: _______________
<PAGE> 39
EXHIBIT E
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Landlord (identified below) to evaluate and finalize a lease agreement
with you as tenant. After a lease agreement is signed by you and the Landlord
(the "Lease Agreement"), on an annual basis in accordance with the provisions of
Section 29 of the signed Lease Agreement, you are to provide an update to the
information initially provided by you in this certificate. The information
contained in the initial Hazardous Materials Disclosure Certificate and each
annual certificate provided by you thereafter will be maintained in
confidentiality by Landlord subject to release and disclosure as required by (i)
any lenders and owners and their respective environmental consultants, (ii) any
prospective purchaser(s) of all or any portion of the property on which the
Premises are located, (iii) Landlord to defend itself or its lenders, partners
or representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders, decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which are
not otherwise defined herein, shall have the same meaning ascribed to such term
in the signed Lease Agreement. Any questions regarding this certificate should
be directed to, and when completed, the certificate should be delivered to:
Landlord: ____________________________________________________________
____________________________________________________________
c/o Lincoln Property Company Management Services, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attn:
Phone: (415) 571-2200
Name of (Prospective) Tenant: __________________________________________________
Mailing Address: _______________________________________________________________
________________________________________________________________________________
Contact Person, Title and Telephone Number(s): _________________________________
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s): ___________________________________________________________
________________________________________________________________________________
Address of (Prospective) Premises: _____________________________________________
Length of (Prospective) initial Term: __________________________________________
________________________________________________________________________________
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or about
the Premises, including, without limitation, principal products processed,
manufactured or assembled services and activities to be provided or
otherwise conducted. Existing tenants should describe any proposed changes
to on-going operations.
__________________________________________________________________________
__________________________________________________________________________
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or disposed
of in, on or about the Premises? Existing tenants should describe
any Hazardous Materials which continue to be used, generated, stored
or disposed of in, on or about the Premises.
Wastes Yes [ ] No [ ]
Chemical Products Yes [ ] No [ ]
Other Yes [ ] No [ ]
1
<PAGE> 40
If Yes is marked, please explain: __________________________________
____________________________________________________________________
____________________________________________________________________
2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous
Materials to be used, generated, stored or disposed of in, on or
about the Premises, including the applicable hazard class and an
estimate of the quantities of such Hazardous Materials at any given
time; estimated annual throughput; the proposed location(s) and
method of storage (excluding nominal amounts of ordinary household
cleaners and janitorial supplies which are not regulated by any
Environmental Laws); and the proposed location(s) and method of
disposal for each Hazardous Material, including, the estimated
frequency, and the proposed contractors or subcontractors. Existing
tenants should attach a list setting forth the information requested
above and such list should include actual data from on-going
operations and the identification of any variations in such
information from the prior year's certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel, petroleum,
or other Hazardous Materials in tanks or sumps proposed in, on or
about the Premises? Existing tenants should describe any such actual
or proposed activities.
Yes [ ] No [ ]
If yes, please explain: ____________________________________________
____________________________________________________________________
____________________________________________________________________
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator I.D.
Number? Existing tenants should describe any additional
identification numbers issued since the previous certificate.
Yes [ ] No [ ]
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing tenants should describe any new
reports filed.
Yes [ ] No [ ]
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
____ storm drain? ____ sewer?
____ surface water? ____ no wastewater or other wastes discharged.
Existing tenants should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
____________________________________________________________________
____________________________________________________________________
5.2 Will any such wastewater or waste be treated before discharge?
Yes [ ] No [ ]
If yes, describe the type of treatment proposed to be conducted.
Existing tenants should describe the actual treatment conducted.
____________________________________________________________________
____________________________________________________________________
6. AIR DISCHARGES
2
<PAGE> 41
6.1 Do you plan for any air filtration systems or stacks to be used in
your company's operations in, on or about the Premises that will
discharge into the air; and will such air emissions be monitored?
Existing tenants should indicate whether or not there are any such
air filtration systems or stacks in use in, on or about the Premises
which discharge into the air and whether such air emissions are
being monitored.
Yes [ ] No [ ]
If yes, please describe: ___________________________________________
____________________________________________________________________
____________________________________________________________________
6.2 Do you propose to operate any of the following types of equipment,
or any other equipment requiring an air emissions permit? Existing
tenants should specify any such equipment being operated in, on or
about the Premises.
____ Spray booth(s) ____ Incinerator(s)
____ Dip tank(s) ____ Other (Please describe)
____ Drying oven(s) ____ No Equipment Requiring Air Permits
If yes, please describe:
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous Materials management plan ("Management Plan") pursuant to
Fire Department or other governmental or regulatory agencies'
requirements? Existing tenants should indicate whether or not a
Management Plan is required and has been prepared.
Yes [ ] No [ ]
If yes, attach a copy of the Management Plan. Existing tenants
should attach a copy of any required updates to the Management Plan.
7.2 Are any of the Hazardous Materials, and in particular chemicals,
proposed to be used in your operations in, on or about the Premises
regulated under Proposition 65? Existing tenants should indicate
whether or not there are any new Hazardous Materials being so used
which are regulated under Proposition 65.
Yes [ ] No [ ]
If yes, please explain: ____________________________________________
____________________________________________________________________
____________________________________________________________________
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has your
company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees or has your company
received requests for information, notice or demand letters, or any
other inquiries regarding its operations? Existing tenants should
indicate whether or not any such actions, orders or decrees have
been, or are in the process of being, undertaken or if any such
requests have been received.
Yes [ ] No [ ]
If yes, describe the actions, orders or decrees and any continuing
compliance obligations imposed as a result of these actions, orders
or decrees and also describe any requests, notices or demands, and
attach a copy of all such documents. Existing tenants should
describe and attach a copy of any new actions, orders, decrees,
requests, notices or demands not already delivered
4
<PAGE> 42
to Landlord pursuant to the provisions of Section 29 of the signed
Lease Agreement.
8.2 Have there ever been, or are there now pending, any lawsuits against
your company regarding any environmental or health and safety
concerns?
Yes [ ] No [ ]
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other documents
related thereto as requested by Landlord. Existing tenants should
describe and attach a copy of any new complaint(s),
cross-complaint(s), pleadings and other related documents not
already delivered to Landlord pursuant to the provisions of Section
29 of the signed Lease Agreement.
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
8.3 Have there been any problems or complaints from adjacent tenants,
owners or other neighbors at your company's current facility with
regard to environmental or health and safety concerns? Existing
tenants should indicate whether or not there have been any such
problems or complaints from adjacent tenants, owners or other
neighbors at, about or near the Premises.
Yes [ ] No [ ]
If yes, please describe. Existing tenants should describe any such
problems or complaints not already disclosed to Landlord under the
provisions of the signed Lease Agreement.
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and licenses
including a Transporter Permit number issued to your company with
respect to its proposed operations in, on or about the Premises,
including, without limitation, any wastewater discharge permits, air
emissions permits, and use permits or approvals. Existing tenants
should attach copies of any new permits and licenses as well as any
renewals of permits or licenses previously issued.
The undersigned hereby acknowledges and agrees that (A) this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Landlord in connection with the evaluation and finalization of a Lease
Agreement and will be attached thereto as an exhibit; (B) that this Hazardous
Materials Disclosure Certificate is being delivered in accordance with, and as
required by, the provisions of Section 29 of the Lease Agreement; and (C) that
Tenant shall have and retain full and complete responsibility and liability with
respect to any of the Hazardous Materials disclosed in the HazMat Certificate
notwithstanding Landlord's/Tenant's receipt and/or approval of such certificate.
Tenant further agrees that none of the following described acts or events shall
be construed or otherwise interpreted as either (a) excusing, diminishing or
otherwise limiting Tenant from the requirement to fully and faithfully perform
its obligations under the Lease with respect to Hazardous Materials, including,
without limitation, Tenant's indemnification of the Indemnitees and compliance
with all Environmental Laws, or (b) imposing upon Landlord, directly or
indirectly, any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or otherwise
verify the accuracy of the representations and statements made therein or to
ensure that Tenant is in compliance with all Environmental Laws; (i) the
delivery of such certificate to Landlord and/or Landlord's acceptance of such
certificate, (ii) Landlord's review and approval of such certificate, (iii)
Landlord's failure to obtain such certificate from Tenant at any time, or (iv)
Landlord's actual or constructive knowledge of the types and quantities of
Hazardous Materials being used, stored, generated, disposed of or transported on
or about the Premises by Tenant or Tenant's Representatives. Notwithstanding the
foregoing
5
<PAGE> 43
or anything to the contrary contained herein, the undersigned acknowledges and
agrees that Landlord and its partners, lenders and representatives may, and
will, rely upon the statements, representations, warranties, and certifications
made herein and the truthfulness thereof in entering into the Lease Agreement
and the continuance thereof throughout the term, and any renewals thereof, of
the Lease Agreement.
I (print name)_________________________ , acting with full authority to bind the
(proposed) Tenant and on behalf of the (proposed) Tenant, certify, represent and
warrant that the information contained in this certificate is true and correct.
(PROSPECTIVE) TENANT:
By: _____________________________________
Title: _____________________________________
Date: _____________________________________
INITIALS:
TENANT: _______________
LANDLORD: _______________
5
<PAGE> 44
EXHIBIT F
FIRST AMENDMENT TO LEASE AGREEMENT
CHANGE OF COMMENCEMENT DATE
This First Amendment to Lease Agreement (the "Amendment") is made and entered
into as of ___________________, by and between ____________________________
("LANDLORD"), AND ________________________ ("TENANT"), with reference to the
following facts:
RECITALS
A. Landlord and Tenant have entered into that certain Lease Agreement dated
___________ (the "Lease"), for the leasing of certain premises located at
____________________________, California (the "Premises") as such Premises
are more fully described in the Lease.
B. Landlord and Tenant wish to amend the Commencement Date of the Lease.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. The Commencement Date of the Lease shall be
________________________.
2. The last day of the Term of the Lease (the "Expiration Date") shall
be ______________.
3. The dates on which the Base Rent will be adjusted are:
for the period _________ to ________ the monthly Base Rent shall be
$_____________;
for the period _________ to ________ the monthly Base Rent shall be
$_____________; and
for the period _________ to ________ the monthly Base Rent shall be
$_____________.
4. Effect of Amendment: Except as modified herein, the terms and
conditions of the Lease shall remain unmodified and continue in full
force and effect. In the event of any conflict between the terms and
conditions of the Lease and this Amendment, the terms and conditions
of this Amendment shall prevail.
5. Definitions: Unless otherwise defined in this Amendment, all terms
not defined in this Amendment shall have the meaning set forth in
the Lease.
6. Authority: Subject to the provisions of the Lease, this Amendment
shall be binding upon and inure to the benefit of the parties
hereto, their respective heirs, legal representatives, successors
and assigns. Each party hereto and the persons signing below warrant
that the person signing below on such party's behalf is authorized
to do so and to bind such party to the terms of this Amendment.
INITIALS:
TENANT: _______________
LANDLORD: _______________
<PAGE> 45
7. The terms and provisions of the Lease are hereby incorporated in
this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and
year first above written.
[PROPERTY MANAGER: PLEASE PROVIDE TENANT INFORMATION AND WORD PROCESSING WILL
COMPLETE THE SIGNATURE BLOCK]
INITIALS:
TENANT: _______________
LANDLORD: _______________
<PAGE> 46
EXHIBIT G
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Landlord (identified below) to evaluate and finalize a lease agreement
with you as tenant. After a lease agreement is signed by you and the Landlord
(the "Lease Agreement"), on an annual basis in accordance with the provisions of
Section 29 of the signed Lease Agreement, you are to provide an update to the
information initially provided by you in this certificate. The information
contained in the initial Hazardous Materials Disclosure Certificate and each
annual certificate provided by you thereafter will be maintained in
confidentiality by Landlord subject to release and disclosure as required by (i)
any lenders and owners and their respective environmental consultants, (ii) any
prospective purchaser(s) of all or any portion of the property on which the
Premises are located, (iii) Landlord to defend itself or its lenders, partners
or representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders, decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which are
not otherwise defined herein, shall have the same meaning ascribed to such term
in the signed Lease Agreement. Any questions regarding this certificate should
be directed to, and when completed, the certificate should be delivered to:
Landlord: ____________________________________________________________
____________________________________________________________
c/o Lincoln Property Company Management Services, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attn:
Phone: (415) 571-2200
Name of (Prospective) Tenant: __________________________________________________
Mailing Address: _______________________________________________________________
________________________________________________________________________________
Contact Person, Title and Telephone Number(s): _________________________________
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s): ___________________________________________________________
________________________________________________________________________________
Address of (Prospective) Premises: _____________________________________________
Length of (Prospective) initial Term: __________________________________________
________________________________________________________________________________
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or about
the Premises, including, without limitation, principal products processed,
manufactured or assembled services and activities to be provided or
otherwise conducted. Existing tenants should describe any proposed changes
to on-going operations.
__________________________________________________________________________
__________________________________________________________________________
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or disposed
of in, on or about the Premises? Existing tenants should describe
any Hazardous Materials which continue to be used, generated, stored
or disposed of in, on or about the Premises.
Wastes Yes [ ] No [ ]
Chemical Products Yes [ ] No [ ]
Other Yes [ ] No [ ]
1
<PAGE> 47
If Yes is marked, please explain: __________________________________
____________________________________________________________________
____________________________________________________________________
2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous
Materials to be used, generated, stored or disposed of in, on or
about the Premises, including the applicable hazard class and an
estimate of the quantities of such Hazardous Materials at any given
time; estimated annual throughput; the proposed location(s) and
method of storage (excluding nominal amounts of ordinary household
cleaners and janitorial supplies which are not regulated by any
Environmental Laws); and the proposed location(s) and method of
disposal for each Hazardous Material, including, the estimated
frequency, and the proposed contractors or subcontractors. Existing
tenants should attach a list setting forth the information requested
above and such list should include actual data from on-going
operations and the identification of any variations in such
information from the prior year's certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel, petroleum,
or other Hazardous Materials in tanks or sumps proposed in, on or
about the Premises? Existing tenants should describe any such actual
or proposed activities.
Yes [ ] No [ ]
If yes, please explain: ____________________________________________
____________________________________________________________________
____________________________________________________________________
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator I.D.
Number? Existing tenants should describe any additional
identification numbers issued since the previous certificate.
Yes [ ] No [ ]
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing tenants should describe any new
reports filed.
Yes [ ] No [ ]
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
____ storm drain? ____ sewer?
____ surface water? ____ no wastewater or other wastes discharged.
Existing tenants should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
____________________________________________________________________
____________________________________________________________________
5.2 Will any such wastewater or waste be treated before discharge?
Yes [ ] No [ ]
If yes, describe the type of treatment proposed to be conducted.
Existing tenants should describe the actual treatment conducted.
____________________________________________________________________
____________________________________________________________________
6. AIR DISCHARGES
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<PAGE> 48
6.1 Do you plan for any air filtration systems or stacks to be used in
your company's operations in, on or about the Premises that will
discharge into the air; and will such air emissions be monitored?
Existing tenants should indicate whether or not there are any such
air filtration systems or stacks in use in, on or about the Premises
which discharge into the air and whether such air emissions are
being monitored.
Yes [ ] No [ ]
If yes, please describe: ___________________________________________
____________________________________________________________________
____________________________________________________________________
6.2 Do you propose to operate any of the following types of equipment,
or any other equipment requiring an air emissions permit? Existing
tenants should specify any such equipment being operated in, on or
about the Premises.
____ Spray booth(s) ____ Incinerator(s)
____ Dip tank(s) ____ Other (Please describe)
____ Drying oven(s) ____ No Equipment Requiring Air Permits
If yes, please describe:
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous Materials management plan ("Management Plan") pursuant to
Fire Department or other governmental or regulatory agencies'
requirements? Existing tenants should indicate whether or not a
Management Plan is required and has been prepared.
Yes [ ] No [ ]
If yes, attach a copy of the Management Plan. Existing tenants
should attach a copy of any required updates to the Management Plan.
7.2 Are any of the Hazardous Materials, and in particular chemicals,
proposed to be used in your operations in, on or about the Premises
regulated under Proposition 65? Existing tenants should indicate
whether or not there are any new Hazardous Materials being so used
which are regulated under Proposition 65.
Yes [ ] No [ ]
If yes, please explain: ____________________________________________
____________________________________________________________________
____________________________________________________________________
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has your
company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees or has your company
received requests for information, notice or demand letters, or any
other inquiries regarding its operations? Existing tenants should
indicate whether or not any such actions, orders or decrees have
been, or are in the process of being, undertaken or if any such
requests have been received.
Yes [ ] No [ ]
If yes, describe the actions, orders or decrees and any continuing
compliance obligations imposed as a result of these actions, orders
or decrees and also describe any requests, notices or demands, and
attach a copy of all such documents. Existing tenants should
describe and attach a copy of any new actions, orders, decrees,
requests, notices or demands not already delivered
4
<PAGE> 49
to Landlord pursuant to the provisions of Section 29 of the signed
Lease Agreement.
8.2 Have there ever been, or are there now pending, any lawsuits against
your company regarding any environmental or health and safety
concerns?
Yes [ ] No [ ]
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other documents
related thereto as requested by Landlord. Existing tenants should
describe and attach a copy of any new complaint(s),
cross-complaint(s), pleadings and other related documents not
already delivered to Landlord pursuant to the provisions of Section
29 of the signed Lease Agreement.
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
8.3 Have there been any problems or complaints from adjacent tenants,
owners or other neighbors at your company's current facility with
regard to environmental or health and safety concerns? Existing
tenants should indicate whether or not there have been any such
problems or complaints from adjacent tenants, owners or other
neighbors at, about or near the Premises.
Yes [ ] No [ ]
If yes, please describe. Existing tenants should describe any such
problems or complaints not already disclosed to Landlord under the
provisions of the signed Lease Agreement.
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and licenses
including a Transporter Permit number issued to your company with
respect to its proposed operations in, on or about the Premises,
including, without limitation, any wastewater discharge permits, air
emissions permits, and use permits or approvals. Existing tenants
should attach copies of any new permits and licenses as well as any
renewals of permits or licenses previously issued.
The undersigned hereby acknowledges and agrees that (A) this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Landlord in connection with the evaluation and finalization of a Lease
Agreement and will be attached thereto as an exhibit; (B) that this Hazardous
Materials Disclosure Certificate is being delivered in accordance with, and as
required by, the provisions of Section 29 of the Lease Agreement; and (C) that
Tenant shall have and retain full and complete responsibility and liability with
respect to any of the Hazardous Materials disclosed in the HazMat Certificate
notwithstanding Landlord's/Tenant's receipt and/or approval of such certificate.
Tenant further agrees that none of the following described acts or events shall
be construed or otherwise interpreted as either (a) excusing, diminishing or
otherwise limiting Tenant from the requirement to fully and faithfully perform
its obligations under the Lease with respect to Hazardous Materials, including,
without limitation, Tenant's indemnification of the Indemnitees and compliance
with all Environmental Laws, or (b) imposing upon Landlord, directly or
indirectly, any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or otherwise
verify the accuracy of the representations and statements made therein or to
ensure that Tenant is in compliance with all Environmental Laws; (i) the
delivery of such certificate to Landlord and/or Landlord's acceptance of such
certificate, (ii) Landlord's review and approval of such certificate, (iii)
Landlord's failure to obtain such certificate from Tenant at any time, or (iv)
Landlord's actual or constructive knowledge of the types and quantities of
Hazardous Materials being used, stored, generated, disposed of or transported on
or about the Premises by Tenant or Tenant's Representatives. Notwithstanding the
foregoing
5
<PAGE> 50
or anything to the contrary contained herein, the undersigned acknowledges and
agrees that Landlord and its partners, lenders and representatives may, and
will, rely upon the statements, representations, warranties, and certifications
made herein and the truthfulness thereof in entering into the Lease Agreement
and the continuance thereof throughout the term, and any renewals thereof, of
the Lease Agreement.
I (print name)_________________________ , acting with full authority to bind the
(proposed) Tenant and on behalf of the (proposed) Tenant, certify, represent and
warrant that the information contained in this certificate is true and correct.
(PROSPECTIVE) TENANT:
By: _____________________________________
Title: _____________________________________
Date: _____________________________________
INITIALS:
TENANT: _______________
LANDLORD: _______________
5
<PAGE> 51
ADDENDUM 1
FIRST OPTION TO EXTEND THE LEASE
This Addendum 1 is incorporated as a part of that certain Lease Agreement, dated
December 12, 1996 (the "Lease"), by and between Lincoln-Whitehall Realty (West),
L.L.C., a Delaware limited liability company ("Landlord"), and Cisco Systems,
Inc., a California corporation ("Tenant"), of those certain premises located at
Fortran Court and Baytech Drive (Buildings A & B) (the "Premises"). Any
capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to such terms as set forth in the Lease.
1. GRANT OF EXTENSION OPTION. Subject to the provisions of Sections 5 and 6
hereinbelow, if Tenant has not at any time been in default of its obligations
beyond applicable cure periods more than three (3) times in any twelve-month
period ("Chronic Default"), or at the time of Tenant's exercise of this option,
is currently not, in default in the performance of any of its obligations under
this Lease beyond applicable cure periods, and contingent upon review and
approval of Tenant's then current financial condition by Landlord [which
financial condition shall be deemed to be acceptable to Landlord so long as
Tenant, at the time of exercise of this option and for the prior twelve month
period of time prior to Tenant's exercise of this option, has a net worth of at
least One Hundred Million Dollars ($100,000,000.00)], Tenant shall have the
right at its option (the "First Option") to extend the initial term of the Lease
for an additional period of one (1) year (the "First Extended Term").
2. TENANT'S FIRST OPTION NOTICE. If Landlord does not receive written notice
from Tenant of its exercise of this First Option on a date which is not more
than five hundred forty (540) days nor less than three hundred sixty (360) days
prior to the end of the initial term of the Lease (the "First Option Notice"),
all rights of Tenant in, to and under this First Option shall automatically
lapse and terminate and shall be of no further force or effect. Time is of the
essence herein.
3. ESTABLISHING THE MONTHLY BASE RENT FOR THE FIRST EXTENDED TERM. In the
event Tenant duly exercises its rights under this First Option, the monthly Base
Rent payable by Tenant to Landlord during the First Extended Term shall be one
hundred seventy-one thousand four hundred eighteen and 50/100 dollars
($171,418.50). If Tenant duly exercises this First Option in accordance with the
terms outlined above, Landlord and Tenant shall immediately execute, at
Landlord's sole option, either the standard lease agreement then in use by
Landlord, or an amendment to this Lease. Such new lease agreement or amendment,
as the case may be, shall set forth among other things, the monthly Base Rent
quoted above for the First Extended Term and the actual commencement date and
expiration date of the First Extended Term. Tenant shall have no other right to
extend the initial term of the Lease under this Addendum 1 unless Landlord and
Tenant otherwise agree in writing.
4. CONDITION OF PREMISES AND BROKERAGE COMMISSIONS FOR THE FIRST EXTENDED
TERM. If Tenant duly exercises this First Option in accordance with the terms
contained herein, the following shall apply: (1) Tenant shall accept the
Premises in its then "As-Is" condition and, accordingly, Landlord shall not be
required to perform nor install any additional improvements to the Premises; and
(2) Tenant hereby agrees that it will be solely responsible for any and all
brokerage commissions and finder's fees payable to any broker except for
Landlord's broker in connection with the First Option described herein, and
Tenant hereby further agrees that Landlord shall in no event or circumstance be
responsible for the payment of any such commissions and fees.
5. LIMITATIONS ON, AND CONDITIONS TO, FIRST EXTENSION OPTION. This First
Option is personal to Tenant and except for a Related Entity may not be
assigned, voluntarily or
INITIALS:
TENANT: _______________
LANDLORD: _______________
1
<PAGE> 52
involuntarily, separate from or as part of the Lease, unless Landlord otherwise
expressly consents in writing to such assignment. At Landlord's option, all
rights of Tenant under this First Option shall terminate and be of no force or
effect if any of the following individual events occur or any combination
thereof occur: (1) Tenant or the Related Entity, as applicable, has been in
Chronic Default at any time during the initial term of the Lease, or at the time
of exercise of the First Option is then currently in default of any provision of
the Lease beyond applicable cure periods; and/or (2) Tenant has assigned its
rights and obligations under all or part of the Lease to any party or entity
other than a Related Entity, or Tenant has subleased all or part of the Premises
to any party or entity other than a Related Entity, unless Landlord otherwise
expressly consents in writing to such assignment or sublease; and/or (3)
Tenant's or the Related Entity's (as applicable) financial condition is
unacceptable to Landlord at the time the First Option Notice is delivered to
Landlord [which financial condition shall be deemed to be acceptable to Landlord
so long as Tenant or the Related Entity, as applicable, at the time of exercise
of this First Option and for the prior twelve month period of time prior to
delivery of the First Option Notice, has a net worth of at least One Hundred
Million Dollars ($100,000,000.00)]; and/or (4) Tenant or the Related Entity (as
applicable) has failed to exercise this First Option in a timely manner and in
strict accordance with the provisions of this Addendum 1; and/or (5) Tenant, a
Related Entity, or a third party subtenant or assignee for which Landlord has
expressly consented, as the case may be, no longer has possession of all or any
part of the Premises under the Lease, or if the Lease has been terminated
earlier, pursuant to the terms of the Lease.
6. RECAPTURE AND EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION.
Notwithstanding anything to the contrary contained in the Lease or herein, if
(I) the Term of the Second Lease has expired or the Second Lease has been
earlier terminated for any reason whatsoever, in whole or in part, and (II)
during the First Extended Term Tenant proposes to sublease or assign this Lease
to a party other than a Related Entity, then for the time period during which
there is any vacancy in Building C and/or Building D (as referred to in the
Second Lease) Landlord shall have the right, to be exercised by giving written
notice to Tenant, to either (1) recapture the space described in the proposed
sublease or assignment, or (2) consent to such proposed sublease or assignment,
in which event Tenant shall pay Landlord monthly, as Additional Rent, at the
same time as the monthly installments of Rent are payable hereunder, fifty
percent (50%) of the excess of each such payment of rent or other consideration
in excess of the Rent called for hereunder, after deduction of the actual
brokerage commission (if any) paid by Tenant in connection with such proposed
sublease or assignment, where the rent or other consideration provided for in
the proposed sublease or assignment either initially or over the term of the
sublease or assignment exceeds the Rent or pro rata portion of the Rent, as the
case may be, for such space reserved in the Lease. If such recapture notice is
given, it shall serve to terminate this Lease with respect to the proposed
sublease or assignment space, or, if the proposed sublease or assignment space
covers all the Premises for the First Extended Term, it shall serve to terminate
the entire term of this Lease in either case, as of the Proposed Effective Date,
with respect to such space.
INITIALS:
TENANT: _______________
LANDLORD: _______________
2
<PAGE> 53
ADDENDUM 2
SECOND OPTION TO EXTEND THE LEASE
This Addendum 2 is incorporated as a part of that certain Lease Agreement, dated
December 12, 1996 (the "Lease"), by and between Lincoln-Whitehall Realty (West),
L.L.C., a Delaware limited liability company ("Landlord"), and Cisco Systems,
Inc., a California corporation ("Tenant"), of those certain premises located at
Fortran Court and Baytech Drive (Buildings A & B) (the "Premises"). Any
capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to such terms as set forth in the Lease.
1. GRANT OF EXTENSION OPTION. Subject to the provisions of Sections 5 and 6
hereinbelow, if (i) Tenant has not at any time been in Chronic Default, or at
the time of Tenant's exercise of this Second Option, is currently not, in
default in the performance of any of its obligations under this Lease beyond any
applicable cure periods, (ii) Tenant has duly exercised the First Option in
accordance with the provisions of Addendum 1 to the Lease, and (iii) contingent
upon review and approval of Tenant's then current financial condition by
Landlord [which financial condition shall be deemed to be acceptable to Landlord
so long as Tenant, at the time of exercise of this option and for the prior
twelve month period of time prior to Tenant's exercise of this Second Option,
has a net worth of at least One Hundred Million Dollars ($100,000,000.00)],
Tenant shall have the right at its option (the "Second Option") to further
extend the term of the Lease for an additional one (1) year period (the "Second
Extended Term").
2. TENANT'S SECOND OPTION NOTICE. If Landlord does not receive written notice
from Tenant of its exercise of this Second Option on a date which is not more
than five hundred forty (540) days nor less than three hundred sixty (360) days
prior to the end of the First Extended Term of the Lease (the "Second Option
Notice"), all rights of Tenant in, to and under this Second Option shall
automatically lapse and terminate and shall be of no further force or effect.
Time is of the essence herein.
3. ESTABLISHING THE MONTHLY BASE RENT FOR THE SECOND EXTENDED TERM. In the
event Tenant duly exercises its rights under this Second Option, the monthly
Base Rent payable by Tenant to Landlord during the Second Extended Term shall be
one hundred seventy-six thousand six hundred thirteen and 00/100 dollars
($176,613.00). If Tenant duly exercises this Second Option in accordance with
the terms outlined above, Landlord and Tenant shall immediately execute, at
Landlord's sole option, either the standard lease agreement then in use by
Landlord, or an amendment to this Lease. Such new lease agreement or amendment,
as the case may be, shall set forth among other things, the monthly Base Rent
quoted above for the Second Extended Term and the actual commencement date and
expiration date of the Second Extended Term. Tenant shall have no other right to
extend the then applicable term of the Lease under this Addendum 2 unless
Landlord and Tenant otherwise agree in writing.
4. CONDITION OF PREMISES AND BROKERAGE COMMISSIONS FOR THE SECOND EXTENDED
TERM. If Tenant duly exercises this Second Option in accordance with the terms
contained herein: (1) Tenant shall accept the Premises in its then "As-Is"
condition and, accordingly, Landlord shall not be required to perform nor
install any additional improvements to the Premises; and (2) Tenant hereby
agrees that it will be solely responsible for any and all brokerage commissions
and finder's fees payable to any broker except for Landlord's broker in
connection with the Second Option described herein, and Tenant hereby further
agrees that Landlord shall in no event or circumstance be responsible for the
payment of any such commissions and fees.
INITIALS:
TENANT: _______________
LANDLORD: _______________
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<PAGE> 54
5. LIMITATIONS ON, AND CONDITIONS TO, SECOND EXTENSION OPTION. This Second
Option is personal to Tenant and except for a Related Entity may not be
assigned, voluntarily or involuntarily, separate from or as part of the Lease,
unless Landlord otherwise expressly consents in writing to such assignment. At
Landlord's option, all rights of Tenant under this First Option shall terminate
and be of no force or effect if any of the following individual events occur or
any combination thereof occur: (1) Tenant or the Related Entity, as applicable,
has been in Chronic Default at any time during the initial term or First
Extended Term of the Lease, or at the time of exercise of the Second Option is
then currently in default of any provision of the Lease beyond applicable cure
periods; and/or (2) Tenant has assigned its rights and obligations under all or
part of the Lease to any party or entity other than a Related Entity, or Tenant
has subleased all or part of the Premises to any party or entity other than a
Related Entity, unless Landlord otherwise expressly consents in writing to such
assignment or sublease; and/or (3) Tenant's or the Related Entity's (as
applicable) financial condition is unacceptable to Landlord at the time the
Second Option Notice is delivered to Landlord [which financial condition shall
be deemed to be acceptable to Landlord so long as Tenant or the Related Entity,
as applicable, at the time of exercise of this Second Option and for the prior
twelve month period of time prior to delivery of the Second Option Notice, has a
net worth of at least One Hundred Million Dollars ($100,000,000.00)]; and/or (4)
Tenant or the Related Entity, as applicable, has failed to exercise the First
Option in a timely manner in strict accordance with the provisions of Addendum 1
to the Lease; (5) Tenant or the Related Entity (as applicable) has failed to
exercise this Second Option in a timely manner and in strict accordance with the
provisions of this Addendum 2; and/or (6) Tenant, a Related Entity, or a third
party subtenant or assignee for which Landlord has expressly consented, as the
case may be, no longer has possession of all or any part of the Premises under
the Lease, or if the Lease has been terminated earlier, pursuant to the terms of
the Lease.
6. RECAPTURE AND EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION.
Notwithstanding anything to the contrary contained in the Lease or herein, if
(I) the Term of the Second Lease has expired or the Second Lease has been
earlier terminated for any reason whatsoever, in whole or in part, and (II)
during the Second Extended Term Tenant proposes to sublease or assign this Lease
to a party other than a Related Entity, then for the time period during which
there is any vacancy in Building C and/or Building D (as referred to in the
Second Lease) Landlord shall have the right, to be exercised by giving written
notice to Tenant, to either (1) recapture the space described in the proposed
sublease or assignment, or (2) consent to such proposed sublease or assignment,
in which event Tenant shall pay Landlord monthly, as Additional Rent, at the
same time as the monthly installments of Rent are payable hereunder, fifty
percent (50%) of the excess of each such payment of rent or other consideration
in excess of the Rent called for hereunder, after deduction of the actual
brokerage commission (if any) paid by Tenant in connection with such proposed
sublease or assignment, where the rent or other consideration provided for in
the proposed sublease or assignment either initially or over the term of the
sublease or assignment exceeds the Rent or pro rata portion of the Rent, as the
case may be, for such space reserved in the Lease. If such recapture notice is
given, it shall serve to terminate this Lease with respect to the proposed
sublease or assignment space, or, if the proposed sublease or assignment space
covers all the Premises for the Second Extended Term, it shall serve to
terminate the entire term of this Lease in either case, as of the Proposed
Effective Date, with respect to such space.
INITIALS:
TENANT: _______________
LANDLORD: _______________
2
<PAGE> 1
EXHIBIT 10.51
LEASE AGREEMENT
(NNN)
BASIC LEASE INFORMATION
LEASE DATE: December 18, 1996
LANDLORD: Lincoln-Whitehall Realty (West), L.L.C.,
a Delaware limited liability company
LANDLORD'S ADDRESS: c/o Lincoln Property Company Management Services, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404-1167
TENANT: Cisco Systems, Inc., a California corporation
TENANT'S ADDRESS: 170 W. Tasman Drive
San Jose, California 95124
Attention: Chris Hampton, Director,
Real Estate Worldwide
PREMISES: Approximately 84,935 rentable square feet as shown on
Exhibit A
PREMISES ADDRESSES: Building C: 130 Baytech Drive, San Jose,
California 95134
Building D: 140 Baytech Drive, San Jose,
California 95134
BUILDINGS (C & D): Approximately 84,935
rentable square feet
LOT (PARK'S TAX PARCEL): APN 015-30-093
PARK (LINCOLN BAY TECH PARK): Approximately 188,825
rentable square feet
TERM: July 1, 1997 ("Commencement Date"), through June 30,
2001 ("Expiration Date"), subject to the
provisions of Section 2 hereof.
BASE RENT (Paragraph 3): One hundred twenty-three
thousand one hundred fifty-five and
75/100 dollars ($123,155.75) per month
($1.45 per rentable square foot)
commencing on the Commencement Date
through June 30, 1998.
ADJUSTMENTS TO BASE RENT: Effective July 1, 1998, Base Rent shall increase to
$127,402.50 per month ($1.50 per rentable square
foot).
Effective July 1, 1999, Base Rent shall
increase to $131,649.25 per month ($1.55
per rentable square foot).
Effective July 1, 2000, Base Rent shall increase to
$135,896.00 per month ($1.60 per rentable square
foot).
SECURITY DEPOSIT
(Paragraph 4): Waived
*TENANT'S SHARE OF OPERATING EXPENSES (Paragraph 6.1): 45% of the Park
*TENANT'S SHARE OF TAX EXPENSES (Paragraph 6.2): 45% of the Park
*TENANT'S SHARE OF COMMON AREA UTILITY COSTS (Paragraph 7): 45% of the Park
*TENANT'S SHARE OF UTILITY EXPENSES (Paragraph 7): 45% of the Park
*The amount of Tenant's Share of the expenses as referenced above shall be
subject to modification as set forth in this Lease.
PERMITTED USES
(Paragraph 9): General office, industrial, assembly, light
manufacturing and distribution of computer products,
but only to the extent permitted by the City of San
Jose and all agencies and governmental authorities
having jurisdiction thereof
UNRESERVED
PARKING SPACES: Three hundred nineteen (319) non-exclusive and
undesignated spaces
BROKERS (Paragraph 38): Dennis Chambers of CPS for Tenant
Wayne Mascia Associates for Landlord
EXHIBITS: Exhibit A - Premises, Building, Lot and/or Park
Exhibit B - Tenant Improvements
Exhibit C - Rules and Regulations
Exhibit D - Covenants, Conditions and Restrictions
(Intentionally Omitted)
Exhibit E - Hazardous Materials Disclosure
Certificate - Example
Exhibit F - Change of Commencement Date - Example
Exhibit G - Tenant's Initial Hazardous Materials
Disclosure Certificate
Exhibit H - Sign Criteria (Intentionally Omitted)
ADDENDA: Addendum 1: First Option to Extend the Lease
Addendum 2: Second Option to Extend the Lease
1
<PAGE> 2
TABLE OF CONTENTS
SECTION PAGE
1. PREMISES.............................................................. 3
2. ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES............ 3
3. RENT.................................................................. 4
4. SECURITY DEPOSIT...................................................... 5
5. TENANT IMPROVEMENTS................................................... 5
6. ADDITIONAL RENT....................................................... 5
7. UTILITIES............................................................. 8
8. LATE CHARGES.......................................................... 9
9. USE OF PREMISES....................................................... 9
10. ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES..................10
11. REPAIRS AND MAINTENANCE...............................................11
12. INSURANCE.............................................................12
13. WAIVER OF SUBROGATION.................................................14
14. LIMITATION OF LIABILITY AND INDEMNITY.................................14
15. ASSIGNMENT AND SUBLEASING.............................................15
16. AD VALOREM TAXES......................................................17
17. SUBORDINATION.........................................................17
18. RIGHT OF ENTRY........................................................17
19. ESTOPPEL CERTIFICATE..................................................18
20. TENANT'S DEFAULT......................................................18
21. REMEDIES FOR TENANT'S DEFAULT.........................................19
22. HOLDING OVER..........................................................20
23. LANDLORD'S DEFAULT....................................................20
24. PARKING...............................................................20
25. SALE OF PREMISES......................................................20
26. WAIVER................................................................21
27. CASUALTY DAMAGE.......................................................21
28. CONDEMNATION..........................................................22
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS.............................22
30. FINANCIAL STATEMENTS..................................................24
31. GENERAL PROVISIONS....................................................24
32. SIGNS.................................................................26
33. MORTGAGEE PROTECTION..................................................26
34. QUITCLAIM.............................................................26
35. MODIFICATIONS FOR LENDER..............................................26
36. WARRANTIES OF TENANT..................................................26
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT.......................27
38. BROKERAGE COMMISSION..................................................27
39. QUIET ENJOYMENT.......................................................28
40. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS........28
41. TENANT'S ABILITY TO PERFORM LANDLORD'S UNPERFORMED OBLIGATIONS........24
2
<PAGE> 3
LEASE AGREEMENT
DATE: This Lease is made and entered into as of the Lease Date set forth on
Page 1. The Basic Lease Information set forth on Page 1 and this Lease
are and shall be construed as a single instrument.
1. PREMISES: Landlord hereby leases the Premises to Tenant upon the terms and
conditions contained herein. Landlord hereby grants to Tenant a license for the
right to use, on a non-exclusive basis, parking areas and ancillary facilities
located within the Common Areas of the Park, subject to the terms of this Lease;
provided, however, such license shall only be revocable (i) if Tenant is in
default of its obligations under this Lease beyond applicable cure periods, or
(ii) upon the expiration or earlier termination of this Lease. For purposes of
this Lease, the term "Premises" shall mean and refer to the entirety of both of
the Buildings, namely, Building A and Building B situated within the Park.
Landlord and Tenant hereby agree that for purposes of this Lease, as of the
Lease Date, the rentable square footage area of the Premises, the Buildings, the
Lot and the Park shall be deemed to be the number of rentable square feet as set
forth in the Basic Lease Information on Page 1; provided, however, within
fifteen (15) days after the date on which Landlord causes the Buildings to be
Substantially Completed (as such term is defined in Exhibit B hereto), Tenant
may have its architect verify the actual rentable square feet contained within
the Premises (i.e. the Buildings), provided that the basis of such measurement
shall be measured from drip line to drip line and not in accordance with BOMA
standards. Tenant hereby acknowledges that the rentable square footage of the
Premises may include a proportionate share of certain areas used in common by
all occupants of the Buildings (for example an electrical room or telephone
room). Landlord and Tenant hereby acknowledge and agree that as of the Lease
Date the Buildings have not been constructed on the Lot. After Landlord has
Substantially Completed (as such term is defined in Exhibit B hereto) the Shell
Improvements, Landlord and Tenant shall execute a written amendment to this
Lease, substantially in the form of Exhibit F hereto, wherein the parties shall
specify the (i) actual approximate rentable square footage of each of the
Premises, the Buildings and the Park, (ii) actual amount of Base Rent to be paid
by Tenant, which shall be based upon the amount of base rent per rentable square
foot as set forth in the Basic Lease Information, (iii) actual amount of
Tenant's Share of the expenses set forth in the Basic Lease Information, which
share shall be based upon such approximate rentable square footages, and (iv)
the Premises Addresses. Tenant further agrees that the number of rentable square
feet of the Buildings, the Lot and the Park may subsequently change after the
Lease Date commensurate with any modifications to any of the foregoing by
Landlord due to any casualty to, or condemnation of, any portion of the
Premises, and Tenant's Share shall accordingly change.
2. ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES:
2.1 If on the Commencement Date (a) Landlord has not delivered
possession of the Premises with only the Shell Improvements (defined in Exhibit
B hereto) Substantially Completed, and (b) Tenant has not Substantially
Completed the Tenant Improvements, Landlord shall not be subject to any
liability nor shall the validity of the Lease be affected; provided, subject to
the provisions set forth below, the Lease Term and the obligation to pay Rent
shall commence on the date which is the earlier to occur of (i) the date on
which Tenant has Substantially Completed the Tenant Improvements (defined in
Exhibit B hereto), or (ii) the date which is ninety (90) business days after
Landlord has Substantially Completed the Shell Improvements (provided, said
90-business day period may be extended by a maximum of an additional period of
30 days if Tenant is delayed from Substantially Completing the Tenant
Improvements wholly due either to delays attributable to Landlord's failure to
timely perform its obligations with respect to the Shell Improvements because of
events within Landlord's control (the "Landlord Delays") or events considered to
be Force Majeure Delays (defined in Exhibit B hereto). The Expiration Date shall
also be extended commensurately therewith. In addition to the foregoing and
notwithstanding anything to the contrary contained herein or in Exhibit B
hereto, if Landlord does not tender possession to Tenant of the Premises with
the Shell Improvements Substantially Complete by November 15, 1997 (the "Outside
Date") (subject to any Force Majeure Delays or Tenant Delays, in which event the
date of November 15, 1997 shall be extended commensurately by the period of time
attributable to such delays), then either Tenant or Landlord may terminate this
Lease by delivering written notice thereof to the other party no later than the
date which is ten (10) business days after the Outside Date, as extended by the
period of time attributable to any Force Majeure Delays and/or Tenant Delays. In
addition to the foregoing and notwithstanding anything to the contrary contained
herein or in Exhibit B hereto, if Landlord does not tender possession to Tenant
of the Premises with the Shell Improvements Substantially Complete by March 1,
1998 (the "Ultimate Outside Date") (subject to any Tenant Delays, in which event
the date of March 1, 1998 shall be extended commensurately by the period of time
attributable to such delays), then either Tenant or Landlord may terminate this
Lease by delivering written notice thereof to the other party no later than the
date which is ten (10) business days after the Ultimate Outside Date, as
extended by the period of time attributable to any Tenant Delays. If either
party fails to timely terminate the Lease as and when provided herein, or if
Landlord delivers to Tenant possession of the Premises with the Tenant
Improvements Substantially Complete at any time earlier than the Outside Date
(as such date may be extended due to Force Majeure Delays or Tenant Delays, as
the case may be) or the Ultimate Outside Date (as such date may be extended due
to Tenant Delays), as applicable, then upon the occurrence of any such events
the foregoing right given to Tenant and Landlord to terminate this Lease as
provided herein shall lapse and be null and void upon the earlier occurrence of
such event and the Lease shall remain in full force and effect with Tenant and
Landlord having no further right to terminate this Lease pursuant to the
foregoing provisions. If Landlord does so timely deliver to Tenant possession of
the Premises with the Shell Improvements Substantially Complete, Tenant shall
promptly deliver
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written notice to Landlord confirming same. In the event the commencement date
and/or the expiration date of this Lease is other than the Commencement Date
and/or Expiration Date provided on Page 1 in the Basic Lease Information, as the
case may be, Landlord and Tenant shall execute a written amendment to this
Lease, substantially in the form of Exhibit F hereto, wherein the parties shall
specify the actual commencement date, expiration date, the date on which Tenant
is to commence paying Rent and the other matters referred to in Section 1 above.
The word "Term" whenever used herein refers to the initial term of this Lease
and any extension thereof. Except as otherwise expressly set forth below with
regard to Punchlist Items, by taking possession of the Premises with only the
Shell Improvements Substantially Completed, Tenant shall be deemed to have
accepted the Premises in a good, clean and completed condition and state of
repair. Notwithstanding the foregoing, within three (3) business days after the
Substantial Completion (as such term is defined in Exhibit B hereto) of the
Shell Improvements representatives of Landlord and Tenant shall make a joint
inspection of the Shell Improvements and the results of each such inspection
shall be set forth in a written list specifying the incomplete items as well as
those items for which corrections need to be made (the "Punchlist Items").
Landlord and Tenant shall promptly (by no later than three (3) business days
thereafter) and in good faith approve the written list of Punchlist Items.
Landlord, at its sole cost and expense, shall use commercially reasonable
efforts to cause the Punchlist Items to be promptly completed and/or corrected,
as applicable. The performance of the work associated with the Punchlist Items
shall be performed in such a manner so as not to preclude or substantially
prevent Tenant's ability to construct the Tenant Improvements in the Premises.
Upon the completion of the Punchlist Items to Tenant's reasonable satisfaction
Tenant shall immediately notify Landlord in writing that such items have been
completed to Tenant's reasonable satisfaction. In addition to the Punchlist
Items, Landlord shall also use commercially reasonable efforts to cause the
general contractor to correct any other patent deficiencies or defects in the
Shell Improvements during the thirty (30) day period following Substantial
Completion of the Shell Improvements. If Tenant fails to timely deliver to
Landlord any such written notice of the aforementioned patent defects or
deficiencies within said 30-day period, Landlord shall have no obligation to
perform any such work thereafter, except as otherwise specifically provided in
Sections 5 and 14 of this Lease. Tenant hereby acknowledges and agrees that
neither Landlord nor Landlord's agents or representatives has made any
representations or warranties as to the suitability, safety or fitness of the
Premises for the conduct of Tenant's business, Tenant's intended use of the
Premises or for any other purpose.
2.2 Landlord shall permit Tenant to enter and occupy the Premises
prior to the Commencement Date for purposes of installing a portion of the
Tenant Improvements and to perform Tenant's Pre-Occupancy Work (as such term is
defined in Exhibit B hereto). Landlord shall consult with its general contractor
and shall notify Tenant, in writing, of the date on which Tenant may commence
such limited purpose occupancy. In no event may Tenant conduct its business or
operations from the Premises until after the Commencement Date. Such limited
purpose occupancy by Tenant shall be at Tenant's sole risk and shall also be
subject to all of the provisions of this Lease other than the requirement to pay
Rent (other than any Utility Expenses incurred during the time period Tenant is
constructing the Tenant Improvements), including, but not limited to, the
requirement to obtain the insurance required pursuant to this Lease (including
without limitation, the provisions of Exhibit B hereto) and to deliver insurance
certificates as required herein, and to pay for all utilities and Utility
Expenses to the extent incurred during the time period Tenant is constructing
the Tenant Improvements. In addition to the foregoing and the provisions of
Exhibit B hereto regarding such early occupancy, Landlord shall have the right
to impose such additional conditions on Tenant's early entry as Landlord shall
deem reasonably appropriate. If, at any time, Tenant is in default of any term,
condition or provision of this Lease, any such waiver by Landlord of Tenant's
requirement to pay rental payments shall be null and void and Tenant shall
immediately pay to Landlord all rental payments so waived by Landlord.
3. RENT: On the date that Tenant executes this Lease, Tenant shall deliver to
Landlord the original executed Lease, the Base Rent (which shall be applied
against the Rent payable for the first month Tenant is required to pay Base
Rent), and all insurance certificates or, alternatively, the letter required
pursuant to Section 12.5 hereof, evidencing the insurance required to be
obtained by Tenant under Section 12 of this Lease and under the provisions of
Exhibit B hereto. Tenant agrees to pay Landlord, without prior notice or demand,
or abatement (except as otherwise set forth in Sections 27 and 41 hereof),
offset, deduction or claim, the Base Rent described on Page 1, payable in
advance at Landlord's address shown on Page 1 on the Commencement Date and
thereafter on the first (1st) day of each month throughout the Term of the
Lease. In addition to the Base Rent set forth on Page 1, Tenant shall pay
Landlord in advance, on the Commencement Date and thereafter on the first (1st)
day of each month throughout the Term of this Lease, as Additional Rent,
Tenant's Share of Operating Expenses, Tax Expenses, Common Area Utility Costs,
and Utility Expenses. The term "Rent" whenever used herein refers to the
aggregate of all these amounts. If Landlord permits Tenant to occupy the
Premises to conduct business operations therein without requiring Tenant to pay
rental payments for a period of time, the waiver of the requirement to pay
rental payments shall only apply to waiver of the Base Rent and Tenant shall
otherwise perform all other obligations of Tenant required hereunder. The Rent
for any fractional part of a calendar month at the commencement or termination
of the Lease term shall be a prorated amount of the Rent for a full calendar
month based upon a thirty (30) day month. The prorated Rent shall be paid on the
Commencement Date and the first day of the calendar month in which the date of
termination occurs, as the case may be.
4. SECURITY DEPOSIT: Intentionally omitted.
5. TENANT IMPROVEMENTS: Upon Substantial Completion by Landlord of the Shell
Improvements and the completion by Landlord of any Punchlist Items, Tenant
hereby agrees to accept the Premises in its then current
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"AS IS" condition. Subject to the provisions of Exhibit B hereto, Tenant shall
install the improvements ("Tenant Improvements") in the Premises in accordance
with the terms, conditions, criteria and provisions set forth in Exhibit B
hereto. Tenant acknowledges that neither Landlord nor any of Landlord's agents,
representatives or employees has made any representations as to the suitability
or fitness of the Premises for the conduct of Tenant's business, including
without limitation, any storage incidental thereto, or for any other purpose,
and that neither Landlord nor any of Landlord's agents, representatives or
employees has agreed to undertake any alterations or construct any Tenant
Improvements to the Premises except for the construction of the Shell
Improvements as expressly provided in Exhibit B to this Lease. Notwithstanding
the foregoing, Landlord shall allow Tenant to, concurrently with Landlord (if
Landlord so desires, otherwise separately), make a claim against Landlord's
general contractor for any patent or latent defects in the initial design or
construction of the Shell Improvements for a period of five (5) years after the
date on which the Shell Improvements are Substantially Completed. In addition to
the foregoing, Tenant shall be entitled to enforce, concurrently with Landlord,
any warranties made or given to Landlord from the general contractor and any
major subcontractors with respect to the Shell Improvements. Notwithstanding
anything to the contrary contained herein, Tenant shall allow Landlord to,
concurrently with Tenant (if Tenant so desires, otherwise separately), or after
the expiration or earlier termination of this Lease, individually, make a claim
against Tenant's general contractor, namely Devcon Construction Inc. (the
"Tenant's General Contractor") for any patent or latent defects in the initial
design or construction of the Tenant Improvements for a period of five (5) years
after the date on which the Tenant Improvements are substantially completed. In
addition to the foregoing, Landlord shall be entitled to enforce, concurrently
with Tenant, or after the expiration or earlier termination of this Lease,
individually, any warranties made or given to Tenant from the Tenant's General
Contractor and any major subcontractors with respect to the Tenant Improvements.
Each of Landlord and Tenant shall be third party beneficiaries of the other
party's construction agreements, and accordingly, each party hereby agrees to
include a provision in their respective construction contracts to effectuate
same.
6. ADDITIONAL RENT : It is intended by Landlord and Tenant that this Lease be a
"triple net lease". The costs and expenses described in this Section 6 and all
other sums, charges, costs and expenses specified in this Lease other than Base
Rent are to be paid by Tenant to Landlord as additional rent (collectively,
"Additional Rent").
6.1 OPERATING EXPENSES: In addition to the Base Rent set forth in
Section 3, Tenant shall pay Tenant's Share, which is defined on Page 1, of all
Operating Expenses as Additional Rent. The term "Operating Expenses" as used
herein shall mean the total actual amounts paid or payable by Landlord in
connection with the ownership, maintenance, repair and operation of the
Premises, the Buildings and the Lot, and where applicable, of the Park referred
to on Page 1. The amount of Tenant's Share of Operating Expenses shall be
reviewed from time to time by Landlord and shall be subject to modification by
Landlord if there is a change in the rentable square footage of the Premises,
the Buildings and/or the Park due to any casualty or condemnation of any portion
of the Premises. These Operating Expenses may include, but are not limited to:
6.1.1 Landlord's cost of repairs to, and maintenance of,
the non-structural portions of the roof, the roof membrane and the
non-structural portions of the exterior walls of the Buildings;
6.1.2 Landlord's cost of maintaining the outside paved
area, landscaping and other common areas for the Park. The term
"Common Areas" shall mean all areas and facilities within the Park
exclusive of the Premises and the other portions of the Park leased
exclusively to other tenants. The Common Areas include, but are not
limited to, parking areas, access and perimeter roads, sidewalks,
landscaped areas and similar areas and facilities;
6.1.3 Landlord's annual cost of insurance insuring against
fire and extended coverage (including, if Landlord elects, "all risk"
or "special purpose" coverage) and all other insurance, including, but
not limited to, earthquake, flood and/or surface water endorsements
for the Buildings, the Lot and the Park (including the Common Areas),
rental value insurance against loss of Rent in an amount equal to the
amount of Rent for a period of no more than twelve (12) months
commencing on the date of loss, and subject to the provisions of
Section 27 below, any commercially reasonable deductible;
6.1.4 Landlord's cost of: (i) modifications and/or new
improvements to the Buildings, the Common Areas and/or the Park
occasioned by any rules, laws or regulations effective subsequent to
the date on which the Buildings are Substantially Completed; (ii)
reasonably necessary replacement improvements to the Buildings, the
Common Areas and the Park after the Commencement Date; and (iii) new
improvements to the Buildings, the Common Areas and/or the Park that
reduce operating costs or improve life/safety conditions, all as
reasonably determined by Landlord, in its sole discretion; provided,
however, if any of the foregoing are in the nature of capital
improvements, then the cost of such capital improvements shall be
amortized on a straight-line basis over a reasonable period, which
shall not be less than the lesser of fifteen (15) years or the
reasonably estimated useful life of such modifications, new
improvements or replacement improvements in question (at an interest
rate as reasonably determined by Landlord), and Tenant shall pay
Tenant's Share of the monthly amortized portion of such costs
(including interest charges) as part of the Operating Expenses herein;
6.1.5 If Landlord elects to so procure, Landlord's cost of
preventative maintenance, and repair contracts including, but not
limited to, contracts for elevator systems and heating, ventilation
and air conditioning systems, lifts for disabled persons, and trash or
refuse collection in the Buildings only;
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6.1.6 Landlord's cost of security and fire protection
services for the Buildings and/or the Park, as the case may be, if in
Landlord's reasonable discretion such services are provided;
6.1.7 Landlord's cost for the creation and negotiation of,
and pursuant to, any licenses, easements or other similar undertakings
benefitting the Buildings or Tenant's use of portions of the Park to
the extent incurred after the Commencement Date;
6.1.8 Landlord's cost of supplies, equipment, rental
equipment and other similar items used in the operation and/or
maintenance of the Park;
6.1.9 Landlord's cost for the repairs and maintenance items
set forth in Section 11.2 below; and
6.1.10 Landlord's cost for the management and
administration of the Premises, the Buildings, the Common Areas and
the Park, including without limitation, a property management fee,
accounting, auditing, billing, salaries for clerical and supervisory
employees (whether located within the Park or off-site) and all fees,
licenses and permits related to the ownership, operation and
management of any portion of the Park in an amount not to exceed three
percent (3%) of the Base Rent.
Notwithstanding anything to the contrary contained herein,
for purposes of this Lease, the term "Operating Expenses" shall not include the
following:
(a) Costs (including permit, license, and inspection fees)
incurred in renovating, improving, decorating, painting, or
redecorating vacant space or space for other tenants within the Park;
(b) Costs incurred because Landlord or another tenant
actually violated the terms of any lease for premises within the
Buildings and/or Park;
(c) Legal and auditing fees (other than those fees
reasonably incurred in connection with the maintenance and operation
of the Buildings and/or Park), leasing commissions, advertising
expenses, and other costs incurred in connection with the original
development or original leasing of the Buildings and/or Park or future
re-leasing of the Buildings and/or Park;
(d) Depreciation of the Buildings or any other improvements
situated within the Park;
(e) Any items for which Landlord is actually reimbursed by
insurance or by direct reimbursement by any other tenant of the
Buildings or Park;
(f) Costs of repairs or other work necessitated by fire,
windstorm or other casualty (excluding any commercially reasonable
deductibles) and/or costs of repair or other work necessitated by the
exercise of the right of eminent domain to the extent insurance
proceeds or a condemnation award, as applicable, is actually received
by Landlord for such purposes; provided such costs of repairs or other
work shall be paid by the parties in accordance with the provisions of
Sections 27 and 28 below;
(g) Other than any interest charges for capital
improvements referred to in Section 6.1.4 hereinabove, any interest or
payments on any financing for the Buildings or the Park, interest and
penalties incurred as a result of Landlord's late payment of any
invoice (provided that Tenant pays Tenant's Share of Operating
Expenses and Tax Expenses to Landlord when due as set forth herein),
and any bad debt loss, rent loss or reserves for same;
(h) Costs associated with the investigation and/or
remediation of Hazardous Materials (hereafter defined) present in, on
or about the Premises, the Buildings or the Park, unless such costs
and expenses are the responsibility of Tenant as provided in Section
29 of this Lease, in which event such costs and expenses shall be paid
solely by Tenant in accordance with the provisions of Section 29 of
this Lease;
(i) Costs of correcting defects in the initial design or
construction of the Shell Improvements or the repair or replacement of
any original materials and equipment as a result of such defects, as
long as such defects are covered by warranties from the contractors
performing such work and Landlord has actually received compensation
therefor; and
(j) Landlord's cost for the repairs and maintenance items
set forth in Section 11.3 below.
6.2 TAX EXPENSES: In addition to the Base Rent set forth in Section 3,
Tenant shall pay its share, which is defined on Page 1, of all real property
taxes applicable to the land and improvements included within the Lot on which
the Premises are situated and one hundred percent (100%) of all personal
property taxes now or hereafter assessed or levied against the Premises or
Tenant's personal property. The amount of Tenant's Share of Tax Expenses shall
be reviewed from time to time by Landlord and shall be subject to modification
by Landlord if there is a change in the rentable square footage of the Premises,
the Buildings and/or the Park. Tenant shall also pay one hundred percent (100%)
of any increase in real property taxes attributable, in Landlord's sole
discretion, to any and all alterations, Tenant Improvements or other
improvements of any kind, which are above standard improvements customarily
installed for similar buildings located within the Buildings or the Park (as
applicable), whatsoever placed in, on or about the Premises for the benefit of,
at the request
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of, or by Tenant. The term "Tax Expenses" shall mean and include, without
limitation, any form of tax and assessment (general, special, supplemental,
ordinary or extraordinary), commercial rental tax, payments under any
improvement bond or bonds, license fees, license tax, business license fee,
rental tax, transaction tax, levy, or penalty imposed by authority having the
direct or indirect power of tax (including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other improvement
district thereof) as against any legal or equitable interest of Landlord in the
Premises, the Buildings, the Lot or the Park, as against Landlord's right to
rent, or as against Landlord's business of leasing the Premises or the occupancy
of Tenant or any other tax, fee, or excise, however described, including, but
not limited to, any value added tax, or any tax imposed in substitution
(partially or totally) of any tax previously included within the definition of
real property taxes, or any additional tax the nature of which was previously
included within the definition of real property taxes. The term "Tax Expenses"
shall not include any (i) franchise, estate, inheritance, net income, or excess
profits tax imposed upon Landlord, or (ii) any interest or penalties resulting
solely from Landlord's failure to pay any Tax Expenses (excluding any failure on
the part of Landlord to so timely make such payments due to Tenant's failure to
timely make such payments to Landlord).
6.3 PAYMENT OF EXPENSES: Landlord shall estimate Tenant's Share of the
Operating Expenses and Tax Expenses for the calendar year in which the Lease
commences. Commencing on the Commencement Date, one-twelfth (1/12th) of this
estimated amount shall be paid by Tenant to Landlord, as Additional Rent, on the
first (1st) day of each month and throughout the remaining months of such
calendar year. Thereafter, Landlord may reasonably estimate such expenses as of
the beginning of each calendar year and Tenant shall pay one-twelfth (1/12th) of
such estimated amount as Additional Rent hereunder on the first day of each
month during such calendar year and for each ensuing calendar year throughout
the Term of this Lease. Tenant's obligation to pay Tenant's Share of Operating
Expenses and Tax Expenses shall survive the expiration or earlier termination of
this Lease.
6.4 ANNUAL RECONCILIATION: By June 30th of each calendar year, or as
soon thereafter as reasonably possible, Landlord shall endeavor to furnish
Tenant with an accounting prepared with reasonable detail of actual Operating
Expenses and Tax Expenses. Within thirty (30) days of Landlord's delivery of
such accounting, Tenant shall pay to Landlord the amount of any underpayment.
Notwithstanding the foregoing, failure by Landlord to give such accounting by
such date shall not constitute a waiver by Landlord of its right to collect any
of Tenant's underpayment at any time. Landlord shall credit the amount of any
overpayment by Tenant toward the next Base Rent falling due, or where the Term
of the Lease has expired, refund the amount of overpayment to Tenant. If the
Term of the Lease expires prior to the annual reconciliation of expenses
Landlord shall have the right to reasonably estimate Tenant's Share of such
expenses, and if Landlord determines that an underpayment is due, Tenant hereby
agrees to pay to Landlord the amount of such underpayment within thirty (30)
days after Landlord's delivery of a demand therefor. If Landlord reasonably
determines that an overpayment has been made by Tenant, Landlord shall refund
said overpayment to Tenant within thirty (30) days after Landlord has made such
determination. Notwithstanding the foregoing, failure of Landlord to accurately
estimate Tenant's Share of such expenses or to otherwise perform such
reconciliation of expenses, including without limitation, Landlord's failure to
make a written demand for any underpayment from Tenant, shall not constitute a
waiver of Landlord's right to collect any of Tenant's underpayment at any time
during the Term of the Lease during the one (1) year period following the last
day of the period to which such underpayment relates or at any time during the
one (1) year period following the expiration or earlier termination of this
Lease.
6.5 AUDIT: After delivery to Landlord of at least thirty (30) days
prior written notice, Tenant, at its sole cost and expense, shall have the right
to examine and/or audit the books and records evidencing such costs and expenses
for the previous one (1) calendar year, during Landlord's reasonable business
hours but not more frequently than once during any calendar year.
Notwithstanding the foregoing, Tenant may only audit the books and records of
Landlord with respect to the Premises and/or the Lease so long as Tenant fully
complies with all of the following requirements: (i) any audit by Tenant shall
be conducted by an accounting or audit firm or financial officer of Tenant; (ii)
any audit shall be conducted in Landlord's offices during reasonable business
hours, and after delivery to Landlord of at least thirty (30) days' prior
written notice; (iii) Tenant may only audit the books and records for the
previous one (1) year period in question and after the lapse of one (1) year
from the date on which Landlord delivers to Tenant any accounting or statement
regarding any rental payments to be made by Tenant under this Lease, Tenant
shall not have any right or ability to audit Landlord's books and records with
respect to such rental payments or charges; and (iv) if it is determined through
such audit that the amount of the expenses actually paid by Tenant to Landlord
for the period in question have not been overstated by an amount that is more
than seven percent (7%) of the aggregate of such expenses, then Tenant shall
immediately pay to Landlord, and reimburse Landlord for, the costs and expenses
incurred by Landlord in connection with such audit, including without
limitation, costs attributable to the time spent by Landlord's or Landlord's
property management company's staff in connection with such audit, as such costs
are reasonably determined by Landlord. Landlord and Tenant shall use their best
efforts to cooperate in such negotiations and to promptly resolve any
discrepancies between Landlord and Tenant in the accounting of such costs and
expenses.
7. UTILITIES: Utility Expenses, Common Area Utility Costs and all other sums or
charges set forth in this Section 7 are considered part of Additional Rent.
Tenant shall pay the cost of all water, sewer use, sewer discharge fees and
sewer connection fees, gas, heat, electricity, refuse pickup, janitorial
service, telephone and other utilities billed or metered separately to the
Premises and/or Tenant. Tenant shall also pay its share of any assessments or
charges for utility or similar purposes included within any tax bill for the Lot
on which the Premises are situated, including, without limitation, entitlement
fees related to Tenant's particular use of the
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Premises, allocation unit fees, and/or any similar fees or charges, and any
penalties related thereto to the extent any such penalties result from Tenant's
failure to so timely make such payments. For any such utility fees or use
charges that are not billed or metered separately to Tenant, Tenant shall pay to
Landlord, as Additional Rent, without prior notice or demand, on the
Commencement Date and thereafter on the first (1st) day of each month throughout
the balance of the Term of this Lease the amount which is attributable to
Tenant's use of the utilities or similar services, as reasonably estimated and
determined by Landlord based upon factors such as size of the Premises and
intensity of use of such utilities by Tenant such that Tenant shall pay the
portion of such charges reasonably consistent with Tenant's use of such
utilities and similar services ("Utility Expenses"). In addition, Tenant shall
pay to Landlord Tenant's Share, which is set forth on Page 1, as Additional
Rent, without prior notice or demand, on the Commencement Date and thereafter on
the first (1st) day of each month throughout the balance of the Term of this
Lease, of any Common Area utility costs, fees, charges or expenses ("Common Area
Utility Costs"). Tenant shall pay to Landlord one-twelfth (1/12th) of the
estimated amount of Tenant's Share of the Common Area Utility Costs in the same
manner and time periods as specified in Section 6.3 above and any reconciliation
thereof shall also be in the same manner as specified in Sections 6.3 and 6.4
above. The amount of Tenant's Share of Common Area Utility Costs shall be
reviewed from time to time by Landlord and shall be subject to modification by
Landlord if there is a change in the rentable square footage of the Premises,
the Buildings and/or the Park due to any casualty or condemnation of any portion
of the Premises. Tenant acknowledges that the Premises may become subject to the
rationing of utility services or restrictions on utility use as required by a
public utility company, governmental agency or other similar entity having
jurisdiction thereof. Notwithstanding any such rationing or restrictions on use
of any such utility services, Tenant acknowledges and agrees that its tenancy
and occupancy hereunder shall be subject to such rationing restrictions as may
be imposed upon Landlord, Tenant, the Premises, the Buildings or the Park, and
Tenant shall in no event be excused or relieved from any covenant or obligation
to be kept or performed by Tenant by reason of any such rationing or
restrictions. Tenant further agrees to timely and faithfully pay, prior to
delinquency, any amount, tax, charge, surcharge, assessment or imposition
levied, assessed or imposed upon the Premises, or Tenant's use and occupancy
thereof. Notwithstanding anything to the contrary contained herein, if due to
incidents, events or occurrences other than those arising from Tenant's or
Tenant's Representatives' negligent or intentional acts or omissions essential
utility services for the conduct of Tenant's operations in the Premises are
discontinued or interrupted for a consecutive period of one hundred eighty (180)
days or more, then such discontinuance or interruption of essential utility
services shall be considered to be a casualty and the provisions of Section 27
shall apply thereto.
8. LATE CHARGES: Any and all sums or charges set forth in this Section 8 are
considered part of Additional Rent. Tenant acknowledges that late payment (the
second day after Landlord's delivery of written notice that any sum has not been
paid when due or any time thereafter) by Tenant to Landlord of Base Rent,
Tenant's Share of Operating Expenses, Tax Expenses, Common Area Utility Costs,
and Utility Expenses or other sums due hereunder, 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 note secured by any encumbrance against
the Premises, and late charges and penalties due to the late payment of real
property taxes on the Premises. Therefore, if any installment of Rent or any
other sum due from Tenant is not received by Landlord within two (2) days after
Landlord's delivery of written notice that such sum is otherwise due, Tenant
shall promptly pay to Landlord all of the following, as applicable: (a) an
additional sum equal to seven percent (7%) of such delinquent amount as a late
charge for every month or portion thereof that such sums remain unpaid, and (b)
the amount of fifty dollars ($50) relating to checks for which there are not
sufficient funds; provided, however, the foregoing late charges shall only be
required to be paid by Tenant if Tenant has been late in making such payments
more than three (3) times during the Term of this Lease. If Tenant delivers to
Landlord a check for which there are not sufficient funds, Landlord may, at its
sole option, require Tenant to replace such check with a cashier's check for the
amount of such check and all other charges payable hereunder. The parties agree
that this late charge and the other charges referenced above represent a fair
and reasonable estimate of the costs that Landlord will incur by reason of late
payment by Tenant. Acceptance of any late charge or other charges shall not
constitute a waiver by Landlord of Tenant's default with respect to the
delinquent amount, nor prevent Landlord from exercising any of the other rights
and remedies available to Landlord for any other breach of Tenant under this
Lease. If a late charge or other charge becomes payable for any three (3)
installments of Rent within any twelve (12) month period, then Landlord, at
Landlord's sole option, can either require the Rent be paid quarterly in
advance, or be paid monthly in advance by cashier's check or by electronic funds
transfer.
9. USE OF PREMISES:
9.1 COMPLIANCE WITH LAWS, RECORDED MATTERS, AND RULES AND REGULATIONS:
The Premises are to be used solely for the uses stated on Page 1 and for no
other uses or purposes without Landlord's prior written consent, which consent
shall not be unreasonably withheld or delayed so long as the proposed use (i)
does not involve the use of Hazardous Materials other than as expressly
permitted under the provisions of Section 29 below, (ii) does not require any
additional parking in excess of the parking spaces already licensed to Tenant
pursuant to the provisions of Section 24 of this Lease, and (iii) is compatible
and consistent with the other uses then being made in the Park and in other
similar type of buildings in the vicinity of the Park, as reasonably determined
by Landlord. The use of the Premises by Tenant and its employees,
representatives, agents, invitees, licensees, subtenants, customers or
contractors (collectively, "Tenant's Representatives") shall be subject to, and
at all times in compliance with, (a) any and all applicable laws, ordinances,
statutes, orders and regulations as same exist from time to time (collectively,
the "Laws"), (b) any and all documents, matters or instruments,
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including without limitation, any declarations of covenants, conditions and
restrictions, and any supplements thereto, each of which has been or hereafter
is recorded in any official or public records with respect to the Premises, the
Buildings, the Lot and/or the Park, or any portion thereof (collectively, the
"Recorded Matters"), provided, if any of the Recorded Matters which are
subsequently recorded after the Lease Date materially affect Tenant's rights and
obligations under this Lease (excluding any liens related to any mortgage, deed
of trust or similar type of security interest, and any easements, liens and
other recorded matters required or imposed in connection with the development
and construction of the Buildings and the other improvements to be made as part
of the Park), then Landlord shall obtain Tenant's prior written consent to same,
which consent shall not be unreasonably withheld or delayed, and (c) any and all
rules and regulations set forth in Exhibit C, attached to and made a part of
this Lease, and any other reasonable rules and regulations promulgated by
Landlord now or hereafter enacted relating to parking and the operation of the
Premises, the Buildings and the Park, provided same are enforced on a
non-discriminatory basis (collectively, the "Rules and Regulations"). Tenant
agrees to, and does hereby, assume full and complete responsibility to ensure
that the Premises are adequate to fully meet the needs and requirements of
Tenant's intended operations of its business within the Premises, and Tenant's
use of the Premises and that same are in compliance with all applicable Laws
throughout the Term of this Lease. Additionally, Tenant shall be solely
responsible for the payment of all costs, fees and expenses associated with any
modifications to the Premises, Buildings, the Common Areas and/or the Park
occasioned by the enactment of, or changes to, any Laws arising from Tenant's
particular use of, or alterations to, the Premises regardless of when such Laws
become effective.
9.2 PROHIBITION ON USE: Tenant shall not use the Premises or permit
anything to be done in or about the Premises nor keep or bring anything therein
which will in any way conflict with any of the requirements of the Board of Fire
Underwriters or similar body now or hereafter constituted or in any way increase
the existing rate of or affect any policy of fire or other insurance upon the
Buildings or any of its contents, or cause a cancellation of any insurance
policy. No auctions may be held or otherwise conducted in, on or about the
Premises, the Buildings, the Lot or the Park without Landlord's written consent
thereto, which consent may be given or withheld in Landlord's sole discretion.
Tenant shall not do or permit anything to be done in or about the Premises which
will in any way obstruct or interfere with the rights of Landlord, other tenants
or occupants of the Buildings, other buildings in the Park, or other persons or
businesses in the area, or injure or annoy other tenants or use or allow the
Premises to be used for any unlawful or objectionable purpose, as determined by
Landlord, in its reasonable discretion, for the benefit, quiet enjoyment and use
by Landlord and all other tenants or occupants of the Buildings or other
buildings in the Park; nor shall Tenant cause, maintain or permit any private or
public nuisance in, on or about the Premises, Buildings, Park and/or the Common
Areas, including, but not limited to, any offensive odors, noises, fumes or
vibrations. Tenant shall not damage or deface or otherwise commit or suffer to
be committed any waste in, upon or about the Premises. Except as may be
permitted under applicable Laws and as Landlord may otherwise approve in
writing, Tenant shall not place or store, nor permit any other person or entity
to place or store, any property, equipment, materials, supplies, personal
property or any other items or goods outside of the Premises for any period of
time except in outside enclosures that are fully fenced and screened in
compliance with all Recorded Matters and Laws, and which enclosures are designed
for such purpose, and which have been approved by Landlord for such use. Other
than seeing-eye dogs for the blind, Tenant shall not permit any animals,
including, but not limited to, any household pets, to be brought or kept in or
about the Premises. Tenant shall place no loads upon the floors, walls, or
ceilings in excess of the maximum designed load permitted by the applicable
Uniform Building Code or which may damage the Buildings or outside areas; nor
place any harmful liquids in the drainage systems; nor dump or store waste
materials, refuse or other such materials, or allow such to remain outside the
Building area, except for any non-hazardous or non-harmful materials which may
be stored in refuse dumpsters or in any enclosed trash areas provided. Tenant
shall honor the terms of all Recorded Matters relating to the Premises, the
Buildings, the Lot and/or the Park. Tenant shall honor the Rules and
Regulations. If Tenant fails to comply with such Laws, Recorded Matters, Rules
and Regulations or the provisions of this Lease, Landlord shall have the right
to collect from Tenant Landlord's costs and expenses, if any, to cure any of
such failures of Tenant, if Landlord, at its sole option, elects to undertake
such cure.
10. ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES:
10.1 ALTERATIONS AND ADDITIONS: Tenant shall be permitted to make, at
its sole cost and expense, non-structural alterations and additions to the
Premises without obtaining Landlord's prior written consent provided the cost of
same does not exceed $75,000 cumulatively in any twelve-month period (the
"Permitted Improvements"). Tenant, however, shall first notify Landlord of such
alterations or additions comprising the Permitted Improvements so that Landlord
may post a Notice of Non-Responsibility on the Premises. Within ten (10)
business days of Landlord's receipt of Tenant's written notice of any item
comprising the Permitted Improvements, Landlord shall notify Tenant whether or
not Landlord will require Tenant to remove such item(s) from the Premises upon
the expiration or earlier termination of this Lease. Except for the Permitted
Improvements, Tenant shall not install any signs, fixtures (excluding trade
fixtures), improvements, nor make or permit any other alterations or additions
to the Premises without the prior written consent of Landlord. If any such
alteration or addition is expressly permitted by Landlord, including without
limitation, the Permitted Improvements, Tenant shall deliver at least twenty
(20) days prior notice to Landlord, from the date Tenant intends to commence
construction, sufficient to enable Landlord to post a Notice of
Non-Responsibility. At the time that Landlord notifies Tenant of its approval or
disapproval of any such request, Landlord shall advise Tenant in writing of
those fixtures (excluding trade fixtures), improvements, alterations and
additions which Landlord will require Tenant to remove upon the expiration or
earlier termination of the Lease. In all events, Tenant shall obtain all permits
or other governmental approvals prior to commencing any of such work and deliver
a copy of same to Landlord. All alterations and additions shall be installed by
a licensed contractor
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reasonably approved by Landlord (except with regard to any Permitted
Improvements the licensed contractor employed by Tenant therefor shall not be
subject to Landlord's prior approval), at Tenant's sole expense in compliance
with all applicable Laws (including, but not limited to, the ADA as defined
herein), Recorded Matters, and Rules and Regulations. Tenant shall keep the
Premises and the property on which the Premises are situated free from any liens
arising out of any work performed, materials furnished or obligations incurred
by or on behalf of Tenant. All alterations and additions performed by Tenant are
subject to Tenant obtaining all necessary building permits and shall be
performed in a first-class workmanlike manner by licensed and insured
contractors. As a condition to Landlord's consent to the installation of any
fixtures, additions or other improvements the cost of which exceeds $100,000 and
solely in the event that there has been a material change in the financial
condition of Tenant such that Tenant's net worth has fallen below
$100,000,000.00, Landlord may require Tenant to post and obtain a completion and
indemnity bond or a letter of credit in form reasonably acceptable to Landlord
for up to one hundred ten percent (110%) of the cost of the work. With respect
to the Tenant Improvements, except for any cafeteria and related items that are
part of the Tenant Improvements for which Landlord will require Tenant, at its
sole cost and expense, to demolish and/or remove from the Premises upon the
expiration or earlier termination of this Lease, Landlord shall not require
Tenant to demolish and/or remove any other items comprising the Tenant
Improvements from the Premises upon the expiration or earlier termination of
this Lease.
10.2 SURRENDER OF PREMISES: Upon the termination of this Lease,
whether by forfeiture, lapse of time or otherwise, or upon the termination of
Tenant's right to possession of the Premises, Tenant will at once surrender and
deliver up the Premises, together with the fixtures (other than trade fixtures),
furnishings, additions and improvements which Landlord has not notified Tenant,
in writing, that Landlord will require Tenant to remove (including without
limitation, any items comprising the Tenant Improvements), to Landlord in good
condition and repair subject to Tenant's compliance with its obligations under
Sections 9, 29 and 37 hereof, including, but not limited to, replacing all light
bulbs and ballasts not in good working condition, except for reasonable wear and
tear, casualty damage and repairs which are Landlord's obligations pursuant to
the provisions of Sections 11.2 and 11.3 below. Reasonable wear and tear shall
not include any damage or deterioration to the floors of the Premises arising
from the use of forklifts in, on or about the Premises (including, without
limitation, any marks or stains of any portion of the floors), and any damage or
deterioration that would have been prevented by proper maintenance by Tenant or
Tenant otherwise performing all of its obligations under this Lease. Upon such
termination of this Lease, Tenant shall remove any cafeteria and related items
that are part of the Tenant Improvements, all tenant signage, trade fixtures,
furniture, furnishings, equipment, personal property, additions, and such other
improvements Landlord requests, in writing, at the time of Landlord's delivery
of its consent to such installation, that Tenant remove some or all of such
additions or improvements installed by, or on behalf of Tenant or situated in or
about the Premises; provided, however, such requirement is reasonably based upon
the nature and type of additions, improvements or alterations being
substantially different than that improved or altered thereby. Tenant shall
repair any damage caused by the installation or removal of any cafeteria and
related items that are part of the Tenant Improvements, and such signs, trade
fixtures, furniture, furnishings, fixtures (other than trade fixtures),
equipment, personal property, additions and improvements which are to be removed
from the Premises by Tenant hereunder. Tenant shall ensure that the removal of
such items and the repair of the Premises will be completed prior to such
termination of this Lease.
11. REPAIRS AND MAINTENANCE:
11.1 TENANT'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for those
portions of the Buildings to be maintained by Landlord as provided in Sections
11.2 and 11.3 below, Tenant shall, at Tenant's sole cost and expense, keep and
maintain the interior non-structural portions of the Premises and the adjacent
dock and staging areas (including, without limitation, any portion of the Common
Areas used by Tenant or Tenant's Representatives) in good, clean and safe
condition and repair to the reasonable satisfaction of Landlord, reasonable wear
and tear and casualty excepted, including, but not limited to, repairing any
damage caused by Tenant or Tenant's Representatives and replacing any property
so damaged by Tenant or Tenant's Representatives. Without limiting the
generality of the foregoing, Tenant shall be solely responsible for maintaining,
repairing and replacing (a) all mechanical systems, heating, ventilation and air
conditioning systems serving the Premises, (b) all plumbing, electrical wiring
and equipment serving the Premises, (c) all interior lighting (including,
without limitation, light bulbs and/or ballasts) and exterior lighting serving
the Premises or immediately adjacent to the Premises, (d) all interior glass,
windows, window frames, window casements, skylights, interior and exterior
doors, door frames and door closers, (e) all roll-up doors, ramps and dock
equipment, including without limitation, dock bumpers, dock plates, dock seals,
dock levelers and dock lights, (f) all tenant signage, (g) lifts for disabled
persons serving the Premises, (h) sprinkler systems, fire protection systems and
security systems, (i) all partitions, fixtures, equipment, interior painting,
and interior walls and floors of the Premises and every part thereof (including,
without limitation, any demising walls contiguous to any portion of the
Premises), and (j) all interior lobbies and any mezzanines.
11.2 REIMBURSABLE REPAIRS AND MAINTENANCE OBLIGATIONS: Subject to the
provisions of Sections 6 and 9 of this Lease and except for (i) the obligations
of Tenant set forth in Section 11.1 above, (ii) the repairs rendered necessary
by the intentional or negligent acts or omissions of Tenant or Tenant's
Representatives, and (iii) the obligations of Landlord set forth in Section 11.3
below, Landlord agrees, at Landlord's expense, subject to reimbursement pursuant
to Section 6 above, to keep in good repair the Common Areas, plumbing and
mechanical systems exterior to the Premises, the roof, roof membranes, exterior
walls of the Buildings, signage (exclusive of tenant signage), and exterior
electrical wiring and equipment, exterior lighting, exterior glass, exterior
doors/entrances and door closers, exterior window casements, exterior painting
of the Buildings
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(exclusive of the Premises), and underground utility and sewer pipes outside the
exterior walls of the Buildings. For purposes of this Section 11.2, the term
"exterior" shall mean exterior to, and not serving the Premises. Unless
otherwise notified by Landlord, in writing, that Landlord has elected to procure
and maintain the following described contract(s), Tenant shall procure and
maintain (a) the heating, ventilation and air conditioning systems preventative
maintenance and repair contract(s); such contract(s) to be on a quarterly basis,
as reasonably determined by Landlord, and (b) the fire and sprinkler protection
services and preventative maintenance and repair contract(s) (including, without
limitation, monitoring services); such contract(s) to be on a quarterly basis.
Landlord reserves the right, but without the obligation to do so, to procure and
maintain, on similar terms with the foregoing requirements, (i) the heating,
ventilation and air conditioning systems preventative maintenance and repair
contract(s), and/or (ii) the fire and sprinkler protection services and
preventative maintenance and repair contract(s) (including, without limitation,
monitoring services). If Landlord so elects to procure and maintain any such
contract(s), Tenant will reimburse Landlord for the cost thereof in accordance
with the provisions of Section 6 above. If Tenant procures and maintains any of
such contract(s), Tenant will promptly deliver to Landlord a true and complete
copy of each such contract and any and all renewals or extensions thereof, and
each service report or other summary received by Tenant pursuant to or in
connection with such contract(s).
11.3 LANDLORD'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for
repairs rendered necessary by the intentional or negligent acts or omissions of
Tenant or Tenant's Representatives, Landlord agrees, at Landlord's sole cost and
expense, to (a) keep in good repair the structural portions of the floors,
foundations and exterior perimeter walls of the Buildings (exclusive of glass
and exterior doors), and (b) replace and repair the structural portions of the
roof of the Buildings (excluding the roof membrane) as, and when, Landlord
determines such replacement to be necessary in Landlord's reasonable discretion,
all of the foregoing to be performed in such a manner as is substantially
consistent with maintenance and repair of comparable buildings of similar type
and nature of construction in the San Jose area.
11.4 TENANT'S FAILURE TO PERFORM REPAIRS AND MAINTENANCE OBLIGATIONS:
Except for normal maintenance and repair of the items described above, Tenant
shall have no right of access to or right to install any device on the roof of
the Buildings nor make any penetrations of the roof of the Buildings without the
express prior written consent of Landlord. If Tenant refuses or neglects to
repair and maintain the Premises and the adjacent areas properly as required
herein and to the reasonable satisfaction of Landlord, Landlord may, but without
obligation to do so, at any time make such repairs and/or maintenance without
Landlord having any liability to Tenant for any loss or damage that may accrue
to Tenant's merchandise, fixtures or other property, or to Tenant's business by
reason thereof, except to the extent any damage is caused by the willful
misconduct or negligence of Landlord or its authorized agents and
representatives. In the event Landlord makes such repairs and/or maintenance,
upon completion thereof Tenant shall pay to Landlord, as additional rent, the
Landlord's costs for making such repairs and/or maintenance, plus ten percent
(10%) for overhead, upon presentation of a bill therefor. The obligations of
Tenant hereunder shall survive the expiration of the Term of this Lease or the
earlier termination thereof. Subject to the provisions of Section 41 hereof,
Tenant hereby waives any right to repair at the expense of Landlord under any
applicable Laws now or hereafter in effect respecting the Premises.
12. INSURANCE:
12.1 TYPES OF INSURANCE: Tenant shall maintain in full force and
effect at all times during the Term of this Lease, at Tenant's sole cost and
expense, for the protection of Tenant and Landlord, as their interests may
appear, policies of insurance issued by a carrier or carriers with an A.M.
Best's rating (or similar publication) of A-:VIII or better which afford the
following coverages: (i) worker's compensation: statutory limits; (ii)
employer's liability, as required by law, with a minimum limit of $100,000 per
employee and $500,000 per occurrence; (iii) commercial general liability
insurance (occurrence form) providing coverage against claims for bodily injury
and property damage occurring in, on or about the Premises arising out of
Tenant's and Tenant's Representatives' use and/or occupancy of the Premises.
Such insurance shall include coverage for blanket contractual liability, fire
damage, premises, personal injury, completed operations, and products liability.
Such insurance shall have a combined single limit of not less than One Million
Dollars ($1,000,000) per occurrence with at least a Three Million Dollar
($3,000,000) aggregate limit. If the aggregate limit is exhausted, then so long
as Tenant satisfies the requirements of Section 12.5 below Tenant shall be
deemed to have self-insured all of such risks. If the aggregate limit is
exhausted but Tenant does not satisfy the requirements of Section 12.5 below,
Tenant shall provide for restoration of the aggregate limit, as reasonably
determined by Landlord; (iv) comprehensive automobile liability insurance: a
combined single limit of not less than $2,000,000 per occurrence and insuring
Tenant against liability for claims arising out of the ownership, maintenance,
or use of any owned, hired or non-owned automobiles; (v) "all risk" or "special
purpose" property insurance, including without limitation, sprinkler leakage,
boiler and machinery comprehensive form, if applicable, covering damage to or
loss of any personal property, trade fixtures, inventory, fixtures and equipment
located in, on or about the Premises, and in addition, coverage for flood, and
business interruption of Tenant, together with, if the property of Tenant's
invitees is to be kept in the Premises, warehouser's legal liability or bailee
customers insurance for the full replacement cost of the property belonging to
invitees and located in the Premises. Such insurance shall be written on a
replacement cost basis (without deduction for depreciation) in an amount equal
to one hundred percent (100%) of the full replacement value of the aggregate of
the items referred to in this subparagraph (v); and (vi) such other insurance as
Landlord deems reasonably necessary and prudent or as may otherwise be required
by any of Landlord's lenders.
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12.2 INSURANCE POLICIES: Insurance required to be maintained by Tenant
shall be written by companies (i) licensed to do business in the State of
California, (ii) domiciled in the United States of America, and (iii) having a
"General Policyholders Rating" of at least A-:VIII as set forth in the most
current issue of "A.M. Best's Rating Guides" or similar publication. Any
deductible amounts under any of the insurance policies actually procured by
Tenant and as required hereunder is not in substitution of the limits of
insurance coverage which must be maintained by Tenant, rather such deductibles
are Tenant's self-insured retention for which Tenant shall be wholly
responsible. Tenant shall deliver to Landlord certificates of insurance together
with a true and complete copy of any waiver of subrogation endorsement required
herein for the insurance required to be maintained by Tenant hereunder at the
time of execution of this Lease by Tenant. If at any time Tenant is in default
of its obligations under this Lease beyond any applicable cure periods, Tenant
will deliver to Landlord a copy of any other endorsements to the insurance
policies obtained by Tenant upon Landlord's request therefor. Tenant shall, at
least five (5) days prior to expiration of each policy, furnish Landlord with
certificates of renewal or "binders" thereof. Each certificate shall expressly
provide that such policies shall not be cancelable or otherwise subject to
material reduction of coverage except after thirty (30) days prior written
notice to the parties named as additional insureds as required in this Lease
(except for cancellation for nonpayment of premium, in which event cancellation
shall not take effect until at least ten (10) days' notice has been given to
Landlord), as such certificates are reasonably acceptable to the insurers
issuing such policies and as is customarily provided to landlords in the general
vicinity of the Premises. Tenant shall have the right to provide insurance
coverage which it is obligated to carry pursuant to the terms of this Lease
under a blanket insurance policy.
12.3 ADDITIONAL INSUREDS AND COVERAGE: Landlord, any property
management company and/or agent of Landlord for the Premises, the Buildings, the
Lot or the Park, and any lender(s) of Landlord having a lien against the
Premises, the Buildings, the Lot or the Park shall be named as additional
insureds under all of the policies required in Section 12.1(iii) above, as each
of such parties' interests may appear. Additionally, such policies shall provide
for severability of interest. All insurance to be maintained by Tenant shall,
except for workers' compensation and employer's liability insurance, be primary,
without right of contribution from insurance maintained by Landlord. The limits
of insurance maintained by Tenant shall not limit Tenant's liability under this
Lease. It is the parties' intention that the insurance to be procured and
maintained by Tenant as required herein shall provide coverage for damage or
injury arising from or related to Tenant's operations of its business and/or
Tenant's or Tenant's Representatives' use of the Premises and/or any of the
areas within the Park, whether such events occur within the Premises (as
described in Exhibit A hereto) or in any other areas of the Park. It is not
contemplated or anticipated by the parties that the aforementioned risks of loss
be borne by Landlord's insurance carriers, rather it is contemplated and
anticipated by Landlord and Tenant that such risks of loss be borne by Tenant's
insurance carriers pursuant to the insurance policies procured and maintained by
Tenant as required herein, except to the extent of Landlord's or its authorized
representatives' negligence or willful misconduct.
12.4 FAILURE OF TENANT TO PURCHASE AND MAINTAIN INSURANCE: Subject to
Tenant's ability to self-insure such risks in accordance with the provisions of
Section 12.5 below, in the event Tenant does not purchase the insurance required
in this Lease or keep the same in full force and effect throughout the Term of
this Lease (including any renewals or extensions), Landlord may, but without
obligation to do so, purchase the necessary insurance and pay the premiums
therefor. If Landlord so elects to purchase such insurance, Tenant shall
promptly pay to Landlord as Additional Rent, the amount so paid by Landlord,
upon Landlord's demand therefor. In addition, Landlord may recover from Tenant
and Tenant agrees to pay, as Additional Rent, any and all damages which Landlord
may sustain by reason of Tenant's failure to so obtain and maintain such
insurance. If Tenant fails to maintain any insurance required in this Lease or
otherwise fails to comply with the provisions of Section 12.5 below regarding
Tenant's ability to self-insure such risks, Tenant shall be liable for all
losses, damages and costs resulting from such failure.
12.5 TENANT'S RIGHT TO SELF-INSURE: Notwithstanding anything to the
contrary contained herein, only with respect to the Tenant named herein as of
the Lease Date and provided that said Tenant has and maintains a net worth in
excess of One Hundred Million Dollars ($100,000,000.00), such originally named
Tenant may self-insure the risks contemplated in this Section 12 to the extent
that such self-insurance is permitted by all applicable Laws and provided
further that Tenant shall be fully and completely responsible and liable, at its
sole cost and expense, (1) to fully repair, restore, and replace any and all
items described above which may be damaged due to such risks contemplated
herein, (2) for all injuries to persons or property for which such risks would
otherwise have been insured against under any of the policies described above,
(3) for any losses experienced by Tenant or in Tenant's business which would
have otherwise been covered by business interruption insurance, and (4) for any
and all claims, damages, losses and other liabilities incurred by, or made
against, Tenant, Landlord, Landlord's property management company and/or lenders
arising from Tenant's election to self-insure the risks contemplated in this
Section 12.5, including without limitation, any and all costs of defense,
litigation or other similar proceeding. If the Tenant named herein as of the
Lease Date does so elect to self-insure such risks, then in lieu of delivering
to Landlord a certificate of insurance, Tenant shall deliver to Landlord
(annually) a letter certified by an authorized officer of its company that such
risks are being self-insured and that Tenant has complied with the financial
criteria set forth herein, and such letter shall also contain such other
information as Landlord's lender(s) may reasonably require (the "Self-Insurance
Certificate").
13. WAIVER OF SUBROGATION: Landlord and Tenant hereby mutually waive their
respective rights of recovery against each other for any loss of, or damage to,
either parties' property to the extent that such loss or damage is insured by an
insurance policy required to be in effect at the time of such loss or damage.
Each party shall obtain any special endorsements, if required by its insurer
whereby the insurer waives its rights of subrogation
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against the other party. This provision is intended to waive fully, and for the
benefit of the parties hereto, any rights and/or claims which might give rise to
a right of subrogation in favor of any insurance carrier. The coverage obtained
by Tenant pursuant to Section 12 of this Lease shall include, without
limitation, a waiver of subrogation endorsement attached to the certificate of
insurance. The provisions of this Section 13 shall not apply in those instances
in which such waiver of subrogation would invalidate such insurance coverage or
would cause either party's insurance coverage to be voided or otherwise
uncollectible.
14. LIMITATION OF LIABILITY AND INDEMNITY: Except to the extent of damage
resulting from the negligence or willful misconduct of Landlord or its
authorized representatives, Tenant agrees to protect, defend (with counsel
acceptable to Landlord) and hold Landlord and Landlord's lender(s), members,
partners, employees, representatives, legal representatives, successors and
assigns (collectively, the "Indemnitees") harmless and indemnify the Indemnitees
from and against all liabilities, damages, claims, losses, judgments, charges
and expenses (including reasonable attorneys' fees, costs of court and expenses
necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to, directly
or indirectly, (i) Tenant's or Tenant's Representatives' use of the Premises,
Buildings and/or the Park, (ii) the failure by Tenant to perform its obligations
under this Lease or any breach on the part of Tenant of any of the provisions of
this Lease, or (iii) the conduct of Tenant's business, or from any activity,
work or thing done, permitted or suffered by Tenant in or about the Premises,
including, but not limited to, any liability for injury to person or property of
Tenant, Tenant's Representatives, or third party persons. Tenant agrees that the
obligations of Tenant herein shall survive the expiration or earlier termination
of this Lease.
Except to the extent of damage resulting from the negligence or
willful misconduct of Landlord or its authorized representatives, Landlord shall
not be liable to Tenant for any loss or damage to Tenant or Tenant's property,
for any injury to or loss of Tenant's business or for any damage or injury to
any person from any cause whatsoever, including, but not limited to, any acts,
errors or omissions by or on behalf of any other tenants or occupants of the
Buildings and/or the Park. Tenant shall not, in any event or circumstance, be
permitted to offset or otherwise credit against any payments of Rent required
herein for matters for which Landlord may be liable hereunder. Landlord and its
authorized representatives shall not be liable for any interference with light
or air, or, subject to the provisions of Section 5 above, for any latent defect
in the Premises or the Buildings. To the fullest extent permitted by law and
except to the extent of damage resulting from the negligence or willful
misconduct of Landlord or its authorized representatives, Tenant agrees that
neither Landlord nor any of Landlord's lender(s), members, partners, employees,
representatives, legal representatives, successors and assigns shall at any time
or to any extent whatsoever be liable, responsible or in any way accountable for
any loss, liability, injury, death or damage to persons or property which at any
time may be suffered or sustained by Tenant or by any person(s) whomsoever who
may at any time be using, occupying or visiting the Premises, the Buildings or
the Park.
Except to the extent of damage resulting from the negligence or
willful misconduct of Tenant or any of Tenant's Representatives, Landlord agrees
to protect, defend (with counsel acceptable to Tenant) and hold Tenant and
Tenant's employees and representatives (collectively, the "Tenant Indemnitees")
harmless and indemnify the Tenant Indemnitees from and against all liabilities,
damages, claims, losses, judgments, charges and expenses (including reasonable
attorneys' fees, costs of court and expenses necessary in the prosecution or
defense of any litigation including the enforcement of this provision) resulting
from Landlord's or its authorized agents' negligence or willful misconduct.
Landlord agrees that the obligations of Landlord herein shall survive the
expiration or earlier termination of this Lease.
15. ASSIGNMENT AND SUBLEASING:
15.1 PROHIBITION: Except as expressly set forth herein with respect to
a Related Entity, Tenant shall not assign, mortgage, hypothecate, encumber,
grant any license or concession, pledge or otherwise transfer this Lease
(collectively, "assignment"), in whole or in part, whether voluntarily or
involuntarily or by operation of law, nor sublet or permit occupancy by any
person other than Tenant of all or any portion of the Premises without first
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Tenant hereby agrees that Landlord may withhold its
consent to any proposed sublease or assignment if the proposed sublessee or
assignee or its business is subject to compliance with additional requirements
of the ADA (defined below) beyond those requirements which are applicable to
Tenant, unless the proposed sublessee or assignee shall (a) first deliver plans
and specifications for complying with such additional requirements and obtain
Landlord's written consent thereto, which consent shall not be unreasonably
withheld, and (b) comply with all Landlord's conditions for or contained in such
consent, including without limitation, requirements for security to assure the
lien-free completion of such improvements. If Tenant seeks to sublet or assign
all or any portion of the Premises, Tenant shall deliver to Landlord at least
thirty (30) days prior to the proposed commencement of the sublease or
assignment (the "Proposed Effective Date") the following: (i) the name of the
proposed assignee or sublessee; (ii) such information as to such assignee's or
sublessee's financial responsibility and standing as Landlord may reasonably
require; and (iii) the aforementioned plans and specifications, if any. Within
ten (10) days after Landlord's receipt of a written request from Tenant that
Tenant seeks to sublet or assign all or any portion of the Premises, Landlord
shall deliver to Tenant a copy of Landlord's standard form of sublease or
assignment agreement (as applicable), which instrument shall be utilized for
each proposed sublease or assignment (as applicable), and such instrument shall
include a provision whereby the assignee or sublessee assumes all of Tenant's
obligations hereunder, but with respect to a sublease only, to the extent
applicable to the subleased portion of the Premises, and agrees to be bound by
the terms hereof. As Additional Rent hereunder, Tenant shall pay to Landlord a
fee in the amount of five hundred dollars ($500) plus Tenant
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shall reimburse Landlord for actual legal and other expenses incurred by
Landlord in connection with any actual or proposed assignment or subletting.
Notwithstanding anything to the contrary contained herein, if (I) the Term of
the First Lease has expired or the First Lease has been earlier terminated for
any reason whatsoever, in whole or in part, and (II) Tenant proposes to sublease
or assign this Lease to a party other than a Related Entity, then for the time
period during which there is any vacancy in Building A and/or Building B (as
referred to in the First Lease) Landlord shall have the right, to be exercised
by giving written notice to Tenant, to either (1) recapture the space described
in the proposed sublease or assignment, or (2) consent to such proposed sublease
or assignment, in which event Tenant shall pay Landlord monthly, as Additional
Rent, at the same time as the monthly installments of Rent are payable
hereunder, fifty percent (50%) of the excess of each such payment of rent or
other consideration in excess of the Rent called for hereunder, after deduction
of the actual brokerage commission (if any) paid by Tenant in connection with
such proposed sublease or assignment, where the rent or other consideration
provided for in the proposed sublease or assignment either initially or over the
term of the sublease or assignment exceeds the Rent or pro rata portion of the
Rent, as the case may be, for such space reserved in the Lease. If such
recapture notice is given, it shall serve to terminate this Lease with respect
to the proposed sublease or assignment space, or, if the proposed sublease or
assignment space covers all the Premises, it shall serve to terminate the entire
term of this Lease in either case, as of the Proposed Effective Date, with
respect to such space. However, no termination of this Lease with respect to
part or all of the Premises shall become effective without the prior written
consent, where necessary, of the holder of each deed of trust encumbering the
Premises or any part thereof. If this Lease is terminated pursuant to the
foregoing with respect to less than the entire Premises, the Rent shall be
adjusted on the basis of the proportion of square feet retained by Tenant to the
square feet originally demised and this Lease as so amended shall continue
thereafter in full force and effect. Each permitted assignee or sublessee,
including without limitation, a Related Entity, shall assume and be deemed to
assume this Lease and shall be and remain liable jointly and severally with
Tenant for payment of Rent and for the due performance of, and compliance with
all the terms, covenants, conditions and agreements herein contained on Tenant's
part to be performed or complied with, for the term of this Lease. No assignment
or subletting shall affect the continuing primary liability of Tenant (which,
following assignment, shall be joint and several with the assignee), and Tenant
shall not be released from performing any of the terms, covenants and conditions
of this Lease. Tenant hereby acknowledges and agrees that it understands that
Landlord's accounting department may process and accept Rent payments without
verifying that such payments are being made by Tenant, a permitted sublessee or
a permitted assignee in accordance with the provisions of this Lease. Although
such payments may be processed and accepted by such accounting department
personnel, any and all actions or omissions by the personnel of Landlord's
accounting department shall not be considered as acceptance by Landlord of any
proposed assignee or sublessee nor shall such actions or omissions be deemed to
be a substitute for the requirement that Tenant obtain Landlord's prior written
consent to any such subletting or assignment, and any such actions or omissions
by the personnel of Landlord's accounting department shall not be considered as
a voluntary relinquishment by Landlord of any of its rights hereunder nor shall
any voluntary relinquishment of such rights be inferred therefrom. For purposes
hereof, and except with respect to a Related Entity, in the event Tenant is a
corporation, partnership, joint venture, trust or other entity other than a
natural person, any change in the direct or indirect ownership of Tenant
(whether pursuant to one or more transfers other than publicly traded stock
which does not confer upon any party or parties control over Tenant) which
results in a change of more than fifty percent (50%) in the direct or indirect
ownership of Tenant shall be deemed to be an assignment within the meaning of
this Section 15 and shall be subject to all the provisions hereof. Except for a
permissible assignment to a Related Entity, any and all options, first rights of
refusal, tenant improvement allowances and other similar rights granted to
Tenant in this Lease, if any, shall not be assignable by Tenant unless expressly
authorized in writing by Landlord, at Landlord's reasonable discretion.
Notwithstanding anything to the contrary contained herein, so long as Tenant
delivers to Landlord (x) at least fifteen (15) business days prior written
notice of its intention to assign or sublease the Premises to any Related
Entity, which notice shall set forth the name of the Related Entity, (y) a copy
of the proposed agreement pursuant to which such assignment or sublease shall be
effectuated, and (z) such other information concerning the Related Entity as
Landlord may reasonably require, including without limitation, information
regarding any change in the proposed use of any portion of the Premises and any
financial information with respect to such Related Entity, and so long as
Landlord approves, in writing, of any change in the proposed use of the subject
portion of the Premises, then Tenant may assign this Lease or sublease any
portion of the Premises (X) to any Related Entity, or (Y) in connection with any
merger, consolidation or sale of substantially all of the assets of Tenant,
without having to obtain the prior written consent of Landlord thereto. For
purposes of this Lease the term "Related Entity" shall mean and refer to any
corporation or entity which controls, is controlled by or is under common
control with Tenant, as all of such terms are customarily used in the industry,
and with an equal or greater net worth as Tenant has as of the proposed transfer
date.
15.2 EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION:
Notwithstanding anything to the contrary contained herein, the provisions of
this Section 15.2 are subject to the provisions of Section 15.1 above and in the
event of any conflict between such provisions, the terms and provisions of
Section 15.1 hereof shall control and prevail. During the initial term of this
Lease only, in the event of any sublease or assignment of all or any portion of
the Premises to a party other than a Related Entity, which sublease or
assignment only relates to the initial term of this Lease and is expressly
approved by Landlord, and where the rent or other consideration provided for in
the sublease or assignment either initially or over the term of the sublease or
assignment exceeds the Rent or pro rata portion of the Rent, as the case may be,
for such space reserved in the Lease, Tenant shall pay the Landlord monthly, as
Additional Rent, at the same time as the monthly installments of Rent are
payable hereunder, fifty percent (50%) of the excess of each such payment of
rent or other consideration in excess of the Rent called for hereunder, after
deduction of the actual brokerage commission (if any) paid by Tenant in
connection with such proposed sublease or assignment. During any renewal or
option terms of this Lease, in the event of any sublease or assignment of all or
any portion of the Premises to a party other than a Related Entity, which
sublease or assignment relates to such renewal or option term of this Lease and
is expressly
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approved by Landlord, and where the rent or other consideration provided for in
the sublease or assignment either initially or over the term of the sublease or
assignment exceeds the Rent or pro rata portion of the Rent, as the case may be,
for such space reserved in the Lease, Tenant shall pay the Landlord monthly, as
Additional Rent, at the same time as the monthly installments of Rent are
payable hereunder, fifty percent (50%) of the excess of each such payment of
rent or other consideration in excess of the Rent called for hereunder, after
deduction of the actual brokerage commission (if any) paid by Tenant in
connection with such proposed sublease or assignment.
15.3 WAIVER: Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Landlord to any assignee
or sublessee, or failure by Landlord to take action against any assignee or
sublessee, Tenant agrees that Landlord may, at its option, proceed against
Tenant without having taken action against or joined such assignee or sublessee,
except that Tenant shall have the benefit of any indulgences, waivers and
extensions of time granted to any such assignee or sublessee.
16. AD VALOREM TAXES: Prior to delinquency, Tenant shall pay all taxes and
assessments levied upon trade fixtures, alterations, additions, improvements,
inventories and personal property located and/or installed on or in the Premises
by, or on behalf of, Tenant; and if requested by Landlord, Tenant shall promptly
deliver to Landlord copies of receipts for payment of all such taxes and
assessments. To the extent any such taxes are not separately assessed or billed
to Tenant, Tenant shall pay the amount thereof as invoiced by Landlord.
17. SUBORDINATION: Landlord hereby represents to Tenant that as of the Lease
Date there does not exist a lien of a mortgage or deed of trust on all or any
portion of the Premises. Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, and at the
election of Landlord or any bona fide mortgagee or deed of trust beneficiary
with a lien on all or any portion of the Premises or any ground lessor with
respect to the land of which the Premises are a part, the rights of Tenant under
this Lease and this Lease shall be subject and subordinate at all times to: (i)
all ground leases or underlying leases which may now exist or hereafter be
executed affecting the Buildings or the land upon which the Buildings are
situated or both provided such ground lease includes a provision that Tenant's
use, occupancy or quiet enjoyment of the Premises will not be disturbed so long
as Tenant is not in default of the terms and provisions of this Lease, and (ii)
the lien of any mortgage or deed of trust which may now exist or hereafter be
executed in any amount for which the Buildings, the Lot, ground leases or
underlying leases, or Landlord's interest or estate in any of said items is
specified as security. Notwithstanding the foregoing, Landlord or any such
ground lessor, mortgagee, or any beneficiary shall have the right to subordinate
or cause to be subordinated any such ground leases or underlying leases or any
such liens to this Lease. If any ground lease or underlying lease terminates for
any reason or any mortgage or deed of trust is foreclosed or a conveyance in
lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination and upon the request of such successor to Landlord, attorn to and
become the Tenant of the successor in interest to Landlord, provided such
successor in interest will not disturb Tenant's use, occupancy or quiet
enjoyment of the Premises so long as Tenant is not in default of the terms and
provisions of this Lease. The successor in interest to Landlord following
foreclosure, sale or deed in lieu thereof shall not be (a) liable for any act or
omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership; (b) subject to any offsets or defenses which Tenant
might have against any prior lessor; or (c) bound by prepayment of more than one
(1) month's Rent. Tenant covenants and agrees to execute (and acknowledge if
required by Landlord, any lender or ground lessor) and deliver, within ten (10)
business days of a demand or request by Landlord and in the form requested by
Landlord, ground lessor, mortgagee or beneficiary, any additional documents
evidencing the priority or subordination of this Lease with respect to any such
ground leases or underlying leases or the lien of any such mortgage or deed of
trust. Tenant's failure to timely execute and deliver such additional documents
shall, at Landlord's option, constitute a material default hereunder. Tenant's
agreement to subordinate this Lease to any future ground or underlying lease or
any future deed of trust or mortgage pursuant to the foregoing provisions of the
Section 17 is conditioned upon Landlord delivering to Tenant from the lessor
under such future ground or underlying lease or the holder of any such mortgage
or deed of trust, a non-disturbance agreement agreeing, among other things, that
Tenant's right to possession of the Premises pursuant to the terms and
conditions of this Lease shall not be disturbed provided Tenant is not in
default under this Lease beyond the applicable notice and cure periods
hereunder.
18. RIGHT OF ENTRY: Tenant grants Landlord or its agents the right to enter the
Premises at all reasonable times, upon 24 hours advance notice to Tenant, for
purposes of inspection, exhibition, posting of notices, repair or alteration. At
Landlord's option, Landlord shall at all times have and retain a key with which
to unlock all the doors not conspicuously designated as restricted access areas
for security reasons in, upon and about the Premises, excluding Tenant's vaults
and safes. It is further agreed that Landlord shall have the right to use any
and all means Landlord deems necessary to enter the Premises in an emergency.
Landlord shall also have the right to place "for sale" signs in the Common Areas
at any time during the Term of this Lease. Landlord shall also have the right to
place "for rent" or "for lease" signs (which signage shall include a phrase to
the effect that Tenant is moving to larger quarters) on the outside of the
Premises and/or in the Common Areas at any time during the last nine (9) months
of the Term or the earlier termination thereof. Tenant hereby waives any claim
from damages or for any injury or inconvenience to or interference with Tenant's
business, or any other loss occasioned thereby except for any claim for any of
the foregoing arising out of the negligence or willful misconduct of Landlord or
its authorized representatives.
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19. ESTOPPEL CERTIFICATE: Tenant shall execute (and acknowledge if required by
any lender or ground lessor) and deliver to Landlord, within not less than ten
(10) business days after Landlord provides such to Tenant, 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), the date to which
the Rent and other charges are paid in advance, if any, acknowledging that there
are not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder or specifying such defaults as are claimed, and such other matters as
Landlord may reasonably require. Any such statement may be conclusively relied
upon by Landlord and any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such statement within such time shall be conclusive
upon the Tenant that (a) this Lease is in full force and effect, without
modification except as may be represented by Landlord; (b) there are no uncured
defaults in Landlord's performance; and (c) not more than one month's Rent has
been paid in advance, except in those instances when Tenant pays Rent quarterly
in advance pursuant to Section 8 hereof, then not more than three month's Rent
has been paid in advance. Failure by Tenant to so deliver such certified
estoppel certificate shall be a material default of the provisions of this
Lease. Tenant shall be liable to Landlord, and shall indemnify Landlord from and
against any loss, cost, damage or expense, incidental, consequential, or
otherwise, resulting from any failure of Tenant to execute or deliver to
Landlord any such certified estoppel certificate.
20. TENANT'S DEFAULT: The occurrence of any one or more of the following events
shall, at Landlord's option, constitute a material default by Tenant of this
Lease:
20.1 The abandonment of the Premises by Tenant or the vacation of the
Premises by Tenant which would cause any insurance policy to be invalidated or
otherwise lapse. Tenant agrees to notice and service of notice as provided for
in this Lease and waives any right to any other or further notice or service of
notice which Tenant may have under any statute or law now or hereafter in
effect;
20.2 The failure by Tenant to make any payment of Rent, Additional
Rent or any other payment required hereunder within three (3) days of Landlord's
delivery of written notice that said payment is due. Tenant agrees to notice and
service of notice as provided for in this Lease and waives any right to any
other or further notice or service of notice which Tenant may have under any
statute or law now or hereafter in effect;
20.3 The failure by Tenant to observe, perform or comply with any of
the conditions, covenants or provisions of this Lease (except failure to make
any payment of Rent and/or Additional Rent) and such failure is not cured within
(i) thirty (30) days of the date on which Landlord delivers written notice of
such failure to Tenant, complying with the notice requirements of Section 31.10
hereof, for all failures other than with respect to Hazardous Materials, and
(ii) ten (10) days of the date on which Landlord delivers written notice of such
failure to Tenant for all failures in any way related to Hazardous Materials.
However, Tenant shall not be in default of its obligations hereunder if such
failure cannot reasonably be cured within such thirty (30) or ten (10) day
period, as applicable, and Tenant promptly commences, and thereafter diligently
proceeds with same to completion, all actions necessary to cure such failure as
soon as is reasonably possible, but in no event shall the completion of such
cure be later than sixty (60) days after the date on which Landlord delivers to
Tenant written notice of such failure, unless Landlord, acting reasonably and in
good faith, otherwise expressly agrees in writing to a longer period of time
based upon the circumstances relating to such failure as well as the nature of
the failure and the nature of the actions necessary to cure such failure;
20.4 The making of a general assignment by Tenant for the benefit of
creditors, the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant's creditors seeking the rehabilitation,
liquidation, or reorganization of Tenant under any law relating to bankruptcy,
insolvency or other relief of debtors and, in the case of an involuntary action,
the failure to remove or discharge the same within sixty (60) days of such
filing, the appointment of a receiver or other custodian to take possession of
substantially all of Tenant's assets or this leasehold, Tenant's insolvency or
inability to pay Tenant's debts or failure generally to pay Tenant's debts when
due, any court entering a decree or order directing the winding up or
liquidation of Tenant or of substantially all of Tenant's assets, Tenant taking
any action toward the dissolution or winding up of Tenant's affairs, the
cessation or suspension of Tenant's use of the Premises, or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets or
this leasehold;
20.5 Tenant's use or storage of Hazardous Materials in, on or about
the Premises, the Buildings, the Lot and/or the Park other than as expressly
permitted by the provisions of Section 29 below;
20.6 The intentional making of any material misrepresentation or
omission by Tenant in any materials delivered by or on behalf of Tenant to
Landlord pursuant to this Lease; or
20.7 A material default by Tenant of any of the terms, provisions or
conditions of that certain Lease Agreement, of even date herewith, by and
between Landlord and Tenant for the leasing by Tenant of those two (2) certain
buildings situated within the Park and referred to as Buildings A and B (the
"First Lease").
21. REMEDIES FOR TENANT'S DEFAULT:
21.1 LANDLORD'S RIGHTS: In the event of Tenant's material default or
breach of the Lease, Landlord may, after expiration of any applicable cure
period, terminate Tenant's right to possession of the Premises by any lawful
means in which case upon delivery of written notice by Landlord this Lease shall
terminate on the date specified by Landlord in such notice and Tenant shall
immediately surrender possession of the Premises
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to Landlord. In addition, the Landlord shall have the immediate right of
re-entry whether or not this Lease is terminated, and if this right of re-entry
is exercised following abandonment of the Premises by Tenant, Landlord may
consider any personal property belonging to Tenant and left on the Premises to
also have been abandoned. No re-entry or taking possession of the Premises by
Landlord pursuant to this Section 21 shall be construed as an election to
terminate this Lease unless a written notice of such intention is given to
Tenant. If Landlord relets the Premises or any portion thereof, (i) Tenant shall
be liable immediately to Landlord for all costs Landlord incurs in reletting the
Premises or any part thereof, including, without limitation, broker's
commissions, expenses of cleaning, redecorating, and further improving the
Premises and other similar costs (collectively, the "Reletting Costs"), and (ii)
the rent received by Landlord from such reletting shall be applied to the
payment of, first, any indebtedness from Tenant to Landlord other than Base
Rent, Operating Expenses, Tax Expenses, Common Area Utility Costs, and Utility
Expenses; second, all costs including maintenance, incurred by Landlord in
reletting; and, third, Base Rent, Operating Expenses, Tax Expenses, Common Area
Utility Costs, Utility Expenses, and all other sums due under this Lease. Any
and all of the Reletting Costs shall be fully chargeable to Tenant and shall not
be prorated or otherwise amortized in relation to any new lease for the Premises
or any portion thereof. After deducting the payments referred to above, any sum
remaining from the rental Landlord receives from reletting shall be held by
Landlord and applied in payment of future Rent as Rent becomes due under this
Lease. In no event shall Tenant be entitled to any excess rent received by
Landlord. Reletting may be for a period shorter or longer than the remaining
term of this Lease. No act by Landlord other than giving written notice to
Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the
Premises or the appointment of a receiver on Landlord's initiative to protect
Landlord's interest under this Lease shall not constitute a termination of
Tenant's right to possession. So long as this Lease is not terminated, Landlord
shall have the right to remedy any default of Tenant, to maintain or improve the
Premises, to cause a receiver to be appointed to administer the Premises and new
or existing subleases and to add to the Rent payable hereunder all of Landlord's
reasonable costs in so doing, with interest at the maximum rate permitted by law
from the date of such expenditure.
21.2 DAMAGES RECOVERABLE: If Tenant breaches this Lease and abandons
the Premises before the end of the Term, or if Tenant's right to possession is
terminated by Landlord because of a breach or default of the Lease, then in
either such case, Landlord may recover from Tenant all damages suffered by
Landlord as a result of Tenant's failure to perform its obligations hereunder,
including, but not limited to, the unamortized portion of any broker's or
leasing agent's commission incurred with respect to the leasing of the Premises
to Tenant for the balance of the Term of the Lease remaining after the date on
which Tenant is in default of its obligations hereunder to the extent such sums
are not already included as part of the calculation of damages, and all
Reletting Costs, and the worth at the time of the award (computed in accordance
with paragraph (3) of Subdivision (a) of Section 1951.2 of the California Civil
Code) of the amount by which the Rent then unpaid hereunder for the balance of
the Lease Term exceeds the amount of such loss of Rent for the same period which
Tenant proves could be reasonably avoided by Landlord and in such case, Landlord
prior to the award, may relet the Premises for the purpose of mitigating damages
suffered by Landlord because of Tenant's failure to perform its obligations
hereunder; provided, however, that even though Tenant has abandoned the Premises
following such breach, this Lease shall nevertheless continue in full force and
effect for as long as Landlord does not terminate Tenant's right of possession,
and until such termination, Landlord shall have the remedy described in Section
1951.4 of the California Civil Code (Landlord may continue this Lease in effect
after Tenant's breach and abandonment and recover Rent as it becomes due, if
Tenant has the right to sublet or assign, subject only to reasonable
limitations) and may enforce all its rights and remedies under this Lease,
including the right to recover the Rent from Tenant as it becomes due hereunder.
The "worth at the time of the award" within the meaning of Subparagraphs (a)(1)
and (a)(2) of Section 1951.2 of the California Civil Code shall be computed by
allowing interest at the rate of ten percent (10%) per annum. Tenant waives
redemption or relief from forfeiture under California Code of Civil Procedure
Sections 1174 and 1179, or under any other present or future law, in the event
Tenant is evicted or Landlord takes possession of the Premises by reason of any
default of Tenant hereunder.
21.3 RIGHTS AND REMEDIES CUMULATIVE: The foregoing rights and remedies
of Landlord are not exclusive; they are cumulative in addition to any rights and
remedies now or hereafter existing at law, in equity by statute or otherwise, or
to any equitable remedies Landlord may have, and to any remedies Landlord may
have under bankruptcy laws or laws affecting creditor's rights generally.
21.4 WAIVER OF A DEFAULT: The waiver by Landlord of any material
default or breach of any provision of this Lease shall not be deemed or
construed a waiver of any other material breach or default by Tenant hereunder
or of any subsequent material breach or default of this Lease, except for the
default specified in the waiver.
22. HOLDING OVER: If Tenant holds possession of the Premises after the
expiration of the Term of this Lease with Landlord's consent, Tenant shall
become a tenant from month-to-month upon the terms and provisions of this Lease,
provided the monthly Base Rent during such hold over period shall be 125% of the
Base Rent due on the last month of the Lease Term, payable in advance on or
before the first day of each month. Acceptance by Landlord of the monthly Base
Rent without the additional twenty-five percent (25%) increase of Base Rent
shall not be deemed or construed as a waiver by Landlord of any of its rights to
collect the increased amount of the Base Rent as provided herein at any time.
Such month-to-month tenancy shall not constitute a renewal or extension for any
further term. All options, if any, granted under the terms of this Lease shall
be deemed automatically terminated and be of no force or effect during said
month-to-month tenancy. Tenant shall continue in possession until such tenancy
shall be terminated by either Landlord or Tenant giving written notice of
termination to the other party at least thirty (30) days prior to the effective
date of termination.
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This paragraph shall not be construed as Landlord's permission for Tenant to
hold over. Acceptance of Base Rent by Landlord following expiration or
termination of this Lease shall not constitute a renewal of this Lease. If
Tenant provides Landlord with at least twelve (12) months advance written notice
of Tenant's intention to hold over and the anticipated hold over period of time,
Landlord shall not be entitled to any consequential damages arising from such
hold over for the hold over period specified in such written notice; provided,
however, the foregoing shall not be considered as Landlord's waiver of the
requirement for Tenant to pay such additional twenty-five percent (25%) increase
of Base Rent during such holdover period as contemplated above.
23. LANDLORD'S DEFAULT: Landlord shall not be deemed in breach or default of
this Lease unless Landlord fails within a reasonable time to perform an
obligation required to be performed by Landlord hereunder. For purposes of this
provision, a reasonable time shall not be less than thirty (30) days after
receipt by Landlord of written notice specifying the nature of the obligation
Landlord has not performed (except for any items of repair or maintenance for
which a prompter response would be reasonably necessary or appropriate given the
then existing circumstances); provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days, after receipt of
written notice, is reasonably necessary for its performance, then Landlord shall
not be in breach or default of this Lease if performance of such obligation is
commenced within such thirty (30) day period and thereafter diligently pursued
to completion.
24. PARKING: Tenant shall have a license to use the number of undesignated and
nonexclusive parking spaces set forth on Page 1. Landlord shall exercise
reasonable efforts to insure that such spaces are available to Tenant for its
use, but Landlord shall not be required to enforce Tenant's right to use the
same. Tenant shall have the exclusive right to use up to ten (10) parking
spaces, in locations designated by Landlord, in close proximity to the entrance
of each of the Buildings for Tenant's exclusive use for visitor parking;
provided, Tenant shall be solely responsible for the payment of all costs
associated with such striping and designation and Tenant's General Contractor
shall perform the work associated therewith as part of the Tenant Improvements.
25. SALE OF PREMISES: In the event of any sale of the Premises by Landlord or
the cessation otherwise of Landlord's interest therein, Landlord shall be and is
hereby entirely released from any and all of its obligations to perform or
further perform under this Lease and from all liability hereunder accruing or
arising from and after the date of such sale; and the purchaser, at such sale or
any subsequent sale of the Premises shall be deemed, without any further
agreement between the parties or their successors in interest or between the
parties and any such purchaser, to have assumed and agreed to carry out any and
all of the covenants and obligations of the Landlord under this Lease except for
those obligations of Landlord which have accrued prior to the date of such
transfer. For purposes of this Section 25, the term "Landlord" means only the
owner and/or agent of the owner as such parties exist as of the date on which
Tenant executes this Lease. A ground lease or similar long term lease by
Landlord of the entire Buildings, of which the Premises are a part, shall be
deemed a sale within the meaning of this Section 25. Tenant agrees to attorn to
such new owner provided such new owner does not disturb Tenant's use, occupancy
or quiet enjoyment of the Premises so long as Tenant is not in default of any of
the provisions of this Lease.
26. WAIVER: No delay or omission in the exercise of any right or remedy of
Landlord on any default by Tenant shall impair such a right or remedy or be
construed as a waiver. The subsequent acceptance of Rent by Landlord after
breach by Tenant of any covenant or term of this Lease shall not be deemed a
waiver of such breach, other than a waiver of timely payment for the particular
Rent payment involved, and shall not prevent Landlord from maintaining an
unlawful detainer or other action based on such breach. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly Rent and other sums due
hereunder shall be deemed to be other than on account of the earliest Rent or
other sums due, nor shall any endorsement or statement on any check or
accompanying any check or payment be deemed an accord and satisfaction; and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance of such Rent or other sum or pursue any other remedy
provided in this Lease. No failure, partial exercise or delay on the part of the
Landlord in exercising any right, power or privilege hereunder shall operate as
a waiver thereof.
27. CASUALTY DAMAGE: If either of the Buildings or any part thereof shall be
damaged by fire or other casualty, Tenant shall give prompt written notice
thereof to Landlord. In case either of the Buildings shall be so damaged by fire
or other casualty that fifty percent (50%) or more of the affected Building(s)
requires substantial alteration or reconstruction, in Landlord's reasonable
opinion, Landlord may, at its option, terminate this Lease with respect only to
the affected Building by notifying Tenant in writing of such termination within
ninety (90) days after the date of such damage, in which event the Rent shall be
abated as of the date of such damage but only to the extent Tenant is not able
to conduct its operations in the affected Building(s). If either of the
Buildings or any part thereof shall be damaged by fire or other casualty such
that the reparation of such damage or casualty shall require more than one
hundred eighty (180) days to complete (subject to extension for Force Majeure
Delays or Tenant Delays), then either Tenant or Landlord may terminate this
Lease with respect only to the affected Building by notifying the other party of
such election to terminate this Lease within thirty (30) days after the date on
which it is determined by Landlord of the length of time necessary to
substantially complete such repairs, in which event the Rent shall be abated as
of the date of such damage but only to the extent Tenant is not able to conduct
its operations in the affected Building(s). If neither party exercises their
rights to so elect to terminate this Lease with respect only to the affected
Building in accordance with the aforesaid provisions, and provided insurance
proceeds are available to fully repair the damage (excluding any
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deductible), Landlord shall within ninety (90) days after the date of such
damage commence to repair and restore the affected Building(s) and shall proceed
with reasonable diligence to restore the affected Building(s) (except that
Landlord shall not be responsible for delays outside its control) to
substantially the same condition in which it was immediately prior to the
happening of the casualty; provided, Landlord shall not be required to rebuild,
repair, or replace any part of Tenant's furniture, furnishings or fixtures and
equipment removable by Tenant or any improvements, alterations or additions
installed by or for the benefit of Tenant under the provisions of this Lease.
Landlord shall not in any event be required to spend for such work an amount in
excess of the insurance proceeds (excluding any deductible) actually received by
Landlord as a result of the fire or other casualty. Landlord shall not be liable
for any inconvenience or annoyance to Tenant, injury to the business of Tenant,
loss of use of any part of the Premises by the Tenant or loss of Tenant's
personal property resulting in any way from such damage or the repair thereof,
except that, subject to the provisions of the next sentence, Landlord shall
allow Tenant a fair diminution of Rent during the time and to the extent the
affected Building(s) is unfit for occupancy. Notwithstanding anything to the
contrary contained herein, if either of the Buildings or any other portion
thereof be damaged by fire or other casualty resulting from the intentional or
negligent acts or omissions of Tenant or any of Tenant's Representatives, (i)
the Rent shall not be diminished during the repair of such damage, (ii) Tenant
shall not have any right to terminate this Lease with respect only to the
affected Building due to the occurrence of such casualty or damage, and (iii)
Tenant shall be liable to Landlord for the cost and expense of the repair and
restoration of all or any portion of the affected Building(s) caused thereby
(including, without limitation, any deductible) to the extent such cost and
expense is not covered by insurance proceeds. In the event the holder of any
indebtedness secured by the affected Building(s) requires that the insurance
proceeds be applied to such indebtedness, then Landlord shall have the right to
terminate this Lease with respect only to the affected Building by delivering
written notice of termination to Tenant within thirty (30) days after the date
of notice to Tenant of any such event, whereupon all rights and obligations
shall cease and terminate hereunder with respect only to the affected Building
except for those obligations expressly intended to survive any such termination
of this Lease. Any notices required to be delivered pursuant to the provisions
of this Section 27 shall be in compliance with the notice requirements of
Section 31.10 of this Lease. Except as otherwise provided in this Section 27,
Tenant hereby waives the provisions of Sections 1932(2.), 1933(4.), 1941 and
1942 of the California Civil Code.
28. CONDEMNATION: If twenty-five percent (25%) or more of the Premises is
condemned by eminent domain, inversely condemned or sold in lieu of condemnation
for any public or quasi-public use or purpose ("Condemned"), then Tenant or
Landlord may terminate this Lease as of the date when physical possession of the
Premises is taken and title vests in such condemning authority, and Rent shall
be adjusted to the date of termination. Tenant shall not because of such
condemnation assert any claim against Landlord or the condemning authority for
any compensation because of such condemnation, and Landlord shall be entitled to
receive the entire amount of any award without deduction for any estate of
interest or other interest of Tenant; provided, however, the foregoing
provisions shall not preclude Tenant, at Tenant's sole cost and expense, from
obtaining any separate award to Tenant for loss of or damage to Tenant's trade
fixtures and removable personal property or for damages for cessation or
interruption of Tenant's business provided such award is separate from
Landlord's award and provided further such separate award does not diminish nor
impair the award otherwise payable to Landlord. In addition to the foregoing,
Tenant shall be entitled to seek compensation for the relocation costs
recoverable by Tenant pursuant to the provisions of California Government Code
Section 7262. If a substantial portion of the Premises, Buildings or the Lot is
so Condemned, Landlord or Tenant may terminate this Lease. If neither party
elects to terminate this Lease, Landlord shall, if necessary, promptly proceed
to restore the Premises or the Buildings to substantially its same condition
prior to such partial condemnation, allowing for the reasonable effects of such
partial condemnation, and a proportionate allowance shall be made to Tenant, as
reasonably determined by Landlord, for the Rent corresponding to the time during
which, and to the part of the Premises of which, Tenant is deprived on account
of such partial condemnation and restoration. Landlord shall not be required to
spend funds for restoration in excess of the amount received by Landlord as
compensation awarded.
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS:
29.1 HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE: Prior to executing
this Lease, Tenant has completed, executed and delivered to Landlord Tenant's
initial Hazardous Materials Disclosure Certificate (the "Initial HazMat
Certificate"), a copy of which is attached hereto as Exhibit G and incorporated
herein by this reference. Tenant covenants, represents and warrants to Landlord
that the information on the Initial HazMat Certificate is true and correct, to
the best of Tenant's knowledge, and accurately describes the use(s) of Hazardous
Materials which will be made and/or used on the Premises by Tenant. Commencing
with the date which is one year from the Commencement Date and continuing every
year thereafter, Tenant shall complete, execute, and deliver to Landlord, a
Hazardous Materials Disclosure Certificate ("the "HazMat Certificate")
describing Tenant's present use of Hazardous Materials on the Premises, and any
other reasonably necessary documents as requested by Landlord. The HazMat
Certificate required hereunder shall be in substantially the form as that which
is attached hereto as Exhibit E. Landlord hereby acknowledges and agrees that as
of the date on which both parties execute and deliver this Lease, Landlord has
approved the Initial HazMat Certificate; however, any such approval by Landlord
shall not be construed to relieve Tenant from its obligations and/or any
liabilities under the provisions of this Section 29.
29.2 DEFINITION OF HAZARDOUS MATERIALS: As used in this Lease, the
term Hazardous Materials shall mean and include (a) any hazardous or toxic
wastes, materials or substances, and other pollutants or contaminants, which are
or become regulated by any Environmental Laws; (b) petroleum, petroleum by
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products, gasoline, diesel fuel, crude oil or any fraction thereof; (c) asbestos
and asbestos containing material, in any form, whether friable or non-friable;
(d) polychlorinated biphenyls; (e) radioactive materials; (f) lead and
lead-containing materials; (g) any other material, waste or substance displaying
toxic, reactive, ignitable or corrosive characteristics, as all such terms are
used in their broadest sense, and are defined or become defined by any
Environmental Law (defined below); or (h) any materials which cause or threatens
to cause a nuisance upon or waste to any portion of the Premises, the Buildings,
the Lot, the Park or any surrounding property; or poses or threatens to pose a
hazard to the health and safety of persons on the Premises or any surrounding
property.
29.3 PROHIBITION; ENVIRONMENTAL LAWS: Except for and to the extent of
the type and quantities of Hazardous Materials specified in the Initial HazMat
Certificate, Tenant shall not be entitled to use nor store any Hazardous
Materials on, in, or about the Premises, the Buildings, the Lot and the Park, or
any portion of the foregoing, without, in each instance, obtaining Landlord's
prior written consent thereto. If Landlord consents to any such usage or
storage, then Tenant shall be permitted to use and/or store only those Hazardous
Materials that are necessary for Tenant's business and to the extent disclosed
in the HazMat Certificate and as expressly approved by Landlord in writing,
provided that such usage and storage is only to the extent of the quantities of
Hazardous Materials as specified in the then applicable HazMat Certificate as
expressly approved by Landlord and provided further that such usage and storage
is in full compliance with any and all local, state and federal environmental,
health and/or safety-related laws, statutes, orders, standards, courts'
decisions, ordinances, rules and regulations (as interpreted by judicial and
administrative decisions), decrees, directives, guidelines, permits or permit
conditions, currently existing and as amended, enacted, issued or adopted in the
future which are or become applicable to Tenant or all or any portion of the
Premises (collectively, the "Environmental Laws"). Tenant agrees that any
changes to the type and/or quantities of Hazardous Materials specified in the
most recent HazMat Certificate may be implemented only with the prior written
consent of Landlord, which consent may be given or withheld in Landlord's
reasonable discretion. Tenant shall not be entitled nor permitted to install any
tanks under, on or about the Premises for the storage of Hazardous Materials
without the express written consent of Landlord, which may be given or withheld
in Landlord's sole discretion. Landlord shall have the right at all times during
the Term of this Lease, upon reasonable advance notice to Tenant, to (i) inspect
the Premises, (ii) conduct tests and investigations to determine whether Tenant
is in compliance with the provisions of this Section 29, and (iii) request lists
of all Hazardous Materials used, stored or otherwise located on, under or about
the Premises, the Common Areas and/or the parking lots. The cost of all such
inspections, tests and investigations shall be borne solely by Tenant, if
Landlord reasonably determines that Tenant or any of Tenant's Representatives
are directly or indirectly responsible in any manner for any contamination
revealed by such inspections, tests and investigations. The aforementioned
rights granted herein to Landlord and its representatives shall not create (a) a
duty on Landlord's part to inspect, test, investigate, monitor or otherwise
observe the Premises or the activities of Tenant and Tenant's Representatives
with respect to Hazardous Materials, including without limitation, Tenant's
operation, use and any remediation related thereto, or (b) liability on the part
of Landlord and its representatives for Tenant's use, storage, disposal or
remediation of Hazardous Materials, it being understood that Tenant shall be
solely responsible for all liability in connection therewith.
29.4 TENANT'S ENVIRONMENTAL OBLIGATIONS: Tenant shall give to Landlord
immediate verbal and follow-up written notice of any spills, releases,
discharges, disposals, emissions, migrations, removals or transportation of
Hazardous Materials by Tenant, Tenant's Representatives or by any other party in
the event Tenant or Tenant's Representatives has actual knowledge thereof, on,
under or about the Premises, or in any Common Areas or parking lots. Tenant, at
its sole cost and expense, covenants and warrants to promptly investigate, clean
up, remove, restore and otherwise remediate (including, without limitation,
preparation of any feasibility studies or reports and the performance of any and
all closures) any spill, release, discharge, disposal, emission, migration or
transportation of Hazardous Materials arising from or related to the intentional
or negligent acts or omissions of Tenant or Tenant's Representatives such that
the affected portions of the Park and any adjacent property are returned to the
condition existing prior to the appearance of such Hazardous Materials. Any such
investigation, clean up, removal, restoration and other remediation shall only
be performed after Tenant has obtained Landlord's prior written consent, which
consent shall not be unreasonably withheld so long as such actions would not
potentially have a material adverse long-term or short-term effect on the
Premises, the Buildings, the Lot or the Park, or any portion of any of the
foregoing. Notwithstanding the foregoing, Tenant shall be entitled to respond
immediately to an emergency without first obtaining Landlord's prior written
consent. Tenant, at its sole cost and expense, shall conduct and perform, or
cause to be conducted and performed, all closures as required by any
Environmental Laws or any agencies or other governmental authorities having
jurisdiction thereof. If Tenant fails to so promptly investigate, clean up,
remove, restore, provide closure or otherwise so remediate, Landlord may, but
without obligation to do so, take any and all steps necessary to rectify the
same and Tenant shall promptly reimburse Landlord, upon demand, for all
reasonable costs and expenses to Landlord of performing investigation, clean up,
removal, restoration, closure and remediation work. All such work undertaken by
Tenant, as required herein, shall be performed in such a manner so as to enable
Landlord to make full economic use of the Premises, the Buildings, the Lot and
the Park after the satisfactory completion of such work.
29.5 ENVIRONMENTAL INDEMNITY: In addition to Tenant's obligations as
set forth hereinabove but subject to the provisions of Section 29.7 below,
Tenant agrees to, and shall, protect, indemnify, defend (with counsel reasonably
acceptable to Landlord) and hold Landlord and Landlord's lenders, members,
partners, property management company (if other than Landlord), agents,
directors, officers, employees, representatives, contractors, shareholders,
successors and assigns and each of their respective partners, directors,
employees, representatives, agents, contractors, shareholders, successors and
assigns harmless from and against any and all claims, judgments, damages,
penalties, fines, liabilities, losses (including, without limitation, diminution
in value
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of the Premises, the Buildings, the Lot, the Park, or any portion of any of the
foregoing, damages for the loss of or restriction on the use of rentable or
usable space, and from any adverse impact of Landlord's marketing of any space
within the Buildings and/or Park), suits, administrative proceedings and costs
(including, but not limited to, reasonable attorneys' and consultant fees and
court costs) arising at any time during or after the Term of this Lease in
connection with or related to, directly or indirectly, the use, presence,
transportation, storage, disposal, migration, removal, spill, release or
discharge of Hazardous Materials on, in or about the Premises, or in any Common
Areas or parking lots as a result (directly or indirectly) of the intentional or
negligent acts or omissions of Tenant or Tenant's Representatives. Neither the
written consent of Landlord to the presence, use or storage of Hazardous
Materials in, on, under or about any portion of the Premises, the Buildings, the
Lot and the Park, nor the strict compliance by Tenant with all Environmental
Laws shall excuse Tenant from its obligations of indemnification pursuant
hereto. Tenant shall not be relieved of its indemnification obligations under
the provisions of this Section 29.5 as a result of Landlord's status as either
an "owner" or "operator" under any Environmental Laws.
29.6 SURVIVAL: Tenant's obligations and liabilities pursuant to the
provisions of this Section 29 shall survive the expiration or earlier
termination of this Lease. If it is determined by Landlord that the condition of
all or any portion of the Premises, the Buildings, the Lot and/or the Park is
not in compliance with the provisions of this Lease with respect to Hazardous
Materials, including without limitation all Environmental Laws at the expiration
or earlier termination of this Lease, then at Landlord's sole option, Landlord
may require Tenant to hold over possession of the Premises until Tenant can
surrender the Premises to Landlord in the condition in which the Premises
existed as of the Commencement Date and prior to the appearance of such
Hazardous Materials except for reasonable wear and tear, including without
limitation, the conduct or performance of any closures as required by any
Environmental Laws. For purposes hereof, the term "reasonable wear and tear"
shall not include any deterioration in the condition or diminution of the value
of any portion of the Premises, the Buildings, the Lot and/or the Park in any
manner whatsoever related to directly, or indirectly, Hazardous Materials. Any
such holdover by Tenant will be with Landlord's consent, will not be terminable
by Tenant in any event or circumstance and will otherwise be subject to the
provisions of Section 22 of this Lease.
29.7 EXCULPATION OF TENANT: Tenant shall not be liable to Landlord for
nor otherwise obligated to Landlord under any provision of the Lease with
respect to the following: (i) any claim, remediation, obligation, investigation,
obligation, liability, cause of action, attorney's fees, consultants' cost,
expense or damage resulting from any Hazardous Materials present in, on or about
the Premises or the Buildings to the extent not caused nor otherwise permitted,
directly or indirectly, by Tenant or Tenant's Representatives; or (ii) the
removal, investigation, monitoring or remediation of any Hazardous Material
present in, on or about the Premises or the Buildings directly caused by any
source, including third parties, other than Tenant or Tenant's Representatives;
provided, however, Tenant shall be fully liable for and otherwise obligated to
Landlord under the provisions of this Lease for all liabilities, costs, damages,
penalties, claims, judgments, expenses (including without limitation, attorneys'
and experts' fees and costs) and losses to the extent (a) Tenant or any of
Tenant's Representatives contributes to the presence of such Hazardous
Materials, or Tenant and/or any of Tenant's Representatives exacerbates the
conditions caused by such Hazardous Materials, or (b) Tenant and/or Tenant's
Representatives allows or permits persons over which Tenant or any of Tenant's
Representatives has control, and/or for which Tenant or any of Tenant's
Representatives are legally responsible for, to cause such Hazardous Materials
to be present in, on, under, through or about any portion of the Premises, the
Common Areas, the Buildings or the Park, or (c) Tenant and/or any of Tenant's
Representatives does not take all reasonably appropriate actions to prevent such
persons over which Tenant or any of Tenant's Representatives has control and/or
for which Tenant or any of Tenant's Representatives are legally responsible from
causing the presence of Hazardous Materials in, on, under, through or about any
portion of the Premises, the Common Areas, the Buildings or the Park.
30. FINANCIAL STATEMENTS: Tenant, for the reliance of Landlord, any lender
holding or anticipated to acquire a lien upon the Premises, the Buildings or the
Park or any portion thereof, or any prospective purchaser of the Buildings or
the Park or any portion thereof, within thirty (30) days after Landlord's
request therefor, but not more often than once annually so long as Tenant is not
in default of this Lease, shall deliver to Landlord the then current audited
financial statements of Tenant (including interim periods following the end of
the last fiscal year for which annual statements are available) which statements
shall be prepared or compiled by a certified public accountant and shall present
fairly the financial condition of Tenant at such dates and the result of its
operations and changes in its financial positions for the periods ended on such
dates. So long as Tenant is a publicly-traded entity, Tenant's publicly-filed
financial statements shall be satisfactory for the satisfaction of the foregoing
requirement. If an audited financial statement has not been prepared, Tenant
shall provide Landlord with an unaudited financial statement and/or such other
information, the type and form of which are acceptable to Landlord in Landlord's
reasonable discretion, which reflects the financial condition of Tenant. If
Landlord so requests, Tenant shall deliver to Landlord an opinion of a certified
public accountant, including a balance sheet and profit and loss statement for
the most recent prior year, all prepared in accordance with generally accepted
accounting principles consistently applied. Any and all options granted to
Tenant hereunder shall be subject to and conditioned upon Landlord's reasonable
approval of Tenant's financial condition at the time of Tenant's exercise of any
such option.
31. GENERAL PROVISIONS:
31.1 TIME. Time is of the essence in this Lease and with respect to
each and all of its provisions in which performance is a factor.
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31.2 SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
31.3 RECORDATION. Tenant shall not record this Lease or a short form
memorandum hereof without the prior written consent of the Landlord.
31.4 LANDLORD'S PERSONAL LIABILITY. The liability of Landlord (which,
for purposes of this Lease, shall include Landlord and the owner of the
Buildings if other than Landlord) to Tenant for any default by Landlord under
the terms of this Lease shall be limited to the actual interest of Landlord and
its present or future partners or members in the Park, and Tenant agrees to look
solely to the Park for satisfaction of any liability and shall not look to other
assets of Landlord nor seek any recourse against the assets of the individual
members, partners, directors, officers, shareholders, agents or employees of
Landlord; it being intended that Landlord and the individual partners, members,
directors, officers, shareholders, agents or employees of Landlord shall not be
personally liable in any manner whatsoever for any judgment or deficiency. The
liability of Landlord under this Lease is limited to its actual period of
ownership of title to the Buildings, and Landlord shall be automatically
released from further performance under this Lease and from all further
liabilities and expenses accruing hereunder after the date of such transfer of
Landlord's interest in the Buildings. The foregoing shall not in any way limit
or impair Tenant's right, if any, to recover proceeds of insurance or any
condemnation award in accordance with the provisions of this Lease.
31.5 SEPARABILITY. Any provisions of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate any
other provisions hereof and such other provision shall remain in full force and
effect.
31.6 CHOICE OF LAW. This Lease shall be governed by the laws of the
State of California.
31.7 ATTORNEYS' FEES. In the event any dispute between the parties
results in litigation or other proceeding or any other litigation involving the
parties arises from this Lease, the prevailing party shall be reimbursed by the
party not prevailing for all reasonable costs and expenses, including, without
limitation, reasonable attorneys' and experts' fees and costs incurred by the
prevailing party in connection with such litigation or other proceeding, and any
appeal thereof. Such costs, expenses and fees shall be included in and made a
part of the judgment recovered by the prevailing party, if any.
31.8 ENTIRE AGREEMENT. This Lease supersedes any prior agreements,
representations, negotiations or correspondence between the parties, and
contains the entire agreement of the parties on matters covered. No other
agreement, statement or promise made by any party, that is not in writing and
signed by all parties to this Lease, shall be binding.
31.9 WARRANTY OF AUTHORITY. On the date that Tenant executes this
Lease, Tenant shall deliver to Landlord an original certificate of status for
Tenant issued by the California Secretary of State or statement of partnership
for Tenant recorded in the county in which the Premises are located, as
applicable, and such other documents as Landlord may reasonably request with
regard to the lawful existence of Tenant. Each person executing this Lease on
behalf of a party represents and warrants that (1) such person is duly and
validly authorized to do so on behalf of the entity it purports to so bind, and
(2) if such party is a limited liability company, partnership, corporation or
trustee, that such limited liability company, partnership, corporation or
trustee has full right and authority to enter into this Lease and perform all of
its obligations hereunder.
31.10 NOTICES. Any and all notices and demands required or permitted
to be given hereunder to Landlord shall be in writing and shall be sent: (a) by
United States mail, certified and postage prepaid; or (b) by personal delivery;
or (c) by overnight courier, addressed to Landlord at 101 Lincoln Centre Drive,
Fourth Floor, Foster City, California 94404-1167. Any and all notices and
demands required or permitted to be given hereunder to Tenant shall be in
writing and shall be sent: (i) by United States mail, certified and postage
prepaid; or (ii) by personal delivery to any employee or agent of Tenant over
the age of eighteen (18) years of age; or (iii) by overnight courier, all of
which shall be addressed to Tenant at the Tenant's Address as provided on Page 1
of this Lease or otherwise provided to Landlord. Notice and/or demand shall be
deemed given upon the earlier of actual receipt or the third day following
deposit in the United States mail. Any notice or requirement of service required
by any statute or law now or hereafter in effect, including, but not limited to,
California Code of Civil Procedure Sections 1161, 1161.1, and 1162, is hereby
waived by Tenant.
31.11 JOINT AND SEVERAL. If Tenant consists of more than one person or
entity, the obligations of all such persons or entities shall be joint and
several.
31.12 COVENANTS AND CONDITIONS. Each provision to be performed by
Tenant hereunder shall be deemed to be both a covenant and a condition.
31.13 WAIVER OF JURY TRIAL. Intentionally omitted.
31.14 COUNTERCLAIMS. In the event Landlord commences any proceedings
for nonpayment of Rent, Additional Rent, or any other sums or amounts due
hereunder, Tenant shall not interpose any counterclaim of whatever nature or
description in any such proceedings, provided, however, nothing contained herein
shall be deemed or construed as a waiver of the Tenant's right to assert such
claims in any separate action brought by Tenant or the right to offset the
amount of any final judgment owed by Landlord to Tenant.
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31.15 UNDERLINING. The use of underlining within the Lease is for
Landlord's reference purposes only and no other meaning or emphasis is intended
by this use, nor should any be inferred.
32. SIGNS: All signs and graphics of every kind visible in or from public view
or corridors or the exterior of the Premises shall be subject to Landlord's
prior written approval, which shall not be unreasonably withheld or delayed, and
shall also be subject to any applicable governmental laws, ordinances, and
regulations and in compliance with Landlord's sign criteria as same may exist
from time to time or as set forth in Exhibit H hereto and made a part hereof.
Tenant shall remove all such signs and graphics prior to the termination of this
Lease. Such installations and removals shall be made in a manner as to avoid
damage or defacement of the Premises; and Tenant shall repair any damage or
defacement, including without limitation, discoloration caused by such
installation or removal. Landlord shall have the right, at its option, to demand
payment from Tenant of such sums as are reasonably necessary to remove such
signs, including, but not limited to, the costs and expenses associated with any
repairs necessitated by such removal. Notwithstanding the foregoing, in no event
shall any: (a) neon, flashing or moving sign(s) or (b) sign(s) which shall
interfere with the visibility of any sign, awning, canopy, advertising matter,
or decoration of any kind of any other business or occupant of the Buildings or
the Park be permitted hereunder. Tenant further agrees to maintain any such
sign, awning, canopy, advertising matter, lettering, decoration or other thing
as may be approved in good condition and repair at all times.
33. MORTGAGEE PROTECTION: Upon any breach or default on the part of Landlord,
Tenant will give written notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage covering the Premises
who has provided Tenant with notice of their interest together with an address
for receiving notice, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default (which, in no event shall be more than ninety
(90) days), including time to obtain possession of the Premises by power of sale
or a judicial foreclosure, if such should prove necessary to effect a cure. If
such breach or default cannot be cured within such time period, then such
additional time as may be necessary will be given to such beneficiary or
mortgagee to effect such cure so long as such beneficiary or mortgagee has
commenced the cure within the original time period and thereafter diligently
pursues such cure to completion, in which event this Lease shall not be
terminated while such cure is being diligently pursued. Tenant agrees that each
lender to whom this Lease has been assigned by Landlord is an express third
party beneficiary hereof. Tenant shall not make any prepayment of Rent more than
one (1) month in advance without the prior written consent of each such lender,
except if Tenant is required to make quarterly payments of Rent in advance
pursuant to the provisions of Section 8 above. Tenant agrees to make all
payments under this Lease to the lender with the most senior encumbrance upon
receiving a direction, in writing, to pay said amounts to such lender. Tenant
shall comply with such written direction to pay without determining whether an
event of default exists under such lender's loan to Landlord.
34. QUITCLAIM: Upon any termination of this Lease, Tenant shall, at Landlord's
request, execute, have acknowledged and deliver to Landlord a quitclaim deed of
Tenant's interest in and to the Premises.
35. MODIFICATIONS FOR LENDER: If, in connection with obtaining financing for the
Premises or any portion thereof, Landlord's lender shall request reasonable
modification(s) to this Lease as a condition to such financing, Tenant shall not
unreasonably withhold, delay or defer its consent thereto, provided such
modifications do not materially adversely affect Tenant's rights hereunder or
the use, occupancy or quiet enjoyment of Tenant hereunder.
36. WARRANTIES OF TENANT: Tenant hereby warrants and represents to Landlord, for
the express benefit of Landlord, that Tenant has undertaken a complete and
independent evaluation of the risks inherent in the execution of this Lease and
the operation of the Premises for the use permitted hereby, and that, based upon
said independent evaluation, Tenant has elected to enter into this Lease and
hereby assumes all risks with respect thereto. Each party hereby warrants and
represents to the other party, for the express benefit of the other party, that
in entering into this Lease, the warranting party has not relied upon any
statement, fact, promise or representation (whether express or implied, written
or oral) not specifically set forth herein in writing and that any statement,
fact, promise or representation (whether express or implied, written or oral)
made at any time to it, which is not expressly incorporated herein in writing,
is hereby waived by it.
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT: Landlord and Tenant hereby
agree and acknowledge that the Premises, the Buildings and/or the Park may be
subject to the requirements of the Americans with Disabilities Act, a federal
law codified at 42 U.S.C. 12101 et seq, including, but not limited to Title III
thereof, all regulations and guidelines related thereto, together with any and
all laws, rules, regulations, ordinances, codes and statutes now or hereafter
enacted by local or state agencies having jurisdiction thereof, including all
requirements of Title 24 of the State of California, as the same may be in
effect on the date of this Lease and may be hereafter modified, amended or
supplemented (collectively, the "ADA"). The Shell Improvements to be constructed
hereunder shall be in compliance with the requirements of the ADA as of the date
on which the Shell Improvements are Substantially Completed. Any Tenant
Improvements to be constructed hereunder shall be in compliance with the
requirements of the ADA, and all costs incurred for purposes of compliance
therewith shall be a part of and included in the costs of the Tenant
Improvements. Tenant shall be solely responsible for conducting its own
independent investigation of this matter and for ensuring that the design of all
Tenant Improvements strictly comply with all requirements of the ADA. Subject to
reimbursement pursuant to Section
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6 of the Lease, if any barrier removal work or other work is required to the
Buildings, the Common Areas or the Park under the ADA, then such work shall be
the responsibility of Landlord; provided, if such work is required under the ADA
as a result of Tenant's use of the Premises or any work or alteration made to
the Premises by or on behalf of Tenant, then such work shall be performed by
Landlord at the sole cost and expense of Tenant. Except as otherwise expressly
provided in this provision, Tenant shall be responsible at its sole cost and
expense for fully and faithfully complying with all applicable requirements of
the ADA, including without limitation, not discriminating against any disabled
persons in the operation of Tenant's business in or about the Premises, and
offering or otherwise providing auxiliary aids and services as, and when,
required by the ADA. Within ten (10) days after receipt, Landlord and Tenant
shall advise the other party in writing, and provide the other with copies of
(as applicable), any notices alleging violation of the ADA relating to any
portion of the Premises or the Buildings; any claims made or threatened in
writing regarding noncompliance with the ADA and relating to any portion of the
Premises or the Buildings; or any governmental or regulatory actions or
investigations instituted or threatened regarding noncompliance with the ADA and
relating to any portion of the Premises or the Buildings. Tenant shall and
hereby agrees to protect, defend (with counsel acceptable to Landlord) and hold
Landlord and Landlord's lender(s), members, partners, employees,
representatives, legal representatives, successors and assigns (collectively,
the "Indemnitees") harmless and indemnify the Indemnitees from and against all
liabilities, damages, claims, losses, penalties, judgments, charges and expenses
(including reasonable attorneys' fees, costs of court and expenses necessary in
the prosecution or defense of any litigation including the enforcement of this
provision) arising from or in any way related to, directly or indirectly,
Tenant's or Tenant's Representatives' violation of the ADA. Tenant agrees that
the obligations of Tenant herein shall survive the expiration or earlier
termination of this Lease.
38. BROKERAGE COMMISSION: Landlord and Tenant each represents and warrants for
the benefit of the other that it has had no dealings with any real estate
broker, agent or finder in connection with the Premises and/or the negotiation
of this Lease, except for the Broker(s) (as set forth on Page 1), and that it
knows of no other real estate broker, agent or finder who is or might be
entitled to a real estate brokerage commission or finder's fee in connection
with this Lease or otherwise based upon contacts between the claimant and
Tenant. Each party shall indemnify and hold harmless the other from and against
any and all liabilities or expenses arising out of claims made for a fee or
commission by any real estate broker, agent or finder in connection with the
Premises and this Lease other than Broker(s), if any, resulting from the actions
of the indemnifying party. Any real estate brokerage commission or finder's fee
payable to the Broker(s) in connection with this Lease shall only be payable and
applicable to the extent of the initial term of the Lease and to the extent of
the Premises as same exist as of the date on which Tenant executes this Lease.
Unless expressly agreed to in writing by Landlord and Broker(s), no real estate
brokerage commission or finder's fee shall be owed to, or otherwise payable to,
the Broker(s) for any renewals or other extensions of the initial Term of this
Lease or for any additional space leased by Tenant other than the Premises as
same exists as of the date on which Tenant executes this Lease. Tenant further
represents and warrants to Landlord that Tenant will not receive (i) any portion
of any brokerage commission or finder's fee payable to the Broker(s) in
connection with this Lease or (ii) any other form of compensation or incentive
from the Broker(s) with respect to this Lease.
39. QUIET ENJOYMENT: Landlord covenants with Tenant, upon the paying of Rent and
observing and keeping the covenants, agreements and conditions of this Lease on
its part to be kept, and during the periods that Tenant is not otherwise in
default of any of the terms or provisions of this Lease, and subject to the
rights of any of Landlord's lenders, (i) that Tenant shall and may peaceably and
quietly hold, occupy and enjoy the Premises and the Common Areas during the Term
of this Lease, and (ii) neither Landlord, nor any successor or assign of
Landlord, shall disturb Tenant's occupancy or enjoyment of the Premises and the
Common Areas.
40. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS:
Notwithstanding anything to the contrary contained in this Lease, if Tenant
shall fail to perform any of the terms, provisions, covenants or conditions to
be performed or complied with by Tenant pursuant to this Lease, and/or if the
failure of Tenant relates to a matter which in Landlord's judgment reasonably
exercised is of an emergency nature and such failure shall remain uncured for a
period of time commensurate with such emergency, then Landlord may, at
Landlord's option without any obligation to do so, and in its sole discretion as
to the necessity therefor, perform any such term, provision, covenant, or
condition, or make any such payment and Landlord by reason of so doing shall not
be liable or responsible for any loss or damage thereby sustained by Tenant or
anyone holding under or through Tenant. If Landlord so performs any of Tenant's
obligations hereunder, the full amount of the cost and expense entailed or the
payment so made or the amount of the loss so sustained shall immediately be
owing by Tenant to Landlord, and Tenant shall promptly pay to Landlord upon
demand, as Additional Rent, the full amount thereof with interest thereon from
the date of payment at the greater of (i) ten percent (10%) per annum, or (ii)
the highest rate permitted by applicable law and Enforcement Expenses.
41. TENANT'S ABILITY TO PERFORM LANDLORD'S UNPERFORMED OBLIGATIONS:
Notwithstanding anything to the contrary contained in this Lease, if Landlord
shall fail to perform any of the terms, provisions, covenants or conditions to
be performed or complied with by Landlord pursuant to this Lease after
expiration of all applicable notice and cure periods for Landlord's and any
mortgagee's benefit as set forth in Sections 23 and 33, respectively, and/or if
the failure of Landlord relates to a matter which in Tenant's judgment
reasonably exercised is of an emergency nature and such failure shall remain
uncured for a period of time commensurate with such emergency, then Tenant may,
at Tenant's option without any obligation to do so, after delivery of prior
written notice to Landlord and affording Landlord an opportunity to cure such
failure, perform any such term, provision, covenant, or condition. If Tenant so
performs any of Landlord's obligations hereunder, the full
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amount of the reasonable costs and expenses incurred shall immediately be owing
by Landlord to Tenant, and Landlord shall pay to Tenant the full amount thereof
within ninety (90) days of Landlord's receipt of Tenant's written demand and
accompanying documentation therefor. If Landlord fails to pay such sums within
said 90-day period, and provided there does not then exist a good faith dispute
thereof on the part of Landlord, Tenant may deduct such sums so demanded from
the next installment of Base Rent then due from Tenant hereunder.
IN WITNESS WHEREOF, this Lease is executed by the parties as of the
Lease Date referenced on page 1 of this Lease.
TENANT:
Cisco Systems, Inc., a California corporation
By: /s/Nancy Bareilles
------------------------
Its: VP
------------------------
Date: 12-19-96
------------------------
LANDLORD:
LINCOLN-WHITEHALL REALTY (WEST), L.L.C.,
a Delaware limited liability company
By: Lincoln Property Company Management Services, Inc.,
as manager and agent for LINCOLN-WHITEHALL REALTY (WEST), L.L.C.
By: /s/Barry DiRaimondo
---------------------------
Vice President
Date: 12/23/96
-----------------------
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EXHIBIT A - PREMISES
This exhibit, entitled "Premises", is and shall constitute EXHIBIT A to that
certain Lease Agreement dated December 18, 1996, (the "Lease"), by and between
Lincoln-Whitehall Realty (West), L.L.C., a Delaware limited liability company
("Landlord"), and Cisco Systems, Inc., a California corporation ("Tenant"), for
the leasing of certain premises located in the Lincoln Bay Tech Park, at
Buildings C & D, San Jose, California (the "Premises").
The Premises consist of the rentable square footage of space specified in the
Basic Lease Information and has the addresses specified in the Basic Lease
Information. The Premises are a part of and are contained in the Buildings
specified in the Basic Lease Information. The cross-hatched area depicts the
Premises within the Buildings and the Park:
INITIALS:
TENANT: ___________
LANDLORD: ___________
<PAGE> 27
EXHIBIT B TO LEASE AGREEMENT
TENANT IMPROVEMENTS AND SHELL IMPROVEMENTS
This exhibit, entitled "Tenant Improvements and Shell Improvements", is and
shall constitute EXHIBIT B to that certain Lease Agreement dated December 18,
1996, (the "Lease"), by and between Lincoln-Whitehall Realty (West), L.L.C., a
Delaware limited liability company ("Landlord"), and Cisco Systems, Inc., a
California corporation ("Tenant"), for the leasing of certain premises located
at 130 Baytech Drive (Building C) and 140 Baytech Drive (Building D), San Jose,
California (the "Premises"). The terms, conditions and provisions of this
EXHIBIT B are hereby incorporated into and are made a part of the Lease. Any
capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to such terms as set forth in the Lease.
1. TENANT TO CONSTRUCT TENANT IMPROVEMENTS. Subject to the provisions
below, Tenant shall be solely responsible for the planning, construction and
completion of the interior tenant improvements ("Tenant Improvements") to the
Premises in accordance with the terms and conditions of this Exhibit B. The
Tenant Improvements shall not include any of Tenant's personal property, trade
fixtures, furnishings, equipment or similar items.
2. TENANT IMPROVEMENT PLANS.
A. PRELIMINARY PLANS AND SPECIFICATIONS. Tenant shall retain a
licensed, insured architect ("Architect") to prepare preliminary working
architectural and engineering plans and specifications ("Preliminary Plans and
Specifications") for the Tenant Improvements. Tenant shall deliver the
Preliminary Plans and Specifications to Landlord. The Preliminary Plans and
Specifications shall be in sufficient detail to show locations, types and
requirements for all heat loads, people loads, floor loads, power and plumbing,
regular and special HVAC needs, telephone communications, telephone and
electrical outlets, lighting, lighting fixtures and related power, and
electrical and telephone switches. Landlord shall reasonably approve or
disapprove the Preliminary Plans and Specifications within five (5) days after
Landlord receives the Preliminary Plans and Specifications and, if disapproved,
Landlord shall return the Preliminary Plans and Specifications to Tenant, who
shall make all necessary revisions within ten (10) days after Tenant's receipt
thereof. This procedure shall be repeated until Landlord approves the
Preliminary Plans and Specifications. The approved Preliminary Plans and
Specifications, as modified, shall be deemed the "Final Preliminary Plans and
Specifications".
B. FINAL PLANS AND SPECIFICATIONS. After the Final Preliminary Plans
and Specifications are approved by Landlord and are deemed to be the Final
Preliminary Plans and Specifications, Tenant shall cause the Architect to
prepare in twenty (20) days following Landlord's approval of the Final
Preliminary Plans and Specifications the final working architectural and
engineering plans, specifications and drawings, ("Final Plans and
Specifications") for the Tenant Improvements. Tenant shall then deliver the
Final Plans and Specifications to Landlord. Landlord shall reasonably approve or
disapprove the Final Plans and Specifications within five (5) days after
Landlord receives the Final Plans and Specifications and, if disapproved,
Landlord shall return the Final Plans and Specifications to Tenant who shall
make all necessary revisions within ten (10) days after Tenant's receipt
thereof. This procedure shall be repeated until Landlord approves, in writing,
the Final Plans and Specifications. The approved Final Plans and Specifications,
as modified, shall be deemed the "Construction Documents".
C. MISCELLANEOUS. All deliveries of the Preliminary Plans and
Specifications, the Final Preliminary Plans and Specifications, the Final Plans
and Specifications, and the Construction Documents shall be delivered by
messenger service, by personal hand delivery or by overnight parcel service.
While Landlord has the right to approve the Preliminary Plans and
Specifications, the Final Preliminary Plans and Specifications, the Final Plans
and Specifications, and the Construction Documents, Landlord's interest in doing
so is to protect the Premises, the Buildings and Landlord's interest.
Accordingly, Tenant shall not rely upon Landlord's approvals and Landlord shall
not be the guarantor of, nor responsible for, the adequacy and correctness or
accuracy of the Preliminary Plans and Specifications, the Final Preliminary
Plans and Specifications, the Final Plans and Specifications, and the
Construction Documents, or the compliance thereof with applicable laws, and
Landlord shall incur no liability of any kind by reason of granting such
approvals.
D. BUILDING STANDARD WORK. The Construction Documents shall provide
that the Tenant Improvements to be constructed in accordance therewith must be
at least equal, in quality, to Landlord's building standard materials,
quantities and procedures then in use by Landlord ("Building Standards")
attached hereto as Exhibit B-2. Notwithstanding the foregoing, so long as the
Construction Documents are consistent with Tenant's Tasman buildings, the
Construction Documents shall be considered to be in accordance with Landlord's
Building Standards.
3. PERMITS. Tenant, at its sole cost and expense (subject to the
provisions of Paragraph 5 below), shall obtain all governmental approvals of the
Construction Documents to the full extent necessary for the issuance of a
building permit for the Tenant Improvements based upon such Construction
Documents. Tenant, at its sole cost and expense, shall also cause to be obtained
all other necessary approvals and permits from all governmental agencies having
jurisdiction or authority for the construction and installation of the Tenant
Improvements in accordance with the approved Construction Documents. Tenant at
its sole cost and expense (subject to the provisions of Paragraph 5 below) shall
undertake all steps necessary to insure that the construction of the Tenant
Improvements is accomplished in strict compliance with all statutes, laws,
ordinances, codes, rules, and regulations applicable to the construction of the
Tenant Improvements and the requirements and standards of
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any insurance underwriting board, inspection bureau or insurance carrier
insuring the Premises and/or the Buildings.
4. CONSTRUCTION.
A. Tenant shall be solely responsible for the construction,
installation and completion of the Tenant Improvements in accordance with the
Construction Documents approved by Landlord and is solely responsible for the
payment of all amounts when payable in connection therewith without any cost or
expense to Landlord, except for Landlord's obligation to contribute the Tenant
Improvement Allowance in accordance with the provisions of Paragraph 5 below.
Tenant shall diligently proceed with the construction, installation and
completion of the Tenant Improvements in accordance with the Construction
Documents and the completion schedule reasonably approved by Landlord. No
material changes shall be made to the Construction Documents and the completion
schedule approved by Landlord without Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed.
B. Tenant at its sole cost and expense (subject to the provisions of
Paragraph 5 below) shall employ a licensed, insured and bondable general
contractor ("Contractor") to construct the Tenant Improvements in accordance
with the Construction Documents. The construction contracts between Tenant and
the Contractor and between the Contractor and subcontractors shall be subject to
Landlord's prior written approval, which approval shall not be unreasonably
withheld. In addition to the foregoing, each of such construction contracts
shall include a provision that Landlord shall be a third party beneficiary in,
to and under such construction contracts. Proof that the Contractor is licensed
in California, is bondable as required under California law, and has the
insurance specified in Exhibit B-1, attached hereto and incorporated herein by
this reference, shall be provided to Landlord at the time that Tenant requests
approval of the Contractor from Landlord. Tenant shall comply with or cause the
Contractor to comply with all other terms and provisions of Exhibit B-1.
Notwithstanding anything to the contrary contained herein, Landlord hereby
approves of Devcon Construction Inc. to be selected by Tenant as the Contractor
under this Exhibit B. Tenant shall keep the Premises and the property on which
the Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by or on behalf of Tenant with
regard to the Tenant Improvements. Additionally, Tenant shall promptly
discharge, bond or otherwise cause the release of any and all liens arising out
of any work performed, materials furnished or obligations incurred by or on
behalf of Tenant with regard to the Tenant Improvements regardless of any
dispute Tenant or its Contractor may have regarding any such liens. In addition
to the foregoing and in consideration for Landlord not requiring the Contractor
to procure a bond with respect to the construction of the Tenant Improvements,
Tenant agrees to protect, defend (with counsel acceptable to Landlord) and hold
Landlord and the Indemnitees harmless and indemnify the Indemnitees from and
against all liabilities, damages, claims, losses, judgments, charges and
expenses (including reasonable attorneys' fees, costs of court and expenses
necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to, directly
or indirectly, the construction of the Tenant Improvements, including without
limitation, the costs to complete the Tenant Improvements and all other matters
for which a payment and performance bond would have otherwise provided coverage.
C. Prior to the commencement of the construction and installation of
the Tenant Improvements, Tenant shall provide the following to Landlord, all of
which shall be to Landlord's reasonable satisfaction:
(i) An estimated budget and cost breakdown for the Tenant
Improvements.
(ii) Estimated completion schedule for the Tenant Improvements.
(iii) Copies of all required approvals and permits from
governmental agencies having jurisdiction or authority for the construction and
installation of the Tenant Improvements; provided, however, if prior to
commencement of the construction and installation of Tenant Improvements Tenant
has not received the electrical, plumbing or mechanical permits, Tenant shall
only be required to provide Landlord with evidence that Tenant has made
application therefor, and, upon receipt by Tenant of such permits, Tenant shall
promptly provide Landlord with copies thereof.
(iv) Evidence of Tenant's procurement of insurance required to be
obtained pursuant to the provisions of Paragraphs 4.B and 4.G.
D. Landlord shall at all reasonable times have a right to inspect the
Tenant Improvements (provided Landlord does not materially interfere with the
work being performed by the Contractor or its subcontractors) and Tenant shall
immediately cease work upon written notice from Landlord if the Tenant
Improvements are not in compliance with the Construction Documents approved by
Landlord. If Landlord shall give notice of faulty construction or any other
material deviation from the Construction Documents, Tenant shall cause the
Contractor to make corrections promptly. However, neither the privilege herein
granted to Landlord to make such inspections, nor the making of such inspections
by Landlord, shall operate as a waiver of any rights of Landlord to require good
and workmanlike construction and improvements constructed in accordance with the
Construction Documents.
E. Subject to Landlord complying with its obligations in Paragraph 5
below, Tenant shall pay and discharge promptly and fully all claims for labor
done and materials and services furnished in connection with the Tenant
Improvements. The Tenant Improvements shall not be commenced until five (5)
business days after Landlord has received notice from Tenant stating the date
the construction of the Tenant Improvements is to commence so that Landlord can
post and record any appropriate Notice of Non-Responsibility.
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F. Tenant acknowledges and agrees that the agreements and covenants
of Tenant in Sections 10 and 37 of the Lease shall be fully applicable to
Tenant's construction of the Tenant Improvements.
G. Tenant shall maintain, and cause to be maintained, during the
construction of the Tenant Improvements, at its sole cost and expense, insurance
of the types and in the amounts specified in Exhibit B-1 and in Section 12 of
the Lease, together with builders' risk insurance for the amount of the
completed value of the Tenant Improvements on an all-risk non-reporting form
covering all improvements under construction, including building materials, and
other insurance in amounts and against such risks as the Landlord shall
reasonably require in connection with the Tenant Improvements.
H. No materials, equipment or fixtures shall be delivered to or
installed upon the Premises pursuant to any agreement by which another party has
a security interest or rights to remove or repossess such items, without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld.
I. Landlord reserves the right to establish reasonable rules and
regulations for the use of the Buildings during the course of construction of
the Tenant Improvements, including, but not limited to, construction parking,
storage of materials, hours of work, use of elevators, and clean-up of
construction related debris.
J. Upon completion of the Tenant Improvements, Tenant shall deliver
to Landlord the following, all of which shall be to Landlord's reasonable
satisfaction:
(i) Any certificates required for occupancy, including a
permanent and complete Certificate of Occupancy issued by the City of San Jose.
(ii) A Certificate of Completion signed by the Architect who
prepared the Construction Documents, reasonably approved by Landlord.
(iii) A cost breakdown itemizing all expenses for the Tenant
Improvements, together with invoices and receipts for the same or other evidence
of payment.
(iv) Final and unconditional mechanic's lien waivers for all the
Tenant Improvements.
(v) A Notice of Completion for execution by Landlord, which
certificate once executed by Landlord shall be recorded by Tenant in the
official records of Santa Clara County, and Tenant shall then deliver to
Landlord a true and correct copy of the recorded Notice of Completion.
(vi) A true and complete copy of all as-built plans and drawings
for the Tenant Improvements.
K. The Tenant Improvements shall be deemed substantially complete on
the date that the building officials of the applicable governmental agency(s)
issues its final approval of the construction of the Tenant Improvements whether
in the form of the issuance of a final permit, certificate of occupancy or the
written approval evidencing its final inspection on the building permits, or the
date on which Tenant first takes occupancy of the Premises for purposes other
than to perform the Tenant's Pre-Occupancy Work (defined below), or the date
that the Contractor issues a certificate stating that the Tenant Improvements
have been substantially completed in accordance with the Construction Drawings,
whichever first occurs ("Substantial Completion", or "Substantially Completed",
or "Substantially Complete").
5. TENANT IMPROVEMENT ALLOWANCE.
A. Subject to Tenant's compliance with the provisions of this Exhibit
B, Landlord shall provide to Tenant an allowance in the approximate amount of
eight hundred forty-nine thousand three hundred fifty and 00/100 dollars and
($849,350.00) based upon a rate of ten dollars ($10.00) per rentable square foot
of the Premises (the "Tenant Improvement Allowance") to construct and install
only the Tenant Improvements. The actual amount of the Tenant Improvement
Allowance shall be adjusted commensurately based upon the actual rentable square
feet of the Premises after Landlord's Substantial Completion of the Shell
Improvements. The Tenant Improvement Allowance shall be used to design, prepare,
plan, obtain the approval of, construct and install the Tenant Improvements and
for no other purpose. Except as otherwise expressly provided herein, Landlord
shall have no obligation to contribute the Tenant Improvement Allowance unless
and until the Construction Documents have been approved by Landlord and Tenant
has complied with all requirements set forth in Paragraph 4.C. of this Exhibit
B. The costs to be paid out of the Tenant Improvement Allowance shall include
all reasonable costs and expenses associated with the design, preparation,
approval, planning, construction and installation of the Tenant Improvements
(the "Tenant Improvement Costs"), including all of the following:
(i) All costs of the Preliminary Plans and Specifications,
the Final Plans and Specifications, and the Construction Documents, and
engineering costs associated with completion of the State of California energy
utilization calculations under Title 24 legislation:
(ii) All costs of obtaining building permits and other necessary
authorizations from local governmental authorities;
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(iii) All costs of interior design and finish schedule plans and
specifications including as-built drawings, if applicable;
(iv) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not limited
to, the construction fee for overhead and profit and the cost of all on-site
supervisory and administrative staff, office, equipment and temporary services
rendered by the Contractor in connection with the construction of the Tenant
Improvements; provided, however, that the construction fee for overhead and
profit, the cost of all on-site supervisory and administrative staff, office,
equipment and temporary services shall not exceed amounts which are reasonable
and customary for such items in the local construction industry;
(v) All fees payable to the Architect and any engineer if they
are required to redesign any portion of the Tenant Improvements following
Tenant's and Landlord's approval of the Construction Documents;
(vi) Utility connection fees;
(vii) Inspection fees and filing fees payable to local
governmental authorities, if any;
(viii) All costs of all permanently affixed equipment and
non-trade fixtures provided for in the Construction Documents, including the
cost of installation; and,
(ix) A construction management fee (the "CM Fee") payable to
Landlord in the amount of one percent (1%) of the aggregate of the hard costs
for the construction and installation of the Tenant Improvements (excluding this
CM Fee).
The Tenant Improvement Allowance shall be the maximum contribution by Landlord
for the Tenant Improvement Costs, and the disbursement of the Tenant Improvement
Allowance is subject to the terms contained hereinbelow.
Except for payment of the CM Fee, Landlord will make payments to Tenant from the
Tenant Improvement Allowance to reimburse Tenant for Tenant Improvement Costs
paid or incurred by Tenant. Payment of the CM Fee shall be the first payment
from the Tenant Improvement Allowance and shall be made by means of a deduction
or credit against the Tenant Improvement Allowance. All other payments of the
Tenant Improvement Allowance shall be by progress payments not more frequently
than once per month and only after satisfaction of the following conditions
precedent: (a) receipt by Landlord of conditional mechanics' lien releases for
the work completed and to be paid by said progress payment, conditioned only on
the payment of the sums set forth in the mechanics' lien release, executed by
the Contractor and all subcontractors, labor suppliers and materialmen; (b)
receipt by Landlord of unconditional mechanics' lien releases from the
Contractor and all subcontractors, labor suppliers and materialmen for all work
other than that being paid by the current progress payment previously completed
by the Contractor, subcontractors, labor suppliers and materialmen and for which
Tenant has received funds from the Tenant Improvement Allowance to pay for such
work; (c) receipt by Landlord of any and all documentation reasonably required
by Landlord detailing the work that has been completed and the materials and
supplies used as of the date of Tenant's request for the progress payment,
including, without limitation, invoices, bills, or statements for the work
completed and the materials and supplies used; and (d) completion by Landlord or
Landlord's agents of any inspections of the work completed and materials and
supplies used as deemed reasonably necessary by Landlord. Except for the CM Fee
payment (credit), Tenant Improvement Allowance progress payments shall be paid
to Tenant within fourteen (14) days from the satisfaction of the conditions set
forth in the immediately preceding sentence. The preceding notwithstanding, all
Tenant Improvement Costs paid or incurred by Tenant prior to Landlord's approval
of the Construction Documents in connection with the design and planning of the
Tenant Improvements by Architect shall be paid from the Tenant Improvement
Allowance, without any retention, within fourteen (14) days following Landlord's
receipt of invoices, bills or statements from Architect evidencing such costs.
Notwithstanding the foregoing to the contrary, Landlord shall be entitled to
withhold and retain five percent (5%) of the Tenant Improvement Allowance or of
any Tenant Improvement Allowance progress payment until the lien-free expiration
of the time for filing of any mechanics' liens claimed or which might be filed
on account of any work ordered by Tenant or the Contractor or any subcontractor
in connection with the construction and installation of the Tenant Improvements.
B. Landlord shall not be obligated to pay any Tenant Improvement
Allowance progress payment or the Tenant Improvement Allowance retention if on
the date Tenant is entitled to receive the Tenant Improvement Allowance progress
payment or the Tenant Improvement Allowance retention Tenant is in material
default of this Lease. Such payments shall resume upon Tenant curing any such
default within the time periods which may be provided for in the Lease.
C. Should the total cost of constructing the Tenant Improvements be
less than the Tenant Improvement Allowance, the Tenant Improvement Allowance
shall be automatically reduced to the amount equal to said actual cost.
6. Termination. If the Lease is terminated prior to the date on which the Tenant
Improvements are completed, for any reason due to the default of Tenant
hereunder, in addition to any other remedies available to Landlord under the
Lease, Tenant shall pay to Landlord as Additional Rent under the Lease, within
five (5) days of receipt of a statement therefor, any and all costs incurred by
Landlord and not reimbursed or otherwise paid by Tenant through the date of
termination in connection with the Tenant Improvements to the extent
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planned, installed and/or constructed as of such date of termination, including,
but not limited to, any costs related to the removal of all or any portion of
the Tenant Improvements and restoration costs related thereto. Except for any
cafeteria and related items that are part of the Tenant Improvements for which
Landlord will require Tenant, at its sole cost and expense, to demolish and/or
remove from the Premises upon the expiration or earlier termination of this
Lease, Landlord shall not require Tenant to demolish and/or remove any other
items comprising the Tenant Improvements from the Premises upon the expiration
or earlier termination of this Lease.
7. Lease Provisions; Conflict. The terms and provisions of the Lease, insofar as
they are applicable, in whole or in part, to this EXHIBIT B, are hereby
incorporated herein by reference, and specifically including all of the
provisions of Section 31 of the Lease. In the event of any conflict between the
terms of the Lease and this EXHIBIT B, the terms of this EXHIBIT B shall
prevail. Any amounts payable by Tenant to Landlord hereunder shall be deemed to
be Additional Rent under the Lease and, upon any default in the payment of same,
Landlord shall have all rights and remedies available to it as provided for in
the Lease.
8. Tenant Access. Landlord, in Landlord's reasonable discretion and upon receipt
of written confirmation from Landlord's general contractor that such entry will
be in harmony with Landlord's general contractor's work schedule with respect to
the Shell Improvements, will grant Tenant a license to have access to the
Premises prior to the Shell Improvements being Substantially Completed (defined
below) to allow Tenant to do other work required by Tenant to install a portion
of the Tenant Improvements and to otherwise make the Premises ready for Tenant's
use and occupancy (the "Tenant's Pre-Occupancy Work"). It shall be a condition
to the grant by Landlord and continued effectiveness of such license that:
(a) Tenant shall give to Landlord a written request to have such
access not less than five (5) business days prior to the date on which such
proposed access will commence (the "Access Notice"). The Access Notice shall
contain or be accompanied by each of the following items, all in form and
substance reasonably acceptable to Landlord: (i) a detailed description of and
schedule for Tenant's Pre-Occupancy Work; (ii) the names and addresses of all
contractors, subcontractors and material suppliers and all other representatives
of Tenant who or which will be entering the Premises on behalf of Tenant to
perform Tenant's Pre-Occupancy Work or will be supplying materials for such
work, and the approximate number of individuals, itemized by trade, who will be
present in the Premises; (iii) copies of all contracts, subcontracts, material
purchase orders, plans and specifications pertaining to Tenant's Pre-Occupancy
Work; (iv) copies of all licenses and permits required in connection with the
performance of Tenant's Pre-Occupancy Work; and (v) certificates of insurance
(in amounts satisfactory to Landlord and with the parties identified in, or
required by, the Lease named as additional insureds) and instruments of
indemnification against all claims, costs, expenses, penalties, fines, and
damages which may arise in connection with Tenant's Pre-Occupancy Work.
(b) Such pre-term access by Tenant and Tenant's employees, agents,
contractors, consultants, workmen, mechanics, suppliers and invitees shall be
subject to reasonable scheduling by Landlord.
(c) Tenant's employees, agents, contractors, consultants, workmen,
mechanics, suppliers and invitees shall fully cooperate, work in harmony and
not, in any manner, unreasonably interfere with Landlord or Landlord's agents or
representatives in performing the work related to substantial completion of the
Shell Improvements (the "Work") and any additional work pursuant to approved
change orders for the Shell Improvements, Landlord's work in other areas of the
Park, or the general operation of the Buildings. If at any time any such person
representing Tenant shall not be cooperative or shall otherwise cause or
threaten to cause any such disharmony or interference, including, without
limitation, labor disharmony, and Tenant fails to immediately institute and
maintain corrective actions as directed by Landlord, then Landlord may revoke
such license upon twenty-four (24) hours' prior written notice to Tenant.
(d) Any such entry into and occupancy of the Premises or any portion
thereof by Tenant or any person or entity working for or on behalf of Tenant
shall be deemed to be subject to all of the terms, covenants, conditions and
provisions of the Lease, excluding only the covenant to pay Rent. Landlord shall
not be liable for any injury, loss or damage that may occur to any of Tenant's
Pre-Occupancy Work made in or about the Premises or to any property placed
therein prior to the commencement of the term of the Lease, the same being at
Tenant's sole risk and liability. Tenant shall be liable to Landlord for any
damage to any portion of the Premises, the Work or the additional work related
to any approved change orders caused by Tenant or any of Tenant's employees,
agents, contractors, consultants, workmen, mechanics, suppliers and invitees. In
the event that the performance of Tenant's Pre-Occupancy Work causes extra costs
to be incurred by Landlord or requires the use of other Building services, after
delivery to Tenant of prior notice that such extra costs are reasonably
anticipated by Landlord to be incurred, Tenant shall promptly reimburse Landlord
for such extra costs and/or shall pay Landlord for such other Building services
at Landlord's standard rates then in effect.
9. Shell Improvements. Subject to the conditions set forth herein, Landlord, at
its sole cost and expense, agrees to construct and install certain shell
improvements ("Shell Improvements") on the Lot, including without limitation,
the construction of the Buildings substantially in accordance with those certain
plans, specifications, and drawings prepared by Cabak Rooney Jordan Associates,
dated September 30, 1996 (collectively, the "Shell Construction Drawings"), a
copy of which is attached hereto as Schedule 1. In constructing and installing
the Shell Improvements Landlord shall not deviate from the Shell Construction
Drawings in any substantial and material manner, without first obtaining
Tenant's prior consent thereto, which consent shall not be unreasonably
withheld, conditioned or delayed; provided, however, Tenant shall not have any
approval nor consensual rights (and Landlord shall not be required to obtain
Tenant's consent therefor) concerning any changes required to be made to the
Shell Construction Drawings or the Shell Improvements by (1) the fire
department, building or
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planning department, building inspectors or any other agency or official having
jurisdiction over the Buildings, the work related to the Shell Improvements
and/or the Shell Improvements, and/or (2) any committee, declarant or other
persons or entities having approval or similar rights under any Recorded Matters
with respect to the Shell Improvements, and/or (3) Landlord's lender(s) making a
construction loan(s) with respect to the Shell Improvements. The Shell
Improvements shall not include the Tenant Improvements nor any of Tenant's
personal property, equipment, furnishings, trade fixtures or fixtures. All other
improvements not specified in this Section 9 shall be considered Tenant
Improvements and shall be paid for in accordance with the provisions of Sections
8 and 10 above. Landlord shall use commercially reasonable efforts to cause its
general contractor to Substantially Complete (defined below) the Shell
Improvements by the scheduled Commencement Date specified in the Basic Lease
Information (the "Completion Date"), subject to delays due to (a) acts or events
beyond its control including, but not limited to, acts of God, earthquakes,
strikes, lockouts, boycotts, casualties, discontinuance of any utility or other
service required for performance of the Work, moratoriums, governmental agencies
and inclement weather (including, but not limited to, rain delays), (b) the lack
of availability or shortage of specialized materials used in the construction of
the Tenant Improvements, (c) any matters beyond the control of Landlord, the
general contractor or any subcontractors, (d) any changes required by the fire
department, building and/or planning department, building inspectors or any
other agency having jurisdiction over the Buildings, the Work, the Tenant
Improvements and/or the Shell Improvements (except to the extent such changes
are directly attributable to Tenant's use or Tenant's specialized tenant
improvements, in which event such delays are considered Tenant Delays) (the
events and matters set forth in Subsections (a), (b), (c) and (d) are
collectively referred to as "Force Majeure Delays"), or (e) any delay
attributable to Tenant and/or any of Tenant's Representatives or Tenant's
intended use of the Premises (collectively, "Tenant Delays"), including, but not
limited to, any of the following described events or occurrences: (i) delays
related to changes made or requested by Tenant to the Work, and/or the approved
final drawings with respect to the Tenant Improvements; (ii) the failure of
Tenant to furnish all or any plans, drawings, specifications, finish details or
other information required above; (iii) the failure of Tenant to comply with the
requirements of this Exhibit B; (iv) Tenant's requirements for special work or
materials, finishes, or installations other than the Building Standards or
Tenant's requirements for special construction or phasing; (v) any changes
required by the fire department, building or planning department, building
inspectors or any other agency having jurisdiction over the Buildings, the Work
and/or the Tenant Improvements if such changes are directly attributable to
Tenant's particular use or Tenant's specialized tenant improvements which do not
conform to Landlord's Building Standards; (vi) the performance of any additional
work pursuant to a change request which is requested by Tenant; (vii) the
performance of work in or about the Premises by any person, firm or corporation
employed by or on behalf of Tenant, including, without limitation, any failure
to complete or any delay in the completion of such work; or (viii) any and all
delays caused by or arising from acts or omissions of Tenant and/or Tenant's
Representatives, in any manner whatsoever. Any delays in the construction of the
Shell Improvements due to any of the events described above and designated as
"Tenant Delays", shall in no way extend or affect the date on which Tenant is
required to commence paying Rent under the terms of the Lease. It is the
intention of the parties that all of such delays will be considered Tenant
Delays for which Tenant shall be wholly and completely responsible for any and
all consequences related to such delays, including, without limitation, any
costs and expenses attributable to increases in labor or materials. The Shell
Improvements shall be deemed substantially complete on the date that the
building officials of the applicable governmental agency(s) issues its final
approval of the construction of the Shell Improvements whether in the form of
the issuance of a final permit, certificate of occupancy or the written approval
evidencing its final inspection on the building permits, or the date on which
Tenant first takes occupancy of the Premises for purposes other than to perform
the Tenant's Pre-Occupancy Work (defined below), or the date that Landlord's
general contractor issues a certificate stating that the Shell Improvements have
been substantially completed in accordance with the Shell Construction Drawings,
whichever first occurs ("Substantial Completion", or "Substantially Completed",
or "Substantially Complete"). Subject to the provisions set forth below, if the
Work with respect to the Shell Improvements is not deemed to be Substantially
Completed on or before the scheduled Completion Date, (A) Landlord agrees to use
reasonable efforts to Substantially Complete the Work as soon as practicable
thereafter, (B) the Lease shall remain in full force and effect, and (C)
Landlord shall not be deemed to be in breach or default of the Lease or this
EXHIBIT B as a result thereof and, Landlord shall have no liability to Tenant as
a result of any delay in occupancy (whether for damages, abatement of all or any
portion of the Rent, or otherwise). Subject to the provisions set forth below,
the Commencement Date and the Expiration Date of the term of the Lease (as
defined in Section 2 of the Lease) shall be extended commensurately by the
amount of time attributable to any Force Majeure Delays which delay the
Substantial Completion of the Shell Improvements. In addition to the foregoing
and notwithstanding anything to the contrary contained herein or in the Lease,
if Landlord does not tender possession to Tenant of the Premises with the Shell
Improvements Substantially Complete by November 15, 1997 (the "Outside Date")
(subject to any Force Majeure Delays or Tenant Delays, in which event the date
of November 15, 1997 shall be extended commensurately by the period of time
attributable to such delays), then either Tenant or Landlord may terminate this
Lease by delivering written notice thereof to the other party no later than the
date which is ten (10) business days after the Outside Date, as extended by the
period of time attributable to any Force Majeure Delays and/or Tenant Delays. In
addition to the foregoing and notwithstanding anything to the contrary contained
herein or in the Lease, if Landlord does not tender possession to Tenant of the
Premises with the Shell Improvements Substantially Complete by March 1, 1998
(the "Ultimate Outside Date") (subject to any Tenant Delays, in which event the
date of March 1, 1998 shall be extended commensurately by the period of time
attributable to such delays), then either Tenant or Landlord may terminate this
Lease by delivering written notice thereof to the other party no later than the
date which is ten (10) business days after the Ultimate Outside Date, as
extended by the period of time attributable to any Tenant Delays. If either
party fails to timely terminate the Lease as and when provided herein, or if
Landlord delivers to Tenant possession of the Premises with the Tenant
Improvements Substantially Complete at any time earlier than the Outside Date
(as such date may be extended due to Force Majeure Delays or Tenant Delays, as
the case may be) or the Ultimate Outside Date (as such date may be extended due
to Tenant Delays), as applicable, then upon the occurrence of any such
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events the foregoing right given to Tenant and Landlord to terminate this Lease
as provided herein shall lapse and be null and void upon the earlier occurrence
of such event and the Lease shall remain in full force and effect with Tenant
and Landlord having no further right to terminate this Lease pursuant to the
foregoing provisions. If Landlord does so timely deliver to Tenant possession of
the Premises with the Shell Improvements Substantially Complete, Tenant shall
promptly deliver written notice to Landlord confirming same. In the event the
commencement date and/or the expiration date of this Lease is other than the
Commencement Date and/or Expiration Date provided on Page 1 in the Basic Lease
Information, as the case may be, Landlord and Tenant shall execute a written
amendment to this Lease, substantially in the form of Exhibit F hereto, wherein
the parties shall specify the actual commencement date, expiration date, the
date on which Tenant is to commence paying Rent and the other matters referred
to in Section 1 of the Lease. Landlord's employees, agents, contractors,
consultants, workmen, mechanics, suppliers and invitees shall fully cooperate,
work in harmony and not, in any manner, unreasonably interfere with Tenant or
Tenant's contractors, agents or representatives in performing the work related
to substantial completion of the Tenant Improvements and any additional work
pursuant to approved change orders for the Tenant Improvements. If at any time
any such person representing Landlord shall not be cooperative or shall
otherwise cause or threaten to cause any such disharmony or interference,
including, without limitation, labor disharmony, and Landlord fails to
immediately institute and maintain corrective actions as requested by Tenant,
then any delays in Substantially Completing the Tenant Improvements as a result
thereof shall be considered to be Landlord Delays.
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EXHIBIT B-1
CONSTRUCTION INSURANCE REQUIREMENTS
Before commencing work, the contractor shall procure and maintain at its sole
cost and expense until completion and final acceptance of the work, at least the
following minimum levels of insurance.
A. Workers' Compensation in statutory amounts and Employers Liability
Insurance in the minimum amounts of $100,000 each accident for bodily
injury by accident and $100,000 each employee for bodily injury by
disease with a $500,000 policy limit, covering each and every worker used
in connection with the contract work.
B. Comprehensive General Liability Insurance on an occurrence basis
including, but not limited to, protection for Premises/Operations
Liability, Broad Form Contractual Liability, Owner's and Contractor's
Protective, and Products/Completed Operations Liability*, in the
following minimum limits of liability.
Bodily Injury, Property Damage, and
Personal Injury Liability $2,000,000/each occurrence
$3,000,000/aggregate
* Products/Completed Operations Liability Insurance is to be
provided for a period of at least one (1) year after completion of
work.
Coverage should include protection for Explosion, Collapse and
Underground Damage.
C. Comprehensive Automobile Liability Insurance with the following minimum
limits of liability.
Bodily Injury and Property $1,000,000/each occurrence
Damage Liability $2,000,000/aggregate
This insurance will apply to all owned, non-owned or hired automobiles to
be used by the Contractor in the completion of the work.
D. Umbrella Liability Insurance in a minimum amount of five million dollars
($5,000,000), providing excess coverage on a following-form basis over
the Employer's Liability limit in Paragraph A and the liability coverages
outlined in Paragraphs B and C.
E. Equipment and Installation coverages in the broadest form available
covering Contractor's tools and equipment and material not accepted by
Tenant. Tenant will provide Builders Risk Insurance on all accepted and
installed materials.
All policies of insurance, duplicates thereof or certificates evidencing
coverage shall be delivered to Landlord prior to commencement of any work and
shall name Landlord, and its partners and lenders as additional insureds as
their interests may appear. All insurance policies shall (1) be issued by a
company or companies licensed to be business in the state of California, (2)
provide that no cancellation, non-renewal or material modification shall be
effective without thirty (30) days prior written notice provided to Landlord,
(3) provide no deductible greater than $15,000 per occurrence, (4) contain a
waiver to subrogation clause in favor of Landlord, and its partners and lenders,
and (5) comply with the requirements of Sections 12.2, 12.3 and 12.4 of the
Lease to the extent such requirements are applicable.
INITIALS:
TENANT: ___________
LANDLORD: ___________
<PAGE> 35
EXHIBIT B-2
BUILDING STANDARDS
OFFICE AREA
DEMISING PARTITION AND CORRIDOR WALLS:
A. 6" 20-gauge metal studs at 24" O.C. (or as required by code for
span) framed full height from finish floor to structure above
B. One (1) layer 5/8" drywall Type "X" both sides of wall, fire taped
only
INTERIOR PARTITIONS:
A. 3 5/8" 25-gauge metal studs at 24" O.C. to bottom of T-bar ceiling
grid approximately 9' - 0' high
B. Top track to be pre-formed slotted aluminum taped in
C. One (1) layer 5/8" drywall both sides of wall, taped texture ready
for paint
D. 3 5/8" metal studs including all lateral bracing as required by
code
PERIMETER DRYWALL (AT OFFICE AREAS):
A. One (1) layer 5/8" Type "X" drywall taped texture ready for paint
B. Provide alternate to texture concrete in lieu of furring walls
COLUMN FURRING:
A. Furring channel all sides
B. One (1) layer 5/8" drywall taped texture and ready for paint
C. Provide deductive alternate for texturing columns where there are
no pipes to furred out
ACOUSTICAL CEILINGS:
A. 2' x 4' standard white T-bar grid system as manufactured by
Chicago Metallic or equal
B. 2' x 4' x 5/8" white, fissured, non-directional acoustical tile to
be Cortega as manufactured by Armstrong or equal
PAINTING:
A. Sheetrock walls to receive two (2) coats of interior latex paint
as manufactured by Kelly Moore or equal. Some portions of second
coat to be single accent color.
B. Provide a deductive alternate for not painting warehouse walls
WINDOW COVERING:
A. 1" aluminum mini-blinds as manufactured by Levelor or equal, color
to be selected by Lincoln Property Company
B. Blinds to be sized to fit window module
VCT:
VCT to be 1/8" x 12" x 12" as manufactured by Armstrong - Excelon Series
or equal
LIGHT FIXTURES:
2' x 4' T-bar lay in 3-tube energy efficient fixture with cool white
fluorescent tubes with prismatic acrylic lens as manufactured by Lithonia
or equal
LIGHT SWITCHES:
A. Double switching as required by Title 24
B. Switch assembly to be Leviton, color - Ivory
ELECTRICAL OUTLET:
A. 110-v duplex outlet in demising or interior partitions only, as
manufactured by Leviton, color to be Ivory
B. Eight (8) outlets per circuit, spacing to meet code (2 per office)
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C. Transformers to be a minimum of 20% or over required capacity
D. Contractors to inspect electric room and to include all necessary
metering costs
E. No aluminum wiring is acceptable
TELEPHONE OUTLET:
A. One (1) single outlet box in wall with pullwire from outlet box to
area above T-bar ceiling per office
B. Cover plate for phone outlets to be included
FIRE SPRINKLERS:
As required by fire codes
TOPSET BASE:
A. 4" rubber base as manufactured by Burke or equal, standard colors
only
B. 4" rubber base at VCT areas
TOILET AREAS:
Wet walls to receive marlite up to 48". Floors to receive sheetvinyl and
cove base as required by code
CARPET:
Minimum 30 ounce, commercial grade, level loop, UM44-C. Type 1 Class 1.
100% continuous filament. 5-year wear guarantee. Glue down, no pad.
WOOD DOORS:
Shall be 3'-0" x 7'-0" x 1 3/4" (unless otherwise specified) solid core,
prefinished birch "Cal-Wood" B-3 or equal if approved by owner
DOOR FRAMES:
Shall be ACI or equal, 3 3/4" or 4 7/8" throat, aluminum, dark bronze
anodized, snap-on trim
HARDWARE:
Shall be "Schlage", a lever type "Levon" D series, dark bronze 613
finish, 2 3/4" backset. Closers (where required) shall be Duro X PA X
SN-1
INSULATION:
By Title 24 insulation
PLUMBING:
A. Shall comply with all local codes and handicapped code
requirements. Fixtures shall be either "American Standard",
"Koher" or "Norris". All toilet accessories and grab bars shall be
"Bobrick" or equal and approved by owner
B. Plumbing bid shall include 5 gallon minimum, or insta hot with
mixer valve electric water heater
TOILET PARTITIONS:
Shall be as manufactured by Fiat, global or equal if approved by owner.
Color shall be chosen by tenant
HVAC:
Five (5) year warranty provided on all HVAC compressor units. All
penetrations and sleeper supports to be hot mopped to LPC standard.
Provide alternate price for electric heat pumps at conditioned spaces.
Provide time overlay switch at compressors.
WAREHOUSE AREAS:
Floor - sealed concrete
Fire Extinguishers - 2A 10 BC surface mount by code x by S.F.
Lighting - 1x8 strip lighting single tube chain hung 25 ft.
Draft stops - by code UBC 198 Edition
Service electrical outlets - HVAC or heaters at tenant cost
(400 W metal halide lighting are acceptable in lieu of strip lighting at
warehouse minimum 15 F.C.)1
2
<PAGE> 37
EXHIBIT C TO LEASE AGREEMENT
RULES & REGULATIONS
This exhibit, entitled "Rules & Regulations", is and shall constitute EXHIBIT C
to that certain Lease Agreement dated December 18, 1996 (the "Lease"), by and
between Lincoln-Whitehall Realty (West), L.L.C., a Delaware limited liability
company ("Landlord"), and Cisco Systems, Inc., a California corporation
("Tenant"), for the leasing of certain premises located at 130 Baytech Drive
(Building C) and 140 Baytech Drive (Building D), San Jose, California (the
"Premises"). The terms, conditions and provisions of this EXHIBIT C are hereby
incorporated into and are made a part of the Lease. Any capitalized terms used
herein and not otherwise defined herein shall have the meaning ascribed to such
terms as set forth in the Lease.
1. No advertisement, picture or sign of any sort shall be displayed on
or outside the Premises or the Buildings without the prior written
consent of Landlord. Landlord shall have the right to remove any such
unapproved item without notice and at Tenant's expense.
2. Tenant shall not regularly store motor vehicles in designated parking
areas after the conclusion of normal daily business activity.
3. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or
delayed.
4. All window coverings installed by Tenant and visible from the outside
of the Buildings require the prior written approval of Landlord.
5. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance or any flammable or combustible materials on
or around the Premises, the Buildings or the Park, except as
otherwise permitted pursuant to the provisions of Section 29 of the
Lease.
6. Tenant shall not alter any lock or install any new locks or bolts on
any door at the Premises without the prior consent of Landlord,
except any conspicuously designated security areas of Tenant.
7. Intentionally omitted.
8. Tenant shall park motor vehicles in those general parking areas as
designated by Landlord except for loading and unloading. During those
periods of loading and unloading, Tenant shall not unreasonably
interfere with traffic flow within the Park and loading and unloading
areas of other tenants.
9. Tenant shall not disturb, solicit or canvas any occupant of the
Buildings or Park and shall cooperate to prevent same.
10. No person shall go on the roof without Landlord's permission.
11. Business machines and mechanical equipment belonging to Tenant which
cause noise or vibration that may be transmitted to the structure of
the Buildings, to such a degree as to be objectionable to Landlord or
other Tenants, shall be placed and maintained by Tenant, at Tenant's
expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration.
12. All goods, including material used to store goods, delivered to the
Premises of Tenant shall be immediately moved into the Premises and
shall not be left in parking or receiving areas overnight without the
prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed.
13. Tractor trailers which must be unhooked or parked with dolly wheels
beyond the concrete loading areas must use steel plates or wood
blocks under the dolly wheels to prevent damage to the asphalt paving
surfaces. No parking or storing of such trailers will be permitted in
the auto parking areas of the Park or on streets adjacent thereto.
14. Forklifts which operate on asphalt paving areas shall not have solid
rubber tires and shall only use tires that do not damage the asphalt.
15. Tenant is responsible for the storage and removal of all trash and
refuse. All such trash and refuse shall be contained in suitable
receptacles stored behind screened enclosures at locations approved
by Landlord.
16. Tenant shall not store or permit the storage or placement of goods,
or merchandise or pallets or equipment of any sort in or around the
Premises, the Buildings, the Park or any of the Common Areas of the
foregoing. No displays or sales of merchandise shall be allowed in
the parking lots or other Common Areas.
17. Tenant shall not permit any animals, including, but not limited to,
any household pets, to be brought or kept in or about the Premises,
the Buildings, the Park or any of the Common Areas of the foregoing.
INITIALS:
TENANT: ___________
LANDLORD: ___________
<PAGE> 38
18. Tenant shall not permit any motor vehicles to be washed on any
portion of the Premises or in the Common Areas of the Park, nor shall
Tenant permit mechanical work or maintenance of motor vehicles to be
performed on any portion of the Premises or in the Common Areas of
the Park.
INITIALS:
TENANT:
LANDLORD:
<PAGE> 39
EXHIBIT E
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Landlord (identified below) to evaluate and finalize a lease agreement
with you as tenant. After a lease agreement is signed by you and the Landlord
(the "Lease Agreement"), on an annual basis in accordance with the provisions of
Section 29 of the signed Lease Agreement, you are to provide an update to the
information initially provided by you in this certificate. The information
contained in the initial Hazardous Materials Disclosure Certificate and each
annual certificate provided by you thereafter will be maintained in
confidentiality by Landlord subject to release and disclosure as required by (i)
any lenders and owners and their respective environmental consultants, (ii) any
prospective purchaser(s) of all or any portion of the property on which the
Premises are located, (iii) Landlord to defend itself or its lenders, partners
or representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders, decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which are
not otherwise defined herein, shall have the same meaning ascribed to such term
in the signed Lease Agreement. Any questions regarding this certificate should
be directed to, and when completed, the certificate should be delivered to:
Landlord: ______________________________________________
______________________________________________
c/o Lincoln Property Company Management Services, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attn:
Phone: (415) 571-2200
Name of (Prospective) Tenant:__________________________________________________
Mailing Address:_______________________________________________________________
Contact Person, Title and Telephone Number(s):_________________________________
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):___________________________________________________________
_______________________________________________________________________________
Address of (Prospective) Premises:_____________________________________________
Length of (Prospective) initial Term:__________________________________________
_______________________________________________________________________________
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or
about the Premises, including, without limitation, principal products
processed, manufactured or assembled services and activities to be
provided or otherwise conducted. Existing tenants should describe
any proposed changes to on-going operations.
____________________________________________________________________
____________________________________________________________________
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or
disposed of in, on or about the Premises? Existing tenants
should describe any Hazardous Materials which continue to
be used, generated, stored or disposed of in, on or about
the Premises.
Wastes Yes [ ] No [ ]
Chemical Products Yes [ ] No [ ]
Other Yes [ ] No [ ]
1
<PAGE> 40
If Yes is marked, please explain:_________________________
__________________________________________________________
__________________________________________________________
2.2 If Yes is marked in Section 2.1, attach a list of any
Hazardous Materials to be used, generated, stored or
disposed of in, on or about the Premises, including the
applicable hazard class and an estimate of the quantities
of such Hazardous Materials at any given time; estimated
annual throughput; the proposed location(s) and method of
storage (excluding nominal amounts of ordinary household
cleaners and janitorial supplies which are not regulated by
any Environmental Laws); and the proposed location(s) and
method of disposal for each Hazardous Material, including,
the estimated frequency, and the proposed contractors or
subcontractors. Existing tenants should attach a list
setting forth the information requested above and such list
should include actual data from on-going operations and the
identification of any variations in such information from
the prior year's certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel,
petroleum, or other Hazardous Materials in tanks or sumps
proposed in, on or about the Premises? Existing tenants
should describe any such actual or proposed activities.
Yes [ ] No [ ]
If yes, please explain:___________________________________
__________________________________________________________
__________________________________________________________
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste
Generator I.D. Number? Existing tenants should describe any
additional identification numbers issued since the previous
certificate.
Yes [ ] No [ ]
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing tenants should describe
any new reports filed.
Yes [ ] No [ ]
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
______storm drain? _______sewer?
______surface water? _______no wastewater or
other wastes discharged.
Existing tenants should indicate any actual discharges. If
so, describe the nature of any proposed or actual
discharge(s).
__________________________________________________________
__________________________________________________________
5.2 Will any such wastewater or waste be treated before
discharge?
Yes [ ] No [ ]
If yes, describe the type of treatment proposed to be
conducted. Existing tenants should describe the actual
treatment conducted.
__________________________________________________________
__________________________________________________________
6. AIR DISCHARGES
2
<PAGE> 41
6.1 Do you plan for any air filtration systems or stacks to be
used in your company's operations in, on or about the
Premises that will discharge into the air; and will such
air emissions be monitored? Existing tenants should
indicate whether or not there are any such air filtration
systems or stacks in use in, on or about the Premises which
discharge into the air and whether such air emissions are
being monitored.
Yes [ ] No [ ]
If yes, please describe:__________________________________
__________________________________________________________
__________________________________________________________
6.2 Do you propose to operate any of the following types of
equipment, or any other equipment requiring an air
emissions permit? Existing tenants should specify any such
equipment being operated in, on or about the Premises.
_______Spray booth(s) _______Incinerator(s)
_______Dip tank(s) _______Other (Please describe)
_______Drying oven(s) _______No Equipment Requiring
Air Permits
If yes, please describe:__________________________________
__________________________________________________________
__________________________________________________________
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare
a Hazardous Materials management plan ("Management Plan")
pursuant to Fire Department or other governmental or
regulatory agencies' requirements? Existing tenants should
indicate whether or not a Management Plan is required and
has been prepared.
Yes [ ] No [ ]
If yes, attach a copy of the Management Plan. Existing
tenants should attach a copy of any required updates to the
Management Plan.
7.2 Are any of the Hazardous Materials, and in particular
chemicals, proposed to be used in your operations in, on or
about the Premises regulated under Proposition 65? Existing
tenants should indicate whether or not there are any new
Hazardous Materials being so used which are regulated under
Proposition 65.
Yes [ ] No [ ]
Yes [ ] No [ ]
If yes, please explain:___________________________________
__________________________________________________________
__________________________________________________________
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws,
has your company ever been subject to any agency
enforcement actions, administrative orders, or consent
decrees or has your company received requests for
information, notice or demand letters, or any other
inquiries regarding its operations? Existing tenants should
indicate whether or not any such actions, orders or decrees
have been, or are in the process of being, undertaken or if
any such requests have been received.
Yes [ ] No [ ]
If yes, describe the actions, orders or decrees and any
continuing compliance obligations imposed as a result of
these actions, orders or decrees and also describe any
requests, notices or demands, and attach a copy of all such
documents. Existing tenants should describe and attach a
copy of any new actions, orders, decrees, requests, notices
or demands not already delivered
3
<PAGE> 42
to Landlord pursuant to the provisions of Section 29 of
the signed Lease Agreement.
__________________________________________________________
__________________________________________________________
__________________________________________________________
8.2 Have there ever been, or are there now pending, any
lawsuits against your company regarding any environmental
or health and safety concerns?
Yes [ ] No [ ]
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other
documents related thereto as requested by Landlord.
Existing tenants should describe and attach a copy of any
new complaint(s), cross-complaint(s), pleadings and other
related documents not already delivered to Landlord
pursuant to the provisions of Section 29 of the signed
Lease Agreement.
__________________________________________________________
__________________________________________________________
__________________________________________________________
8.3 Have there been any problems or complaints from adjacent
tenants, owners or other neighbors at your company's
current facility with regard to environmental or health and
safety concerns? Existing tenants should indicate whether
or not there have been any such problems or complaints from
adjacent tenants, owners or other neighbors at, about or
near the Premises.
Yes [ ] No [ ]
If yes, please describe. Existing tenants should describe
any such problems or complaints not already disclosed to
Landlord under the provisions of the signed Lease
Agreement.
__________________________________________________________
__________________________________________________________
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and
licenses including a Transporter Permit number issued to
your company with respect to its proposed operations in, on
or about the Premises, including, without limitation, any
wastewater discharge permits, air emissions permits, and
use permits or approvals. Existing tenants should attach
copies of any new permits and licenses as well as any
renewals of permits or licenses previously issued.
The undersigned hereby acknowledges and agrees that (A) this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Landlord in connection with the evaluation and finalization of a Lease
Agreement and will be attached thereto as an exhibit; (B) that this Hazardous
Materials Disclosure Certificate is being delivered in accordance with, and as
required by, the provisions of Section 29 of the Lease Agreement; and (C) that
Tenant shall have and retain full and complete responsibility and liability with
respect to any of the Hazardous Materials disclosed in the HazMat Certificate
notwithstanding Landlord's/Tenant's receipt and/or approval of such certificate.
Tenant further agrees that none of the following described acts or events shall
be construed or otherwise interpreted as either (a) excusing, diminishing or
otherwise limiting Tenant from the requirement to fully and faithfully perform
its obligations under the Lease with respect to Hazardous Materials, including,
without limitation, Tenant's indemnification of the Indemnitees and compliance
with all Environmental Laws, or (b) imposing upon Landlord, directly or
indirectly, any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or otherwise
verify the accuracy of the representations and statements made therein or to
ensure that Tenant is in compliance with all Environmental Laws; (i) the
delivery of such certificate to Landlord and/or Landlord's acceptance of such
certificate, (ii) Landlord's review and approval of such certificate, (iii)
Landlord's failure to obtain such certificate from Tenant at any time, or (iv)
Landlord's actual or constructive knowledge of the types and quantities of
Hazardous Materials being used, stored, generated, disposed of or transported on
or about the Premises by Tenant or Tenant's Representatives. Notwithstanding the
foregoing
4
<PAGE> 43
or anything to the contrary contained herein, the undersigned
acknowledges and agrees that Landlord and its partners, lenders and
representatives may, and will, rely upon the statements, representations,
warranties, and certifications made herein and the truthfulness thereof in
entering into the Lease Agreement and the continuance thereof throughout the
term, and any renewals thereof, of the Lease Agreement.
I (print name)___________________, acting with full authority to bind the
(proposed) Tenant and on behalf of the (proposed) Tenant, certify, represent and
warrant that the information contained in this certificate is true and correct.
(PROSPECTIVE) TENANT:
By: ________________________
Title: ________________________
Date: ________________________
INITIALS:
TENANT: _____________
LANDLORD: _____________
5
<PAGE> 44
<PAGE> 45
EXHIBIT F
FIRST AMENDMENT TO LEASE AGREEMENT
CHANGE OF COMMENCEMENT DATE
This First Amendment to Lease Agreement (the "Amendment") is made and entered
into as of ___________________, by and between ____________________________
("LANDLORD"), AND ________________________ ("TENANT"), with reference to the
following facts:
RECITALS
A. Landlord and Tenant have entered into that certain Lease Agreement dated
___________ (the "Lease"), for the leasing of certain premises located at
____________________________, California (the "Premises") as such
Premises are more fully described in the Lease.
B. Landlord and Tenant wish to amend the Commencement Date of the Lease.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. The Commencement Date of the Lease shall be ________________________.
2. The last day of the Term of the Lease (the "Expiration Date") shall be
______________.
3. The dates on which the Base Rent will be adjusted are:
for the period _________ to ________ the monthly Base Rent shall be
$_____________;
for the period _________ to ________ the monthly Base Rent shall be
$_____________; and
for the period _________ to ________ the monthly Base Rent shall be
$_____________.
4. Effect of Amendment: Except as modified herein, the terms and
conditions of the Lease shall remain unmodified and continue in
full force and effect. In the event of any conflict between the
terms and conditions of the Lease and this Amendment, the terms and
conditions of this Amendment shall prevail.
5. Definitions: Unless otherwise defined in this Amendment, all terms
not defined in this Amendment shall have the meaning set forth in
the Lease.
6. Authority: Subject to the provisions of the Lease, this Amendment
shall be binding upon and inure to the benefit of the parties
hereto, their respective heirs, legal representatives, successors
and assigns. Each party hereto and the persons signing below
warrant that the person signing below on such party's behalf is
authorized to do so and to bind such party to the terms of this
Amendment.
7. The terms and provisions of the Lease are hereby incorporated in
this Amendment.
INITIALS:
TENANT: _____________
LANDLORD: _____________
<PAGE> 46
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and
year first above written.
[PROPERTY MANAGER: PLEASE PROVIDE TENANT INFORMATION AND WORD PROCESSING WILL
COMPLETE THE SIGNATURE BLOCK]
INITIALS:
TENANT: ___
LANDLORD: ___
<PAGE> 47
EXHIBIT G
TENANT'S INITIAL HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Landlord (identified below) to evaluate and finalize a lease agreement
with you as tenant. After a lease agreement is signed by you and the Landlord
(the "Lease Agreement"), on an annual basis in accordance with the provisions of
Section 29 of the signed Lease Agreement, you are to provide an update to the
information initially provided by you in this certificate. The information
contained in the initial Hazardous Materials Disclosure Certificate and each
annual certificate provided by you thereafter will be maintained in
confidentiality by Landlord subject to release and disclosure as required by (i)
any lenders and owners and their respective environmental consultants, (ii) any
prospective purchaser(s) of all or any portion of the property on which the
Premises are located, (iii) Landlord to defend itself or its lenders, partners
or representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders, decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which are
not otherwise defined herein, shall have the same meaning ascribed to such term
in the signed Lease Agreement. Any questions regarding this certificate should
be directed to, and when completed, the certificate should be delivered to:
Landlord:
__________________________________________________________
__________________________________________________________
c/o Lincoln Property Company Management Services, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attn:_____________________________________________________
Phone: (415) 571-2200
Name of (Prospective) Tenant:__________________________________________________
Mailing Address:_______________________________________________________________
_______________________________________________________________________________
Contact Person, Title and Telephone Number(s):_________________________________
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):___________________________________________________________
_______________________________________________________________________________
Address of (Prospective) Premises:_____________________________________________
Length of (Prospective) initial Term:__________________________________________
_______________________________________________________________________________
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or
about the Premises, including, without limitation, principal products
processed, manufactured or assembled services and activities to be
provided or otherwise conducted. Existing tenants should describe any
proposed changes to on-going operations.
____________________________________________________________________
____________________________________________________________________
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or
disposed of in, on or about the Premises? Existing tenants
should describe any Hazardous Materials which continue to
be used, generated, stored or disposed of in, on or about
the Premises.
Wastes Yes [ ] No [ ]
Chemical Products Yes [ ] No [ ]
Other Yes [ ] No [ ]
1
<PAGE> 48
If Yes is marked, please explain:_________________________
__________________________________________________________
__________________________________________________________
2.2 If Yes is marked in Section 2.1, attach a list of any
Hazardous Materials to be used, generated, stored or
disposed of in, on or about the Premises, including the
applicable hazard class and an estimate of the quantities
of such Hazardous Materials at any given time; estimated
annual throughput; the proposed location(s) and method of
storage (excluding nominal amounts of ordinary household
cleaners and janitorial supplies which are not regulated by
any Environmental Laws); and the proposed location(s) and
method of disposal for each Hazardous Material, including,
the estimated frequency, and the proposed contractors or
subcontractors. Existing tenants should attach a list
setting forth the information requested above and such list
should include actual data from on-going operations and the
identification of any variations in such information from
the prior year's certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel,
petroleum, or other Hazardous Materials in tanks or sumps
proposed in, on or about the Premises? Existing tenants
should describe any such actual or proposed activities.
Yes [ ] No [ ]
If yes, please explain:___________________________________
__________________________________________________________
__________________________________________________________
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste
Generator I.D. Number? Existing tenants should describe any
additional identification numbers issued since the previous
certificate.
Yes [ ] No [ ]
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing tenants should
describe any new reports filed.
Yes [ ] No [ ]
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
______storm drain? _______sewer?
______surface water? _______no wastewater or other
wastes discharged.
Existing tenants should indicate any actual discharges. If
so, describe the nature of any proposed or actual
discharge(s).
__________________________________________________________
__________________________________________________________
5.2 Will any such wastewater or waste be treated before
discharge?
Yes [ ] No [ ]
If yes, describe the type of treatment proposed to be
conducted. Existing tenants should describe the actual
treatment conducted.
__________________________________________________________
__________________________________________________________
6. AIR DISCHARGES
2
<PAGE> 49
6.1 Do you plan for any air filtration systems or stacks to be
used in your company's operations in, on or about the
Premises that will discharge into the air; and will such
air emissions be monitored? Existing tenants should
indicate whether or not there are any such air filtration
systems or stacks in use in, on or about the Premises which
discharge into the air and whether such air emissions are
being monitored.
Yes [ ] No [ ]
If yes, please describe:__________________________________
__________________________________________________________
__________________________________________________________
6.2 Do you propose to operate any of the following types of
equipment, or any other equipment requiring an air
emissions permit? Existing tenants should specify any such
equipment being operated in, on or about the Premises.
_______Spray booth(s) ______Incinerator(s)
_______Dip tank(s) ______Other (Please describe)
_______Drying oven(s) ______No Equipment Requiring
Air Permits
If yes, please describe:__________________________________
__________________________________________________________
__________________________________________________________
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare
a Hazardous Materials management plan ("Management Plan")
pursuant to Fire Department or other governmental or
regulatory agencies' requirements? Existing tenants should
indicate whether or not a Management Plan is required and
has been prepared.
Yes [ ] No [ ]
If yes, attach a copy of the Management Plan. Existing
tenants should attach a copy of any required updates to the
Management Plan.
7.2 Are any of the Hazardous Materials, and in particular
chemicals, proposed to be used in your operations in, on or
about the Premises regulated under Proposition 65? Existing
tenants should indicate whether or not there are any new
Hazardous Materials being so used which are regulated under
Proposition 65.
Yes [ ] No [ ]
If yes, please explain:___________________________________
__________________________________________________________
__________________________________________________________
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws,
has your company ever been subject to any agency
enforcement actions, administrative orders, or consent
decrees or has your company received requests for
information, notice or demand letters, or any other
inquiries regarding its operations? Existing tenants should
indicate whether or not any such actions, orders or decrees
have been, or are in the process of being, undertaken or if
any such requests have been received.
Yes [ ] No [ ]
If yes, describe the actions, orders or decrees and any
continuing compliance obligations imposed as a result of
these actions, orders or decrees and also describe any
requests, notices or demands, and attach a copy of all such
documents. Existing tenants should describe and attach a
copy of any new actions, orders, decrees, requests, notices
or demands not already delivered
3
<PAGE> 50
to Landlord pursuant to the provisions of Section 29 of the
signed Lease Agreement.
__________________________________________________________
__________________________________________________________
__________________________________________________________
8.2 Have there ever been, or are there now pending, any
lawsuits against your company regarding any environmental
or health and safety concerns?
Yes [ ] No [ ]
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other
documents related thereto as requested by Landlord.
Existing tenants should describe and attach a copy of any
new complaint(s), cross-complaint(s), pleadings and other
related documents not already delivered to Landlord
pursuant to the provisions of Section 29 of the signed
Lease Agreement.
__________________________________________________________
__________________________________________________________
__________________________________________________________
8.3 Have there been any problems or complaints from adjacent
tenants, owners or other neighbors at your company's
current facility with regard to environmental or health and
safety concerns? Existing tenants should indicate whether
or not there have been any such problems or complaints from
adjacent tenants, owners or other neighbors at, about or
near the Premises.
Yes [ ] No [ ]
If yes, please describe. Existing tenants should describe
any such problems or complaints not already disclosed to
Landlord under the provisions of the signed Lease
Agreement.
__________________________________________________________
__________________________________________________________
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and
licenses including a Transporter Permit number issued to
your company with respect to its proposed operations in, on
or about the Premises, including, without limitation, any
wastewater discharge permits, air emissions permits, and
use permits or approvals. Existing tenants should attach
copies of any new permits and licenses as well as any
renewals of permits or licenses previously issued.
The undersigned hereby acknowledges and agrees that (A) this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Landlord in connection with the evaluation and finalization of a Lease
Agreement and will be attached thereto as an exhibit; (B) that this Hazardous
Materials Disclosure Certificate is being delivered in accordance with, and as
required by, the provisions of Section 29 of the Lease Agreement; and (C) that
Tenant shall have and retain full and complete responsibility and liability with
respect to any of the Hazardous Materials disclosed in the HazMat Certificate
notwithstanding Landlord's/Tenant's receipt and/or approval of such certificate.
Tenant further agrees that none of the following described acts or events shall
be construed or otherwise interpreted as either (a) excusing, diminishing or
otherwise limiting Tenant from the requirement to fully and faithfully perform
its obligations under the Lease with respect to Hazardous Materials, including,
without limitation, Tenant's indemnification of the Indemnitees and compliance
with all Environmental Laws, or (b) imposing upon Landlord, directly or
indirectly, any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or otherwise
verify the accuracy of the representations and statements made therein or to
ensure that Tenant is in compliance with all Environmental Laws; (i) the
delivery of such certificate to Landlord and/or Landlord's acceptance of such
certificate, (ii) Landlord's review and approval of such certificate, (iii)
Landlord's failure to obtain such certificate from Tenant at any time, or (iv)
Landlord's actual or constructive knowledge of the types and quantities of
Hazardous Materials being used, stored, generated, disposed of or transported on
or about the Premises by Tenant or Tenant's Representatives. Notwithstanding the
foregoing
4
<PAGE> 51
or anything to the contrary contained herein, the undersigned acknowledges and
agrees that Landlord and its partners, lenders and representatives may, and
will, rely upon the statements, representations, warranties, and certifications
made herein and the truthfulness thereof in entering into the Lease Agreement
and the continuance thereof throughout the term, and any renewals thereof, of
the Lease Agreement.
I (print name) , acting with full authority to bind the (proposed) Tenant and on
behalf of the (proposed) Tenant, certify, represent and warrant that the
information contained in this certificate is true and correct.
(PROSPECTIVE) TENANT:
By: __________________
Title: __________________
Date: __________________
INITIALS:
TENANT: ______________
LANDLORD: ______________
5
<PAGE> 52
ADDENDUM 1
FIRST OPTION TO EXTEND THE LEASE
This Addendum 1 is incorporated as a part of that certain Lease Agreement, dated
December 18, 1996 (the "Lease"), by and between Lincoln-Whitehall Realty (West),
L.L.C., a Delaware limited liability company ("Landlord"), and Cisco Systems,
Inc., a California corporation ("Tenant"), of those certain premises located at
130 and 140 Baytech Drive (Buildings C & D), San Jose, California (the
"Premises"). Any capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed to such terms as set forth in the Lease.
1. GRANT OF EXTENSION OPTION. Subject to the provisions of Sections 5 and 6
hereinbelow, if Tenant has not at any time been in default of its obligations
beyond applicable cure periods more than three (3) times in any twelve-month
period ("Chronic Default"), or at the time of Tenant's exercise of this option,
is currently not, in default in the performance of any of its obligations under
this Lease beyond applicable cure periods, and contingent upon review and
approval of Tenant's then current financial condition by Landlord [which
financial condition shall be deemed to be acceptable to Landlord so long as
Tenant, at the time of exercise of this option and for the prior twelve month
period of time prior to Tenant's exercise of this option, has a net worth of at
least One Hundred Million Dollars ($100,000,000.00)], Tenant shall have the
right at its option (the "First Option") to extend the initial term of the Lease
for an additional period of one (1) year (the "First Extended Term").
2. TENANT'S FIRST OPTION NOTICE. If Landlord does not receive written notice
from Tenant of its exercise of this First Option on a date which is not more
than five hundred forty (540) days nor less than three hundred sixty (360) days
prior to the end of the initial term of the Lease (the "First Option Notice"),
all rights of Tenant in, to and under this First Option shall automatically
lapse and terminate and shall be of no further force or effect. Time is of the
essence herein.
3. ESTABLISHING THE MONTHLY BASE RENT FOR THE FIRST EXTENDED TERM. In the event
Tenant duly exercises its rights under this First Option, the monthly Base Rent
payable by Tenant to Landlord during the First Extended Term shall be one
hundred forty thousand one hundred forty-two and 75/100 dollars ($140,142.75).
If Tenant duly exercises this First Option in accordance with the terms outlined
above, Landlord and Tenant shall immediately execute, at Landlord's sole option,
either the standard lease agreement then in use by Landlord, or an amendment to
this Lease. Such new lease agreement or amendment, as the case may be, shall set
forth among other things, the monthly Base Rent quoted above for the First
Extended Term and the actual commencement date and expiration date of the First
Extended Term. Tenant shall have no other right to extend the initial term of
the Lease under this Addendum 1 unless Landlord and Tenant otherwise agree in
writing.
4. CONDITION OF PREMISES AND BROKERAGE COMMISSIONS FOR THE FIRST EXTENDED TERM.
If Tenant duly exercises this First Option in accordance with the terms
contained herein, the following shall apply: (1) Tenant shall accept the
Premises in its then "As-Is" condition and, accordingly, Landlord shall not be
required to perform nor install any additional improvements to the Premises; and
(2) Tenant hereby agrees that it will be solely responsible for any and all
brokerage commissions and finder's fees payable to any broker except for
Landlord's broker in connection with the First Option described herein, and
Tenant hereby further agrees that Landlord shall in no event or circumstance be
responsible for the payment of any such commissions and fees.
5. LIMITATIONS ON, AND CONDITIONS TO, FIRST EXTENSION OPTION. Except as
otherwise provided below, this First Option is personal to Tenant and except for
a Related Entity may not be assigned, voluntarily or involuntarily, separate
from or as part of the Lease, unless Landlord otherwise expressly consents in
writing to such assignment. At Landlord's option, all rights of Tenant under
this First Option shall terminate and be of no force or effect if any of the
following individual events occur or any combination thereof occur: (1) Tenant
or the Related Entity, as applicable, has been in Chronic Default at any time
during the initial term of the Lease, or at the time of exercise of the First
Option is then currently in default of any provision of the Lease beyond
applicable cure periods; and/or (2) Tenant has
1
<PAGE> 53
assigned its rights and obligations under all or part of the Lease to any party
or entity other than a Related Entity, or Tenant has subleased all or part of
the Premises to any party or entity other than a Related Entity, unless Landlord
otherwise expressly consents in writing to such assignment or sublease, which
consent shall not be unreasonably withheld, and/or (3) Tenant's or the Related
Entity's (as applicable) financial condition is unacceptable to Landlord at the
time the First Option Notice is delivered to Landlord [which financial condition
shall be deemed to be acceptable to Landlord so long as Tenant or the Related
Entity, as applicable, at the time of exercise of this First Option and for the
prior twelve month period of time prior to delivery of the First Option Notice,
has a net worth of at least One Hundred Million Dollars ($100,000,000.00)];
and/or (4) Tenant or the Related Entity (as applicable) has failed to exercise
this First Option in a timely manner and in strict accordance with the
provisions of this Addendum 1; and/or (5) Tenant, a Related Entity, or a third
party subtenant or assignee for which Landlord has expressly consented, as the
case may be, no longer has possession of all or any part of the Premises under
the Lease, or if the Lease has been terminated earlier, pursuant to the terms of
the Lease.
6. RECAPTURE AND EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION.
Notwithstanding anything to the contrary contained in the Lease or herein, if
(I) the Term of the First Lease has expired or the First Lease has been earlier
terminated for any reason whatsoever, in whole or in part, and (II) during the
First Extended Term Tenant proposes to sublease or assign this Lease to a party
other than a Related Entity, then for the time period during which there is any
vacancy in Building A and/or Building B (as referred to in the First Lease)
Landlord shall have the right, to be exercised by giving written notice to
Tenant, to either (1) recapture the space described in the proposed sublease or
assignment, or (2) consent to such proposed sublease or assignment, (which
consent shall not be unreasonably withheld) in which event Tenant shall pay
Landlord monthly, as Additional Rent, at the same time as the monthly
installments of Rent are payable hereunder, fifty percent (50%) of the excess of
each such payment of rent or other consideration in excess of the Rent called
for hereunder, after deduction of the actual brokerage commission (if any) paid
by Tenant in connection with such proposed sublease or assignment, where the
rent or other consideration provided for in the proposed sublease or assignment
either initially or over the term of the sublease or assignment exceeds the Rent
or pro rata portion of the Rent, as the case may be, for such space reserved in
the Lease. If such recapture notice is given, it shall serve to terminate this
Lease with respect to the proposed sublease or assignment space, or, if the
proposed sublease or assignment space covers all the Premises for the First
Extended Term, it shall serve to terminate the entire term of this Lease in
either case, as of the Proposed Effective Date, with respect to such space.
INITIALS:
TENANT: __________
LANDLORD: __________
2
<PAGE> 54
ADDENDUM 2
SECOND OPTION TO EXTEND THE LEASE
This Addendum 2 is incorporated as a part of that certain Lease Agreement, dated
December 18, 1996 (the "Lease"), by and between Lincoln-Whitehall Realty (West),
L.L.C., a Delaware limited liability company ("Landlord"), and Cisco Systems,
Inc., a California corporation ("Tenant"), of those certain premises located at
130 and 140 Baytech Drive (Buildings C & D), San Jose, California (the
"Premises"). Any capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed to such terms as set forth in the Lease.
1. GRANT OF EXTENSION OPTION. Subject to the provisions of Sections 5 and 6
hereinbelow, if (i) Tenant has not at any time been in Chronic Default, or at
the time of Tenant's exercise of this Second Option, is currently not, in
default in the performance of any of its obligations under this Lease beyond any
applicable cure periods, (ii) Tenant has duly exercised the First Option in
accordance with the provisions of Addendum 1 to the Lease, and (iii) contingent
upon review and approval of Tenant's then current financial condition by
Landlord [which financial condition shall be deemed to be acceptable to Landlord
so long as Tenant, at the time of exercise of this option and for the prior
twelve month period of time prior to Tenant's exercise of this Second Option,
has a net worth of at least One Hundred Million Dollars ($100,000,000.00)],
Tenant shall have the right at its option (the "Second Option") to further
extend the term of the Lease for an additional one (1) year period (the "Second
Extended Term").
2. TENANT'S SECOND OPTION NOTICE. If Landlord does not receive written notice
from Tenant of its exercise of this Second Option on a date which is not more
than five hundred forty (540) days nor less than three hundred sixty (360) days
prior to the end of the First Extended Term of the Lease (the "Second Option
Notice"), all rights of Tenant in, to and under this Second Option shall
automatically lapse and terminate and shall be of no further force or effect.
Time is of the essence herein.
3. ESTABLISHING THE MONTHLY BASE RENT FOR THE SECOND EXTENDED TERM. In the event
Tenant duly exercises its rights under this Second Option, the monthly Base Rent
payable by Tenant to Landlord during the Second Extended Term shall be one
hundred forty-four thousand three hundred eighty-nine and 50/100 dollars
($144,389.50). If Tenant duly exercises this Second Option in accordance with
the terms outlined above, Landlord and Tenant shall immediately execute, at
Landlord's sole option, either the standard lease agreement then in use by
Landlord, or an amendment to this Lease. Such new lease agreement or amendment,
as the case may be, shall set forth among other things, the monthly Base Rent
quoted above for the Second Extended Term and the actual commencement date and
expiration date of the Second Extended Term. Tenant shall have no other right to
extend the then applicable term of the Lease under this Addendum 2 unless
Landlord and Tenant otherwise agree in writing.
4. CONDITION OF PREMISES AND BROKERAGE COMMISSIONS FOR THE SECOND EXTENDED TERM.
If Tenant duly exercises this Second Option in accordance with the terms
contained herein: (1) Tenant shall accept the Premises in its then "As-Is"
condition and, accordingly, Landlord shall not be required to perform nor
install any additional improvements to the Premises; and (2) Tenant hereby
agrees that it will be solely responsible for any and all brokerage commissions
and finder's fees payable to any broker except for Landlord's broker in
connection with the Second Option described herein, and Tenant hereby further
agrees that Landlord shall in no event or circumstance be responsible for the
payment of any such commissions and fees.
5. LIMITATIONS ON, AND CONDITIONS TO, SECOND EXTENSION OPTION. Except as
otherwise provided herein, this Second Option is personal to Tenant and except
for a Related Entity may not be assigned, voluntarily or involuntarily, separate
from or as part of the Lease, unless Landlord otherwise expressly consents in
writing to such assignment. At Landlord's option, all rights of Tenant under
this First Option shall terminate and be of no force or effect if any of the
following individual events occur or any combination thereof occur: (1) Tenant
or the Related Entity, as applicable, has been in Chronic Default at any time
during the initial term or First Extended Term of the Lease, or at the time of
exercise of the
1
<PAGE> 55
Second Option is then currently in default of any provision of the Lease beyond
applicable cure periods; and/or (2) Tenant has assigned its rights and
obligations under all or part of the Lease to any party or entity other than a
Related Entity, or Tenant has subleased all or part of the Premises to any party
or entity other than a Related Entity, unless Landlord otherwise expressly
consents in writing to such assignment or sublease, which consent shall not be
unreasonably withheld, and/or (3) Tenant's or the Related Entity's (as
applicable) financial condition is unacceptable to Landlord at the time the
Second Option Notice is delivered to Landlord [which financial condition shall
be deemed to be acceptable to Landlord so long as Tenant or the Related Entity,
as applicable, at the time of exercise of this Second Option and for the prior
twelve month period of time prior to delivery of the Second Option Notice, has a
net worth of at least One Hundred Million Dollars ($100,000,000.00)]; and/or (4)
Tenant or the Related Entity, as applicable, has failed to exercise the First
Option in a timely manner in strict accordance with the provisions of Addendum 1
to the Lease; (5) Tenant or the Related Entity (as applicable) has failed to
exercise this Second Option in a timely manner and in strict accordance with the
provisions of this Addendum 2; and/or (6) Tenant, a Related Entity, or a third
party subtenant or assignee for which Landlord has expressly consented, as the
case may be, no longer has possession of all or any part of the Premises under
the Lease, or if the Lease has been terminated earlier, pursuant to the terms of
the Lease.
6. RECAPTURE AND EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION.
Notwithstanding anything to the contrary contained in the Lease or herein, if
(I) the Term of the First Lease has expired or the First Lease has been earlier
terminated for any reason whatsoever, in whole or in part, and (II) during the
Second Extended Term Tenant proposes to sublease or assign this Lease to a party
other than a Related Entity, then for the time period during which there is any
vacancy in Building A and/or Building B (as referred to in the First Lease)
Landlord shall have the right, to be exercised by giving written notice to
Tenant, to either (1) recapture the space described in the proposed sublease or
assignment, or (2) consent to such proposed sublease or assignment, (which
consent shall not be unreasonably withheld) in which event Tenant shall pay
Landlord monthly, as Additional Rent, at the same time as the monthly
installments of Rent are payable hereunder, fifty percent (50%) of the excess of
each such payment of rent or other consideration in excess of the Rent called
for hereunder, after deduction of the actual brokerage commission (if any) paid
by Tenant in connection with such proposed sublease or assignment, where the
rent or other consideration provided for in the proposed sublease or assignment
either initially or over the term of the sublease or assignment exceeds the Rent
or pro rata portion of the Rent, as the case may be, for such space reserved in
the Lease. If such recapture notice is given, it shall serve to terminate this
Lease with respect to the proposed sublease or assignment space, or, if the
proposed sublease or assignment space covers all the Premises for the Second
Extended Term, it shall serve to terminate the entire term of this Lease in
either case, as of the Proposed Effective Date, with respect to such space.
INITIALS:
TENANT: __________
LANDLORD: __________
2
<PAGE> 1
EXHIBIT 10.52
[EXECUTION COPY]
================================================================================
MASTER LEASE
THIS DOCUMENT SECURES FUTURE ADVANCES
Dated as of December 27, 1996
between
CISCO SYSTEMS, INC.,
as the Lessee,
and
UBS MORTGAGE FINANCE INC.
as the Lessor.
================================================================================
This Master Lease is subject to a lien in favor of the Lender under the Loan
Agreement. This Master Lease has been executed in several counterparts. To the
extent, if any, that this Master Lease constitutes chattel paper (as such term
is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no lien on this Master Lease may be created through the transfer
or possession of any counterpart other than the original counterpart containing
the receipt therefor executed by UNION BANK OF SWITZERLAND, acting through its
New York Branch, as the Lender, on or following the signature page hereof.
This counterpart is [not] the original counterpart.
<PAGE> 2
MASTER LEASE
THIS DOCUMENT SECURES FUTURE ADVANCES
THIS MASTER LEASE (this "Master Lease"), dated as of December 27, 1996,
between UBS MORTGAGE FINANCE INC., a New York corporation, as Lessor (in such
capacity, the "Lessor") and CISCO SYSTEMS, INC., a California corporation, as
Lessee (in such capacity, the "Lessee").
W I T N E S S E T H:
WHEREAS, pursuant to a Participation Agreement dated as of the date
hereof (as amended, modified, restated or supplemented from time to time, the
"Participation Agreement"), among the Lessee, as Lessee and Construction Agent,
the Lessor and Union Bank of Switzerland, acting through its New York Branch, as
Lender (the "Lender") under the Loan Agreement, the Lender and the Lessor have
agreed to finance the acquisition and construction of each Property;
WHEREAS, on each Acquisition Date, the Lessor will purchase from the
Seller certain parcels of Land, together with any Improvements thereon;
WHEREAS, the Lessee, as Construction Agent for the Lessor, will cause
the construction of certain Improvements on each Property which as constructed
will be the property of the Lessor and will become part of such Property;
WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee
desires to lease from the Lessor, each Property; and
WHEREAS, each Property will be subject to the terms of this
Master Lease;
NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions; Interpretation. Capitalized terms used but not
otherwise defined in this Master Lease have the respective meanings specified in
Appendix A to this Master Lease (as the same may be amended, supplemented,
amended and restated or otherwise modified from time to time, "Appendix A to
this
<PAGE> 3
Master Lease
Master Lease"); and the rules of interpretation set forth in Appendix A to
this Master Lease shall apply to this Master Lease.
ARTICLE II
MASTER LEASE
2.1. Acceptance and Lease of Property. Subject to the conditions set
forth in the Participation Agreement, including without limitation the
satisfaction or waiver of the conditions set forth in Article VI thereof, the
Lessor hereby covenants and agrees to acquire and to accept pursuant to the
terms of the Participation Agreement delivery on each Acquisition Date of the
Land together with Improvements thereon to be delivered by the Seller on such
Acquisition Date and simultaneously to demise and lease to the Lessee hereunder
and under the Lease Supplement for the Lease Term, the Lessor's interest in such
Land and in such Improvements together with any Improvements which thereafter
may be constructed on such Land pursuant to the Construction Agency Agreement or
this Master Lease, and the Lessee hereby agrees, expressly for the direct
benefit of the Lessor, to lease from the Lessor for the Lease Term, the Lessor's
interest in such Land and in such Improvements together with any Improvements
which thereafter may be constructed on such Land pursuant to the Construction
Agency Agreement and this Master Lease.
2.2. Acceptance Procedure. The Lessee hereby agrees that the execution
and delivery by the Lessee on each Acquisition Date of an appropriately
completed Lease Supplement in the form of either Exhibit A-1 hereto, or Exhibit
A-2 hereto, covering the Land or all Improvements or any Land to be acquired by
the Lessor on such Acquisition Date and all other Improvements which thereafter
may be constructed thereon pursuant to the Construction Agency Agreement,
respectively, and this Master Lease, shall, without further act, constitute the
acceptance by the Lessee of all of the Land which is the subject of such Lease
Supplement for all purposes of this Master Lease and the other Operative
Documents on the terms set forth therein and herein, and that such Land,
together with any Improvements constructed on such Land pursuant to the
Construction Agency Agreement and this Master Lease, shall be deemed to be
included in the leasehold estate of this Master Lease and shall be subject to
the terms and conditions of this Master Lease as of such Acquisition Date.
2.3. Lease Term. The Basic Lease Term (Land) (the "Basic Lease Term
(Land)") of this Master Lease with respect to any Property (a) shall begin on
the earlier of (i) the Completion Date for the first Property on which
Improvements are constructed and (ii) the date the Lessee delivers written
notice to the
-2-
<PAGE> 4
Master Lease
Lessor requesting commencement of the Basic Lease Term, and (b) end on the
Expiration Date. The Basic Lease Term (Improvements) (the "Basic Lease Term
(Improvements)" shall begin on the Completion Date for such Property and shall
end on the Expiration Date. In the event the Basic Lease Term (Land) or Basic
Lease Term (Improvements) commences on any day other than the day following the
last day of the then effective Interest Period, the Lessee shall pay any Break
Costs associated with the early termination of the Interest Period.
2.4. Title. Each Property is leased to the Lessee without any
representation or warranty, express or implied, by the Lessor and subject to the
rights of parties in possession, the existing state of title (including, without
limitation, all Liens other than Lessor Liens) and all applicable Requirements
of Law. The Lessee shall in no event have any recourse against the Lessor for
any defect in or exception to title to any Property other than resulting from
Lessor Liens attributable to the Lessor.
ARTICLE III
PAYMENT OF RENT
3.1. Rent.
(a) During the Lease Term, the Lessee shall pay Basic Rent to the
Lessor on each Basic Rent Payment Date, on the date required under
Section 20.1(k) in connection with the Lessee's exercise of the
Remarketing Option and on any date on which this Master Lease shall
terminate with respect to any or all Properties. At least 10 days prior
to each Basic Rent Payment Date, the Lessor shall deliver to the Lessee
a notice of the exact amount of the Basic Rent due on such date (the
"Invoice"). For the purposes of this Section 3.1, delivery of the
Invoice by facsimile transmission, receipt confirmed, will be
sufficient.
(b) The Lessee's inability or failure to take possession of all
or any portion of any Property when delivered by the Lessor attributable
to any act or omission of the Lessee shall not delay or otherwise affect
the Lessee's obligation to pay Rent for such Property in accordance with
the terms of this Master Lease.
3.2. Payment of Rent. Rent shall be paid absolutely net to each Person
entitled thereto, so that this Master Lease shall yield to such Person the full
amount thereof, without setoff, deduction or reduction.
-3-
<PAGE> 5
Master Lease
3.3. Supplemental Rent. The Lessee shall pay to the Lessor or any other
Person entitled thereto any and all Supplemental Rent promptly as the same shall
become due and payable, and if the Lessee fails to pay any Supplemental Rent,
the Lessor and such other Persons shall have all rights, powers and remedies
provided for herein or by law or equity or otherwise. The Lessee shall pay to
the Lessor, as Supplemental Rent, among other things, on demand, to the extent
permitted by applicable Requirements of Law, interest at the applicable Overdue
Rate on any installment of Basic Rent not paid when due for the period for which
the same shall be overdue and on any payment of Supplemental Rent not paid when
due or demanded by the Lessor for the period from the due date or the date of
any such demand, as the case may be, until the same shall be paid. The
expiration or other termination of the Lessee's obligations to pay Basic Rent
hereunder shall not limit or modify the obligations of the Lessee with respect
to Supplemental Rent. Unless expressly provided otherwise in this Master Lease,
in the event of any failure on the part of the Lessee to pay and discharge any
Supplemental Rent as and when due, the Lessee shall also promptly pay and
discharge any fine, penalty, interest or cost which may be assessed or added
under any agreement to which Lessee is a party or which is authorized in writing
by the Lessee with a third party for nonpayment or late payment of such
Supplemental Rent, all of which shall also constitute Supplemental Rent.
3.4. Method of Payment. Each payment of Rent payable by the Lessee to
the Lessor under this Lease or any other Operative Document shall be made by the
Lessee to the Lender as assignee of the Lessor under the Assignment of Lease
(or, if all Loans and all other amounts owing to the Lender under the Loan
Agreement and the other Operative Documents have been paid in full and all
Commitments of the Lender have been permanently terminated, to the Lessor) prior
to 2:00 p.m., New York City time, to the Account in immediately available funds
consisting of lawful currency of the United States of America on the date when
such payment shall be due. Payments received after 2:00 p.m., New York City
time, on the date due shall for the purpose of Section 16.1 hereof be deemed
received on such day; provided, however, that for the purposes of the second
sentence of Section 3.3 hereof, such payments shall be deemed received on the
next succeeding Business Day and, unless the Lender (or the Lessor, as
applicable) is otherwise able to invest or employ such funds on the date
received, subject to interest at the Overdue Rate as provided in such Section
3.3.
-4-
<PAGE> 6
Master Lease
ARTICLE IV
QUIET ENJOYMENT; RIGHT TO INSPECT
4.1. Quiet Enjoyment. Subject to Sections 2.4 and 4.2, and subject to
the rights of the Lessor contained in Article XV and the other terms of the
Operative Documents to which the Lessee is a party, the Lessee shall peaceably
and quietly have, hold and enjoy each Property for the Lease Term, free of any
claim or other action by the Lessor or anyone claiming by, through or under the
Lessor (other than the Lessee) with respect to any matters arising from and
after the applicable Acquisition Date. Such right of quiet enjoyment is
independent of, and shall not affect the Lessor's rights otherwise to initiate
legal action to enforce the obligations of the Lessee under this Master Lease.
4.2. Right to Inspect. During the Lease Term, the Lessee shall upon
reasonable notice from the Lessor, permit the Lessor, the Lender, and their
respective authorized representatives to inspect any Property subject to this
Master Lease during normal business hours, provided that such inspections shall
not unreasonably interfere with the Lessee's business operations at such
Property.
ARTICLE V
NET LEASE, ETC.
5.1. Net Lease. This Master Lease shall constitute a net lease. Any
present or future law to the contrary notwithstanding, this Master Lease shall
not terminate, nor shall the Lessee be entitled to any abatement, suspension,
deferment, reduction, setoff, counterclaim, or defense with respect to the Rent,
nor shall the obligations of the Lessee hereunder be affected (except as
expressly herein permitted and by performance of the obligations in connection
therewith) by reason of: (i) any defect in the condition, merchantability,
design, construction, quality or fitness for use of any Property or any part
thereof, or the failure of any Property to comply with all Requirements of Law,
including any inability to occupy or use any such Property by reason of such
non-compliance; (ii) any damage to, removal, abandonment, salvage, loss,
contamination of or Release from, scrapping or destruction of or any requisition
or taking of any Property or any part thereof; (iii) any restriction, prevention
or curtailment of or interference with the construction on or any use of any
Property or any part thereof including eviction; (iv) any defect in title to or
rights to any Property or any Lien on such title or rights or on any Property
(other than Lessor Liens); (v) any change, waiver, extension, indulgence or
other action or omission or breach in
-5-
<PAGE> 7
Master Lease
respect of any obligation or liability of or by the Lessor or the Lender; (vi)
any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceedings relating to the Lessee, the
Lessor, the Lender or any other Person, or any action taken with respect to this
Master Lease by any trustee or receiver of the Lessee, the Lessor, the Lender or
any other Person, or by any court, in any such proceeding; (vii) any claim that
the Lessee has or might have against any Person, including without limitation
the Lessor, the Lender, or any vendor, manufacturer, contractor of or for any
Property; (viii) any failure on the part of the Lessor or any other Lessor to
perform or comply with any of the terms of this Master Lease (other than
performance by the Lessor of its obligations set forth in Section 2.1 hereof),
of any other Operative Document or of any other agreement; (ix) any invalidity
or unenforceability or illegality or disaffirmance of this Master Lease against
or by the Lessee or any provision hereof or any of the other Operative Documents
or any provision of any thereof; (x) the impossibility or illegality of
performance by the Lessee, the Lessor or both; (xi) any action by any court,
administrative agency or other Governmental Authority; or (xii) any other cause
or circumstances whether similar or dissimilar to the foregoing and whether or
not the Lessee shall have notice or knowledge of any of the foregoing. The
Lessee's agreement in the preceding sentence shall not affect any claim, action
or right the Lessee may have against the Lessor or any other Participant. The
parties intend that the obligations of the Lessee hereunder shall be covenants
and agreements that are separate and independent from any obligations of the
Lessor hereunder or under any other Operative Documents and the obligations of
the Lessee shall continue unaffected unless such obligations shall have been
modified or terminated in accordance with an express provision of this Master
Lease.
5.2. No Termination or Abatement. The Lessee shall remain obligated
under this Master Lease in accordance with its terms and shall not take any
action to terminate, rescind or avoid this Master Lease (except as provided
herein), notwithstanding any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution, or other proceeding affecting the Lessor or any
Participant, or any action with respect to this Master Lease which may be taken
by any trustee, receiver or liquidator of the Lessor or any Participant or by
any court with respect to the Lessor or any Participant. The Lessee hereby
waives all right (i) to terminate or surrender this Master Lease (except as
provided herein) or (ii) except as a consequence of a reduction in the Lease
Balance as a result of Casualty or Condemnation proceeds pursuant to the terms
of Section 14.1 of this Master Lease, or as a result of a purchase of any or all
of the
-6-
<PAGE> 8
Master Lease
Properties pursuant to Section 18.1 of this Master Lease, to avail itself of any
abatement, suspension, deferment, reduction, setoff, counterclaim or defense
with respect to the Lease Balance. The Lessee shall remain obligated under this
Master Lease in accordance with its terms and the Lessee hereby waives any and
all rights now or hereafter conferred by statute or otherwise to modify or to
avoid strict compliance with its obligations under this Master Lease.
Notwithstanding any such statute or otherwise, the Lessee shall be bound by all
of the terms and conditions contained in this Master Lease.
ARTICLE VI
SUBLEASES
6.1. Subletting. The Lessee may from time to time, sublease any Property
or any portion thereof to any Person and to extend, modify or renew any sublease
without the approval of Lessor or Lender; provided, however, that: (a) no
sublease or other relinquishment of possession of any Property shall in any way
discharge or diminish any of the Lessee's obligations to the Lessor hereunder
and the Lessee shall remain directly and primarily liable under this Master
Lease as to the Properties, or portion thereof, so sublet; (b) each sublease of
any Property shall expressly be made subject to and subordinated to this Master
Lease and to the rights of the Lessor hereunder; and (c) each sublease shall
expressly provide for the surrender of the applicable Property or portion
thereof by the applicable sublessee at the election of the Lender or the Lessor
(as applicable) after the occurrence of a Lease Event of Default.
ARTICLE VII
LESSEE ACKNOWLEDGMENTS
7.1. Condition of the Properties. THE LESSEE ACKNOWLEDGES AND AGREES
THAT ALTHOUGH THE LESSOR WILL OWN AND HOLD TITLE TO THE IMPROVEMENTS, THE
LESSEE, ACTING AS CONSTRUCTION AGENT, IS SOLELY RESPONSIBLE UNDER THE TERMS OF
THE CONSTRUCTION AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND
CONSTRUCTION OF THE IMPROVEMENTS AND ANY ALTERATIONS OR MODIFICATIONS. THE
LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY "AS IS"
WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR
OR THE LENDER AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE
(EXCLUDING LESSOR LIENS), (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF,
(C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT
SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW WHICH MAY EXIST ON THE DATE
HEREOF OR ON THE ACQUISITION DATE FOR
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Master Lease
SUCH PROPERTY. NEITHER THE LESSOR NOR THE LENDER HAS MADE OR SHALL BE DEEMED TO
HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL
BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE (OTHER THAN FOR
LESSOR LIENS ATTRIBUTABLE TO THE LESSOR OR THE LENDER), VALUE, HABITABILITY,
USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF ANY PROPERTY (OR ANY
PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT (EXCEPT SECTION
4.1 HEREOF) WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY
PART THEREOF) AND NEITHER THE LESSOR NOR THE LENDER SHALL BE LIABLE FOR ANY
LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR LIENS
ATTRIBUTABLE TO THE LESSOR OR THE LENDER) OR THE FAILURE OF ANY PROPERTY, OR ANY
PART THEREOF, TO COMPLY WITH ANY REQUIREMENT OF LAW.
7.2. Risk of Loss. Subject to the terms of Section 14.1 of this Master
Lease, during the Lease Term the risk of loss of or decrease in the enjoyment
and beneficial use of the Properties as a result of the damage or destruction
thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is
assumed by the Lessee, and except for loss or damages arising from the gross
negligence or willful misconduct of Lessor or Lender or their respective agents,
employees or contractors, neither the Lessor nor the Lender shall in any event
be answerable or accountable to Lessee therefor.
ARTICLE VIII
POSSESSION AND USE OF THE PROPERTIES, ETC.
8.1. Utility Charges. The Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on the Properties during
the Lease Term. The Lessee shall be entitled to receive any credit or refund
with respect to any utility charge paid by the Lessee and the amount of any
credit or refund received by the Lessor on account of any utility charges paid
by the Lessee, net of the costs and expenses reasonably incurred by the Lessor
in obtaining such credit or refund, shall be promptly paid over to the Lessee.
8.2. Possession and Use of the Property. Prior to the Completion Date,
each Property shall be used in a manner consistent with the Construction Agency
Agreement and, after the Completion Date for such Property, as set forth in the
applicable lease supplement, and not less than the standards applied by the
Lessee for other comparable properties owned or leased by the Lessee. The Lessee
shall pay, or cause to be paid, all charges and costs required in connection
with the use of the Properties
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Master Lease
as contemplated by this Master Lease and the Construction Agency Agreement. The
Lessee shall not commit or permit any waste of the Properties or any part
thereof.
8.3. Compliance with Requirements of Laws and Insurance Requirements.
Subject to the terms of Article XII relating to permitted contests, the Lessee,
at its sole cost and expense, shall (a) comply in all material respects with all
Requirements of Law (including all Hazardous Materials Laws) and Insurance
Requirements relating to the Properties, including the use, construction,
operation, maintenance, repair and restoration thereof and the remarketing
thereof pursuant to Article XX, whether or not compliance therewith shall
require structural or extraordinary changes in the Improvements or interfere
with the use and enjoyment of the Properties, and (b) procure, maintain and
comply with all licenses, permits, orders, approvals, consents and other
authorizations required for the construction, use, maintenance and operation of
the Properties and for the use, operation, maintenance, repair and restoration
of the Improvements. Notwithstanding the preceding sentence, the Lessee shall be
deemed to be in compliance with all Hazardous Materials Laws for purposes of
this Master Lease notwithstanding any Environmental Violation if the severity of
such Environmental Violation is less than Federal, state or local standards
requiring remediation or removal or, if such standards are exceeded, remediation
or removal is proceeding in accordance with all applicable Hazardous Materials
Laws.
8.4. Assignment by Lessee. The Lessee may not assign this Master Lease
or any of its rights or obligations hereunder in whole or in part to any Person,
except that the Lessee may Sublease any Property or portion thereof as permitted
under Section 6.1. Notwithstanding the foregoing sentence, the Lessee may, so
long as no Event of Default has occurred and is continuing, or would result
therefrom, upon prior written notice to each of the Lessor and the Lender,
assign this Master Lease and all of the Lessee's rights and obligations
hereunder to an Affiliate of the Lessee pursuant to an assignment and assumption
agreement and such other documentation, including opinions of counsel, all in
form and substance reasonably satisfactory to the Lessor and the Lender;
provided, that, in any event of such assignment, the Lessee shall execute and
deliver a guaranty in form and substance and in all respects satisfactory to the
Lessor and the Lender pursuant to which the Lessee shall guaranty the full and
punctual payment and performance of all obligations of such Affiliate as the
"Lessee" hereunder and under the other Operative Documents.
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Master Lease
8.5. Phase Two Improvements. The Lessor agrees that it will negotiate in
good faith with the Lessee with regard to any proposals that the Lessee may make
with respect to the construction of improvements on any portions of the Land
which are not intended to be developed as a part of the Improvements nor
constructed or otherwise purchased with amounts advanced by the Participants
pursuant to the Operative Documents, including specifically any financing
involving a third party unrelated to the Lender or the Lessor or any
improvements paid for by the Lessee (any such improvements being referred to
herein, collectively, as the "Phase Two Improvements"). The Lessee shall have
the right to construct Phase Two Improvements on any unimproved portion of the
Land, subject to the Lessor's consent which shall not be unreasonably withheld.
In furtherance of the foregoing, the Lessor shall give reasonable consideration
to (including with respect to the taking of any action reasonably requested in
connection with) the Lessee's development of any Phase Two Improvements,
including (i) the execution of one or more subleases of those portions of the
Land on which the Phase Two Improvements will be constructed between the Lessee,
as the sublessor, and the owner of the Phase Two Improvements, as the sublessee;
(ii) subordination of the Lessor's and the Lender's interests in such portions
of the Land to the interests of the owners (other than the Lessee) or the
lenders of the Phase Two Improvements; and/or (iii) the subordination of the
Lessor's and the Lender's interests in such portions of the Land to any mortgage
or deed of trust securing financing of the Phase Two Improvements; provided,
however, that the Lessee's obligations to the Lessor with respect to the Land
Lease shall remain secured by the Pledge Agreement.
ARTICLE IX
MAINTENANCE AND REPAIR; RETURN
9.1. Maintenance and Repair; Return.
(a) The Lessee, at its sole cost and expense, shall maintain each
Property in good condition (ordinary wear and tear excepted) and make
all necessary repairs thereto, of every kind and nature whatsoever,
whether interior or exterior, ordinary or extraordinary, structural or
nonstructural or foreseen or unforeseen, in each case as required by all
Requirements of Law and Insurance Requirements and in no event less than
the standards applied by the Lessee in the operation and maintenance of
other comparable properties owned or leased by the Lessee or its
Affiliates.
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Master Lease
(b) The Lessor shall under no circumstances be required to build
any improvements on any Property, make any repairs, replacements,
alterations or renewals of any nature or description to any Property,
make any expenditure whatsoever in connection with this Master Lease
(other than for Advances made in accordance with and pursuant to the
terms of the Participation Agreement and the Construction Agency
Agreement) or maintain any Property in any way. The Lessee waives any
right to (i) require the Lessor to maintain, repair, or rebuild all or
any part of any Property or (ii) make repairs at the expense of the
Lessor pursuant to any Requirement of Law, Insurance Requirement,
contract, agreement, or covenant, condition or restriction in effect at
any time during the Lease Term.
(c) The Lessee shall, upon the expiration or earlier termination
of this Master Lease with respect to any Property (other than as a
result of the Lessee's purchase of such Property from the Lessor as
provided herein), vacate and surrender such Property to the Lessor in
its then-current, "AS IS" condition, without any express or implied
warranty subject to the Lessee's obligations under Sections 8.3, 9.1(a),
10.1, 11.1, 14.1, 14.2 and 20.1. Title to all improvements, furnishings,
furniture, fixtures and any personal property of the Lessee which were
not funded by the Lessor and the Lender pursuant to the Participation
Agreement, located on or about a Property whether or not affixed to the
realty, shall, subject to the following sentence, be and remain the
property of the Lessee throughout the Lease Term, and at any time during
the Lease Term may be removed by the Lessee or, at the Lessee's election
surrendered with the Property, in which event title to such surrendered
property shall, if the Lessor so elects, be deemed transferred to the
Lessor. Notwithstanding the foregoing, any fixture constituting part of
the Property which are required by Applicable Law or which cannot be
removed without causing Material damage to or the diminution in value of
the applicable Property shall at all times remain part of the Property.
ARTICLE X
MODIFICATIONS, ETC.
10.1. Modifications, Substitutions and Replacements. During the Lease
Term, the Lessee, at its sole cost and expense, may at any time and from time to
time make alterations, renovations, improvements and additions to any Property
or any
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Master Lease
part thereof and substitutions and replacements therefor (collectively,
"Modifications"); provided, however, that:
(i) except for any Modification required to be made pursuant to a
Requirement of Law (a "Required Modification"), no Modification shall
adversely affect the value or useful life of such Property or any part
thereof from that which existed immediately prior to such Modification;
(ii) such Modifications shall be (and shall be done in a manner)
consistent with the Plans and Specifications for such Property;
(iii) such Modifications shall comply with Sections 8.3 and
9.1(a); and
(iv) the Lessee shall have provided notice to the Lessor of any
structural Modification the cost of which exceeds 10% of the
Improvements Budget for such Property.
All Modifications shall remain part of the realty and shall be subject to this
Master Lease and title thereto shall immediately vest in the Lessor; provided,
however, that Modifications that (x) are not Required Modifications, (y) were
not financed by the Participants and (z) either (i) are readily removable
without impairing the value, utility or remaining useful life of the applicable
Property, or (ii) subject to the Lessor's consent rights under Section 8.5
hereof, Phase Two Improvements shall be the property of the Lessee or other
third party and shall not be subject to this Master Lease. The Lessee may place
upon the Properties any trade fixtures, machinery, equipment, inventory or other
property belonging to the Lessee or third parties and may remove the same at any
time during the Lease Term, subject, however, to the terms of Section 9.1(a);
provided, however, that such trade fixtures, machinery, equipment, inventory or
other property do not impair the value or useful life of the applicable
remaining Property; provided, further, however, that the Lessee shall keep and
maintain at the Properties and shall not remove from the Properties any
Equipment financed or otherwise paid for by the Lender pursuant to the
Participation Agreement.
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Master Lease
ARTICLE XI
WARRANT OF TITLE; EASEMENTS
11.1. Warrant of Title.
(a) The Lessee agrees that except as otherwise provided herein
and subject to the terms of Article XII relating to permitted contests,
the Lessee shall not directly or indirectly create or allow to remain,
and shall promptly discharge at its sole cost and expense, any Lien
(other than any Lessor Lien or any Permitted Property Lien), defect,
attachment, levy, title retention agreement or claim upon any Property
or any Lien, attachment, levy or claim with respect to the Rent or with
respect to any amounts held by the Lessor or the Lender pursuant to the
Loan Agreement or the other Operative Documents, other than Permitted
Property Liens and Liens on machinery, equipment, general intangibles
and other personal property not financed by the proceeds of the Loans or
the Lessor Amounts.
(b) Nothing contained in this Master Lease shall be construed as
constituting the consent or request of the Lessor or any other
Participant, expressed or implied, to or for the performance by any
contractor, mechanic, laborer, materialman, supplier or vendor of any
labor or services or for the furnishing of any materials for any
construction, alteration, addition, repair or demolition of or to any
Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NEITHER THE
LESSOR NOR THE LENDER IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR
MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE, OR TO ANYONE
HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE, AND
THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR OR THE
LENDER IN AND TO ANY PROPERTY.
11.2. Grants and Releases of Easements; Lessor's Waivers. Provided that
no Lease Event of Default shall have occurred and be continuing, from time to
time upon request of the Lessee and subject to the Lessee's prompt reimbursement
of the Lessor's costs and expenses, the Lessor (as holder of record title to the
Property) shall execute such documents reasonably satisfactory in form (which
have been prepared at Lessee's expense) to effect any of the actions set forth
in clauses (a), (b), (c), (d), (e) and (f) of the following sentence, if in the
Lessee's reasonable and good faith opinion such action by the Lessor is
necessary or appropriate to effect such intended actions. Provided that no Lease
Event of Default shall have occurred and be continuing and subject to the
provisions of Articles VII, IX and X and Section
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Master Lease
8.3, the Lessor hereby consents in each instance to the following actions by the
Lessee as the Lessor's Construction Agent, and the Lessor hereby appoints the
Lessee the Lessor's attorney-in-fact, with full authority in the place and stead
of the Lessor to take such action or actions from time to time during the Lease
Term, but at the Lessee's sole cost and expense: (a) the granting of easements,
licenses, rights-of-way and other rights and privileges in the nature of
easements reasonably necessary or desirable for the use, repair, or maintenance
of any Property as herein provided; (b) the release of existing easements or
other rights in the nature of easements which are for the benefit of any
Property; (c) if required by applicable Governmental Authority in connection
with the Construction, the dedication or transfer of unimproved portions of any
Property for road, highway or other public purposes; (d) the execution of
amendments to any covenants and restrictions; (e) the filing and processing of
Site Development Permit Amendments, Parcel Maps, Tentative Maps, Development
Agreements and any and all other permit applications, authorizations,
entitlements, agreements with any government or regulatory agency or amendments
thereof, or other documents reasonably required or beneficial for construction
or Modification of the Improvements, or amendments to Permitted Property Liens
or governmental permits or approvals affecting any Property; and (f) the
execution and filing of tract or parcel maps subdividing the Land into lots or
parcels or reconfiguring existing lots of parcels; provided, however, that in
each case (i) such grant, release, dedication, transfer or amendment does not
materially impair the value or remaining useful life of the applicable Property,
(ii) such grant, release, dedication, transfer or amendment that in the Lessee's
judgment is reasonably necessary or beneficial in connection with the use,
maintenance, alteration or improvement of the applicable Property, (iii) such
grant, release, dedication, transfer or amendment will not cause the applicable
Property or any portion thereof to fail to comply with the provisions of this
Master Lease or any other Operative Documents and all Requirements of Law
(including, without limitation, all applicable zoning, planning, building and
subdivision ordinances, all applicable restrictive covenants and all applicable
architectural approval requirements); (iv) any and all governmental consents or
approvals required prior to such grant, release, dedication, transfer,
annexation or amendment have been obtained, and any and all filings required
prior to such action have been made; (v) the Lessee shall remain obligated under
this Master Lease and under any instrument executed by the Lessee consenting to
the assignment of the Lessor's interests in this Master Lease as security for
indebtedness, in each such case in accordance with their terms, substantially as
though such grant, release, dedication, transfer or amendment had not been
effected and (vi) the Lessee shall pay and perform any
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Master Lease
obligations of the Lessor under such grant, release, dedication, transfer or
amendment. The Lessor acknowledges the Lessee's right to finance and to secure
under the Uniform Commercial Code, inventory, furnishings, furniture, equipment,
machinery, leasehold improvements and other personal property located at the
Properties other than Equipment, and the Lessor agrees to execute Lessor waiver
forms and release of Lessor Liens in favor of any purchase money seller, lessor
or lender which has financed or may finance in the future such items. Without
limiting the effectiveness of the foregoing, provided that no Lease Event of
Default shall have occurred and be continuing, the Lessor shall, upon the
request of the Lessee, and at the Lessee's sole cost and expense, execute and
deliver any instruments necessary or appropriate to confirm any such grant,
release, dedication, transfer, annexation or amendment to any Person permitted
under this Section 11.2 including landlord waivers with respect to any of the
foregoing.
ARTICLE XII
PERMITTED CONTESTS
12.1. Permitted Contests in Respect of Applicable Law. If, to the extent
and for so long as (a) a test, challenge, appeal or proceeding for review of any
Applicable Law relating to any Property shall be prosecuted diligently and in
good faith in appropriate proceedings by the Lessee or (b) compliance with such
Applicable Law shall have been excused or exempted by a valid nonconforming use,
variance permit, waiver, extension or forbearance, the Lessee shall not be
required to comply with such Applicable Law but only if and so long as any such
test, challenge, appeal, proceeding, waiver, extension, forbearance or
noncompliance shall not, in the reasonable opinion of the Lessor and the Lender,
involve (A) any risk of criminal liability being imposed on the Lessor or the
Lender or (B) any risk of (1) foreclosure, forfeiture or loss of such Property,
or any material part thereof, or (2) the nonpayment of Rent or (C) any
substantial risk of (1) the sale of, or the creation of any Lien (other than a
Permitted Property Lien) on, any part of such Property, (2) civil liability
being imposed on the Lessor, the Lender, or such Property, or (3) enjoinment of,
or interference with, the use, possession or disposition of such Property in any
material respect.
The Lessor will not be required to join in any proceedings pursuant to
this Section 12.1 unless a provision of any Applicable Law requires that such
proceedings be brought by or in the name of the Lessor; and in that event the
Lessor will join in the proceedings or permit them or any part thereof to be
brought
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Master Lease
in its name if and so long as (i) the Lessee has not elected the Remarketing
Option and (ii) the Lessee pays all related expenses and indemnifies the Lessor
and the Lender with respect to such proceedings.
ARTICLE XIII
INSURANCE
13.1. Public Liability and Workers' Compensation Insurance.
(a) During the Lease Term, the Lessee shall procure and carry, at
the Lessee's sole cost and expense, commercial general liability
insurance for claims for injuries or death sustained by persons or
damage to property while on the Properties and such other public
liability coverages as are ordinarily procured by the Lessee or its
Affiliates who own or operate similar properties, but in any case shall
provide liability coverage of at least $2,000,000 per person and
$1,000,000 for property damage per occurrence. Such insurance shall be
on terms and in amounts that are no less favorable than insurance
maintained by the Lessee or such Affiliates with respect to similar
properties that they own and that are in accordance with normal industry
practice. The policy shall be endorsed to include the Lessor and the
Lender as additional insureds. The policy shall also specifically
provide that the policy shall be considered primary insurance which
shall apply to any loss or claim before any contribution by any
insurance which the Lessor or the Lender may have in force.
(b) The Lessee shall, in the construction of the Improvements
(including in connection with any Modifications thereof) and the
operation of the Properties, comply with the applicable workers'
compensation laws.
(c) The Lessee shall have the right to self-insure with respect
to any of the insurance required under this Master Lease so long as (i)
the Lessee is a publicly traded domestic corporation whose stock is
traded on a nationally recognized exchange; (ii) the Lessee has not
assigned this Master Lease; (iii) the Lessee maintains a Consolidated
Tangible Net Worth of at least $1,000,000,000 according to its most
recent audited financial statement; and (iv) the 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. Upon request, the Lessee shall supply
the Lessor from time to time with evidence reasonably
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Master Lease
satisfactory to the Lessor of the Lessee's net worth and the
satisfaction of the condition set forth above. If the Lessee elects to
self-insure, the Lessee shall be responsible for losses or liabilities
which would have been assumed by the insurance companies which would
have issued the insurance required of the Lessee under the Master Lease.
The Lessee will notify the Lessor in advance of any period for which it
intends to self-insure and shall provide Lessor with satisfactory
evidence that it complies with these requirements in order to give the
Lessor an opportunity to confirm the satisfaction of the conditions set
forth above. For so long as the Lessee self-insures, the Lessee, for
applicable periods, shall and does hereby indemnify and hold harmless
the Lessor, its officers, directors, agents, employees and
representatives from and against all costs, damages, or expenses
(including reasonable attorneys' fees) incurred or paid by the Lessor as
a result of any claim customarily covered by a broad-form policy of
commercial general liability insurance, including a contractual
liability indorsement.
13.2. [Intentionally Omitted].
13.3. [Intentionally Omitted].
ARTICLE XIV
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
14.1. Casualty and Condemnation.
(a) Subject to the provisions of this Article XIV, if all or a
portion of any Property is damaged or destroyed in whole or in part by a
Casualty or if the use, access, occupancy, easement rights or title to
any Property or any part thereof, is the subject of a Condemnation, then
(i) any insurance proceeds payable with respect to such
Casualty shall be paid directly to the Lessee (or if received by
the Lessor, shall be paid over to the Lessee) for the sole
purpose of reconstruction, refurbishment and repair of such
Property; provided, that such reconstruction, refurbishment or
repair can be completed prior to the end of the Lease Term;
provided, further, that in the event that either (i) such
reconstruction, refurbishment or repair cannot be completed prior
to the end of the Lease Term or (ii) the Lessee shall elect not
to use such proceeds for the reconstruction, refurbishment or
repair of such
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Master Lease
Property, then all such insurance proceeds payable with respect
to such Casualty shall be paid to the Lessor to be applied
towards the payment of the Lease Balance in accordance with
Section 7.2 of the Participation Agreement, and
(ii) (x) in the case of a Condemnation (that is not a
Significant Condemnation) of any part of any Land (not including
the applicable Improvements), any award or compensation relating
thereto shall be paid to the Lessee for the sole purpose of
restoration of such Property (provided, that such restoration can
be completed prior to the end of the Lease Term) or else shall be
paid to the Lessor to be applied in the Lessor's and the Lender's
reasonable discretion to the partial restoration of such Property
or towards the payment of the applicable Lease Balance, and (y)
in the case of a Significant Condemnation, such award or
compensation shall be paid to the Lessor to be applied in the
Lessor's and the Lender's reasonable discretion to the
restoration of such Property or toward the payment of the
applicable Lease Balance in accordance with Article VII of the
Participation Agreement.
provided, however, that, in each case, if a Lease Event of Default shall
have occurred and be continuing, such award, compensation or insurance
proceeds shall be paid directly to the Lessor or, if received by the
Lessee, shall be held in trust for the Lessor and the Lender, and shall
be paid by the Lessee to the Account to be distributed in accordance
with Article VII of the Participation Agreement. All amounts held by the
Lessor or the Lender when a Lease Event of Default exists hereunder on
account of any award, compensation or insurance proceeds either paid
directly to the Lessor or the Lender or turned over to the Lessor or the
Lender shall at the option of the Lessor either be (i) paid to the
Lessee for the repair of damage caused by such Casualty or Condemnation
in accordance with clause (d) of this Section 14.1, or (ii) applied to
the repayment of the Property Balance of the related Property on the
Termination Date with respect to such Property in accordance with
Article XV, with any Excess Casualty/Condemnation Proceeds being payable
to the Lessee.
(b) The Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At the Lessee's
reasonable request, and at the
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Master Lease
Lessee's sole cost and expense, the Lessor and the Lender shall
participate in any such proceeding, action, negotiation, prosecution or
adjustment. The Lessor and the Lessee agree that this Master Lease shall
control the rights of the Lessor and the Lessee in and to any such
award, compensation or insurance payment.
(c) If the Lessor or the Lessee shall receive notice of a
Casualty or of an actual, pending or threatened Condemnation of any
Property or any interest therein, the Lessor or the Lessee, as the case
may be, shall give notice thereof to the other and to the Lender
promptly after the receipt of such notice.
(d) If pursuant to this Section 14.1 and Section 15.1 this Master
Lease shall continue in full force and effect following a Casualty or
Condemnation with respect to any Property, the Lessee shall, at its sole
cost and expense (and, without limitation, if any award, compensation or
insurance payment is not sufficient to restore such Property in
accordance with this clause (d), the Lessee shall pay the shortfall),
promptly and diligently repair any damage to such Property caused by
such Casualty or Condemnation in conformity with the requirements of
Sections 8.3 and 9.1, to restore such Property to at least the same
condition, operative value and useful life as existed immediately prior
to such Casualty or Condemnation. In such event, title to such Property
shall remain with the Lessor subject to the terms of this Master Lease.
Upon completion of such restoration, the Lessee shall furnish to the
Lessor (which, in turn, shall furnish to the Lender) an architect's
certificate of substantial completion and a Responsible Officer's
Certificate confirming that such restoration has been completed pursuant
to this Master Lease.
(e) In no event shall a Casualty or Condemnation affect the
Lessee's obligations to pay Rent pursuant to Section 3.1 or to perform
its obligations and pay any amounts due on the Expiration Date or
pursuant to Articles XVIII and XXI.
(f) Any Excess Casualty/Condemnation Proceeds received by the
Lessor or the Lender in respect of a Casualty or Condemnation shall be
turned over to the Lessee.
14.2. Environmental Matters. Promptly upon the Lessee's knowledge of the
existence of an Environmental Violation with respect to any Property, the Lessee
shall notify the Lessor in writing of such Environmental Violation. If the
Lessor elects
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Master Lease
not to terminate this Master Lease with respect to such Property pursuant to
Section 15.1, at the Lessee's sole cost and expense, the Lessee shall promptly
and diligently commence any response, clean up, remedial or other action
necessary to remove, clean up or remediate the Environmental Violation in
accordance with the terms of Section 8.3 (including the last sentence thereof).
The Lessee shall, upon completion of remedial action by the Lessee, cause to be
prepared by an environmental consultant reasonably acceptable to the Lessor a
report describing the Environmental Violation and the actions taken by the
Lessee (or its agents) in response to such Environmental Violation, and a
statement by the consultant that the Environmental Violation has been remedied
in compliance in all material respects with applicable Hazardous Materials Laws.
Each such Environmental Violation shall be remedied prior to the Expiration Date
unless each Property with respect to which an Environmental Violation has
occurred but has not been remedied has been purchased by the Lessee in
accordance with Section 18.1. Nothing in this Article XIV shall reduce or limit
the Lessee's obligations under Sections 13.1, 13.2 or 13.3 of the Participation
Agreement.
14.3. Notice of Environmental Matters. Promptly, but in any event within
sixty (60) Business Days from the date the Lessee has actual knowledge thereof,
the Lessee shall provide to the Lessor written notice of any pending or
threatened claim, action or proceeding involving any Hazardous Materials Laws or
any Release on or in connection with any Property. All such notices shall
describe in reasonable detail the nature of the claim, action or proceeding and
the Lessee's proposed response thereto. In addition, the Lessee shall provide to
the Lessor, within sixty (60) Business Days of receipt, copies of all written
communications with any Governmental Authority relating to any Environmental
Violation in connection with any Property. The Lessee shall also promptly
provide such detailed reports of any such material environmental claims as may
reasonably be requested by the Lessor or the Lender. In the event that the
Lessor receives written notice of any pending or threatened claim, action or
proceeding involving any Hazardous Materials Laws or any Release on or in
connection with any Property, the Lessor shall promptly give notice thereof to
the Lessee. For purposes of this paragraph, "actual knowledge" of the Lessee
shall mean the actual knowledge of the Lessee's Director of Planning and
Development, who is responsible for the day to day operations of the Properties.
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ARTICLE XV
TERMINATION OF LEASE
15.1. Partial Termination upon Certain Events. If any of the following
occurs with respect to any Property:
(i) a Significant Condemnation occurs; or
(ii) an Environmental Violation occurs or is discovered
the cost of remediation of which would exceed $5,000,000;
and the Lessor shall have given written notice (a "Termination Notice") to the
Lessee that, as a consequence of such event (x) the Lease Supplement(s) relating
to such Property are to be terminated or, with respect to the Lease Supplement
(Land), modified and (y) this Master Lease is to be terminated with respect to
such Property, then the Lessee shall be obligated to purchase the Lessor's
interest in such affected Property within 30 days after Lessee's receipt of the
Termination Notice, by paying to the Lessor an amount equal to the Property
Balance for such affected Property.
15.2. Termination Procedures. On the date of the payment by the Lessee
of the Property Balance for the affected Property or Properties in accordance
with Section 15.1 (such date, the "Termination Date"), the Lease Supplement
relating to each such affected Property shall terminate and this Master Lease
shall terminate with respect to each such Property and, concurrent with the
Lessor's receipt of such payment,
(a) the Lessor shall execute and deliver to the Lessee (or to the
Lessee's designee) at the Lessee's cost and expense a quitclaim deed
with respect to each such Property with a covenant against grantor acts
and an assignment of the Lessor's entire interest in each such Property
(which shall include an assignment of all of the Lessor's right, title
and interest in and to any Net Proceeds with respect to each such
Property not previously received by the Lessor), in each case in
recordable form and otherwise in conformity with local custom and free
and clear of the Lien of the Lessor Mortgage and any Lessor Liens,
attributable to the Lessor;
(b) each such Property shall be conveyed to the Lessee (or to the
Lessee's designee) "AS IS" and in its then present physical condition;
and
(c) in the case of a termination pursuant to clause (i) of
Section 15.1, the Lessor shall convey to the Lessee
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any Net Proceeds with respect to the Condemnation giving rise to the
termination of this Master Lease with respect to such Property
theretofore received by the Lessor or at the request of the Lessee, such
amounts shall be applied against sums due hereunder.
ARTICLE XVI
EVENTS OF DEFAULT
16.1. Lease Events of Default. The occurrence of any one or more of the
following events (whether such event shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) shall constitute a "Lease Event of
Default":
(a) the Lessee shall fail to make payment of (i) any Basic Rent
due and payable ten (10) days after the date of Lessee's receipt of
written notice thereof, (ii) any Supplemental Rent due and payable
within ten (10) days after receipt of written notice thereof, or (iii)
any Property Balance, Loan Balance or Lease Balance, on the date due
therefor; or
(b) the Lessee shall fail to deposit with the Lender, within ten
(10) days of receipt of written notice, the Deficiency Collateral;
(c) the Lessee shall not be in compliance with Section 10.8 of
the Participation Agreement;
(d) [Intentionally Omitted];
(e) the Lessee shall fail to observe or perform any term,
covenant or condition of the Lessee under this Master Lease or the other
Operative Documents to which it is party other than those described in
the foregoing clauses (a), (b), (c) or (d) of this Section 16.1, and, in
each such case, such failure shall have continued unremedied for thirty
(30) days after written notice; provided, that such cure period shall be
extended from thirty (30) days to one-hundred and eighty (180) days if
such term, covenant or condition is, without prejudice to the Lessor
and/or the Lender, curable or remediable and the Lessee is at all times
during such extended period diligently taking action reasonably
satisfactory to the Lessor and the Lender to so cure or remedy default;
provided, further, that failure by
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Master Lease
the Lessee to fully comply with the requirements of Section 20.1 hereof
shall not be subject to any cure period; provided, further, that, for
purposes of clarification, the failure by the Lessee to comply with the
foregoing clauses (a), (b), (c) and (d) of this Section 16.1 shall not
be subject to any cure period except as expressly set forth in such
clauses (a), (b), (c) and (d);
(f) any representation or warranty made or deemed made by the
Lessee herein or in any Operative Document or which is contained in any
certificate, document or financial or other statement furnished at any
time under or in connection with any Operative Document shall prove to
have been incorrect, false or misleading in any material respect on or
as of the date made or deemed made, unless the fact or condition which
made such representation of warranty incorrect, false or misleading is,
without prejudice to the Lessor and/or the Lender, curable or remediable
and the Lessee is at all times diligently taking action reasonably
satisfactory to the Lessor and the Lender to so cure or remedy such fact
or condition in order to make such representation and/or warranty true
and correct in all material respects, in which event the Lessee shall
have one-hundred and eighty (180) days from the date such representation
or warranty was made or deemed made to cure or remedy such default;
(g) a Construction Agency Agreement Event of Default by virtue of
a breach by the Construction Agent of its obligation to complete the
construction of the Improvements;
(h) (i) The Lessee shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it
or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or
any substantial part of its assets, or the Lessee shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Lessee any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of
an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of sixty (60)
days; or
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Master Lease
(iii) there shall be commenced against the Lessee any case, proceeding
other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending
appeal within sixty (60) days from the entry thereof; or (iv) the Lessee
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) the Lessee shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(i) any Operative Document or any Lien granted under any
Operative Document shall, taken as a whole, terminate, cease to be
effective against, or cease to be the legal, valid, binding and
enforceable obligation of the Lessee;
(j) the Lessee shall directly or indirectly contest the
effectiveness, validity, binding nature of enforceability of any
Operative Document or any Lien granted under any Operative Document;
(k) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $5,000,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent
to terminate a Material plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan administrator or any combination
of the foregoing; or the PBGC shall institute proceedings under Title IV
of ERISA to terminate, to impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Material Plan; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or a default, within the
meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $5,000,000;
(l) any judgements or orders for the payment of money, in any
case not covered by insurance, individually or in the aggregate in
excess of $50,000,000 shall be rendered against the Lessee, and such
judgment or order shall continue
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Master Lease
unsatisfied and unstayed (pursuant to laws, rules or court
orders) for a period of thirty (30) days;
(m) a default shall occur in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any
Indebtedness of the Lessee or any of its Consolidated Subsidiaries
having a principal amount, individually or in the aggregate, in excess
of $50,000,000, or a default shall occur in the performance or
observance of any obligation or condition with respect to such
Indebtedness if the effect of such default is to accelerate the maturity
of any such Indebtedness or such default shall continue unremedied for
any applicable period of time sufficient to permit the holder or holders
of such Indebtedness, or any trustee or agent for such holders, to cause
such Indebtedness to become due and payable prior to its expressed
maturity; and
(n) any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) of
35% or more of the outstanding shares of common stock of the Lessee.
16.2. Remedies. Upon the occurrence of any Lease Event of Default and
the declaration thereof, the Lease Balance due hereunder without further act
shall be accelerated and be deemed to be due and payable hereunder, and at any
time thereafter, the Lessor may, subject to the last three paragraphs of this
Section 16.2 and so long as such Lease Event of Default is continuing, do one or
more of the following as the Lessor in its sole discretion shall determine,
without limiting any other right or remedy the Lessor may have on account of
such Lease Event of Default.
(a) The Lessor may, by notice to the Lessee, rescind or terminate
this Master Lease as to any Property or all of the Properties as of the
date specified in such notice; provided, however (i) no reletting,
reentry or taking of possession of any Property (or any portion thereof)
by the Lessor will be construed as an election on the Lessor's part to
terminate this Master Lease unless a written notice of such intention is
given to the Lessee, (ii) notwithstanding any reletting, reentry or
taking of possession, the Lessor may at any time thereafter elect to
terminate this Master Lease for a continuing Lease Event of Default and
(iii) no act or thing done by the Lessor or any of its agents,
representatives or employees and no agreement accepting a
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Master Lease
surrender of the Properties shall be valid unless the same
be made in writing and executed by the Lessor;
(b) The Lessor may (i) demand that the Lessee, and the Lessee
shall upon the written demand of the Lessor, return any Property
promptly to the Lessor in the manner and condition required by, and
otherwise in accordance with all of the provisions of, Articles VII and
IX and Section 8.3 hereof as if such Property were being returned at the
end of the Lease Term, and the Lessor shall not be liable for the
reimbursement of the Lessee for any costs and expenses incurred by the
Lessee in connection therewith and (ii) without prejudice to any other
remedy which the Lessor may have for possession of any Property, and to
the extent and in the manner permitted by Applicable Law, enter upon
such Property and take immediate possession of (to the exclusion of the
Lessee) such Property or any part thereof and expel or remove the Lessee
and any other Person who may be occupying such Property, by summary
proceedings or otherwise, all without liability to the Lessee for or by
reason of such entry or taking of possession, whether for the
restoration of damage to property caused by such taking or otherwise
and, in addition to the Lessor's other damages, the Lessee shall be
responsible for all costs and expenses incurred by the Lessor and/or the
Lender in connection with any reletting, including, without limitation,
reasonable brokers' fees and all costs of any alterations or repairs
made by the Lessor or the Lender;
(c) As more fully set forth in each Lease Supplement, the Lessor
may sell all or any part of any one or more Properties at public or
private sale, as the Lessor may determine;
(d) The Lessor may, at its option, elect not to terminate this
Master Lease with respect to any Property or all of the Properties and
continue to collect all Basic Rent, Supplemental Rent, and all other
amounts due to the Lessor (together with all costs of collection) and
enforce the Lessee's obligations under this Master Lease as and when the
same become due, or are to be performed, and at the option of the
Lessor, upon any abandonment of any Property by the Lessee or re-entry
of same by the Lessor, the Lessor may enforce, by suit or otherwise, all
other covenants and conditions hereof to be performed or complied with
by the Lessee hereunder and to exercise all other remedies permitted by
Section 1951.4 of the California Civil Code or any amendments thereof or
any successor laws which replace such Section 1951.4;
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Master Lease
(e) [Intentionally Omitted]
(f) The Lessor may exercise any other right or remedy that may be
available to it under Applicable Law, including any and all rights or
remedies under the Pledge Agreement, or proceed by appropriate court
action (legal or equitable) to enforce the terms hereof or to recover
damages for the breach hereof. Separate suits may be brought to collect
any such damages for any period(s), and such suits shall not in any
manner prejudice the Lessor's right to collect any such damages for any
subsequent period(s), or the Lessor may defer any such suit until after
the expiration of the Lease Term, in which event such suit shall be
deemed not to have accrued until the expiration of the Lease Term;
(g) The Lessor may retain and apply against the Lease Balance all
sums which the Lessor would, absent such Lease Event of Default, be
required to pay to, or turn over to, the Lessee pursuant to the terms of
this Master Lease; or
(h) If a Lease Event of Default shall have occurred and be
continuing, the Lessor, to the extent permitted by Applicable Law, as a
matter of right and with notice to the Lessee, shall have the right to
apply to any court having jurisdiction to appoint a receiver or
receivers of any Property, and the Lessee hereby irrevocably consents to
any such appointment. Any such receiver(s) shall have all of the usual
powers and duties of receivers in like or similar cases and all of the
powers and duties of the Lessor in case of entry, and shall continue as
such and exercise such powers until the date of confirmation of the sale
of such Property unless such receivership is sooner terminated.
(i) To the maximum extent permitted by law, the Lessee hereby
waives the benefit of any appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale of any Property or any
interest therein.
(j) The Lessor shall be entitled to enforce payment of the
indebtedness and performance of the obligations secured hereby and to
exercise all rights and powers under this instrument or under any of the
other Operative Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the obligations
secured hereby may now or hereafter be otherwise secured, whether by
mortgage, security agreement, pledge, lien, assignment or otherwise.
Neither the acceptance of this instrument nor its enforcement, shall
prejudice or in any manner affect the
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Master Lease
Lessor's right to realize upon or enforce any other security now or
hereafter held by the Lessor, it being agreed that the Lessor shall be
entitled to enforce this instrument and any other security now or
hereafter held by the Lessor in such order and manner as the Lessor may
determine in its absolute discretion. No remedy herein conferred upon or
reserved to the Lessor is intended to be exclusive of any other remedy
herein or by law provided or permitted, but each shall be cumulative and
shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute. Every power or
remedy given by any of the Operative Documents to the Lessor or to which
it may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient
by the Lessor. In no event shall the Lessor, in the exercise of the
remedies provided in this instrument (including, without limitation, in
connection with the assignment of rents to Lessor, or the appointment of
a receiver and the entry of such receiver onto all or any part of the
Properties), be deemed a "mortgagee in possession", and the Lessor shall
not in any way be made liable for any act, either of commission or
omission, in connection with the exercise of such remedies, except for
the exercise of the remedies set forth in clauses (c), (j) or (k) of
this Section 16.2 within thirty (30) days after the declaration of the
occurrence of an Event of Default in contravention of Lessee's purchase
right set forth in the last paragraph of this Section 16.2.
(k) Foreclosure; Power of Sale. The Lessee hereby grants to First
American Title Insurance Company, as trustee (together with all
successor trustees, the "Trustee"), IN TRUST, WITH POWER OF SALE, all of
the Lessee's right, title and interest in and to the Properties and,
upon the occurrence of a Lease Event of Default and following
termination of this Master Lease by the Lessor, the Lessor shall have
the power and authority, after proper notice and lapse of such time as
may be required by law and by the Master Lease, to cause the Trustee to
sell any Property or the Properties by notifying the Trustee of that
election and depositing with the Trustee this instrument and receipts
and evidence of expenditures made and secured hereby as the Trustee may
reasonably require. Upon receipt of any such notice from the Lessor, the
Trustee shall cause to be recorded, published and delivered to Lessee
such Notice of Default and Election to Sell as is then required by
applicable statutory authority and by this instrument, which notice
shall set forth, among other things, the nature of the breach(es) or
default(s), the action(s) required to
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effect a cure thereof and the time period within which that cure may be
effected. If no cure is effected within the statutory time limits
following recordation of the Notice of Default and Election to Sell and
after Notice of Sale has been given as required by the above-referenced
statutes, the Trustee may without further notice or demand sell and
convey any Property or the Properties in accordance with the
above-referenced statutes. Each Property may be sold as a whole or in
separate lots, parcels or items and in such order as the Lessor may
direct, at public auction to the highest bidder for cash in lawful money
of the United States payable at the time of sale. The Trustee shall
deliver to such purchaser(s) a good and sufficient deed or deeds
conveying the property so sold, but without any covenant or warranty
express or implied. The recitals in such deed of any matter or fact
shall be conclusive proof of the truthfulness thereof. Any Person,
including the Lessee, the Trustee or the Lessor, may purchase at any
sale. After deducting all costs, fees and expenses of the Lessor and the
Trustee, including costs of evidence of title in connection with any
sale, the Lessor shall apply the proceeds of sale, in the following
order of priority, to payment of the following (collectively referred to
herein as the "Obligated Amounts"): (i) first, all amounts expended by
or for the account of the Lessor under the terms hereof and not then
repaid, with accrued interest at the Overdue Rate; and (ii) second, all
other amounts then due and owing hereunder including, without
limitation, all Basic Rent, Supplemental Rent, the full amount of the
Lease Balance as of the date of sale as if this Lease had been
terminated with respect to all of the Properties then subject to this
Lease under Section 18.1, and all other amounts then payable by the
Lessee under this Lease and the other Operative Documents, with the
Lessor having the right to apply the proceeds of sale to the amounts
described above in this clause (ii) in such order, proportion and
priority as the Lessor may elect in its sole and absolute discretion. To
the extent permitted by applicable statutes, the Trustee may postpone
the sale of all or any portion of any Property or the Properties by
public announcement at the time and place of sale, and from time to time
thereafter may again postpone that sale by public announcement or
subsequently noticed sale, and without further notice may make such sale
at the time fixed at the last postponement or may, in its discretion,
give a new notice of sale. A sale of less than all of any Property or
the Properties or any defective or irregular sale made hereunder shall
not exhaust the power of sale provided for herein, and subsequent sales
may be made hereunder until all of the Obligated Amounts have been
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Master Lease
satisfied or all the Properties have been sold, without defect or
irregularity. No action of the Lessor or the Trustee based upon the
provisions contained herein or contained in the applicable statutes,
including, without limitation, the giving of the Notice of Default and
Election to Sell or the Notice of Sale, shall constitute an election of
remedies which would preclude the Lessor from pursuing judicial
foreclosure before a completed sale pursuant to the power of sale
contained herein. The Lessor shall have the right, with the irrevocable
consent of the Lessee hereby given and evidenced by the execution of
this instrument, to obtain appointment of a receiver by any court of
competent jurisdiction without further notice to the Lessee, which
receiver shall be authorized and empowered to enter upon and take
possession of any Property or the Properties, including all personal
property used upon or in connection with the real property herein
conveyed, to let any Property or the Properties, to receive all the
rents, issues and profits, if any, which may be due or become due in
respect to the leasing of any Property or the Properties to another
party (herein, "Property Rents"), and apply the Property Rents after
payment of all necessary charges and expenses to reduction of the
Obligated Amounts in such order, proportion and priority as the Lessor
may elect. At the option of the Lessor, the receiver shall accomplish
entry and taking possession of any Property or the Properties by actual
entry and possession or by notice to the Lessee. The receiver so
appointed by a court of competent jurisdiction shall be empowered to
issue receiver's certificates for funds advanced by the Lessor for the
purpose of protecting the value of any Property or the Properties as
security for the Obligated Amounts. The amounts evidenced by receiver's
certificates shall bear interest at the Overdue Rate and may be added to
the Obligated Amounts if the Lessee or a junior lienholder purchases any
Property or the Properties at the trustee's sale. The Trustee or any
successor acting hereunder may resign and thereupon be discharged of the
trusts hereunder upon thirty (30) days' prior written notice to the
Lessor. Regardless of whether the Trustee resigns, the Lessor may, from
time to time, substitute a successor or successors to any Trustee named
herein or acting hereunder in accordance with any statutory procedure
for such substitution; or if Lessor, in its sole and absolute
discretion, so elects, and if permitted by law, the Lessor may
substitute such successors or successors by recording, in the office of
the recorder of the county or counties where such Property is located, a
document executed by the Lessor and containing the name of the original
Lessee and Lessor hereunder, the book and page where this instrument
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(or a memorandum hereof) is recorded (and/or instrument number, as
applicable) and the name of the new Trustee, which instrument shall be
conclusive proof of proper substitution of such successor Trustee or
Trustees, who shall, without conveyance from the predecessor Trustee,
succeed to the rights, powers and duties hereunder. It is acknowledged
that A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF
SALE MAY ALLOW LESSOR TO TAKE THE PROPERTIES AND SELL THEM WITHOUT GOING
TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE LESSEE UNDER THIS
INSTRUMENT.
The Lessor acknowledges and agrees that upon the declaration of an Event
of Default the amount due and owing by it to the Lessor hereunder shall be the
Lease Balance and that to the maximum extent permitted by law, the Lessee waives
any right to contest the Lease Balance as the liquidated sum due upon
acceleration of this instrument.
In order to satisfy the Lease Balance due and owing the Lessee may avail
itself of any and all of the foregoing remedies provided, however, that the
Lessor acknowledges and agrees that in the case of a Lease Event of Default set
forth in clause (a), (b), (c), (e) (unless such Event of Default is caused by a
breach of Section 6.1, Section 8.4, failure to complete a structural
Modification the cost of which exceeds 10% of the Property Balance for such
Property, Section 11.2 hereof if the effect of such has the result described in
clause (i) of the proviso therein and Section 14.2 hereof), (f), (i), (j), (k),
(l), (m) or (n) of Section 16.1 hereof, in the absence of a Lease Event of
Default under any other clause, that the Lessor's personal recourse against the
Lessee shall be limited to the sum of all past due and accrued and unpaid Rent
hereunder and the Tranche A Loan Balance plus Lessor Balance in respect of the
Land. Any Lease Balance remaining after realization from the Lessee of the
foregoing amount shall be satisfied solely from proceeds derived from the sale
or use of the Property.
If, pursuant to the exercise by the Lessor of its remedies pursuant to
this Section 16.2, the Lease Balance and all other amounts due and owing from
the Lessee under this Master Lease and the other Operative Documents have been
paid in full, then the Lessor shall remit to the Lessee any excess amounts
received by the Lessor. The obligation to deliver such excess to the Lessee
shall survive this Master Lease.
The Lessor agrees that for thirty (30) days after the declaration of the
occurrence of an Event of Default, Lessor shall forebear from exercising the
remedies set forth in clauses
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(c), (j) or (k) of this Section 16.2 during which time Lessee may tender to the
Lessor in immediately available funds the Lease Balance and all past due and
accrued and unpaid Rent upon the receipt of which Lessor shall transfer the
Properties to the Lessee or its designee in accordance with Article XXI hereof.
16.3. Waiver of Certain Rights. Subject to the foregoing, if this Master
Lease shall be terminated pursuant to Section 16.2, the Lessee waives, to the
fullest extent permitted by law, (a) any notice of re-entry or the institution
of legal proceedings to obtain re-entry or possession; (b) any right of
redemption, re-entry or repossession; (c) the benefit of any laws now or
hereafter in force exempting property from liability for rent or for debt or
limiting the Lessor with respect to the election of remedies; and (d) any other
rights which might otherwise limit or modify any of the Lessor's rights or
remedies under this Article XVI.
ARTICLE XVII
LESSOR'S RIGHT TO CURE
17.1. The Lessor's Right to Cure the Lessee's Lease Defaults. The
Lessor, without waiving or releasing any obligation or Lease Event of Default,
may (but shall be under no obligation to) remedy any Lease Event of Default for
the account and at the sole cost and expense of the Lessee, including the
failure by the Lessee to maintain the insurance required by Article XIII, and
may, to the fullest extent permitted by law, and notwithstanding any right of
quiet enjoyment in favor of the Lessee, enter upon any Property for such purpose
and take all such action thereon as may be necessary or appropriate therefor. No
such entry shall be deemed an eviction of the Lessee. All reasonable
out-of-pocket costs and expenses so incurred (including fees and expenses of
counsel), together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid by the Lessor, shall be paid by the Lessee
to the Lessor as Supplemental Rent.
ARTICLE XVIII
PURCHASE PROVISIONS
18.1. Purchase of the Properties. Subject to the conditions contained
herein, the Lessee shall have the irrevocable option on any Business Day to
purchase any or all (subject, however, to the penultimate sentence of this
Section 18.1) of the Properties subject to this Master Lease at a price (the
"Purchase Price") equal to the aggregate Property Balances
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Master Lease
of the applicable Properties on the date of such purchase, plus Break Costs (if
any). The Lessee's exercise of its option pursuant to this Section 18.1 shall be
subject to the following conditions:
(i) the Lessee shall have delivered a Purchase Notice to the
Lessor not less than thirty (30) days prior to such purchase, specifying
the date of such purchase;
(ii) [Intentionally Omitted].
(iii) the Lessee shall not have given notice of its intention to
exercise the Remarketing Option.
If the Lessee exercises its option pursuant to this Section 18.1 then, upon the
Lessor's receipt of all amounts due in connection therewith, the Lessor shall
transfer to the Lessee or its designee all of the Lessor's right, title and
interest in and to the applicable Properties in accordance with the procedures
set forth in Section 21.1(a), such transfer to be effective as of the date
specified in the Purchase Notice. The Lessee may designate, in a notice given to
the Lessor not less than ten (10) Business Days prior to the closing of such
purchase (time being of the essence), the transferee or transferees to whom the
conveyance shall be made (if other than to the Lessee), in which case such
conveyance shall (subject to the terms and conditions set forth herein) be made
to such designee; provided, however, that such designation of a transferee or
transferees shall not cause the Lessee to be released, fully or partially, from
any of its obligations under this Master Lease, including, without limitation,
the obligation to pay to the Lessor the Property Balances of the applicable
Properties on the date specified in the applicable Purchase Notice.
Notwithstanding anything herein to the contrary, the Lessee may only exercise
its Purchase Option for less than all of the Properties so long as after giving
effect to such purchase, the aggregate of the Property Balance (Improvements) of
the Properties remaining subject to this Master Lease would be equal to 50.0% or
more of an amount equal to the highest Lease Balance (Improvements) in respect
of all Properties outstanding at any time prior to the time of such purchase.
The Lessee shall have the right to elect by written notice to the Lessor and the
Lender to have all or part of the Purchase Price paid by liquidation of the
Additional Collateral so long as, in the case of a purchase of less than all the
Properties, sufficient Additional Collateral remains subject to the Pledge
Agreement.
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Master Lease
ARTICLE XIX
EXTENSION OF EXPIRATION DATE
19.1. Extension of Expiration Date. The Lessee may extend the Expiration
Date subject to, and in accordance with, the terms and conditions of Section
11.2 of the Participation Agreement.
ARTICLE XX
REMARKETING OPTION
20.1. Option to Remarket. Subject to the fulfillment of each of the
conditions set forth in this Section 20.1, the Lessee shall have the option (the
"Remarketing Option") to market all of the Properties on behalf of the Lessor.
The Lessee's effective exercise and consummation of the Remarketing
Option shall be subject to the due and timely fulfillment of each of the
following provisions as to each of the Properties as of the dates set forth
below:
(a) Not later than six months prior to the Expiration Date, the
Lessee shall give to the Lessor written notice of the Lessee's exercise
of the Remarketing Option, which exercise shall be irrevocable. Failure
by the Lessee to give timely notice shall be deemed to be an election by
the Lessee, without further act thereby, of its Purchase Option for all
of the Properties.
(b) Not later than ninety (90) days prior to the Expiration Date,
the Lessee shall deliver to the Lessor an Environmental Audit for each
of the Properties. Such Environmental Audit shall be prepared by an
environmental consultant selected by the Lessor in the Lessor's
reasonable discretion and shall contain conclusions reasonably
satisfactory to the Lessor as to the environmental status of the
Properties. If any such Environmental Audit indicates any exceptions,
the Lessee shall have also delivered prior to the Expiration Date a
Phase Two environmental assessment by such environmental consultant and
a written statement by such environmental consultant indicating that all
such exceptions have been remedied in compliance with Applicable Law. As
of the Expiration Date, any Permitted Property Liens (other than (x)
Liens of the type described in clause (iii) of the definition of
"Permitted Property Liens" to the extent, but only to the extent, the
Lessor is in its opinion fully indemnified therefrom, and (y) Liens of
the type described in clause (vii) of the definition of "Permitted
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Master Lease
Property Liens") on any Property that were contested by the Lessee shall
have been removed.
(c) [Intentionally Omitted].
(d) [Intentionally Omitted].
(e) [Intentionally Omitted].
(f) During the Marketing Period, the Lessee shall, as
nonexclusive agent for the Lessor, use reasonable commercial efforts to
sell the Lessor's interest in the Properties and will attempt to obtain
the highest purchase price therefor and for not less than the Fair
Market Sales Value.
(g) [Intentionally Omitted].
(h) [Intentionally Omitted].
(i) The Lessee shall have obtained, at its cost and expense, all
required governmental and regulatory consents and approvals and shall
have made all filings as required by Applicable Law in order to carry
out and complete the transfer of each of the Properties. As to the
Lessor, any such sale shall be made on an "as is, with all faults" basis
without representation or warranty by the Lessor other than the absence
of Lessor Liens.
(j) The Lessee shall pay directly, and not from the sale
proceeds, all prorations and credits, whether incurred by the Lessor or
the Lessee, including without limitation, the cost of all environmental
reports, appraisals required under Section 13.2 of the Participation
Agreement and the Lessee's attorneys' fees.
(k) The Lessee shall pay to the Lessor on or prior to the
Expiration Date (or in the case of Supplemental Rent, to the Person
entitled thereto) an amount equal to the Tranche A Loan Balance plus the
aggregate amount of Lessor Amounts that are allocable to Land
Acquisition Costs (without duplication of the Tranche A Loan Balance)
plus all accrued and unpaid Rent and all other amounts hereunder which
have accrued or will accrue prior to or as of the Expiration Date, in
the type of funds specified in Section 3.1(b) hereof; provided that in
no event shall the Lessee be obligated to pay the Tranche B Loan Balance
or the Lessor Amount attributable to construction of the Improvements.
(l) [Intentionally Omitted].
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Master Lease
(m) The gross proceeds (the "Gross Remarketing Proceeds") of the
sale of the Properties (less any marketing, closing or other costs,
prorations or commissions related to the marketing of the Properties),
shall be paid directly to the Lessor; provided, however, that if the sum
of (x) the Gross Remarketing Proceeds from such sale plus (y) the
Tranche A Loan Balance and Lessor Amounts allocable to Land Acquisition
Costs received by the Lessor pursuant to Section 20.1(k) exceeds the
Lease Balance as of such date, then the excess shall be paid to the
Lessee promptly after receipt thereof by the Lessor. The obligations of
the Lessor under this paragraph shall survive the expiration or
termination of this Master Lease.
If the Lessee effectively elects the Remarketing Option and the sale of
any Property is not consummated prior to the end of the Marketing Period, the
Lessee shall, in addition to making the payment required pursuant to Section
20.1(k) above, at its own cost and expense, do each of the following:
(i) execute and deliver to the Lessor and the Lessor's title
insurance company an affidavit as to the absence of any Liens (other
than Permitted Property Liens of the type described in clause (i),
(vii), (viii), (ix) or (x) Liens for taxes not yet due and Lessor
Liens), and shall execute and deliver to the Lessor a statement of
termination of this Master Lease to the extent relating to such
Property;
(ii) on the Expiration Date, transfer possession of such Property
to the Lessor or any Person designated by the Lessor, by surrendering
the same into the possession of the Lessor or such Person, as the case
may be, in the condition required by this Section 20.1 and in compliance
with Applicable Law; and
(iii) for a period of up to one year after the Expiration Date,
cooperate reasonably with the Lessor and/or any Person designated by the
Lessor to receive such Property, which cooperation shall include
reasonable efforts with respect to the following, all of which the
Lessee shall do on or before the Expiration Date for such Property or as
soon thereafter as is reasonably practicable: providing copies of all
books and records regarding the maintenance and ownership of such
Property and all know-how, data and technical information relating
thereto, providing a current copy of the applicable Plans and
Specifications, granting or assigning all assignable licenses necessary
for the operation and maintenance of such Property and cooperating
reasonably in seeking and obtaining all necessary
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Master Lease
Governmental Action. The obligations of the Lessee under
this paragraph shall survive the expiration or termination
of this Master Lease.
Lessor shall have no obligation to approve any bid for the Properties
except for bona fide all-cash bids which, together with amounts payable by the
Lessee under clause (k) hereof, in the aggregate is at least equal to the Lease
Balance and the acceptance of which will not subject the Lessor to any
additional liability. Except as expressly set forth herein, the Lessee shall
have no right, power or authority to bind the Lessor or any Participant in
connection with any proposed sale of any Property.
If one or more of the foregoing provisions (a) through (k) shall not be
fulfilled as of the Expiration Date with respect to any Property, then the
Lessor shall declare by written notice to the Lessee the Remarketing Option to
be null and void (whether or not it has been theretofore exercised by the
Lessee) as to all of the Properties, in which event all of the Lessee's rights
under this Section 20.1 shall immediately terminate and the Lessee shall
purchase from the Lessor, and the Lessor shall convey to the Lessee, on the
Expiration Date all of the Lessor's interest in all of the Properties for an
amount equal to the Lease Balance..
20.2. Certain Obligations Continue. During the Marketing Period, the
obligation of the Lessee to pay Rent with respect to each Property (including
the installment of Rent due on the Expiration Date) shall continue undiminished
until payment in full of the Tranche A Loan Balance plus the aggregate amount of
the Lessor Balance allocable to Land Acquisition Costs and all accrued and
unpaid Supplemental Rent due to the Lessor with respect to the Properties under
the Operative Documents to which the Lessee is a party. The Lessor shall have
the right, but shall be under no duty, to solicit bids, to inquire into the
efforts of the Lessee to obtain bids or otherwise to take action in connection
with any such sale.
ARTICLE XXI
PROCEDURES RELATING TO PURCHASE OR REMARKETING
21.1. Provisions Relating to the Exercise of Purchase
Option or Obligation and Conveyance Upon Remarketing and
Conveyance Upon Certain Other Events.
(a) In connection with any termination of this Master Lease with
respect to any Property pursuant to the terms of Article XV, in
connection with any purchase or in connection
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Master Lease
with the Lessee's purchase of any Property in accordance with Section
18.1 or in connection with the Lessee's exercise of the purchase right
under Section 16.2, then, upon the date on which this Master Lease is to
terminate with respect to the applicable Property and upon the payment
of all amounts due under Section 5.1 of the Construction Agency
Agreement, as applicable, and upon tender by the Lessee of the amounts
set forth in Article XV, Sections 16.2 or 18.1, as applicable:
(i) the Lessor shall execute and deliver to the Lessee (or
to the Lessee's designee) at the Lessee's cost and expense a
quitclaim deed with covenants against grantor's acts with respect
to such Property or Properties and an assignment of the Lessor's
entire interest in such Property or Properties (which shall
include an assignment of all of the Lessor's right, title and
interest in and to any Net Proceeds with respect to such Property
or Properties not previously received by the Lessor and an
assignment of leases of the Properties), in each case in
recordable form and otherwise in conformity with local custom and
free and clear of the Lien of the Lessor Mortgage and any Lessor
Liens;
(ii) such Property or Properties shall be conveyed to the
Lessee "AS IS" and in its then present physical condition; and
(iii) the Lessor shall execute and deliver to Lessee and
the Lessee's title insurance company an affidavit as to the
Lessor's title and Lessor Liens and shall execute and deliver to
Lessee a statement of termination of this Master Lease to the
extent this Master Lease relates to such Property or Properties.
(b) If the Lessee properly exercises the Remarketing Option, then
the Lessee shall, on the Expiration Date, and at its own cost, transfer
possession of all of the Properties to the independent purchaser(s)
thereof, in each case by surrendering the same into the possession of
the Lessor or such purchaser(s), as the case may be, free and clear of
all Liens other than Lessor Liens and the lien of the Lessor Mortgage,
in good condition (as modified by Modifications permitted by this Master
Lease), ordinary wear and tear excepted, and in compliance with
Applicable Law.
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Master Lease
ARTICLE XXII
ESTOPPEL CERTIFICATES
22.1. Estoppel Certificates. At any time and from time to time upon not
less than thirty (30) Business Days' prior request by the Lessor or the Lessee
(the "Requesting Party"), the other party (whichever party shall have received
such request, the "Certifying Party") shall furnish to the Requesting Party a
certificate signed by an individual having the office of vice president or
higher in the Certifying Party certifying that this Master Lease is in full
force and effect (or that this Master Lease is in full force and effect as
modified and setting forth the modifications); the dates to which the Basic Rent
and Supplemental Rent have been paid; to the best knowledge of the signer of
such certificate, whether or not the Requesting Party is in default under any of
its obligations hereunder (and, if so, the nature of such alleged default); and
such other matters under this Master Lease as the Requesting Party may
reasonably request. Any such certificate furnished pursuant to this Article XXII
may be relied upon by the Requesting Party, and any existing or prospective
mortgagee, purchaser or lender, and any accountant or auditor, of, from or to
the Requesting Party (or any Affiliate thereof).
ARTICLE XXIII
ACCEPTANCE OF SURRENDER
23.1. Acceptance of Surrender. No surrender to the Lessor of this Master
Lease or of all or any of the Properties or of any part of any thereof or of any
interest therein shall be valid or effective unless agreed to and accepted in
writing by the Lessor and, prior to the payment or performance of all
obligations under the Loan Agreement and termination of the Commitments, the
Lender, and no act by the Lessor or the Lender or any representative or agent of
the Lessor or the Lender, other than a written acceptance, shall constitute an
acceptance of any such surrender.
ARTICLE XXIV
NO MERGER OF TITLE
24.1. No Merger of Title. There shall be no merger of this Master Lease
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, in whole or in part,
(a) this Master Lease or the leasehold estate created hereby or any interest in
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Master Lease
this Master Lease or such leasehold estate, (b) the fee or groundleasehold
estate in any Property, except as may expressly be stated in a written
instrument duly executed and delivered by the appropriate Person or (c) a
beneficial interest in the Lessor.
ARTICLE XXV
INTENT OF THE PARTIES
25.1. Nature of Transaction.
(a) It is the intent of the parties that: (a) the Lease constitutes an
operating lease from Lessor to the Lessee for purposes of the Lessee's financial
reporting, (b) the Lease and other transactions contemplated will result in the
Lessee being recognized as the owner of the Properties for Federal and state
income tax and bankruptcy purposes, (c) each Lease Supplement grants to Lessor a
Lien on the Lessee's interest in the Property covered thereby, and (d) the
obligations of the Lessee to pay Basic Rent and any part of the Property Balance
shall be treated as payments of interest and principal, respectively, for
Federal and state income tax and bankruptcy purposes. The Lessor shall be deemed
to have a valid and binding security interest in and Lien on the Lessee's
interest in the Properties, free and clear of all Liens other than Permitted
Property Liens, as security for the obligations of the Lessee under the
Operative Documents (it being understood and agreed that the Lessee does hereby
grant a Lien, and convey, transfer, assign, mortgage and warrant to Lessor and
its successors, transferees and assigns, for the benefit of the Lessor and its
successors, transferees and assigns, the Properties and any proceeds or products
thereof, to have and hold the same as collateral security for the payment and
performance of the obligations of the Lessee under the Operative Documents),
each of the parties hereto agrees that it will not, nor will it permit any
Affiliate to at any time, take any action or fail to take any action with
respect to the preparation or filing of any income tax return, including an
amended income tax return, to the extent that such action or such failure to
take action would be inconsistent with the intention of the parties expressed in
this Section 25.1.
(b) Specifically, without limiting the generality of clause (a) of this
Section 25.1, the parties hereto intend and agree that in the event of any
insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any State or Commonwealth thereof affecting Lessee, Lessor,
any Participant or any collection actions, the
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Master Lease
transactions evidenced by the Operative Documents shall be regarded as loans
made by the Participants to the Lessee.
ARTICLE XXVI
MISCELLANEOUS
26.1. Survival; Severability; Etc. Anything contained in this Master
Lease to the contrary notwithstanding, all claims against and liabilities of the
Lessee or the Lessor arising from events commencing prior to the expiration or
earlier termination of this Master Lease shall survive such expiration or
earlier termination for a period of one year except as to indemnification which
shall continue to survive. If any term or provision of this Master Lease or any
application thereof shall be declared invalid or unenforceable, the remainder of
this Master Lease and any other application of such term or provision shall not
be affected thereby. If any right or option of the Lessee provided in this
Master Lease, including any right or option described in Article XIV, XV, XVIII
or XX, would, in the absence of the limitation imposed by this sentence, be
invalid or unenforceable as being in violation of the rule against perpetuities
or any other rule of law relating to the vesting of an interest in or the
suspension of the power of alienation of property, then such right or option
shall be exercisable only during the period which shall end twenty-one (21)
years after the date of death of the last survivor of the descendants of
Franklin D. Roosevelt, the former President of the United States, Henry Ford,
the deceased automobile manufacturer, and John D. Rockefeller, the founder of
the Standard Oil Company, known to be alive on the date of the execution,
acknowledgement and delivery of this Master Lease.
26.2. Amendments and Modifications. Subject to the requirements,
restrictions and conditions set forth in the Participation Agreement, neither
this Master Lease nor any provision hereof may be amended, waived, discharged or
terminated except by an instrument in writing in recordable form signed by the
Lessor and the Lessee.
26.3. No Waiver. No failure by the Lessor, any Participant or the Lessee
to insist upon the strict performance of any term hereof or to exercise any
right, power or remedy upon a default hereunder, and no acceptance of full or
partial payment of Rent during the continuance of any such default, shall
constitute a waiver of any such default or of any such term. To the fullest
extent permitted by law, no waiver of any default shall affect or alter this
Master Lease, and this Master Lease shall continue in full force and effect with
respect to any other then existing or subsequent default.
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Master Lease
26.4. Notices. All notices, demands, requests, consents, approvals and
other communications hereunder shall be in writing and directed to the address
described in, and deemed received in accordance with the provisions of, Section
15.3 of the Participation Agreement.
26.5. Successors and Assigns. All the terms and provisions of this
Master Lease shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
26.6. Headings and Table of Contents. The headings and table of contents
in this Master Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
26.7. Counterparts. This Master Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
26.8. GOVERNING LAW. THIS MASTER LEASE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS RELATING TO
THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER AND THE EXERCISE OF RIGHTS AND
REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. WITHOUT LIMITING THE
FOREGOING, IN THE EVENT THAT THIS MASTER LEASE IS DEEMED TO CONSTITUTE A
FINANCING WHICH IS THE INTENTION OF THE PARTIES, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, SHALL GOVERN THE CREATION,
TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED HEREBY, BUT THE LIEN CREATED
HEREBY AND THE CREATION AND THE ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN WHICH SUCH ESTATES ARE
LOCATED.
26.9. Liability Limited. The parties hereto agree that except as
specifically set forth in this Master Lease or in any other Operative Document,
the Lessor shall have no personal liability whatsoever to the Lessee or the
Lender or their respective successors and assigns for any claim based on or in
respect of this Master Lease or any of the other Operative Documents or arising
in any way from the transactions contemplated hereby or thereby and the recourse
shall be solely had against the Lessor's interest in the Properties; provided,
however, that Lessor shall be liable in its individual capacity (a) for its own
willful misconduct or gross negligence, (b) breach of any of its
representations, warranties or covenants under the Operative Documents, or (c)
for any Tax based on or
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Master Lease
measured by any fees, commission or compensation received by it for acting as
the Lessor as contemplated by the Operative Documents.
26.10. Original Lease. The single executed original of this Master Lease
marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature
page thereof and containing the receipt thereof of Union Bank of Switzerland,
New York Branch, as the Lender therefor on or following the signature page
thereof shall be the Original Executed Counterpart of this Master Lease (the
"Original Executed Counterpart"). To the extent that this Master Lease
constitutes chattel paper, as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction, no security interest in this
Master Lease may be created through the transfer or possession of any
counterpart other than the Original Executed Counterpart.
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Master Lease
IN WITNESS WHEREOF, the parties have caused this Master Lease be duly
executed and delivered as of the date first above written.
CISCO SYSTEMS, INC.,
as Lessee
By
--------------------------------------
Name:
Title:
S-1
<PAGE> 46
Master Lease
UBS MORTGAGE FINANCE INC.,
as Lessor
By
--------------------------------------
Name:
Title:
By
--------------------------------------
Name:
Title:
S-2
<PAGE> 47
Master Lease
THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART.
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date hereof.
UNION BANK OF SWITZERLAND,
acting through its New York
Branch,
as Lender
By
--------------------------------------
Name:
Title:
By
--------------------------------------
Name:
Title:
S-3
<PAGE> 48
Master Lease
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.1. Definitions; Interpretation........................................................ 1
ARTICLE II
MASTER LEASE
2.1. Acceptance and Lease of Property................................................... 2
2.2. Acceptance Procedure............................................................... 2
2.3. Lease Term......................................................................... 2
2.4. Title ............................................................................ 3
ARTICLE III
PAYMENT OF RENT
3.1. Rent ............................................................................ 3
3.2. Payment of Rent.................................................................... 3
3.3. Supplemental Rent.................................................................. 4
3.4. Method of Payment.................................................................. 4
ARTICLE IV
QUIET ENJOYMENT; RIGHT TO INSPECT
4.1. Quiet Enjoyment.................................................................... 5
4.2. Right to Inspect................................................................... 5
ARTICLE V
NET LEASE, ETC.
5.1. Net Lease.......................................................................... 5
5.2. No Termination or Abatement........................................................ 6
ARTICLE VI
SUBLEASES
6.1. Subletting......................................................................... 7
ARTICLE VII
LESSEE ACKNOWLEDGMENTS
7.1. Condition of the Properties........................................................ 7
7.2. Risk of Loss....................................................................... 8
</TABLE>
i
<PAGE> 49
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE VIII
POSSESSION AND USE OF THE PROPERTIES, ETC.
8.1. Utility Charges.................................................................... 8
8.2. Possession and Use of the Property................................................. 8
8.3. Compliance with Requirements of Laws and
Insurance Requirements...................................................... 9
8.4. Assignment by Lessee............................................................... 9
8.5. Phase Two Improvements............................................................. 10
ARTICLE IX
MAINTENANCE AND REPAIR; RETURN
9.1. Maintenance and Repair; Return..................................................... 10
ARTICLE X
MODIFICATIONS, ETC.
10.1. Modifications, Substitutions and Replacements..................................... 11
ARTICLE XI
WARRANT OF TITLE; EASEMENTS
11.1. Warrant of Title.................................................................. 13
11.2. Grants and Releases of Easements; Lessor's
Waivers..................................................................... 13
ARTICLE XII
PERMITTED CONTESTS
12.1. Permitted Contests in Respect of Applicable Law................................... 15
ARTICLE XIII
INSURANCE
13.1. Public Liability and Workers' Compensation
Insurance................................................................... 16
13.2. [Intentionally Omitted]........................................................... 17
13.3. [Intentionally Omitted]........................................................... 17
ARTICLE XIV
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
14.1. Casualty and Condemnation......................................................... 17
14.2. Environmental Matters............................................................. 19
14.3. Notice of Environmental Matters................................................... 20
</TABLE>
ii
<PAGE> 50
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE XV
TERMINATION OF LEASE
15.1. Partial Termination upon Certain Events........................................... 21
15.2. Termination Procedures............................................................ 21
ARTICLE XVI
EVENTS OF DEFAULT
16.1. Lease Events of Default........................................................... 22
16.2. Remedies.......................................................................... 25
16.3. Waiver of Certain Rights.......................................................... 32
ARTICLE XVII
LESSOR'S RIGHT TO CURE
17.1. The Lessor's Right to Cure the
Lessee's Lease Defaults..................................................... 32
ARTICLE XVIII
PURCHASE PROVISIONS
18.1. Purchase of the Properties........................................................ 32
ARTICLE XIX
EXTENSION OF EXPIRATION DATE
19.1. Extension of Expiration Date...................................................... 34
ARTICLE XX
REMARKETING OPTION
20.1. Option to Remarket................................................................ 34
20.2. Certain Obligations Continue...................................................... 37
ARTICLE XXI
PROCEDURES RELATING TO PURCHASE OR REMARKETING
21.1. Provisions Relating to the Exercise of Purchase
Option or Obligation and Conveyance Upon
Remarketing and Conveyance Upon Certain Other
Events...................................................................... 37
ARTICLE XXII
ESTOPPEL CERTIFICATES
</TABLE>
iii
<PAGE> 51
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
22.1. Estoppel Certificates............................................................. 39
ARTICLE XXIII
ACCEPTANCE OF SURRENDER
23.1. Acceptance of Surrender........................................................... 39
ARTICLE XXIV
NO MERGER OF TITLE
24.1. No Merger of Title................................................................ 39
ARTICLE XXV
INTENT OF THE PARTIES
25.1. Nature of Transaction............................................................. 40
ARTICLE XXVI
MISCELLANEOUS
26.1. Survival; Severability; Etc....................................................... 41
26.2. Amendments and Modifications...................................................... 41
26.3. No Waiver......................................................................... 41
26.4. Notices........................................................................... 42
26.5. Successors and Assigns............................................................ 42
26.6. Headings and Table of Contents.................................................... 42
26.7. Counterparts...................................................................... 42
26.8. GOVERNING LAW..................................................................... 42
26.9. Liability Limited................................................................. 42
26.10. Original Lease.................................................................... 43
</TABLE>
EXHIBITS
EXHIBIT A-1 Form of Lease Supplement (Land)
EXHIBIT A-2 Form of Lease Supplement (Improvements)
iv
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[EXECUTION COPY]
APPENDIX A
to
Participation Agreement,
Master Lease,
Lease Supplements
Loan Agreement,
Construction Agency Agreement,
Mortgages,
Pledge Agreement
DEFINITIONS AND INTERPRETATION
A. Interpretation. In each Operative Document, unless a
clear contrary intention appears:
(i) the singular number includes the plural number and
vice versa;
(ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by the Operative Documents, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Operative
Document), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms of the
other Operative Documents and reference to any promissory note includes
any promissory note which is an extension or renewal thereof or a
substitute or replacement therefor;
(v) reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision
of any Applicable Law means that provision of such Applicable Law from
time to time in effect and constituting the substantive
<PAGE> 53
Appendix A
amendment, modification, codification, replacement or
reenactment of such section or other provision;
(vi) reference in any Operative Document to any Article, Section,
Appendix, Schedule or Exhibit means such Article or Section thereof or
Appendix, Schedule or Exhibit thereto;
(vii) "hereunder", "hereof", "hereto" and words of similar import
shall be deemed references to an Operative Document as a whole and not
to any particular Article, Section or other provision thereof;
(viii) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding
such term;
(ix) relative to the determination of any period of time, "from"
means "from and including" and "to" means "to but excluding"; and
(x) with respect to any rights and obligations of the parties
under the Operative Documents, all such rights and obligations shall be
construed to the extent permitted by Applicable Law.
B. Computation of Time Periods. For purposes of computation of periods
of time under the Operative Documents, the word "from" means "from and
including" and the words "to" and "until" each mean "to but excluding".
C. Accounting Terms and Determinations. Unless otherwise specified in
any Operative Document, all terms of an accounting character used therein shall
be interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Lessee's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Lessee and its consolidated Subsidiaries delivered
to the Lessor and the Lender unless with respect to any such change concurred in
by the Lessee's independent public accountants or required by GAAP, in
determining compliance with any of the provisions of any Operative Document, the
Lessee shall have objected to determining such compliance on such basis at the
time of delivery of such financial statements, in which event such calculations
shall be made on a basis consistent with those used in the preparation of
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Appendix A
the latest financial statements as to which such objection shall not have been
made.
D. Conflict in Operative Documents. If there is any conflict between any
Operative Documents, such Operative Document shall be interpreted and construed,
if possible, so as to avoid or minimize such conflict but, to the extent (and
only to the extent) of such conflict, the Participation Agreement shall prevail
and control.
E. Legal Representation of the Parties. The Operative Documents were
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring the Operative Document to
be construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.
F. Defined Terms. Unless a clear contrary intention appears, terms
defined herein have the respective indicated meanings when used in each
Operative Document.
"Account" means the account established by the Lessee with the Lender
pursuant to which all payments by the Lessee under the Operative Documents shall
be made. The Account shall be specified on Schedule II to the Participation
Agreement, as such Schedule may from time to time be amended, supplemented,
amended and restated or otherwise modified from time to time.
"Acquisition Date" is defined in Section 6.1 of the
Participation Agreement.
"Additional Collateral" means any of the following obligations which
have been issued by the United States of America, registered under the name of
Union Bank of Switzerland and delivered under the Pledge Agreement:
(a) all allotments, accretions, offers, rights, benefits and
advantages whatsoever at any time accruing, offered or arising in
respect of or incidental to the same or in respect of or incidental to
any securities, rights, moneys or other property previously accruing,
offered or arising as mentioned in this clause (a); and
(b) all proceeds of sale, dividends, interest and other
distributions or income hereafter paid or payable or made in respect of
the same or the securities, rights, moneys or other property falling
within clause (a) above or deriving from any investment of any such
dividends, interest
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Appendix A
and other distributions or income; also includes (without
limitation):
(i) obligations of the United States of America having a
maturity of not more than one (1) year from the date of issue and
commonly known as "treasury bills"; and
(ii) obligations of the United States of America having a
maturity greater than one year, but no more than ten (10) years,
from the date of issue and commonly known as "treasury notes".
"Adjusted Eurodollar Rate" means the applicable London Interbank Offered
Rate, as applicable to any Interest Period and, in the event Lender is required
to maintain reserves against "Eurocurrency Liabilities" under Regulation D,
during such period the Adjusted Eurodollar Rate shall mean a rate per annum
equal to the quotient obtained (rounded upwards, if necessary, to the next
higher 1/100th of 1%) by dividing (i) the applicable London Interbank Offered
Rate for such Interest Period by (ii) 1.00 minus the Eurodollar Reserve
Percentage.
"Advance" means an advance of funds to the Lessee pursuant to Article
III of the Participation Agreement.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"After Tax Basis" means, with respect to any payment to be received, the
amount of such payment increased so that, after deduction of the amount of all
taxes required to be paid by the recipient (less any tax savings realized and
the present value of any tax savings projected to be realized by the recipient
as a result of the payment of the indemnified amount) with respect to the
receipt by the recipient of such amounts, such increased payment (as so reduced)
is equal to the payment otherwise required to be made.
"Applicable Law" means all existing and future applicable laws, rules,
regulations (including Hazardous Materials Laws) statutes, treaties, codes,
ordinances, permits, certificates,
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Appendix A
orders and licenses of and interpretations by, any Governmental Authority, and
applicable judgments, decrees, injunctions, writs, orders or like action of any
court, arbitrator or other administrative, judicial or quasi-judicial tribunal
or agency of competent jurisdiction (including those pertaining to health,
safety or the environment (including, without limitation, wetlands) and those
pertaining to the construction, use or occupancy of any Property) or in each
case affecting the Lessee, any Property or any material interests in any other
kind of property or asset, whether real, personal or mixed, or tangible or
intangible, of the Lessee.
"Appraisal" means, with respect to each Property, an appraisal of such
Property as if improved in accordance with the Plans and Specifications, which
Appraisal complies in all material respects with all of the provisions of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended,
the rules and regulations adopted pursuant thereto, and all other applicable
Requirements of Law addressed to the Lender, the Lessor and the Lessee, and will
appraise the Fair Market Sales Value of such Property as built in accordance
with the applicable Plans and Specifications therefor as of the Completion Date
for such Property and as of the Expiration Date. Each Appraisal shall be
prepared by a reputable appraiser selected by the Lender and the Lessor, and
such appraiser shall be reasonably acceptable to the Lessee. Each such Appraisal
may "bring-down" by a letter a previously delivered appraisal meeting the above
requirements.
"Appraiser" means, with respect to any Property, the appraiser which
prepared the Appraisal or such other Person selected by the Lender and the
Lessor.
"Appurtenant Rights" means, with respect to any Land, (i) all
agreements, easements, rights of way or use, rights of ingress or egress,
privileges, appurtenances, tenements, hereditaments and other rights and
benefits at any time belonging or pertaining to such Land or the Improvements
thereon, including, without limitation, the use of any streets, ways, alleys,
vaults or strips of land adjoining, abutting, adjacent or contiguous to such
Land and (ii) all permits, licenses and rights, whether or not of record,
appurtenant to such Land.
"Assignment of Lease and Rent" means the Assignment of Lease and Rent
dated as of December 27, 1996, from the Lessor, as assignor, to the Lender, as
assignee, as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time.
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Appendix A
"Available Commitments" means the Available Loan Commitments
and the Available Lessor Commitments.
"Available Lessor Commitment" means at any time, an amount equal to the
excess, if any, of (x) the aggregate amount of the Lessor Commitments minus (y)
the aggregate outstanding amounts of the Lessor Amounts.
"Available Loan Commitment" means at any time, an amount equal to the
excess, if any, of (x) the aggregate amount of the Loan Commitments minus (y)
the aggregate outstanding principal amounts of all Loans.
"Bankruptcy Code" is defined in Section 5.1(e) of the Loan
Agreement.
"Base Rate" means, for any day, the rate per annum equal to one-half of
one percent above the Federal Funds Rate.
"Base Rate Loan(s)/Lessor Amount(s)" means a Loan or Lessor Amount, as
the case may be, bearing interest at the Base Rate.
"Base Lease Term (Improvements)" is defined in Section 2.3
of the Master Lease.
"Basic Lease Term (Land)" is defined in Section 2.3 of the
Master Lease.
"Basic Rent" means, for each Property, the sum of (i) the Lender Basic
Rent and (ii) the Lessor Basic Rent, calculated as of the applicable date on
which Basic Rent is due.
"Basic Rent Payment Date" means the last day of each Interest Period
then in effect.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Bill of Sale" is defined in Section 6.1(j) of the
Participation Agreement.
"Break Costs" means an amount equal to the amount, if any, required to
compensate any Participant for any additional losses (including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or funds acquired by such Participant to fund its
obligations under the Operative Documents) it may reasonably incur as a
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Appendix A
result of (v) the Lessee's payment of Rent other than on a Basic Rent Payment
Date, (x) any Advance not being made on the date specified therefor in the
applicable Funding Request (other than as a result of a breach by such
Participant, as the case may be, of its obligation under Section 3.1, 3.2 or
3.3, as the case may be, of the Participation Agreement to make Advances to the
Lessee or make Lessor Amounts or Loans available to the Lessor), (y) the
Lessee's payment of the Lease Balance on any date other than a Basic Rent
Payment Date, or (z) as a result of any conversion of the Eurodollar Rate in
accordance with Section 13.7 of the Participation Agreement. A statement as to
the amount of such loss, cost or expense, prepared in good faith and in
reasonable detail and submitted by such Participant, as the case may be, to the
Lessee, shall be presumed correct and binding on the Lessee absent demonstrable
error.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York or San Francisco, California are
authorized or required by law to close, except that, when used in connection
with a Eurodollar Loan or Eurodollar Lessor Amount, such day shall also be a day
on which dealings between banks are carried on in U.S. dollar deposits in
London, England, San Francisco, California and New York, New York.
"Capital Lease" means any lease of property, real or personal, the
obligations with respect to which are required to be capitalized on a balance
sheet of the lessee in accordance with GAAP.
"Capital Lease Obligations" means the capitalized lease obligations
relating to a Capital Lease determined in accordance with GAAP.
"Casualty" means any damage or destruction of all or any portion of a
Property as a result of a fire or other casualty.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. SectionSection 9601 et.
seq., as amended by the Superfund Amendments and Reauthorization
Act of 1986, as otherwise amended or modified from time to time,
or any successor statute thereto.
"Certifying Party" is defined in Section 22.1 of the Master
Lease.
"Claims" means any and all obligations, liabilities, losses,
actions, suits, judgments, penalties, fines, claims, demands,
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Appendix A
settlements, costs and expenses (including, without limitation, reasonable legal
fees and expenses) of any nature whatsoever.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto.
"Commitment" means (i) as to the Lender, the Loan Commitment, and (ii)
as to the Lessor, the Lessor Commitment.
"Commitment Letter" means that certain Commitment Letter, dated as of
November 25, 1996, among the Lessee, the Lessor and the Lender.
"Commitment Percentage" means, with respect to any Participant, the
percentage set forth such Participant's name under the heading "Commitment
Percentage" on Schedule I to the Participation Agreement, as such Schedule may
be amended, supplemented, amended and restated or otherwise modified from time
to time.
"Commitment Period" means, with respect to each Property, the period
from and including the Acquisition Date to but not including the date occurring
on the earlier of (i) the Commitment Termination Date, (ii) the date on which
the sum of the Loan Balance and the Lessor Balance equals the Maximum Commitment
Amount, subject to Section 4.3 of the Participation Agreement, (iii) the date of
Completion of the applicable Construction and (iv) the date on which the
Commitments shall terminate as provided in the Operative Documents; provided,
however, that in the event that any Commitment Period would end after the Final
Commitment Termination Date, such Commitment Period shall end on such Final
Commitment Termination Date.
"Commitment Termination Date" means the date specified in a written
notice from the Lessee to the Lessor and Lender as the Commitment Termination
Date.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Lessee within the meaning
of Section 4001 of ERISA or is part of a group which includes the Lessee and
which is treated as a single employer under Section 414 of the Code.
"Completion" means, with respect to any Property, such time as the
conditions set forth in Section 6.3 of the Participation Agreement are satisfied
with respect thereto.
"Completion Certificate" is defined in Section 6.3(a) of the
Participation Agreement.
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Appendix A
"Completion Date" means, with respect to any Property, the date
determined under Section 6.3 of the Participation Agreement.
"Condemnation" means, with respect to any Property, any condemnation,
requisition, confiscation, seizure or other taking or sale of the use, access,
occupancy, easement rights or title to such Property or any part thereof, wholly
or partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any Person
having the power of eminent domain, including an action by a Governmental
Authority to change the grade of, or widen the streets adjacent to, such
Property or alter the pedestrian or vehicular traffic flow to such Property so
as to result in change in access to such Property, or by or on account of an
eviction by paramount title or any transfer made in lieu of any such proceeding
or action. A "Condemnation" shall be deemed to have occurred on the earliest of
the dates that use, occupancy or title vests in the condemning authority.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Lessee in
its consolidated financial statements if such statements were prepared as of
such date.
"Consolidated Tangible Net Worth" means at any date the consolidated
stockholders' equity of the Lessee and its Consolidated Subsidiaries less their
consolidated Intangible Assets, all determined as of such date. For purposes of
this definition, "Intangible Assets" means the amount (to the extent reflected
in determining such consolidated stockholders' equity) of (i) all write-ups
(other than write-ups resulting from foreign currency translations and write-ups
of assets of a going concern business made within twelve months after the
acquisition of such business) subsequent to January 29, 1995 in the book value
of any asset owned by the Lessee or a Consolidated Subsidiary, and (ii) all
unamortized debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, anticipated future benefit of
tax loss carry-forwards, copyrights, organization or developmental expenses and
other intangible assets.
"Construction" means, with respect to any Property, the construction and
installation of all Improvements thereon contemplated by the Plans and
Specifications applicable to such Property.
"Construction Agency Agreement" means the Construction
Agency Agreement, dated as of December 27, 1996, between the
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Appendix A
Lessor and the Lender, as the same may be amended, supplemented, amended and
restated or otherwise modified from time to time.
"Construction Agency Agreement Assignment" means the Construction Agency
Agreement Assignment, dated as of December 27, 1996, made by the Lessor, as
assignor, in favor of the Lender, as assignee, as the same may be amended,
supplemented, amended and restated or otherwise modified from
time to time.
"Construction Agency Agreement Default" means any event or condition
which, with the lapse of time or the giving of notice, or both, would constitute
a Construction Agency Agreement Event of Default.
"Construction Agency Agreement Event of Default" means a "Construction
Agency Agreement Event of Default" as defined in Section 5.1 of the Construction
Agency Agreement.
"Construction Agency Agreement Supplement" means any duly executed and
delivered Supplement to the Construction Agency Agreement substantially in the
form attached to the Construction Agency Agreement as Exhibit A thereto.
"Construction Agent" means the Lessee, as construction agent under the
Construction Agency Agreement.
"Construction Costs" means the fees, expenses, costs and other items
related to the development and construction of the Properties and specified
below:
(a) the costs of development, architectural and engineering
services related to the Properties, including the costs of preparation
of studies, surveys, reports, tests, plans and specifications;
(b) the costs of legal, accounting and other services
related to the Properties and other improvements;
(c) the fees and charges incurred in connection with securing all
Governmental Actions required to be taken, given or obtained in
connection with the development, construction, ownership, financing,
maintenance or operation of the Properties;
(d) any title fees, premiums and escrow costs and other expenses
relating to title insurance and the closings contemplated by the
Operative Documents;
(e) all expenses relating to all Environmental Audits;
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Appendix A
(f) fees and other expenses relating to Appraisals;
(g) the costs incurred in connection with the acquisition,
construction, improvement, rehabilitation or extension of the
Improvements comprising a part of the Properties and the provision of
the necessary services and utilities thereto;
(h) interest on the Loans and Yield on the Lessor
Amounts during the Construction Period in respect to each
Property;
(i) the Fees of the Lessor and the Lender;
(j) any sales, use, property, real or personal,
tangible or intangible taxes incurred in connection with the
Properties;
(k) any other items included in the construction
budget;
(l) any other costs and expenses incurred in
connection with the acquisition, construction, development
and equipping of the Properties; and
(m) such other items as the Participants may
reasonably approve in writing.
"Construction Documents" is defined in Section 2.7 of the Construction
Agency Agreement.
"Construction Documents Assignment" means the Construction Documents
Assignment, dated as of December 27, 1996, made by the Construction Agent in
favor of the Lessor and delivered pursuant to the Construction Agency Agreement,
as the same may be amended, supplemented, amended and restated or otherwise
modified from time to time.
"Construction Period" means, with respect to any Property, the period
commencing on the commencement of construction on such Property and ending on
the Completion Date for such Property.
"Construction Period Property" means, at any date of determination, any
Property as to which the Construction Period has commenced but not ended on or
prior to such date.
"Contractual Obligations" means, as to any Person, any provision of any
security issued by such Person or of any
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Appendix A
agreement, instrument or undertaking to which such Person is a party or by which
it or any of its property is bound.
"CPS" is defined in the first recital to the Participation
Agreement.
"Deed" means a quitclaim, grant or special warranty deed, as applicable,
with respect to the real property comprising the applicable Property, in
conformity with Applicable Law and appropriate for recording with the applicable
Governmental Authorities, conveying fee simple title to such real property to
the Lessor, subject only to Permitted Exceptions.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"Deficiency Collateral" is defined in Section 14.1 of the
Participation Agreement.
"Deficiency Date" is defined in Section 14.1 of the
Participation Agreement.
"Documentation Date" is defined in Section 2.1 of the
Participation Agreement.
"Dollars" and "$" mean dollars in lawful currency of the
United States of America.
"End of the Term Report" is defined in Section 13.2(a) of
the Participation Agreement.
"Environmental Audit" means, with respect to each Property, a Phase One
environmental site assessment (the scope and performance of which meets or
exceeds the then most current ASTM Standard Practice E1527 for Environmental
Site Assessments: Phase One Environmental Site Assessment Process) of such
Property.
"Environmental Laws" means any and all applicable foreign, Federal,
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes or decrees of any Governmental Authority or other Requirement
of Law (including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment or
the use, storage, handling, disposal, transport, treatment or generation of
Hazardous Materials, as now or may at any time be in effect during the Lease
Term, including CERCLA, RCRA, the Clean Air Act, 42 USC Section 7401 et seq.,
the Toxic
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Appendix A
Substances Control Act 15 USC Section 2601 et seq. and any rules, regulations
and guidance documents promulgated thereunder.
"Environmental Violation" means, with respect to any Property, any
activity, occurrence or condition that violates or results in non-compliance
with any Hazardous Materials Law.
"Equipment" means equipment, apparatus, furnishings, fittings and
personal property of every kind and nature whatsoever purchased, leased or
otherwise acquired by the Lessor using the proceeds of the Loans and/or the
Lessor Amounts and now or subsequently attached to, contained in or used or
usable in any way in connection with any operation or letting of a Property,
including but without limiting the generality of the foregoing, all screens,
awnings, shades, blinds, curtains, draperies, artwork, carpets, rugs, storm
doors and windows, shelving, display cases, counters, furniture and furnishings,
heating, electrical, switch gear, uninterrupted power supply, and mechanical
equipment, lighting, switchboards, plumbing, ventilation, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment, escalators,
generators, elevators, loading and unloading equipment and systems, stoves,
ranges, laundry equipment, cleaning systems (including window cleaning
apparatus), telephones, communications systems (including satellite dishes and
antennae), televisions, computers, sprinkler systems and other fire prevention
and extinguishing apparatus and materials, security systems, motors, engines,
machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of
every kind and description.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means, with respect to the Lessee, the Lessee and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Lessee, are treated as a single employer under Section 414 of the Code.
"Estimated Improvement Costs" means, with respect to any Property as of
the related Acquisition Date, an amount equal to the aggregate amount which the
Construction Agent in good faith expects to be expended in order to achieve
Completion with respect to Improvements for such Property, including (i)
Construction Costs, and (ii) Transaction Expenses, in each case allocated with
respect to such Property during its Construction Period.
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Appendix A
"Eurodollar Loan(s)/Lessor Amount(s)" means a Loan or Lessor Amount, as
the case may be, bearing interest at the Adjusted Eurodollar Rate.
"Eurodollar Reserve Percentage" means that percentage (expressed as a
decimal) which is in effect on any day that a reserve percentage is prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of any
Bank to United States residents). The London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" means a Lease Event of Default.
"Excess Casualty/Condemnation Proceeds" means the excess, if any, of (x)
the aggregate of all awards, compensation or insurance proceeds payable in
connection with a Casualty or Condemnation minus (y) the Property Balance paid
by the Lessee pursuant to Article XV of the Master Lease with respect to such
Casualty or Condemnation.
"Excess Sales Proceeds" means the excess, if any, of (x) the aggregate
of all proceeds received by the Lessor in connection with the Lessee's exercise
of the Remarketing Option under Article XX of the Master Lease, less all fees,
costs and expenses of the Lessor in connection with the exercise of its rights
and remedies thereunder, minus (y) the Lease Balance.
"Expiration Date" means, with respect to the Master Lease, unless the
Master Lease shall have been earlier terminated in accordance with the
provisions of the Master Lease or any of the other Operative Documents, the
Maturity Date.
"Expiration Date Purchase Obligation" means the Lessee's obligation,
pursuant to Section 20.1 of the Master Lease, to purchase all (but not less than
all) of the Properties on the Expiration Date.
"Extension Conditions" is defined in Section 11.2 of the
Participation Agreement.
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"Fair Market Sales Value" means, with respect to any Property, the
amount, which in any event shall not be less than zero, that would be paid in
cash in an arm's-length transaction between an informed and willing purchaser
and an informed and willing seller, neither of whom is under any compulsion to
purchase or sell, respectively, for the ownership of such Property. The Fair
Market Sales Value of any Property shall be determined based on the assumption
that, except for purposes of Article XVI of the Master Lease and Section 13.2 of
the Participation Agreement, such Property is in the condition and state of
repair required under Section 9.1 of the Master Lease and the Lessee is in
compliance with the other requirements of the Operative Documents relating to
the condition of the Property.
"Federal Funds Rate" means, for any day or period, as applicable, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) at
which Federal funds in the amount equal to the principal amount of the related
Loans or Lessor Amounts are offered in the interbank market to Union Bank of
Switzerland, New York Branch, as of 11:00 a.m., New York time, on such day for
such day or for such period, as applicable.
"Fees" means, collectively, the fees set forth in the Commitment Letter
paid or payable to the Lessor and/or the Lender.
"Final Commitment Termination Date" means December 27, 2003, the seventh
year anniversary of the Documentation Date, unless the Maturity Date shall have
been extended pursuant to Section 2.8 of the Loan Agreement and Section 11.1 of
the Participation Agreement, in which case, the "Final Commitment Termination
Date" shall mean December 27, 2006, the tenth year anniversary of the
Documentation Date.
"Fixed Charge Coverage Ratio" means the following (as calculated on a
rolling four quarter basis):
(Consolidated Net Income + Interest Expense + Taxes
+ Depreciation + Amortization + Write Off of Goodwill
related to an Acquisition - Cash - Short Term Investments)
(Interest Expense + Total Rent Expense)
"Force Majeure Event" means, with respect to the Construction of any
Property, any event (the existence of which was not known and could not have
been discovered through the exercise of reasonable due diligence by the Lessee
or the Construction Agent prior to the Acquisition Date with respect to such
Property) beyond the control of the Lessee and the Construction Agent,
including, but not limited to, strikes,
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lockouts, adverse soil conditions, acts of God, adverse weather conditions,
inability to obtain labor or materials, government activities, civil commotion
and enemy action; but excluding any event, cause or condition that results from
the Construction Agent's financial condition or failure to pay or any event,
cause or condition which could have been avoided or which could be remedied
through the exercise of commercially reasonable efforts or the commercially
reasonable expenditure of funds.
"F.R.S. Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Funding Date" means the date in each month on which an Advance is made.
In the event that any Funding Date shall not fall on a Business Day, then the
Funding Date for such calendar month in which such event occurs shall be the
immediately succeeding Business Day.
"Funding Office" means the office of each Participant identified on
Schedule II to the Participation Agreement as its Funding Office.
"Funding Request" is defined in Section 3.4(a) of the
Participation Agreement.
"GAAP" means generally accepted accounting principles applied on a basis
consistent with those which, in accordance with paragraph C hereof, are to be
used in making the calculations for purposes of determining compliance with the
terms of the Operative Documents.
"Governmental Action" means all permits, authorizations, registrations,
consents, approvals, waivers, exceptions, variances, orders, judgments, written
interpretations, decrees, licenses, exemptions, publications, filings, notices
to and declarations of or with, or required by, any Governmental Authority, or
required by any Applicable Law, and shall include, without limitation, all
environmental and operating permits and licenses that are required for the use,
occupancy, zoning and operation of any Property as provided in the Master Lease.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and having jurisdiction over any Property or the Operative
Documents, as applicable.
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"Gross Remarketing Proceeds" is defined in Section 20.1(m)
of the Master Lease.
"Hazardous Activity" means any activity, process, procedure or
undertaking that (a) directly or indirectly (i) produces, generates or creates
any Hazardous Material; (ii) causes or results in (or threatens to cause or
result in) the Release of any Hazardous Material into the environment (including
air, water vapor, surface water, groundwater, drinking water, land (including
surface or subsurface), plant, aquatic and animal life); or (iii) involves the
containment or storage of any Hazardous Material; and (b) is regulated as
hazardous waste treatment, storage or disposal within the meaning of any
Hazardous Materials Law.
"Hazardous Materials" means any hazardous, toxic or dangerous materials,
substances, chemicals, wastes or pollutants that from time to time are defined
by or pursuant to or are regulated under any Hazardous Materials Laws, including
asbestos, polychlorinated biphenyls, petroleum, petroleum derivatives or
by-products, other hydrocarbons, urea formaldehyde and any material, substance,
pollutant or waste that is defined as a hazardous waste under RCRA or defined as
a hazardous substance under CERCLA.
"Hazardous Materials Laws" means all laws, statutes, rules, regulations
or ordinances of Governmental Authority, now or hereafter in effect, relating to
the generation, recycling, use, reuse, sale, storage, handling, transport,
treatment or disposal of Hazardous Materials, including CERCLA, RCRA, the Clean
Air Act, 42 U.S.C. Section 7401, et seq. ("CAA"), the Toxic Substances Control
Act, 15 U.S.C. Section 2601 et seq. ("TSCA") and any rules, regulations and
guidance documents promulgated or published thereunder, and any statute, law,
rule, regulation or ordinance of Governmental Authority now or hereafter in
effect that relates to public health, safety or the discharge, emission or
disposal of Hazardous Materials in or to air, water, land or groundwater, to the
withdrawal or use of groundwater, to the use, handling or disposal of asbestos,
polychlorinated biphenyls, petroleum, petroleum derivatives or by-products,
other hydrocarbons or urea formaldehyde, to the treatment, storage, disposal or
management of Hazardous Materials, to exposure to Hazardous Materials or to the
transportation, storage, disposal, management or release of gaseous or liquid
substances, and any regulation, order, injunction, judgment, declaration, notice
or demand issued thereunder.
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"Impositions" means any and all liabilities, losses, expenses and costs
of any kind whatsoever for fees, taxes, levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever imposed by Governmental
Authority ("Taxes") (including, without limitation, (i) real and personal
property taxes, including personal property taxes on any property covered by any
Lease that is classified by Governmental Authorities as personal property, and
real estate or ad valorem taxes in the nature of property taxes; (ii) sales
taxes, use taxes and other similar taxes (including rent taxes and intangibles
taxes); (iii) any excise taxes; (iv) real estate transfer taxes, conveyance
taxes, mortgage taxes, intangible taxes, stamp taxes and documentary recording
taxes and fees; (v) taxes that are or are in the nature of franchise, income,
value added, gross receipts, privilege and doing business taxes, license and
registration fees; and (vi) assessments on any Property, including all
assessments for public improvements or benefits, whether or not such
improvements are commenced or completed within the Lease Term), and in each case
all interest, additions to tax and penalties thereon, which at any time may be
levied, assessed or imposed by any Federal, state or local authority upon or
with respect to (a) any Tax Indemnitee, any Property or any part thereof or
interest therein, or the Lessee or any sublessee or user of any Property; (b)
the financing, refinancing, demolition, construction, substitution, subleasing,
assignment, control, condition, occupancy, servicing, maintenance, repair,
ownership, possession, purchase, rental, lease, activity conducted on, delivery,
insuring, use, operation, improvement, transfer, return or other disposition of
such Property or any part thereof or interest therein; (c) the Notes or interest
therein or transfer thereof; (d) the rentals, receipts or earnings arising from
any Property or any part thereof or interest therein; (e) the Operative
Documents or any payment made or accrued pursuant thereto; (f) the income or
other proceeds received with respect to any Property or any part thereof or
interest therein upon the sale or disposition thereof; (g) any contract
(including the Construction Agency Agreement) relating to the construction,
acquisition or delivery of the Improvements or any part thereof or interest
therein; (h) the issuance of the Notes; or (i) otherwise in connection with the
transactions contemplated by the Operative Documents. Impositions for any given
tax year shall exclude assessment installments that are not due and payable
during such tax year.
Notwithstanding anything in the first paragraph of this definition
(except as provided in the final paragraph of this definition) the term
"Imposition" shall not mean or include:
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(i) Taxes and impositions (other than Taxes that are, or are in
the nature of, sales, use, rental, transfer or property taxes) that are
imposed by any Governmental Authority and that are based upon or
measured by or with respect to the gross or net income or gross or net
receipts (including, without limitation, any minimum taxes, income or
capital gains taxes, withholding taxes or taxes on, measured by or with
respect to or in the nature of capital, net worth, excess profits, items
of tax preference, capital stock, franchise, gift, succession, estate,
business privilege or doing business taxes or any similar taxes or taxes
in lieu thereof) and any interest, additions to tax, penalties or other
charges in respect thereof and any withholding tax imposed as a
collection device for, in lieu of, or otherwise related to the foregoing
without regard to whether such tax is required to be collected by Lessee
and without regard to whether Lessee would be liable for such
withholding tax in the event it failed to so withhold; provided that
this clause (i) shall not be interpreted to prevent a payment from being
made on an After Tax Basis if such payment is otherwise required to be
so made;
(ii) any Tax or imposition to the extent, but only to such
extent, it relates to any act, event or omission that occurs, or relates
to a period, after the termination of the Master Lease (but not any Tax
or imposition that relates to any period prior to the termination of the
Master Lease with respect to the Property to which such Imposition
relates);
(iii) any Tax or imposition for so long as, but only for so long
as, it is being contested in accordance with the provisions of Section
13.5(b) of the Participation Agreement, provided that the foregoing
shall not limit any Lessee's obligation under Section 13.5(b) of the
Participation Agreement to advance to such Tax Indemnitee amounts with
respect to Taxes that are being contested in accordance with Section
13.5(b) of the Participation Agreement or any expenses incurred by such
Tax Indemnitee in connection with such contest;
(iv) any interest, additions to tax or penalties imposed on a Tax
Indemnitee as a result of a breach by such Tax Indemnitee of its
obligations under Section 13.5(e) of the Participation Agreement as a
result of a Tax Indemnitee's failure to file any return or other
documents timely and as prescribed by applicable law; provided that this
clause (iv) shall not apply (x) if such interest or penalties arise as a
result of a position taken (or requested to be taken) by the Lessee in a
contest controlled
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by the Lessee under Section 13.5(b) of the Participation Agreement or
(y) if such failure is attributable to a failure by the Lessee to
fulfill its obligations under the Master Lease with respect to any such
return;
(v) any Taxes or impositions imposed upon a Tax Indemnitee with
respect to any voluntary transfer, sale, financing or other voluntary
disposition of any interest in any Property or any part thereof, or any
interest therein or any interest or obligation under the Operative
Documents or from any sale, assignment, transfer or other disposition of
any interest in a Tax Indemnitee or any Affiliate thereof, (other than
any transfer pursuant to the terms of the Master Lease in connection
with (1) the exercise by the Lessee of its Purchase Option or any
termination option or other purchase of any Property by any Lessee, (2)
the occurrence of an Event of Default, (3) a Casualty or Condemnation
affecting any Property, or (4) any sublease, modification or addition to
any Property by the Lessee);
(vi) any Taxes or impositions imposed on a Tax Indemnitee, to the
extent such Tax Indemnitee actually receives a credit (or otherwise has
a reduction in a liability for Taxes) in respect thereof against Taxes
that are not indemnified under the Participation Agreement (but only to
the extent such credit is not taken into account in calculating the
indemnity payment on an After Tax Basis);
(vii) Taxes imposed on or with respect to or payable by any Tax
Indemnitee based on, measured by or imposed with respect to any fees or
rents received by such Tax Indemnitee;
(viii) any Taxes imposed against or payable by a Tax Indemnitee
resulting from, or that would not have been imposed but for, the gross
negligence or willful misconduct of such Tax Indemnitee;
(ix) Taxes imposed on or payable by a Tax Indemnitee to the
extent such Taxes result from or would not have been imposed but for, a
breach by the Tax Indemnitee or any Affiliate thereof of any
representations, warranties or covenants set forth in the Operative
Documents (unless such breach is directly caused by any Lessee's breach
of its representations, warranties or covenants set forth in the
Operative Documents);
(x) Taxes to the extent resulting from such Tax Indemnitee's
failure to comply with the provisions of
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Section 13.5(b) of the Participation Agreement, which failure precludes
or materially adversely affects the ability to conduct a contest
pursuant to Section 13.5(b) of the Participation Agreement (unless such
failure is caused by the Lessee's breach of its obligations);
(xi) with respect to each Property, Taxes which are included in
applicable Property Improvements Cost or applicable Land Acquisition
Cost if and to the extent actually paid;
(xii) Taxes that would have been imposed in the absence of the
transactions contemplated by the Operative Documents and Taxes imposed
on or with respect to or payable as a result of activities of a Tax
Indemnitee or Affiliate thereof unrelated to the transactions
contemplated by the Operative Documents or not specifically authorized
by Lessee or the Operative Documents;
(xiii) Taxes imposed on or with respect to or payable by a Tax
Indemnitee resulting from, or that would not have been imposed but for
the existence of, any Lessor Lien created by or through such Tax
Indemnitee or an Affiliate thereof and not caused by acts or omissions
of any Lessee, unless required to be removed by any Lessee;
(xiv) Any Tax imposed against or payable by a Tax Indemnitee to
the extent that the amount of such Tax exceeds the amount of such Tax
that would have been imposed against or payable by such Tax Indemnitee
(or, if less, that would have been subject to indemnification under
Section 13.5 of the Participation Agreement) if such Tax Indemnitee were
not a direct or indirect successor, transferee or assign of one of the
original Tax Indemnitees; provided, however, that this exclusion (xiv)
shall not apply if such direct or indirect successor, transferee or
assign acquired its interest as a result of a transfer permitted under
the Operative Documents pursuant to and while an Event of Default shall
have occurred and is continuing;
(xv) Taxes imposed on or with respect to or payable by a Tax
Indemnitee that would not have been imposed but for an amendment,
supplement, modification, consent or waiver to any Operative Document
not initiated, requested or consented to by any Lessee unless such
amendment, supplement, modification, consent or waiver (A) arises due
to, or in connection with there having occurred, an Event of Default or
(B) is required by the terms of the Operative Documents
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or is executed in connection with any amendment to the Operative
Documents required by law;
(xvi) Taxes in the nature of intangibles, stamp, documentary or
similar Taxes;
(xvii) Taxes imposed on or with respect to or payable by a Tax
Indemnitee or any Affiliate because such Tax Indemnitee or any Affiliate
thereof is not a United States person within the meaning of Section
7701(a)(30) of the Code; and
(xviii) Any tax imposed by its express terms in lieu of or in
substitution for a Tax not subject to indemnity pursuant to the
provisions of Section 13.5 of the Participation Agreement.
Notwithstanding the foregoing, the exclusions from the definition of Impositions
set forth in clauses (i), (ii), (v), (vii), (xii), (xvi) and (xviii) (to the
extent that any such tax is imposed by its express terms in lieu of or in
substitution for a Tax set forth in clauses (i), (ii), (v), (vii), (xii) and
(xvi)) above shall not apply (but the other exclusions shall apply) to any Taxes
or any increase in Taxes imposed on a Tax Indemnitee net of any decrease in
taxes realized by such Tax Indemnitee, to the extent that such tax increase or
decrease would not have occurred if on each Funding Date the Lessor had advanced
funds to the Lessee in the form of a loan secured by the applicable Property in
an amount equal to the applicable Property Improvement Cost funded on such
Funding Date, with debt service for such loan equal to the Basic Rent payable on
each Rent Payment Date and a principal balance at the maturity of such loan in
an amount equal to the then outstanding amount of the Advances at the end of the
term of the Master Lease.
For purposes of determining the exclusion from the definition of
Impositions set forth in clause (i), an income tax shall include, without
limitation, any tax imposed under the United States Internal Revenue Code, as
well as any tax that could qualify as an "income tax" under United States
Treasury Regulation Section 1.901-2.
"Improvements" means all buildings, structures, Fixtures, Equipment, and
other improvements of every kind existing at any time and from time to time and
constructed pursuant to the Construction Agency Agreement, or otherwise
purchased, with amounts advanced by the Participants pursuant to the
Participation Agreement, on or under any Land, or any parcel of Land to be
acquired pursuant to the terms of the Operative
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Documents, together with any and all appurtenances to such buildings, structures
or improvements, including sidewalks, utility pipes, conduits and lines, parking
areas and roadways, and including all Modifications and other additions to or
changes in the Improvements at any time.
"Improvements Budget" means, with respect to each Property, the budget
for the Construction of Improvements on such Property as agreed to by the Lessor
and the Lessee on a per square foot basis.
"Indebtedness" means, of any Person at any date, (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (ii) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (iii) all obligations of such Person as lessee under Capital
Leases, (iv) all obligations of such Person in respect of acceptances issued or
created for the account of such Person, (v) all liabilities secured by any Lien
on any property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof, (vi) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (vii) all obligations of such Person under take-or-pay or
similar arrangements or under commodities agreements, (viii) all obligations of
such Person in respect of any guaranty, reimbursement or similar obligation,
(ix) all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements, commodity purchase or option
agreements or other interest or exchange rate or commodity price hedging
agreements, and (x) all contingent or non-contingent obligations of such Person
in respect of letters of credit issued or bankers' acceptances created for the
account of such Person.
"Indemnitee" means each of the Lessor, the Lender, their respective
Affiliates and their respective successors, assigns, directors, shareholders,
partners, officers, employees and agents.
"Insolvency" means, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Insolvent" means pertaining to a condition of Insolvency.
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"Insurance Requirements" means all terms and conditions of any insurance
policy either required by the Master Lease to be maintained by the Lessee or
required by the Construction Agency Agreement to be maintained by the
Construction Agent, and all requirements of the issuer of any such policy.
"Interest Period" means,
(a) with respect to any Loan or Lessor Amount advanced
during the Commitment Period;
(i) initially, the period commencing on the Funding Date
with respect to such Loan or Lessor Amount and ending on the day
preceding the Payment Set Date (determined in accordance with
clause (i) of the definition thereof); and
(ii) thereafter, each period commencing on the day after
the last day of the preceding Interest Period and ending on the
day preceding the next succeeding Payment Set Date (determined in
accordance with clause (ii) of the definition thereof); provided,
however, that the Interest Period applicable to Advances made (x)
on the twentieth day of the month following the commencement of
such period shall end on the day preceding the twentieth day of
the month following two months thereafter and (y) on the
twentieth day of the month following two months after the
commencement of such period shall end on the day preceding the
twentieth day of the month following one month thereafter and
(b) with respect to any Loan or Lessor Amount advanced
outstanding during the Basic Lease Term:
(i) initially, the period commencing on the day the Lease
Term begins and ending on the day preceding the first twentieth
day of the month of the Lease Term; and
(ii) thereafter, each period commencing on the day after
the last day of the preceding Interest Period applicable to such
Loan or Lessor Amount and ending on the day preceding the date
which is three months thereafter.
The foregoing provisions relating to Interest Periods are subject to the
following:
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(x) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event
such Interest Period shall end on the immediately preceding Business
Day;
(y) any Interest Period that would otherwise extend beyond the
Commitment Period with respect to any Property shall end on the last day
of the Commitment Period with respect to such Property; and
(z) any Interest Period that would otherwise extend beyond the
Maturity Date shall end on the Maturity Date.
"Land" means each parcel of real property described on Schedule I to any
Lease Supplement, and includes all Appurtenant Rights attached thereto.
"Land Acquisition Cost" means the amount of the Advance made available
to the Construction Agent for the purpose of acquiring any portion of the Land,
developing the infrastructure related to the Land, including without limitation,
the filing and processing of applications for government or regulatory permits,
authorizations, entitlements or approvals and payment of fees by any
Governmental Authority and paying the Transaction Expenses relating to such
funding and acquisition, as such amount is set forth in the Funding Request
relating to the acquisition of such Property.
"Lease" means, collectively, the Master Lease and each Lease
Supplement.
"Lease Balance" means, as of any date of determination, an amount equal
to the sum of the Loan Balance and the Lessor Balance and all other amounts
owing by the Lessee under the Operative Documents (including without limitation,
accrued and unpaid Rent and Supplemental Rent, if any).
"Lease Balance (Improvements)" means the aggregate Lease
Balance for the Improvements only.
"Lease Balance (Land)" means the aggregate Lease Balance for
the Land only.
"Lease Default" means any event or condition which, with the lapse of
time or the giving of notice, or both, would constitute a Lease Event of
Default.
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"Lease Event of Default" means a "Lease Event of Default" as defined in
Section 16.1 of the Master Lease.
"Lease Supplement" means each Lease Supplement, executed by the Lessee,
dated as of an Acquisition Date or a Funding Date and covering either (i) the
Land identified on Schedule I thereto or (ii) the Improvements on the Land (but
not such Land itself) identified on Schedule I thereto, substantially in the
form of Exhibit A-1 to the Master Lease (in the case of Land) or substantially
in the form of Exhibit A-2 to the Master Lease (in the case of Improvements), in
each case as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time.
"Lease Term" means the period commencing on the first day of the Basic
Lease Term and ending on the Expiration Date.
"Lender" means Union Bank of Switzerland, acting through its New York
Branch, together with its successors and assigns permitted pursuant to Section
12.1 of the Participation Agreement.
"Lender Basic Rent" means, as determined as of any Basic Rent Payment
Date, the interest due on the Loans, determined in accordance with Section 2.4
of the Loan Agreement and excluding any interest at the applicable Overdue Rate
on any installment of Basic Rent not paid when due and any fine, penalty,
interest or cost assessed or added under any agreement with a third party for
nonpayment or late payment of Basic Rent.
"Lessee" means Cisco Systems, Inc., a California corporation, as lessee
under the Lease, and its successors and assigns expressly permitted under the
Master Lease.
"Lessee Mortgage" is defined in the ninth recital to the Participation
Agreement, the provisions for which shall be contained in each Lease Supplement.
"Lessor" means UBS Mortgage Finance Inc., a New York corporation,
together with its successors and assigns permitted pursuant to Section 12.1 of
the Participation Agreement.
"Lessor Amount" is defined at Section 3.2 of the
Participation Agreement.
"Lessor Balance" means, as of any date of determination, an amount equal
to the sum of the outstanding Lessor Amounts together with all accrued and
unpaid Yield thereon.
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"Lessor Basic Rent" means the amount of accrued Yield due on the Lessor
Amounts, determined in accordance with Section 4.1 of the Participation
Agreement as of any Basic Rent Payment Date and excluding any interest at the
applicable Overdue Rate on any installment of Lessor Basic Rent not paid when
due and any fine, penalty, interest or cost assessed or added under any
agreement with a third party for nonpayment or late payment of Lessor Basic
Rent.
"Lessor Commitment" means the Commitment of the Lessor in the amount set
forth on Schedule I of the Participation Agreement, as such Schedule may be
amended, supplemented, amended and restated or otherwise modified from time to
time.
"Lessor Financing Statements" means UCC financing statements
appropriately completed and executed for filing in the applicable jurisdiction
in order to protect the Lessor's interest under the Master Lease and the Lease
Supplements to the extent the Master Lease and Lease Supplements are security
agreements.
"Lessor Lien" means any Lien, true lease or sublease or disposition of
title arising as a result of (a) any claim against any Participant, whether or
not resulting from the transactions contemplated by the Operative Documents, (b)
any act or omission of any Participant which is not required or permitted by the
Operative Documents or is in violation of any of the terms of the Operative
Documents, (c) any claim against any Participant, with respect to Taxes or
Transaction Expenses against which the Lessee is not required to indemnify any
Participant, in its individual capacity, pursuant to Article IX of the
Participation Agreement or (d) any claim against the Lessor arising out of any
transfer by the Lessor of all or any portion of the interest of the Lessor in
the Properties or the Operative Documents other than the transfer of title to or
possession of the Properties by the Lessor pursuant to and in accordance with
the Master Lease, the Loan Agreement or the Participation Agreement or pursuant
to the exercise of the remedies set forth in Section 16.2 of the Master Lease.
"Lessor Margin" means, with respect to the Lessor Amounts, 0.20% per
annum and in the event the Lessee has suspended the Lender's right to enter into
repurchase agreements for the Additional Collateral pursuant to Section 2.8 of
the Pledge Agreement, the applicable margin during the period of suspension is
0.25% per annum.
"Lessor Mortgage" means, with respect to any Property, the Lease
Supplement for such Property and any and all other security instruments in
appropriate recordable form in each relevant
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jurisdiction sufficient to grant to the Lessor a first priority Lien on the
Lessee's interest in such Property.
"Leverage Ratio" means the following (as determined as of the most
recent fiscal year end):
Total Debt + [8 x minimum
annual rent expense for next year] - Cash - Short Term Investments
(Consolidated Net Income + Interest Expense + Taxes + Depreciation +
Amortization
+ Write Off of Goodwill related to acquisitions)
"Lien" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, easement, servitude or charge of any kind, including, without
limitation, any irrevocable license, conditional sale or other title retention
agreement, any lease in the nature thereof, or any other right of or arrangement
with any creditor to have its claim satisfied out of any specified property or
asset with the proceeds therefrom prior to the satisfaction of the claims of the
general creditors of the owner thereof, whether or not filed or recorded, or the
filing of, or agreement to execute as "debtor", any financing or continuation
statement under the Uniform Commercial Code of any jurisdiction or any federal,
state or local lien imposed pursuant to any Environmental Law.
"Loan Agreement" means the Loan Agreement, dated as of December 27,
1996, between the Lessor, as borrower thereunder and the Lender, as the same may
be amended, supplemented, amended and restated or otherwise modified from time
to time.
"Loan Agreement Default" means any event, act or condition which with
notice or lapse of time, or both, would constitute a Loan Agreement Event of
Default.
"Loan Agreement Event of Default" is defined in Section 5 of
the Loan Agreement.
"Loan Balance" means, as of any date of determination, an amount equal
to the sum of the outstanding Loans together with all accrued and unpaid
interest thereon pursuant to the Loan Agreement.
"Loan Commitment" means the Commitment of the Lender in the amount(s)
set forth on Schedule I to the Participation Agreement, as such Schedule may be
amended, supplemented, amended and restated or otherwise modified from time to
time.
"Loan Documents" means the Loan Agreement and the Notes.
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"Loan Margin" means, with respect to the Tranche A and Tranche B Loans
respectively, 0.10% per annum and 0.20% per annum, and in the event the Lessee
has suspended the Lender's right to enter into repurchase agreements for the
Additional Collateral pursuant to Section 2.8 of the Pledge Agreement, the
applicable margin during the period of suspension is 0.15% per annum for Tranche
A Loans and 0.25% per annum for Tranche B Loans.
"Loans" is defined in Section 2.1 of the Loan Agreement.
"London Interbank Offered Rate" means, as applicable to any Eurodollar
Loan, for an Interest Period of three (3) months, the rate per annum determined
by the Lender on the basis of the offered rate for deposits in Dollars of
amounts equal or comparable to the principal amount of such Eurodollar Loan
offered for a period comparable to such Interest Period, which rates appear on
the Reuters Screen LIBO Page as of 11:00 a.m., London time, two (2) Business
Days prior to the first day of each such Interest Period, provided that (i) if
more than one such offered rate appears on the Reuters Screen LIBO Page, the
"London Interbank Offered Rate" will be the arithmetic average (rounded upwards,
if necessary, to the next higher 1/100th of 1%) of such offered rates; and (ii)
if no such offered rates appear on such page, the "London Interbank Offered
Rate" for such Interest Period will be the rate per annum quoted by the Lender's
London Branch, two (2) Business Days prior to the first day of each such
Interest Period, for deposits in Dollars offered to leading banks for a period
comparable to such Interest Period in an amount comparable to the principal
amount of such Eurodollar Loan; provided, that in the event this rate is
unavailable for an Interest Period of three months, an Interest Period based on
a combination of one or two months interest periods shall be used.
"Marketing Period" means the period commencing on the date six months
prior to the Expiration Date and ending on the Expiration Date.
"Master Lease" means the Master Lease, dated as of December 27, 1996,
between the Lessor and the Lessee, as the same may be amended, supplemented,
amended and restated or otherwise modified from time to time.
"Material" and "Materially" mean material to (i) the ability of a Person
to perform its obligations under the Operative Documents to which it is a party,
or (ii) the value or condition of any Property.
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Appendix A
"Material Adverse Effect" means a material adverse effect on (i) the
business, financial position or results of operations of the Lessee and its
Subsidiaries taken as a whole, (ii) the ability of the Lessee to perform any
material obligation under the Operative Documents or (iii) any of the rights and
remedies of the Lessor and/or the Lender under any of the Operative Documents.
"Maturity Date" means with respect to the Loans and the Lessor Amounts,
the seventh anniversary of the Documentation Date, unless such Maturity Date is
extended pursuant to Section 2.7 of the Loan Agreement and Section 11.2 of the
Participation Agreement, in which case, the "Maturity Date" shall mean the tenth
year anniversary of the Documentation Date.
"Maximum Commitment Amount" means an amount equal to
$250,000,000.00.
"Modifications" is defined in Section 10.1 of the Master
Lease.
"Moody's" means Moody's Investors Service, Inc. or any
successor or assignee of the business of such company in the
business of rating securities.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Net Proceeds" means all amounts received by the Lessor in connection
with any Casualty or Condemnation or any sale of the Property pursuant to the
Lessor's exercise of remedies under Section 16.2 of the Master Lease or the
Lessee's exercise of the Remarketing Option under Article XX of the Master
Lease, and all interest earned thereon, less any Impositions arising in
connection with such amounts, if any, and less the expense of claiming and
collecting such amounts, including all costs and expenses in connection
therewith for which the Lessor or any Participant is entitled to be reimbursed
pursuant to the Lease.
"Notes" is defined in Section 2.2 of the Loan Agreement.
"Obligations" means all obligations (monetary or otherwise) of the
Lessee arising under or in connection with any of the Operative Documents.
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Appendix A
"Operative Documents" means the following:
(a) the Participation Agreement;
(b) the Master Lease;
(c) each Lease Supplement;
(d) the Loan Agreement;
(e) each Note;
(f) the Assignment of Lease and Rent;
(g) each Deed;
(h) the Pledge Agreement;
(i) the Lessor Financing Statements;
(j) the Construction Agency Agreement;
(k) the Construction Agency Agreement Assignment;
(l) the Construction Documents Assignment;
(m) each Construction Agency Agreement Supplement; and
(n) the Purchase and Sale Agreement Assignment.
Operative Documents amended, modified or supplemented without Lessee's prior
written consent shall, to the extent of such amendment, modification or
supplement, not constitute Operative Documents for purposes of Lessee's
liability or obligations under any of the Operative Documents.
"Overdue Rate" means, with respect to any Loan or Lessor Amount, the
Base Rate or the Adjusted Eurodollar Rate then in effect for such Loan or Lessor
Amount, as the case may be, plus two percent (2%), or the highest rate permitted
by Applicable Law (if any), whichever is less. In the event that the Overdue
Rate collected by any Participant is in violation of any usury or similar law,
then the Overdue Rate shall be reduced to the extent necessary to cause the
Overdue Rate to comply with any usury or similar law.
"Participants" means, collectively, the Lender and the
Lessor, and their respective successors and assigns.
"Participation Agreement" means the Participation Agreement, dated as of
December 27, 1996, among the Lessee, as Lessee and as Construction Agent, the
Lessor and the Lender, as the same may be amended, supplemented, amended and
restated or otherwise modified from time to time.
"Participant Balance" means, with respect to any Participant as of any
date of determination: (i) with respect to the Lender, an amount equal to the
aggregate outstanding Loan of the Lender, together with all accrued and unpaid
interest thereon or (ii) with respect to the Lessor, an amount equal to the
aggregate outstanding Lessor Amounts of the Lessor, together with all amounts of
accrued and unpaid Yield thereon.
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Appendix A
"Payment Set Date" means (i) the first twentieth day of the month
immediately following the initial Advance and (ii) thereafter, the twentieth day
of the month following three months after the date determined under clause (i)
and each succeeding twentieth day of the third month thereafter.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto.
"Permitted Property Liens" means, with respect to any
Property, any of the following:
(i) the respective rights and interests of the parties
to the Operative Documents as provided in the Operative
Documents;
(ii) the rights of any sublessee under a sublease permitted by
the terms of the Master Lease;
(iii) Liens for Taxes that either are not yet due or are being
contested in accordance with the provisions of Section 12.1 of the
Master Lease;
(iv) Liens arising by operation of law, materialmen's,
mechanics', workers', repairmen's, employees', carriers', warehousemen's
and other like Liens relating to the construction of the Improvements or
in connection with any Modifications or arising in the ordinary course
of business for amounts that either are not more than 60 days past due
or are being diligently contested in good faith by appropriate
proceedings, so long as such proceedings satisfy the conditions for the
continuation of proceedings to contest Taxes set forth in Section 12.1
of the Master Lease;
(v) Liens of any of the types referred to in clause (iv) above
that have been bonded for not less than the full amount in dispute (or
as to which other security arrangements satisfactory to the Lessor have
been made), which bonding (or arrangements) shall comply with applicable
Requirements of Law, and has effectively stayed any execution or
enforcement of such Liens;
(vi) Liens arising out of judgments or awards with respect to
which appeals or other proceedings for review are being prosecuted in
good faith and for the payment of which adequate reserves have been
provided as required by GAAP or other appropriate provisions have been
made, so long as such proceedings have the effect of staying the
execution of such
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Appendix A
judgments or awards and satisfy the conditions for the
continuation of proceedings to contest set forth in Section
12.1 of the Master Lease;
(vii) easements, rights of way and other encumbrances on title to
real property pursuant to Section 11.2 of the Master Lease;
(viii) Lessor Liens; provided that the existence of such liens
shall not be deemed Lessee's authorization or recognition of such liens;
(ix) Liens created by the Lessee with the consent of the Lessor;
and
(x) Liens described on the title insurance policy delivered with
respect to such Property pursuant to Section 6.1(p) of the Participation
Agreement other than Liens described in clause (iv) or (vi) above that
are not removed within forty (40) days of their origination.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Authority or any other entity.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"Plans and Specifications" means, with respect to each Property, the
plans and specifications for the Construction thereof, as more particularly
described in Schedule II to the Construction Agency Agreement Supplement
applicable to such
Property.
"Pledge Agreement" means the Pledge Agreement, dated as of December 27,
1996, made by the Lessee in favor of the Lender, as "Collateral Agent"
thereunder, as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time.
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Appendix A
"Property" means each individual building to be constructed including
the Lessor's interest in all Land, as owner in fee simple, related thereto or,
in the case of Land on which no Improvements are to be constructed, each portion
of the Land, constituting a separate legal parcel.
"Property Balance" means, with respect to any Property, the sum of (i)
the Property Balance (Land) and (ii) the Property Balance (Improvements).
"Property Balance (Improvements)" means, with respect to any Property,
an amount equal to the outstanding principal amount of the Loans and Lessor
Amounts relating only to the Improvements in respect of such Property, and all
accrued and unpaid interest and Yield thereon, and any Supplemental Rent related
thereto.
"Property Balance (Land)" means, with respect to any Property, an amount
equal to the outstanding principal amount of the Loans and Lessor Amounts
relating only to the Land in respect of such Property, and all accrued and
unpaid interest and Yield thereon, and any Supplemental Rent related thereto.
"Property Cost" means, with respect to any Property, the sum of the Land
Acquisition Cost and the Property Improvement Costs for such Property and
pro-rata portion of the Commitment Fees.
"Property Improvement Costs" means, with respect to any Property, the
aggregate amount of Advances made to the Construction Agent for the purpose of
paying Construction Costs and the Transaction Expenses relating to such funding
and construction, as such amount is set forth in the Funding Request relating
thereto.
"Purchase and Sale Agreement" is defined in the first recital to the
Participation Agreement.
"Purchase and Sale Agreement Assignment" is defined in the second
recital to the Participation Agreement.
"Purchase Notice" means an irrevocable written notice by the Lessee
delivered to the Lessor pursuant to Section 18.1 of the Master Lease, notifying
the Lessor of the Lessee's intention to exercise its option pursuant to such
Section, and identifying the Property or Properties to be purchased in
accordance therewith and the proposed purchase date therefor.
"Purchase Option" means the Lessee's option to purchase a Property in
accordance with the provisions of Section 18.1 of the Master Lease.
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Appendix A
"Rating" means the respective rating or indication of each of the Rating
Agency applicable to the long-term senior unsecured non-credit enhanced debt of
the Lessee, as announced by the Rating Agency from time to time.
"Rating Agency" means S&P.
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C.
Section6901 et seq., or as otherwise amended or modified or any successor
statute thereto.
"Release" means any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or
emission of a Hazardous Material.
"Remarketing Option" is defined in Section 20.1 of the
Master Lease.
"Rent" means, collectively, the Basic Rent and the Supplemental Rent, in
each case payable under the Master Lease.
"Reorganization" means with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of such term as
used in Section 4241 of ERISA.
"Reportable Event" means any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the PBGC has by regulation waived
the applicable notice requirement, or as to which the PBGC has announced a
policy of not enforcing penalties for failure to satisfy applicable notice
requirements.
"Repurchase Agreement" is defined in Section 2.8 of the
Pledge Agreement.
"Required Modification" is defined in clause (i) of Section
10.1 of the Master Lease.
"Requirement of Law" means, as to any Person, (a) the partnership
agreement, certificate of incorporation, bylaws or other organizational or
governing documents of such Person, and (b) all statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of any Governmental
Authority affecting any Property, the Improvements or the demolition,
Construction, use or alteration thereof, whether now or hereafter enacted and in
force, including any that require repairs, modifications or alterations in or to
any Property or in any way limit the use and enjoyment thereof (including all
building, zoning and fire codes and the Americans with Disabilities Act of
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Appendix A
1990, 42 U.S.C. Section 1201 et. seq. and any other similar Federal, state or
local laws or ordinances and the regulations promulgated thereunder) and any
that may relate to environmental requirements (including all Hazardous Materials
Laws), and all permits, certificates of occupancy, licenses, authorizations and
regulations relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments which are either of record or known to
the Lessee affecting any Property, the Appurtenant Rights and any easements,
licenses or other agreements entered into pursuant to Section 11.2 of the Master
Lease.
"Responsible Officer" means as to the Lessee, any duly
authorized officer thereof.
"Responsible Officer's Certificate" means a certificate signed by any
Responsible Officer, which certificate shall certify as true and correct the
subject matter being certified to in such certificate.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., or any successor or assignee of the business of such division in the
business of rating securities.
"Scheduled Payment Date" means the Payment Set Date.
"Seller" is defined in the first recital to the
Participation Agreement.
"Shortfall Amount" means, as of the Expiration Date, an amount equal to
(i) the Lease Balance, minus (ii) the Loan Balance received by the Lessor from
the Lessee pursuant to Section 20.1(k) of the Master Lease, minus (iii) the
aggregate amount of the highest, binding, written, unconditional, irrevocable
offer to purchase each Property obtained by the Lessee pursuant to Section
20.1(f) of the Master Lease; provided, however, that if the sale of the
Properties to the Person submitting such offer is not consummated on or prior to
the Expiration Date, then the term "Shortfall Amount" shall mean an amount equal
to (i) the Lease Balance, minus (ii) the Loan Balance received by the Lessor
pursuant to Section 20.1(k) of the Master Lease.
"Significant Condemnation" means (a) a Condemnation that involves a
taking of the Lessor's entire title to the related Land, or (b) a Condemnation
that in the reasonable, good faith judgment of the Lender and the Lessor (i)
renders the related Property unsuitable for continued use as property of the
type of such Property immediately prior to such Condemnation, or (b) is
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Appendix A
so substantial in nature that restoration of the related property to
substantially its condition as it existed immediately prior to such Condemnation
would be impracticable or impossible.
"Significant Subsidiary" means any Subsidiary of the Lessee the assets
of which represent 5% or more of the total assets of the Lessee and the
Subsidiaries on a consolidated basis.
"Single Employer Plan" means any Plan which is not a Multiemployer Plan.
"Solvent" means with respect to any Person on a particular date, that on
such date (i) the fair value of the property of such Person (including, without
limitation, its Consolidated Subsidiaries) is greater than the total amount of
liabilities, including, without limitation, contingent liabilities, of such
Person (including, without limitation, its Consolidated Subsidiaries), (ii) the
present fair saleable value of the assets of such Person (including, without
limitation, its Consolidated Subsidiaries) is not less than the amount that will
be required to pay the probable liability of such Person (including, without
limitation, its Consolidated Subsidiaries) on its debts as they become absolute
and matured, (iii) such Person is able to realize upon its assets and pay its
debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, (iv) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (v) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property (including,
without limitation, the property of its Consolidated Subsidiaries and other
Subsidiaries) would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such Person is
engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount which, in light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability taking
into account any subrogation and contribution rights.
"Subsidiary" means, as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the
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Appendix A
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in the Operative Documents
shall refer to a Subsidiary or Subsidiaries of the Lessee.
"Supplemental Rent" means all amounts, liabilities and obligations
(other than Basic Rent) which the Lessee assumes or agrees to pay to the Lessor
or any other Person under the Master Lease, or under any of the other Operative
Documents, including, without limitation, Fees, Break Costs, the Loan Balance,
the Shortfall Amount, amounts due pursuant to Section 13.2 of the Participation
Agreement and payments pursuant to Sections 15.2 of the Master Lease and
Articles XVIII and XX of the Master Lease.
"Tax Indemnitee" means the Lender, the Lessor, their respective
Affiliates and their respective successors, assigns, directors, shareholders,
partners, officers, employees and agents.
"Taxes" is defined in the definition of Impositions.
"Termination Date" is defined in Section 15.2 of the Master Lease.
"Termination Notice" is defined in Section 15.1 of the Master Lease.
"Tranche A Loan" is defined in Section 2.1 of the Loan Agreement.
"Tranche A Loan Balance" is the Loan Balance with respect to the Tranche
A Loans.
"Tranche A Loan Commitment" is the Tranche A Commitment specified in
Schedule I to the Participation Agreement.
"Tranche B Loan" is defined in Section 2.1 of the Loan Agreement.
"Tranche B Loan Balance" is the Loan Balance with respect to the Tranche
B Loans.
"Tranche B Loan Commitment" is the Tranche B Commitment specified in
Schedule I to the Participation Agreement.
"Transaction Expenses" means all costs, expenses and Impositions
incurred in connection with the preparation, execution and delivery of the
Operative Documents and the
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Appendix A
transactions contemplated by the Operative Documents including without
limitation:
(a) the reasonable fees, out-of-pocket expenses and disbursements
of Mayer, Brown & Platt, special counsel for the Lessor and the Lender,
and such other reasonable fees, expenses and disbursements of counsel
for the Lessee, in negotiating the terms of the Operative Documents and
the other transaction documents, preparing for the closing under, and
rendering opinions in connection with, such transactions and in
rendering other services customary for counsel representing parties to
transactions of the types involved in the transactions contemplated by
the Operative Documents;
(b) the reasonable fees, out-of-pocket expenses and disbursements
of any law firm or other external counsel of the Lessor, the Lessee and
the Lender in connection with (1) any amendment, supplement, waiver or
consent with respect to any Operative Documents requested or approved by
the Lessee and (2) any enforcement of any rights or remedies against the
Lessee in respect of the Operative Documents;
(c) any and all Taxes and fees incurred in recording, registering
or filing any Operative Document or any other transaction document, any
deed, declaration, mortgage, security agreement, notice or financing
statement with any public office, registry or governmental agency in
connection with the transactions contemplated by the Operative
Documents; and
(d) any brokerage commissions paid or payable by the Lessee.
"Uniform Commercial Code" and "UCC" means the Uniform Commercial Code as
in effect in any applicable jurisdiction.
"Yield" is defined in Section 4.1(a) of the Participation Agreement.
"Yield Rate" means, at the option of the Lessee, (i) the Base Rate, or
(ii) the sum of the Adjusted Eurodollar Rate plus the Lessor Margin, as the case
may be. The Adjusted Eurodollar Rate may not be selected by the Lessee for any
period of less than one month without the prior written consent of the Lender.
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<PAGE> 1
EXHIBIT 10.53
EXECUTION COPY
$500,000,000
CREDIT AGREEMENT
dated as of
July 2, 1997
among
Cisco Systems, Inc.,
The Lenders Listed Herein,
Citicorp USA, Inc., as Administrative Agent,
Morgan Guaranty Trust Company of New York,
as Documentation Agent
and
Bank of America National Trust and Savings Association
The Chase Manhattan Bank,
as Co-Agents
---------------------------
Citicorp Securities, Inc.
J.P. Morgan Securities Inc.
Arrangers
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1
Definitions
Section 1.01. Definitions . . . . . . . . . . . . . 1
Section 1.02. Accounting Terms and Determinations . 14
Section 1.03. Types of Borrowings . . . . . . . . . 15
ARTICLE 2
The Credits
Section 2.01. Commitments to Lend1 . . . . . . . . 5
Section 2.02. Notice of Committed Borrowing . . . . 15
Section 2.03. Money Market Borrowings . . . . . . . 16
Section 2.04. Notice to Lenders; Funding of Loans . 20
Section 2.05. Registry. . . . . . . . . . . . . . . 21
Section 2.06. Maturity of Loans . . . . . . . . . . 22
Section 2.07. Interest Rates. . . . . . . . . . . . 22
Section 2.08. Facility Fees . . . . . . . . . . . . 23
Section 2.09. Optional Termination or Reduction
of Commitments . . . . . . . . . . 24
Section 2.10. Mandatory Termination of Commitments. 24
Section 2.11. Optional Payments . . . . . . . . . . 24
Section 2.12. General Provisions as to Payments . . 25
Section 2.13. Funding Losses. . . . . . . . . . . . 25
Section 2.14. Computation of Interest and Fees. . . 26
Section 2.15. Increased Commitments; Additional
Lenders . . . . . . . . . . . . . . 26
Section 2.16. Regulation D Compensation . . . . . . 28
Section 2.17. Method of Electing Interest Rates . . 28
ARTICLE 3
Conditions
Section 3.01. Closing . . . . . . . . . . . . . . . 30
Section 3.02. Credit Events . . . . . . . . . . . . 31
</TABLE>
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ARTICLE 4
Representations and Warranties
Section 4.01. Corporate Existence and Power . . . . 32
Section 4.02. Corporate and Governmental
Authorization; No Contravention . . 32
Section 4.03. Binding Effect. . . . . . . . . . . . 32
Section 4.04. Financial Information . . . . . . . . 32
Section 4.05. Litigation. . . . . . . . . . . . . . 33
Section 4.06. Compliance with ERISA . . . . . . . . 33
Section 4.07. Environmental Matters . . . . . . . . 33
Section 4.08. Taxes . . . . . . . . . . . . . . . . 34
Section 4.09. Subsidiaries. . . . . . . . . . . . . 34
Section 4.10. Regulatory Restrictions on Borrowing. 34
Section 4.11. Full Disclosure . . . . . . . . . . . 34
ARTICLE 5
Covenants
Section 5.01. Information . . . . . . . . . . . . . 35
Section 5.02. Payment of Obligations. . . . . . . . 37
Section 5.03. Maintenance of Property; Insurance. . 37
Section 5.04. Conduct of Business and Maintenance
of Existence. . . . . . . . . . . . 37
Section 5.05. Compliance with Laws. . . . . . . . . 38
Section 5.06. Inspection of Property, Books and
Records . . . . . . . . . . . . . . 38
Section 5.07. Mergers and Sales of Assets . . . . . 38
Section 5.08. Use of Proceeds . . . . . . . . . . . 38
Section 5.09. Negative Pledge . . . . . . . . . . . 38
Section 5.10. Consolidated Tangible Net Worth . . . 40
Section 5.11. Ratings . . . . . . . . . . . . . . . 40
ARTICLE 6
Defaults
Section 6.01. Events of Default . . . . . . . . . . 40
Section 6.02. Notice of Default . . . . . . . . . . 43
</TABLE>
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ARTICLE 7
The Agents
Section 7.01. Appointment and Authorization . . . . 43
Section 7.02. Delegation of Duties. . . . . . . . . 43
Section 7.03. Liability of Agents . . . . . . . . . 43
Section 7.04. Reliance by Agents. . . . . . . . . . 44
Section 7.05. Notice of Default . . . . . . . . . . 44
Section 7.06. Credit Decision . . . . . . . . . . . 44
Section 7.07. Indemnification of Agents . . . . . . 45
Section 7.08. Agents in Individual Capacities . . . 45
Section 7.09. Successor Agents. . . . . . . . . . . 46
Section 7.10. Co-Agents . . . . . . . . . . . . . . 46
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest
Rate Unfair . . . . . . . . . . . . 47
Section 8.02. Illegality. . . . . . . . . . . . . . 47
Section 8.03. Increased Cost and Reduced Return . . 48
Section 8.04. Taxes . . . . . . . . . . . . . . . . 50
Section 8.05. Base Rate Loans Substituted for
Affected Fixed Rate Loans . . . . . 51
Section 8.06. Substitution of Lender. . . . . . . . 52
ARTICLE 9
Miscellaneous
Section 9.01. Notices . . . . . . . . . . . . . . . 52
Section 9.02. No Waiver . . . . . . . . . . . . . . 53
Section 9.03. Expenses; Indemnification . . . . . . 53
Section 9.04. Sharing of Set-offs . . . . . . . . . 53
Section 9.05. Right of Set-off. . . . . . . . . . . 54
Section 9.06. Amendments and Waivers. . . . . . . . 54
Section 9.07. Successors and Assigns. . . . . . . . 55
Section 9.08. Collateral. . . . . . . . . . . . . . 57
Section 9.09. Governing Law; Submission to
Jurisdiction. . . . . . . . . . . . 57
Section 9.10. Counterparts; Integration;
Effectiveness . . . . . . . . . . . 57
Section 9.11. Consequences of Effectiveness;
Transitional Provisions . . . . . . 58
Section 9.12. WAIVER OF JURY TRIAL. . . . . . . . . 58
Section 9.13. Confidentiality . . . . . . . . . . . 58
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<TABLE>
<S> <C> <C>
EXHIBIT A - Note . . . . . . . . . . . . . . . . . . 1
EXHIBIT B - Money Market Quote Request . . . . . . . 1
EXHIBIT C - Invitation for Money Market Quotes . . . 1
EXHIBIT D - Money Market Quote . . . . . . . . . . . 1
EXHIBIT E - Opinion of Counsel for the Borrower. . . 1
EXHIBIT F - Opinion of Special Counsel for
the Agents . . . . . . . . . . . . . . 1
EXHIBIT G - Assignment and Assumption Agreement. . . 1
</TABLE>
iv
<PAGE> 6
AGREEMENT dated as of July 2, 1997 among CISCO SYSTEMS, INC., the
LENDERS listed on the signature pages hereof, CITICORP USA, INC., as
Administrative Agent, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Documentation Agent and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
and THE CHASE MANHATTAN BANK, as Co-Agents.
WHEREAS, the Borrower and certain Lenders are parties to the Credit
Agreement dated as of May 22, 1995 (the "Existing Agreement"); and
WHEREAS, the Borrower wishes to replace the credit facility under the
Existing Agreement with a new credit facility hereunder; and
WHEREAS, when all the conditions specified in Section 9.11 have been
satisfied, the Existing Agreement will be automatically terminated and the loans
outstanding thereunder (if any) will be repaid or refinanced hereunder;
NOW, THEREFORE, The parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03 .
"ADDITIONAL LENDER" has the meaning set forth in Section 2.15.
"ADMINISTRATIVE AGENT" means Citicorp USA, Inc., in its capacity as
Administrative Agent for the Lenders hereunder, and its successors in such
capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Borrower) duly
completed by such Lender.
<PAGE> 7
"AFFILIATE" means, with respect to any Person, (i) any Person that
directly, or indirectly through one or more intermediaries, controls such Person
(a "Controlling Person") or (ii) any Person (other than such Person or any of
its Subsidiaries) which is controlled by or is under common control with a
Controlling Person. As used herein, the term "control" means possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"AGENT" means the Administrative Agent or the Documentation Agent, and
"Agents" both of them.
"AGENT-RELATED PERSONS" means either Agent and any successor agent
arising under Section 7.09, together with their respective Affiliates (including
the Arrangers), and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and affiliates.
"APPLICABLE LENDING OFFICE" means, with respect to any Lender, (i) in
the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.
"ARRANGERS" means Citicorp Securities, Inc. and J.P. Morgan Securities
Inc.
"ATTORNEY COSTS" means and includes all fees and disbursements of any
law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
"BASE RATE" means, for any day, a rate per annum equal to the higher of
(i) the Reference Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"BASE RATE LOAN" means a Committed Loan which bears interest at the Base
Rate pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or the provisions of Section 2.07(a) or Article 8.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
2
<PAGE> 8
"BORROWER" means Cisco Systems, Inc., a California corporation, and its
successors.
"BORROWER'S 1996 FORM 10-K" means the Borrower's annual report on Form
10-K for July 28, 1996, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
"BORROWER'S LATEST FORM 10-Q" means the Borrower's quarterly report on
Form 10-Q for the quarter ended January 25, 1997, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"BORROWING" has the meaning set forth in Section 1.03.
"CLOSING DATE" means the date (which must occur prior to July 30, 1997)
on or after the Effective Date on which the Documentation Agent shall have
received the documents specified in or pursuant to Section 3.01.
"COMMITMENT" means (i) with respect to each Lender listed on the
signature pages hereof, the amount set forth opposite the name of such Lender on
the signature pages hereof and (ii) with respect to each Additional Lender or
Eligible Assignee which becomes a Lender pursuant to Section 2.15 or 9.07(c),
the amount of the Commitment thereby assumed by it, in each case as such amount
may be changed from time to time pursuant to Section 2.09, 2.15 or 9.07(c).
"COMMITTED LOAN" means a loan made by a Lender pursuant to Section 2.01,
provided that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term Committed
Loan shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"CONSOLIDATED EBIT" means, for any period, Consolidated Net Income for
such period plus, to the extent deducted in determining Consolidated Net Income
for such period, the aggregate amount of Consolidated Interest Expense and
income tax expense for such period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest
expense of the Borrower and its Consolidated Subsidiaries determined on a
consolidated basis for such period.
3
<PAGE> 9
"CONSOLIDATED NET INCOME" means, for any fiscal period, the net income
of the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis for such period.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date. "Consolidated Tangible Net Worth" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries less
their consolidated Intangible Assets, all determined as of such date. For
purposes of this definition, "Intangible Assets" means the amount (to the extent
reflected in determining such consolidated stockholders' equity) of (i) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of assets of a going concern business made within twelve months after
the acquisition of such business) subsequent to January 28, 1997 in the book
value of any asset owned by the Borrower or a Consolidated Subsidiary, (ii)
except for such as constitute marketable securities under generally accepted
accounting principles, all investments in unconsolidated Subsidiaries and all
equity investments in Persons which are not Subsidiaries and (iii) all
unamortized debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, anticipated future benefit of
tax loss carry-forwards, copyrights, organization or developmental expenses and
other intangible assets.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable or accrued liabilities in respect of
accrued expenses arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which are capitalized in accordance with
generally accepted accounting principles, (v) all non-contingent obligations
(and, for purposes of Section 5.09 and the definitions of Material Debt and
Material Financial Obligations, all contingent obligations) of such Person to
reimburse any bank or other Person in respect of amounts paid under a letter of
credit or similar instrument, (vi) any of the foregoing secured by a Lien on any
asset of such Person, whether or not such Debt is otherwise an obligation of
such Person and (vii) any of the foregoing of others Guaranteed by such Person;
provided that Synthetic Leases are not Debt for purposes hereof.
4
<PAGE> 10
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"DOCUMENTATION AGENT" means Morgan Guaranty Trust Company of New York in
its capacity as documentation agent for the Lenders hereunder, and its
successors in such capacity.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized by law to close.
"DOMESTIC LENDING OFFICE" means, as to each Lender, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Lender may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent.
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 9.10.
"ELIGIBLE ASSIGNEE" means (i) a Lender; (ii) an Affiliate of a Lender;
(iii) a commercial bank organized under the laws of the United States or any
State thereof and having a combined capital and surplus of at least
$1,000,000,000; (iv) a savings and loan association or savings bank organized
under the laws of the United States or any State thereof and having a combined
capital and surplus of at least $1,000,000,000; (v) a commercial bank organized
under the laws of any other country that is
5
<PAGE> 11
a member of the Organization for Economic Cooperation and Development or has
concluded a special lending arrangement with the International Monetary Fund
associated with its General Arrangements to Borrow, or a political subdivision
of any such country, and having a combined capital and surplus of at least
$1,000,000,000, as long as such bank is acting through a branch or agency
located in the United States; (vi) the central bank of any country that is a
member of the Organization for Economic Cooperation and Development; (vii) a
finance company, insurance company or other financial institution or fund
(whether a corporation, partnership, trust or other entity) that is engaged in
making, purchasing or otherwise investing in commercial loans in the ordinary
course of business and having a combined capital and surplus of at least
$1,000,000,000 and (viii) any other Person approved by the Agent and the
Borrower, such approval not to be unreasonably withheld or delayed; provided
however, that neither the Borrower nor an Affiliate or Subsidiary of the
Borrower shall qualify as an Eligible Assignee.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London, England.
"EURO-DOLLAR LENDING OFFICE" means, as to each Lender, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.
6
<PAGE> 12
"EURO-DOLLAR LOAN" means a Committed Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election.
"EURO-DOLLAR MARGIN" means a rate per annum determined in accordance
with the Pricing Schedule.
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.07(b) on the basis of a London Interbank Offered Rate.
"EURO-DOLLAR RESERVE PERCENTAGE" has the meaning set forth in Section
2.16.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXISTING AGREEMENT" has the meaning set forth in the recitals hereto.
"FACILITY FEE RATE" has the meaning set forth in Section 2.08.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Citibank, N.A. on such day on such
transactions as determined by the Administrative Agent.
"FIXED RATE LOANS" means Euro-Dollar Loans or Money Market Loans
(excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant
to Section 8.01) or any combination of the foregoing.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
7
<PAGE> 13
"GROUP OF LOANS" means, at any time, a group of Loans consisting of (i)
all Committed Loans which are Base Rate Loans at such time or (ii) all Euro-
Dollar Loans having the same Interest Period at such time, provided that, if a
Committed Loan of any particular Lender is converted to or made as a Base Rate
Loan pursuant to Article 8, such Loan shall be included in the same Group or
Groups of Loans from time to time as it would have been in if it had not been so
converted or made.
"GUARANTEE" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the holder of such Debt of the payment
thereof or to protect such holder against loss in respect thereof (in whole or
in part), providedthat the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "GUARANTEE"
used as a verb has a corresponding meaning.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"INCREASED COMMITMENTS" has the meaning set forth in Section 2.15
hereof.
"INDEMNIFIED LIABILITIES" has the meaning set forth in Section 9.03(b).
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before
any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshaling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors, undertaken under U.S. Federal, state or foreign law, including
the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Sec 101, et seq.).
8
<PAGE> 14
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar Loan, (i)
the period commencing on the date of borrowing specified in the applicable
Notice of Borrowing or on the date specified in an applicable Notice of Interest
Rate Election and ending one, two, three or six months thereafter, as the
Borrower may elect in the applicable Notice of Borrowing or (ii) if the Borrower
requests a maturity of nine or twelve months in the applicable Notice of
Borrowing or Notice of Interest Rate Election and each Lender advises the
Administrative Agent that deposits in dollars with maturities of nine or twelve
months, as the case may be, are being offered to such Lender in the London
interbank market in amounts sufficient to fund such Lender's proportionate share
of such Borrowing or that such Interest Period is otherwise acceptable to such
Lender, the period commencing on the date of such Borrowing and ending nine or
twelve months thereafter, as the case may be, provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall, subject to clause (c) below, be extended to
the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of
a calendar month; and
(c) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
(2) with respect to each Money Market LIBOR Loan, the period commencing
on the date of borrowing specified in the applicable Notice of Borrowing and
ending one, two, three, six, nine or twelve months thereafter as the Borrower
may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to
the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
9
<PAGE> 15
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of
a calendar month; and
(c) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
(3) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter (but not less than 7 days or
more than 366 days) as the Borrower may elect in accordance with Section 2.03;
provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to
the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"LENDER" means each Person listed on the signature pages hereof with a
Commitment opposite its name, each Additional Lender or Eligible Assignee which
becomes a Lender pursuant to Section 2.15 or 9.07(c), as the case may be, and
their respective successors.
"LIBOR AUCTION" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"LOAN" means a Base Rate Loan, a Euro-Dollar Loan or a Money Market Loan
and "Loans" means Base Rate Loans, Euro-Dollar Loans or Money Market Loans or
any combination of the foregoing.
10
<PAGE> 16
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.07(b).
"MATERIAL ADVERSE EFFECT" means (i) any material adverse effect upon the
business, financial position or results of operations of the Borrower and its
Consolidated Subsidiaries, taken as a whole; (ii) a material impairment of the
ability of the Borrower to perform its obligations under this Agreement or (iii)
a material adverse effect on the rights and remedies of the Agents and the
Lenders under this Agreement.
"MATERIAL DEBT" means Debt (other than the Notes) of the Borrower and/or
one or more of its Subsidiaries, arising in one or more related or unrelated
transactions, in an aggregate principal or face amount exceeding $50,000,000.
"MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of
Debt and/or net payment obligations in respect of Derivatives Obligations of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, exceeding in the aggregate $50,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $50,000,000.
"MATERIAL SUBSIDIARY" means at any time any Subsidiary which at such
time is a "significant subsidiary" as such term is defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission.
"MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section
2.03(d)(ii)(D).
"MONEY MARKET ABSOLUTE RATE LOAN" means a loan to be made by a Lender
pursuant to an Absolute Rate Auction.
"MONEY MARKET LENDING OFFICE" means, as to each Lender, its Domestic
Lending Office or such other office, branch or affiliate of such Lender as it
may hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Administrative Agent; provided that any Lender may from time to
time by notice to the Borrower and the Administrative Agent designate separate
Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand,
and its Money Market Absolute Rate Loans, on the other hand, in which case all
references herein to the Money Market Lending Office of such Lender shall be
deemed to refer to either or both of such offices, as the context may require.
11
<PAGE> 17
"MONEY MARKET LIBOR LOAN" means a loan to be made by a Lender pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01).
"MONEY MARKET LOAN" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"MONEY MARKET MARGIN" has the meaning set forth in Section
2.03(d)(ii)(c).
"MONEY MARKET QUOTE" means an offer by a Lender to make a Money Market
Loan in accordance with Section 2.03.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"NET QUALIFYING ASSETS" means, on the last day of any fiscal quarter,
the sum of (i) cash, (ii) cash equivalents, (iii) marketable securities to be
disposed within one year of the date of acquisition thereof and (iv) long-term
investments (other than any such assets subject to a Lien permitted by Section
5.09(a), (b), (h) or (j)), less the Debt of the Borrower and its Consolidated
Subsidiaries, all determined on a consolidated basis for the Borrower and its
Consolidated Subsidiaries as of such date.
"NOTES" means any promissory notes issued pursuant to Section 2.05(b).
"NOTICE OF BORROWING" means a Notice of Committed Borrowing or a Notice
of Money Market Borrowing.
"NOTICE OF COMMITTED BORROWING" has the meaning set forth in Section
2.02.
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in Section
2.17.
"NOTICE OF MONEY MARKET BORROWING" has the meaning set forth in Section
2.03(f).
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<PAGE> 18
"PARENT" means, with respect to any Lender, any Person controlling such
Lender.
"PARTICIPANT" has the meaning set forth in Section 9.07(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"PLAN" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"PRICING SCHEDULE" means the Schedule attached hereto identified as
such. "Quarterly Payment Dates" means each March 31, June 30, September 30 and
December 31.
"REFERENCE BANKS" means the principal London offices of Citibank, N.A.,
Union Bank of Switzerland and Morgan Guaranty Trust Company of New York or
replacements thereof selected by the Administrative Agent and reasonably
acceptable to the Borrower.
"REFERENCE RATE" means the rate of interest publicly announced by
Citibank, N.A. in New York City from time to time as its base rate.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED LENDERS" means at any time Lenders having at least 60% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding at least 60% of the aggregate unpaid principal amount of the
Loans.
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<PAGE> 19
"SUBSIDIARY" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.
"SYNTHETIC LEASE" means (i) any lease transaction intended by the
parties to be treated as an operating lease for financial reporting purposes but
to enable the lessee to be treated as the owner for federal income tax purposes
or (ii) any similar off-balance-sheet lease transaction.
"TERMINATION DATE" means July 2, 2002, or, if such day is not a Euro-
Dollar Business Day, the next preceding Euro-Dollar Business Day.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
Section 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Lenders; providedthat, no change in generally accepted accounting
principles shall affect the operation of any covenant if the Borrower notifies
the Administrative Agent that the Borrower wishes to amend such covenant in
Article 5 to eliminate such effect (or if the Administrative Agent notifies the
Borrower that the Required Lenders wish to amend Article 5 for such purpose)
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders. Until such notice is
given or withdrawal is made, as the case
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may be, the Borrower's compliance with such covenant shall be determined on the
basis of generally accepted accounting principles in effect immediately before
the relevant change in generally accepted accounting principles became
effective.
Section 1.03. Types of Borrowings. The term "BORROWING" denotes the
aggregation of Loans of one or more Lenders to be made to the Borrower pursuant
to Article 2 on a single date and for a single Interest Period. Borrowings are
classified for purposes of this Agreement either by reference to the pricing of
Loans comprising such Borrowing (e.g., a "FIXED RATE BORROWING" is a Euro-Dollar
Borrowing or a Money Market Borrowing (excluding any such Borrowing consisting
of Money Market LIBOR Loans bearing interest at the Base Rate pursuant to
Section 8.01), and a "EURO-DOLLAR BORROWING" is a Borrowing comprised of
Euro-Dollar Loans) or by reference to the provisions of Article 2 under which
participation therein is determined (i.e., a "COMMITTED BORROWING" is a
Borrowing under Section 2.01 in which all Lenders participate in proportion to
their Commitments, while a "MONEY MARKET BORROWING" is a Borrowing under Section
2.03 in which the Lender participants are determined on the basis of their bids
in accordance therewith).
ARTICLE 2
The Credits
Section 2.01. Commitments to Lend. Each Lender severally agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the Borrower
pursuant to this Section from time to time from the Closing Date to but
excluding the Termination Date in amounts such that the aggregate principal
amount of Committed Loans by such Lender at any one time outstanding shall not
exceed the amount of its Commitment. Each Borrowing under this Section shall be
in an aggregate principal amount of $10,000,000 or any larger multiple of
$1,000,000 (except that any such Borrowing may be in the aggregate amount
available in accordance with Section 3.02) and shall be made from the several
Lenders ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrower may borrow under this Section, repay, or to the
extent permitted by Section 2.11, prepay Loans and reborrow at any time under
this Section.
Section 2.02. Notice of Committed Borrowing. The Borrower shall give the
Administrative Agent notice (a "NOTICE OF COMMITTED BORROWING") (x) not later
than 1:00 P.M. (New York City time) on the date of each Base Rate
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Borrowing and (y) not later than 1:00 P.M. (New York City time) on the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate or a Euro-Dollar Rate; and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
initial interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
Notwithstanding the foregoing, no more than 10 Euro-Dollar Borrowings shall be
outstanding at any one time, and any Borrowing which would exceed such
limitation shall be made as a Base Rate Borrowing.
Section 2.03. Money Market Borrowings. (a) The Money Market Option. In
addition to Committed Borrowings pursuant to Section 2.01, the Borrower may
request the Lenders to make offers to make Money Market Loans to the Borrower in
accordance with this Section. The Lenders may, but shall have no obligation to,
make such offers and the Borrower may, but shall have no obligation to, accept
any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Administrative Agent by telex or facsimile transmission a Money Market Quote
Request substantially in the form of Exhibit B hereto so as to be received not
later than 1:00 P.M. (New York City time) on (x) the fourth Euro-Dollar Business
Day prior to the date of Borrowing proposed therein, in the case of a LIBOR
Auction or (y) the Domestic Business Day next preceding the date of Borrowing
proposed therein, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Administrative Agent shall have
mutually agreed and shall have notified to the Lenders not later than the date
of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective) specifying:
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(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day
in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for up to three
different Interest Periods in a single Money Market Quote Request. No Money
Market Quote Request shall be given within five Euro-Dollar Business Days (or
such other number of days as the Borrower and the Administrative Agent may
agree) of any other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a Money
Market Quote Request, the Administrative Agent shall send to the Lenders by
telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto, which shall constitute an
invitation by the Borrower to each Lender to submit Money Market Quotes offering
to make the Money Market Loans to which such Money Market Quote Request relates
in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Lender may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection 2.03(d) and must be
submitted to the Administrative Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M.
(New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 12:00 Noon
(New York City time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall have
notified to the Lenders not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective); provided that Money Market Quotes submitted by the
Administrative Agent (or any affiliate of the Administrative Agent) in the
capacity of a Lender
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may be submitted, and may only be submitted, if the Administrative Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for the other Lenders,
in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the
other Lenders, in the case of an Absolute Rate Auction. Subject to Articles 3
and 6 , any Money Market Quote so made shall be irrevocable except with the
written consent of the Administrative Agent given on the instructions of the
Borrower.
(ii) Each Money Market Quote shall be in substantially the form
of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount (w)
may be equal to, greater than or less than the Commitment of the
quoting Lender, (x) must be $10,000,000 or a larger multiple of
$1,000,000, (y) may not exceed the principal amount of Money
Market Loans for which offers were requested and (z) may be
subject to an aggregate limitation as to the principal amount of
Money Market Loans for which offers being made by such quoting
Lender may be accepted,
(C) in the case of a LIBOR Auction, the margin above or
below the applicable London Interbank Offered Rate (the "Money
Market Margin") offered for each such Money Market Loan,
expressed as a percentage (specified to the nearest 1/10,000th of
1%) to be added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of
interest per annum (specified to the nearest 1/10,000th of 1%)
(the "Money Market Absolute Rate") offered for each such Money
Market Loan, and
(E) the identity of the quoting Lender.
A Money Market Quote may set forth up to five separate offers by the
quoting Lender with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
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(A) is not substantially in conformity with Exhibit D
hereto or does not specify all of the information required by
subsection 2.03(d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set
forth in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection
2.03(d)(i).
(e) Notice to Borrower. The Administrative Agent shall promptly notify
the Borrower of the terms (x) of any Money Market Quote submitted by a Lender
that is in accordance with subsection 2.03(d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Lender with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Administrative Agent unless such subsequent Money Market Quote is submitted
solely to correct a manifest error in such former Money Market Quote. The
Administrative Agent's notice to the Borrower shall specify (A) the aggregate
principal amount of Money Market Loans for which offers have been received for
each Interest Period specified in the related Money Market Quote Request, (B)
the respective principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered and (C) if applicable,
limitations on the aggregate principal amount of Money Market Loans for which
offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 1:00 P.M. (New
York City time) on (x) the third Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Administrative Agent shall have
mutually agreed and shall have notified to the Lenders not later than the date
of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective), the Borrower shall notify the
Administrative Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to subsection 2.03(e). The Borrower may, but shall have
no obligation to, accept any such offers in the manner set forth in this
Section. In the case of acceptance, such notice (a "Notice of Money Market
Borrowing") shall specify the aggregate principal amount of offers for each
Interest Period that are accepted. The Borrower may accept any Money Market
Quote in whole or in part; provided that:
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(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money
Market Quote Request;
(ii) the aggregate principal amount of each Money Market
Borrowing must be $10,000,000 or a larger multiple of $1,000,000;
(iii) acceptance of offers for any requested Interest Period may
only be made on the basis of ascending Money Market Margins or Money
Market Absolute Rates, as the case may be; and
(iv) the Borrower may not accept any offer that is described in
subsection 2.03(d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) Allocation by Administrative Agent. If offers are made by two or
more Lenders with the same Money Market Margins or Money Market Absolute Rates,
as the case may be, for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period, the
principal amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Administrative Agent among such Lenders as
nearly as possible (in multiples of $1,000,000, as the Administrative Agent may
deem appropriate) in proportion to the aggregate principal amounts of such
offers. Determinations by the Administrative Agent of the amounts of Money
Market Loans shall be conclusive in the absence of manifest error.
(h) Notice by Administrative Agent. Promptly following each Money Market
Borrowing, the Administrative Agent shall notify each Lender of (i) the ranges
of bids submitted, (ii) the highest and lowest bids accepted for such Borrowing
and (iii) the aggregate principal amount of the Loans included in such
Borrowing.
Section 2.04. Notice to Lenders; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Lender
of the contents thereof and of such Lender's share (if any) of such Borrowing
and such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 2:00 P.M. (New York City time) on the date of each
Borrowing, each Lender participating therein shall make available its share of
such Borrowing, in federal or other funds immediately available in New York
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City, to the Administrative Agent at its address referred to in Section 9.01.
Unless the Administrative Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Administrative Agent will
make the funds so received from the Lenders available to the Borrower at the
Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
to the Administrative Agent on the date of such Borrowing in accordance with
subsection (b) of this Section and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such share available to the Administrative Agent, such Lender and the
Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the
interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case
of such Lender, the Federal Funds Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Loan included in such Borrowing for purposes of this
Agreement.
Section 2.05. Registry. (a) The Administrative Agent shall maintain a
register (the "Register") on which it will record the Commitment of each Lender,
each Loan made by such Lender and each repayment of any Loan made by such
Lender. Any such recordation by the Administrative Agent on the Register shall
be conclusive, absent manifest error. Each Lender shall record on its internal
records (including computerized systems) the foregoing information as to its own
Commitment and Loans. Failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's obligations hereunder.
(b) The Borrower hereby agrees that, promptly upon the request of any
Lender at any time, the Borrower shall deliver to such Lender a duly executed
promissory note (a "Note"), substantially in the form of Exhibit A hereto,
payable to the order of such Lender and representing the obligation of the
Borrower to pay the unpaid principal amount of the Loans made by such Lender,
with interest as provided herein on the unpaid principal amount from time to
time outstanding.
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Section 2.06. Maturity of Loans. Each Loan shall mature, and the
principal amount thereof shall be due and payable (together with interest
accrued thereon), on the Termination Date.
Section 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable at maturity, quarterly in
arrears on each Quarterly Payment Date prior to maturity and, with respect to
the principal amount of any Base Rate Loan converted to a Euro-Dollar Loan, on
the date such amount is so converted. Any overdue principal of or interest on
any Base Rate Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 2% plus the rate otherwise
applicable to Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable in arrears for each Interest Period on
the last day thereof and, if such Interest Period is longer than three months,
at intervals of three months after the first day thereof.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the rate appearing on Page 3750 of the Telerate Service (or on any
successor or substitute page of such service, or any successor to or substitute
for such service, providing rate quotations comparable to those currently
provided on such page of the Telerate Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days prior to
the commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
so available at such time for any reason, then the "London Interbank Offered
Rate" with respect to such Euro-Dollar Borrowing for such Interest Period shall
be the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of
the respective rates per annum at which deposits in dollars are offered to each
of the Reference Banks in the London interbank market at approximately 11:00
A.M. (London time) two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the principal amount of the
Euro-Dollar Loan of such Reference Bank to which such Interest Period is to
apply and for a period of
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time comparable to such Interest Period. If any Reference Bank does not furnish
a timely quotation, the Administrative Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Loan on the day
before such payment was due and (ii) the sum of 2% plus the rate applicable to
Base Rate Loans for such day.
(d) Subject to Section 8.01 , each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with subsection
(b) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar
Borrowing) plus (or minus) the Money Market Margin quoted by the Lender making
such Loan in accordance with Section 2.03 . Each Money Market Absolute Rate Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the Money
Market Absolute Rate quoted by the Lender making such Loan in accordance with
Section 2.03. Such interest shall be payable in arrears for each Interest Period
on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the Base Rate for such day.
(e) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the participating Lenders of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
Section 2.08. Facility Fees. The Borrower shall pay to the
Administrative Agent for the account of the Lenders ratably a facility fee as
set forth in this paragraph at the facility fee rate determined daily in
accordance with the Pricing Schedule (the "Facility Fee Rate"). Such facility
fee shall accrue (i) from and including the Effective Date to but excluding the
date of termination of the Commitments in their entirety, on the daily aggregate
amount of the
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Commitments (whether used or unused) and (ii) from and including such date of
termination to but excluding the date the Loans shall be repaid in their
entirety, on the sum of the daily aggregate outstanding principal amount of the
Loans. Accrued fees under this Section shall be payable quarterly in arrears on
each Quarterly Payment Date and on the date of termination of the Commitments in
their entirety (and, if later, the date the Loans shall be repaid in their
entirety). In the case of Commitment reductions pursuant to Section 2.09,
effective upon such reduction, the foregoing fees shall be calculated on such
Commitments as so reduced.
Section 2.09. Optional Termination or Reduction of Commitments. The
Borrower may, upon at least three Domestic Business Days' notice to the
Administrative Agent, (i) terminate the Commitments at any time, if no Loans are
outstanding at such time or (ii) ratably reduce from time to time by an
aggregate amount of $10,000,000 or a larger multiple of $1,000,000, the
aggregate amount of the Commitments in excess of the aggregate outstanding
principal amount of the Loans.
Section 2.10. Mandatory Termination of Commitments. The Commitments
shall terminate on the Termination Date and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on such date.
Section 2.11. Optional Payments. (a) Subject in the case of any Euro-
Dollar Borrowing to Section 2.13, the Borrower may, upon notice to the
Administrative Agent not later than 12:00 Noon (New York City time) on the date
of such prepayment, prepay any Group of Base Rate Loans (or any Money Market
Borrowing bearing interest at the Base Rate pursuant to Section 8.01 ) or upon
at least three Euro-Dollar Business Days' notice to the Administrative Agent,
prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or
from time to time in part in amounts aggregating $10,000,000 or any larger
multiple of $1,000,000, by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Lenders
included in such Group of Loans (or such Money Market Borrowing).
(b) Except (i) as provided in subsection (a) above or (ii) with respect
to any particular Money Market Loan, as agreed upon between the Lender making
such Loan and the Borrower, the Borrower may not prepay all or any portion of
the principal amount of any Money Market Loan prior to the maturity thereof.
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(c) Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Lender of the contents thereof
and of such Lender's ratable share (if any) of such prepayment and such notice
shall not thereafter be revocable by the Borrower.
Section 2.12. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans, and facility fees
not later than 2:00 P.M. (New York City time) on the date when due, in Federal
or other funds immediately available in New York City, to the Administrative
Agent at its address referred to in Section 9.01. The Administrative Agent will
promptly distribute to each Lender its ratable share of each such payment
received by the Administrative Agent for the account of the Lenders. Whenever
any payment of principal of, or interest on, the Base Rate Loans or of fees
shall be due on a day which is not a Domestic Business Day, the date for payment
thereof shall be extended to the next succeeding Domestic Business Day. Whenever
any payment of principal of, or interest on, the Euro-Dollar Loans shall be due
on a day which is not a Euro-Dollar Business Day, the date for payment thereof
shall be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Euro-Dollar Business Day.
Whenever any payment of principal of, or interest on, the Money Market Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day. If the date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent that the Borrower
shall not have so made such payment, each Lender shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
together with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to the
Administrative Agent, at the Federal Funds Rate.
Section 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
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converted to a different type of Loan (pursuant to Article 2, 6 or 8 otherwise)
on any day other than the last day of an Interest Period applicable thereto, or
if the Borrower fails to borrow, prepay, convert or continue any Fixed Rate
Loans after notice has been given to any Lender in accordance with Section
2.04(a), 2.09 or 2.11, the Borrower shall reimburse each Lender within 15 days
after demand for any resulting loss or expense incurred by it including (without
limitation) any loss incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin for the period after any such
payment or conversion or failure to borrow, prepay, convert or continue;
provided that such Lender shall have delivered to the Borrower a certificate
setting forth in reasonable detail the nature and amount thereof and the basis
for the calculation of such loss or expense, which certificate shall be
conclusive in the absence of manifest error; and provided further that the
Borrower shall not be required to make any payment to any Lender pursuant to
this Section 2.13 as a result of any prepayment of any Euro-Dollar Loan of such
Lender made by the Borrower pursuant to Section 8.02 if such Lender shall not
have complied with the provisions of the second sentence of Section 8.02.
Section 2.14. Computation of Interest and Fees. Interest based on the
Reference Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
Section 2.15. Increased Commitments; Additional Lenders. (a) From time
to time (but no more than twice per calendar year), the Borrower may, upon
notice of not less than 30 days nor more than 45 days to the Administrative
Agent (which shall promptly provide a copy of such notice to the Lenders),
propose to increase the aggregate amount of the Commitments by an amount not
less than $10,000,000 (the amount of any such increase, the "Increased
Commitments"). Each Lender party to this Agreement at such time shall have the
right (but no obligation), for a period of 15 days following receipt of such
notice, to elect by notice to the Borrower and the Administrative Agent to
increase its Commitment by a principal amount which bears the same ratio to the
Increased Commitments as its then Commitment bears to the aggregate Commitments
then existing. Any Lender not responding within 15 days of receipt of such
notice shall be deemed to have declined to increase its Commitment.
(b) If any Lender party to this Agreement shall not elect to increase
its Commitment pursuant to subsection (a) of this Section, the Borrower may,
within 10 days of the Lenders' response, designate one or more of the existing
Lenders
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or other financial institutions acceptable to the Administrative Agent and the
Borrower (which consent of the Administrative Agent and the Borrower shall not
be unreasonably withheld) which at the time agree to (i) in the case of any such
lender that is an existing Lender, increase its Commitment and (ii) in the case
of any other such lender (an "Additional Lender"), become a party to this
Agreement with a Commitment of not less than $10,000,000. The sum of the
increases in the Commitments of the existing Lenders pursuant to this subsection
(b) plus the Commitments of the Additional Lenders shall not in the aggregate
exceed the unsubscribed amount of the Increased Commitments.
(c) Any increase in the Commitments pursuant to this Section 2.15 shall
be subject to satisfaction of the following conditions:
(i) before and after giving effect to such increase, all
representations and warranties contained in Article 4 shall be true and
correct in all material respects;
(ii) at the time of such increase, no Default shall have occurred
and be continuing or would result from such increase; and
(iii) after giving effect to such increase, the aggregate amount
of all increases in Commitments made pursuant to this Section 2.15 shall
not exceed $250,000,000.
(d) An increase in the aggregate amount of the Commitments pursuant to
this Section 2.15 shall become effective upon the receipt by the Administrative
Agent of (i) an agreement in form and substance satisfactory to the
Administrative Agent signed by the Borrower, by each Additional Lender and by
each other Lender whose Commitment is to be increased, setting forth the new
Commitments of such Lenders and setting forth the agreement of each Additional
Lender to become a party to this Agreement and to be bound by all the terms and
provisions hereof, and (ii) such evidence of the satisfaction of the conditions
set forth in subsection (c) above as the Administrative Agent may reasonably
request.
(e) Upon any increase in the aggregate amount of the Commitments
pursuant to this Section 2.15, within five Domestic Business Days, in the case
of each Group of Base Rate Loans then outstanding, and at the end of the then
current Interest Period with respect thereto, in the case of each Group of Euro-
Dollar Loans then outstanding, the Borrower shall prepay such Group of Loans in
its entirety and, to the extent the Borrower elects to do so and subject to the
conditions specified in Article 3, the Borrower shall reborrow Committed Loans
from the Lenders in proportion to their respective Commitments after giving
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effect to such increase, until such time as all outstanding Committed Loans are
held by the Lenders in such proportion.
Section 2.16. Regulation D Compensation. Each Lender may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such
Lender at a rate per annum determined by such Lender up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London
Interbank Offered Rate. Any Lender wishing to require payment of such additional
interest (x) shall so notify the Borrower and the Administrative Agent, in which
case such additional interest on the Euro-Dollar Loans of such Lender shall be
payable to such Lender at the place indicated in such notice with respect to
each Interest Period commencing at least three Euro-Dollar Business Days after
such Lender gives such notice and (y) shall furnish to the Borrower at least
five Euro-Dollar Business Days prior to each date on which interest is payable
on the Euro-Dollar Loans an officer's certificate setting forth the amount to
which such Lender is then entitled under this Section (which shall be consistent
with such Lender's good faith estimate of the level at which the related
reserves are maintained by it). Each such certificate shall be accompanied by
such information as the Borrower may reasonably request as to the computation
set forth therein.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "EUROCURRENCY LIABILITIES" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Lender to
United States residents).
Section 2.17. Method of Electing Interest Rates. (a) The Loans included
in each Committed Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Group of Loans (subject to subsection (d) of
this Section and the provisions of Article 8), as follows:
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(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business
Day; and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect
to convert such Loans to Base Rate Loans or elect to continue such Loans
as Euro-Dollar Loans for an additional Interest Period, subject to
Section 2.13 if any such conversion is effective on any day other than
the last day of an Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Administrative Agent not later than 1:00 P.M. (New York
City time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such Notice applies, and the remaining portion to which it does not
apply, are each at least $10,000,000 (unless such portion is comprised of Base
Rate Loans). If no such notice is timely received before the end of an Interest
Period for any Group of Euro-Dollar Loans, the Borrower shall be deemed to have
elected that such Group of Loans be converted to Base Rate Loans at the end of
such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion of continuation selected in
such notice is to be effective, which shall comply with the applicable
clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the
new type of Loans and, if the Loans resulting from such conversion are
to be Euro-Dollar Loans, the duration of the next succeeding Interest
Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for
an additional Interest Period, the duration of such additional Interest
Period.
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Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Administrative Agent shall notify
each Lender of the contents thereof and such Notice of Interest Rate Election
shall not thereafter be revocable by the Borrower.
(d) The Borrower shall not be entitled to elect to convert any Committed
Loans to, or continue any Committed Loans for an additional Interest Period as,
Euro-Dollar Loans if (i) the aggregate principal amounts of any Group of Euro-
Dollar Loans created or continued as a result of such election would be less
than $10,000,000 or (ii) a Default shall have occurred and be continuing when
the Borrower delivers notice of such election to the Administrative Agent.
ARTICLE 3
Conditions
Section 3.01. Closing. The closing hereunder shall occur upon receipt by
the Documentation Agent of the following documents, each dated the Closing Date
unless otherwise indicated:
(a) an opinion of Brobeck Phleger & Harrison LLP, special counsel for
the Borrower, substantially in the form of Exhibit E hereto;
(b) an opinion of Davis Polk & Wardwell, special counsel for the Agents,
substantially in the form of Exhibit F hereto and covering such additional
matters relating to the transactions contemplated hereby as the Required Lenders
may reasonably request;
(c) evidence satisfactory to the Documentation Agent that all fees
payable by the Borrower to the Documentation Agent and the Administrative Agent,
in the amounts previously agreed upon between the Borrower and each such Agent,
shall have been paid in full;
(d) all documents the Documentation Agent may reasonably request
relating to the existence of the Borrower, the corporate authority for and the
validity of this Agreement and the Notes and the transactions contemplated
hereby, all in form and substance satisfactory to the Documentation Agent.
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The Documentation Agent shall promptly notify the Borrower, the Lenders and the
Administrative Agent of the Closing Date, and such notice shall be conclusive
and binding on all parties hereto. The Documentation Agent will forward to the
Administrative Agent copies of all documents referred to in Section 3.01
promptly after the Closing Date.
Section 3.02. Credit Events. The obligation of any Lender to make a Loan
on the occasion of any Borrowing is subject to the satisfaction of the following
conditions: (a) the fact that the Closing Date shall have occurred;
(b) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02 or 2.03, as the case may be;
(c) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate amount
of the Commitments;
(d) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the Borrower
contained in this Agreement (except the representations and warranties set forth
in Sections 4.04(c) and 4.05 as to any matter which has theretofore been
disclosed in writing by the Borrower to the Lenders) shall be true on and as of
the date of such Borrowing; provided that the representations and warranties set
forth in Sections 4.04 and 4.05 shall be deemed to refer to the last day of the
most recent quarter and year for which financial statements have then been
delivered in respect thereof.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in
subsections (c), (d) and (e) of this Section.
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ARTICLE 4
Representations and Warranties
The Borrower represents and warrants that:
Section 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all corporate powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
Section 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the corporate powers of the Borrower, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement or instrument evidencing or governing Debt of the Borrower
or a Subsidiary or any other material agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrower or any of its Subsidiaries
or result in the creation or imposition of any Lien on any asset of the Borrower
or any of its Subsidiaries.
Section 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, if and when executed and
delivered in accordance with this Agreement, will constitute a valid and binding
obligation of the Borrower, in each case enforceable in accordance with its
terms except as the same may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general principles of equity.
Section 4.04. Financial Information. (a) The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of July 28, 1996 and the related
consolidated statements of operations and cash flows for the fiscal year then
ended, reported on by Coopers & Lybrand L.L.P. and set forth in the Borrower's
1996 Form 10-K, a copy of which has been delivered to each of the Lenders,
fairly present, in conformity with generally accepted accounting principles, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such fiscal year.
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(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of January 25, 1997 and the related unaudited
consolidated statements of operations and cash flows for the six months then
ended, set forth in the Borrower's Latest Form 10-Q, a copy of which has been
delivered to each of the Lenders, fairly present, in conformity with generally
accepted accounting principles applied on a basis consistent with the financial
statements referred to in subsection (a) of this Section, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such
six-month period (subject to normal year-end adjustments).
(c) Since July 31, 1996 there has been no material adverse change in the
business, condition (financial or otherwise) or results of operations of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
Section 4.05. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or affecting,
the Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable possibility
of an adverse decision which could reasonably be expected to have a Material
Adverse Effect.
Section 4.06. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan, except if no Material Adverse
Effect could reasonably be expected to result therefrom. No member of the ERISA
Group has (i) sought a waiver of the minimum funding standard under Section 412
of the Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA, except if no Material Adverse
Effect could reasonably be expected to result therefrom.
Section 4.07. Environmental Matters. The Borrower has reasonably
concluded that the liabilities and costs associated with the effect of
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries (including, without limitation, any capital or operating
expenditures
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required for clean-up or closure of properties presently or previously owned,
any capital or operating expenditures required to achieve or maintain compliance
with environmental protection standards imposed by law or as a condition of any
license, permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction in the
level of or change in the nature of operations conducted thereat, any costs or
liabilities in connection with off-site disposal of wastes or Hazardous
Substances, and any actual or potential liabilities to third parties, including
employees, and any related costs and expenses) could not reasonably be expected
to have a Material Adverse Effect.
Section 4.08. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary, except to the extent such taxes are being contested in good faith
and are adequately reserved against in accordance with generally accepted
accounting principles. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes or other governmental charges
are, in the opinion of the Borrower, adequate.
Section 4.09. Subsidiaries. Each of the Borrower's corporate
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
Section 4.10. Regulatory Restrictions on Borrowing. The Borrower is not
an "investment company" within the meaning of the Investment Company Act of
1940, as amended, a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or otherwise subject to any regulatory
scheme which restricts its ability to incur debt.
Section 4.11. Full Disclosure. All information in any exhibit, report,
certificate or written statement heretofore furnished by the Borrower to the
Administrative Agent or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby, taken as a whole is, and all
such information hereafter furnished by the Borrower to the Administrative Agent
or any Lender, taken as a whole, will be, true and accurate in all material
respects on the date as of which such information is stated or certified and not
incomplete by omitting to state any material fact required to be stated therein
or necessary to
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make the statements made therein, in the light of the circumstances under which
they are made, not misleading, as of the time made or delivered.
ARTICLE 5
Covenants
The Borrower agrees that, so long as any Lender has any Commitment
hereunder or any amount payable hereunder remains unpaid:
Section 5.01. Information. The Borrower will deliver to the
Administrative Agent for distribution to each of the Lenders:
(a) as soon as available and in any event within 105 days after
the end of each fiscal year of the Borrower, a consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of the end of
such fiscal year and the related consolidated statements of operations
and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported
on in a manner acceptable to the Securities and Exchange Commission by
Coopers & Lybrand or other independent public accountants of nationally
recognized standing;
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of operations and cash flows for such quarter
and for the portion of the Borrower's fiscal year ended at the end of
such quarter, setting forth in the case of such statements of operations
and cash flows, in comparative form the figures for the corresponding
quarter and the corresponding portion of the Borrower's previous fiscal
year, all certified (subject to normal year-end adjustments) as to
fairness of presentation, generally accepted accounting principles and
consistency by the chief financial officer, the chief accounting officer
or the treasurer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses 5.01(a) and 5.01(b) above, a
certificate of the chief financial officer, the chief accounting officer
or the treasurer of the Borrower (i) setting forth in reasonable detail
the calculations required to establish whether the Borrower was in
compliance with the
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requirements of Section 5.10 on the date of such financial statements,
(ii) setting forth Net Qualifying Assets as at the date of such
financial statements and Consolidated Net Income for the period of four
consecutive fiscal quarters then ended and (iii) stating whether any
Default exists and is continuing on the date of such certificate and, if
any Default then exists and is continuing, setting forth the details
thereof and the action which the Borrower is taking or proposes to take
with respect thereto;
(d) within five Domestic Business Days after any officer of the
Borrower obtains knowledge of any Default, if such Default is then
continuing, a certificate of the chief financial officer, the chief
accounting officer or the treasurer of the Borrower setting forth the
details thereof and the action which the Borrower is taking or proposes
to take with respect thereto;
(e) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) which the Borrower shall have filed
with the Securities and Exchange Commission;
(g) promptly upon the Borrower's obtaining knowledge thereof,
notice of each change in or withdrawal of the ratings of the Borrower's
senior unsecured long-term debt securities by either Moody's Investors
Service, Inc. and its successors or Standard & Poor's Ratings Services
and its successors and all information relating to such change or
withdrawal; and
(h) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as
the Administrative Agent, at the request of any Lender, may reasonably
request.
Information required to be delivered pursuant to subsections (a), (b), (e) or
(f) of this Section 5.01 shall be deemed to have been delivered on the date on
which the Borrower provides notice to the Lenders that such information has been
posted on the Borrower's website on the Internet at the website address listed
on the signature pages hereof or at sec.gov/edaux/searches.htm; provided that
such
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notice may be included in a certificate delivered pursuant to subsection (c) of
this Section 5.01 and provided further that the Borrower shall deliver paper
copies of the information referred to in subsections (a), (b), (e) or (f) of
this Section 5.01 to any Lender who requests such delivery.
Section 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective obligations and liabilities in excess of
$10,000,000 in any one case and in the aggregate in excess of $50,000,000
(including, without limitation, tax liabilities and claims of materialmen,
warehousemen and the like which if unpaid might by law give rise to a Lien),
except where the same may be contested in good faith by appropriate proceedings,
and will maintain, and will cause each Subsidiary to maintain, in accordance
with generally accepted accounting principles, appropriate reserves for the
accrual of any of the same.
Section 5.03. Maintenance of Property; Insurance. (a) The Borrower will
keep, and will cause each Subsidiary to keep, all property useful and necessary
in its business in good working order and condition, ordinary wear and tear
excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all
their respective properties in at least such amounts, against at least such
risks and with such risk retention as are usually maintained, insured against or
retained, as the case may be, in the same general area by companies of
established repute engaged in the same or a similar business.
Section 5.04. Conduct of Business and Maintenance of Existence. The
Borrower will continue, and will cause each Subsidiary to continue, to engage in
business in the same industry as the industry which the business now conducted
by the Borrower and its Subsidiaries is in, and will preserve, renew and keep in
full force and effect, and will cause each Subsidiary to preserve, renew and
keep in full force and effect their respective corporate existence and their
respective rights, privileges and franchises necessary or desirable in the
normal conduct of business; provided that nothing in this Section 5.04 shall
prohibit (i) the merger of a Subsidiary into the Borrower or the merger or
consolidation of a Subsidiary with or into another Person if the corporation
surviving such consolidation or merger is a Subsidiary and if, in each case,
after giving effect thereto, no Default shall have occurred and be continuing or
(ii) the termination of the corporate existence of any Subsidiary if the
Borrower in good faith determines that such termination is in
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the best interest of the Borrower and is not materially disadvantageous to the
Lenders.
Section 5.05. Compliance with Laws. The Borrower will comply, and cause
each Subsidiary to comply, with all applicable laws, ordinances, rules,
regulations, and requirements of Governmental Authorities (including, without
limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) except where (i) the necessity of compliance therewith is contested
in good faith by appropriate proceedings or (ii) noncompliance could not
reasonably be expected to have a Material Adverse Effect.
Section 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit,
and will cause each Subsidiary to permit, representatives of any Lender at such
Lender's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all at such reasonable
times during normal business hours and as often as may reasonably be desired,
subject to the provisions of Section 9.13.
Section 5.07. Mergers and Sales of Assets. The Borrower will not (i)
consolidate or merge with or into any other Person or (ii) sell, lease or
otherwise transfer, directly or indirectly, all or any substantial part of the
assets of the Borrower and its Subsidiaries, taken as a whole, to any other
Person; providedthat the Borrower may merge with another Person if (x) the
Borrower is the corporation surviving such merger and (y) after giving effect to
such merger, no Default shall have occurred and be continuing.
Section 5.08. Use of Proceeds. The proceeds of the Loans made under this
Agreement will be used by the Borrower for working capital and general corporate
purposes. None of such proceeds will be used in violation of Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System, as in effect from
time to time. None of such proceeds will be used for the acquisition of any
Person unless such acquisition is recommended by the Board of Directors (or
other persons performing similar functions) of such Person.
Section 5.09. Negative Pledge. Neither the Borrower nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
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(a) Liens securing obligations in respect of Synthetic Leases,
providedthat the lesser of (i) the value of the collateral subject to such Liens
or (ii) the face amount of the obligations secured thereby shall not exceed
$800,000,000;
(b) any Lien existing on any asset of any corporation at the time such
corporation becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien (including any such Lien arising pursuant to any capital
lease, conditional sale or other title retention arrangement) on any asset
securing Debt incurred or assumed for the purpose of financing all or any part
of the cost of acquiring or leasing such asset, provided that such Lien attaches
to such asset concurrently with or within 90 days after the acquisition or lease
thereof;
(d) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Borrower or a Subsidiary
and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
subsections of this Section, provided that the principal or face amount of such
Debt is not increased and such Debt is not then secured by any additional
assets;
(g) Liens arising in the ordinary course of its business which (i) do
not secure Debt or Derivatives Obligations, (ii) do not secure any obligation in
an amount exceeding $150,000,000 and (iii) do not in the aggregate materially
detract from the value of its assets or materially impair the use thereof in the
operation of its business;
(h) (x) Liens on marketable equity securities securing Derivatives
Obligations entered into in respect of such marketable equity securities and (y)
other Liens on cash, cash equivalents and marketable securities securing
Derivatives Obligations, provided that the aggregate value of the collateral
subject to Liens permitted by this subclause (y) may at no time exceed
$100,000,000;
(i) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Borrower in excess
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of those set forth by regulations promulgated by the Federal Reserve Board, and
(ii) such deposit account is not intended by the Borrower to provide collateral
to the depository institution; and
(j) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount at any date not
to exceed 5% of Consolidated Tangible Net Worth.
Section 5.10. Consolidated Tangible Net Worth. If at the last day of any
fiscal quarter the ratio of Consolidated EBIT to Consolidated Interest Expense
for the period of four consecutive fiscal quarters then ended is less than 6:1,
Consolidated Tangible Net Worth at such date shall be greater than the Minimum
Amount. For purposes of this Section 5.10, "Minimum Amount" means an amount
equal to the sum of (i) $2,800,000,000 plus (ii) an amount equal to 25% of
Consolidated Net Income for each fiscal quarter of the Borrower ending after
April 26, 1997 but prior to the date of determination, in each case, for which
Consolidated Net Income is positive (but with no deduction on account of
negative Consolidated Net Income for any fiscal quarter of the Borrower).
Section 5.11. Ratings. The Borrower has instructed S&P to disclose to
any Lender or the Administrative Agent, upon request, any private rating
assigned by S&P to the Borrower's senior unsecured long term debt securities.
The Borrower will take all actions necessary or that the Administrative Agent or
any Lender may request to ensure that any such rating will at all times be
available to any Lender or the Administrative Agent, upon request.
ARTICLE 6
Defaults
Section 6.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan or
shall fail to pay within five Domestic Business Days of the due date thereof any
interest, any fees or any other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant contained
in Sections 5.07, 5.08, and 5.10, or any covenant contained in Section 5.09,
solely with respect to Liens securing Debt or Derivative Obligations;
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(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by subsections
(a) or (b) above) for 30 days after written notice thereof has been given to the
Borrower by the Administrative Agent at the request of any Lender;
(d) any representation, warranty, certification or statement made by the
Borrower in this Agreement or in any certificate, financial statement or other
document delivered pursuant to this Agreement shall prove to have been incorrect
in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any applicable
grace period;
(f) any event or condition shall occur which results in the acceleration
of the maturity of any Material Debt;
(g) the Borrower or any Material Subsidiary shall commence a voluntary
Insolvency Proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary Insolvency Proceeding shall be commenced against the
Borrower or any Material Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Material Subsidiary under
the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $50,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the
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ERISA Group, any plan administrator or any combination of the foregoing; or the
PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or a default, within the meaning of
Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans
which could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $50,000,000;
(j) judgments or orders for the payment of money, which individually or
in the aggregate (net of applicable insurance for which the insurer has
acknowledged coverage) shall exceed $50,000,000 shall be rendered against the
Borrower or any Material Subsidiary and such judgments or orders shall continue
unsatisfied and unstayed for a period of 45 days; or
(k) any person or group of persons (within the meaning of Section 13 or
14 of the Securities Exchange Act of 1934, as amended) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of 35% or more of the
outstanding shares of common stock of the Borrower; or, during any period of 12
consecutive calendar months, individuals who were directors of the Borrower on
the first day of such period shall cease to constitute a majority of the board
of directors of the Borrower (other than as a result of death or disability);
then, and in every such event, the Administrative Agent shall (i) if requested
by the Required Lenders, by notice to the Borrower terminate the Commitments and
they shall thereupon terminate, and (ii) if requested by Lenders holding more
than 60% of the aggregate principal amount of the Loans, by notice to the
Borrower declare the Loans (together with accrued interest thereon) to be, and
the Loans shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; provided that in the case of any of the Events of
Default specified in clause 6.01(g) (other than a failure generally to pay debts
as they become due, or the taking of any corporate action to authorize the same)
or 6.01(h) above with respect to the Borrower, without any notice to the
Borrower or any other act by the Administrative Agent or the Lenders, the
Commitments shall thereupon terminate and the Loans (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower.
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Section 6.02. Notice of Default. The Administrative Agent shall give
written notice to the Borrower under Section 6.01(c) promptly upon being
requested to do so by any Lender and shall thereupon notify all the Lenders
thereof.
ARTICLE 7
The Agents
Section 7.01. Appointment and Authorization. Each Lender hereby
irrevocably (subject to Section 7.09) appoints, designates and authorizes each
Agent to take such action on its behalf under the provisions of this Agreement
and to exercise such powers and perform such duties as are expressly delegated
to such Agent by the terms of this Agreement, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement, neither Agent shall have any duties or
responsibilities, except those expressly set forth herein, nor shall either
Agent have or be deemed to have any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against either
Agent.
Section 7.02. Delegation of Duties. Each Agent may execute any of its
duties under this Agreement by or through agents, employees or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties. Neither Agent shall be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects with reasonable care.
Section 7.03. Liability of Agents. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any of the Lenders for any recital, statement,
representation or warranty made by the Borrower or any Subsidiary or Affiliate,
or any officer thereof, contained in this Agreement, or in any certificate,
report, statement or other document referred to or provided for in, or received
by either Agent under or in connection with, this Agreement, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, or
for any failure of the Borrower to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries or
Affiliates.
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Section 7.04. Reliance by Agents. Each Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Borrower), independent accountants and other experts selected by such
Agent in good faith. Each Agent shall be fully justified in failing or refusing
to take any action under this Agreement unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Each Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
in accordance with a request or consent of the Required Lenders and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all of the Lenders.
Section 7.05. Notice of Default. Each Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default, except with respect to
defaults in the payment of principal, interest and fees required to be paid to
such Agent for the account of the Lenders, unless such Agent shall have received
written notice from a Lender or the Borrower referring to this Agreement,
describing such Default and stating that such notice is a "notice of default".
Each Agent will notify the Lenders of its receipt of any such notice. The
Administrative Agent shall take such action with respect to such Default as may
be requested by the Required Lenders in accordance with Article 6; provided,
however, that unless and until the Administrative Agent has received any such
request, the Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default as it
shall deem advisable or in the best interest of the Lenders.
Section 7.06. Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by either Agent hereinafter taken, including any review of the affairs of
the Borrower and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to each Agent that it has, independently and without reliance
upon any Agent- Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries, and all applicable
Lenders regulatory laws relating to the transactions contemplated hereby, and
made its own decision to
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enter into this Agreement and to extend credit to the Borrower hereunder. Each
Lender also represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders by either
Agent, such Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Borrower which may come into the possession of any of the Agent-Related Persons.
Section 7.07. Indemnification of Agents. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrower and without limiting the obligation of the Borrower to do so), pro
rata, from and against any and all Indemnified Liabilities; provided, however,
that no Lender shall be liable for the payment to the Agent-Related Persons of
any portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender shall reimburse each Agent upon demand for its ratable share of any
costs or out-of-pocket expenses (including Attorney Costs) incurred by such
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, or any document contemplated by or
referred to herein, to the extent that such Agent is not reimbursed for such
expenses by or on behalf of the Borrower; provided that to the extent
indemnification payments made by the Lenders pursuant to this Section 7.07 are
subsequently recovered from or for the account of the Borrower, such Agent shall
promptly refund such previously paid indemnification payments to the Lenders .
The undertaking in this Section shall survive the payment of all obligations
hereunder and the resignation or replacement of one or both Agents.
Section 7.08. Agents in Individual Capacities. Each Agent and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with the
Borrower and its Subsidiaries and Affiliates as though Citicorp USA, Inc.
("Citicorp") and Morgan Guaranty Trust Company of New York ("MORGAN")
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were not Agents hereunder and without notice to or consent of the Lenders. The
Lenders acknowledge that, pursuant to such activities, each Agent or its
Affiliates may receive information regarding the Borrower or its Affiliates
(including information that may be subject to confidentiality obligations in
favor of the Borrower or such Subsidiary) and acknowledge that neither Agent
shall be under any obligation to provide such information to them. With respect
to its Loans, each of Morgan and Citicorp shall have the same rights and powers
under this Agreement as any other Lender and may exercise the same as though it
were not an Agent or the Issuing Lender, and the terms "Lender" and "Lenders"
include Morgan and Citicorp in their individual capacities.
Section 7.09. Successor Agents. Each Agent may resign as Agent upon 30
days' notice to the Lenders. If either Agent resigns under this Agreement, the
Required Lenders, with the consent of the Borrower (such consent not to be
unreasonably withheld), shall appoint from among the Lenders a successor agent
for the Lenders. If no successor agent is appointed prior to the effective date
of the resignation of either Agent, such Agent may appoint, after consulting
with the Lenders and the Borrower, a successor agent from among the Lenders.
Upon the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall include such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article 7 and Section 9.03 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement. If
no successor agent has accepted appointment as Agent by the date which is 30
days following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of such Agent hereunder until such time, if any, as
the Required Lenders appoint a successor agent as provided for above.
Section 7.10. Co-Agents. None of the Banks identified on the facing page
or the signature pages of this Agreement as a "Co-Agent" shall have any right,
power, obligation, liability, responsibility or duty under this Agreement other
than those applicable to all Banks as such. Without limiting the foregoing, none
of the Banks so identified as "Co-Agent" shall have or be deemed to have any
fiduciary relationship with any Bank. Each Bank acknowledges that it has not
relied and will not rely on any of the Banks so identified in deciding to enter
into this Agreement or in taking or not taking action hereunder.
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ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Unfair. If on or prior
to the first day of any Interest Period for any Euro-Dollar Loan or Money Market
LIBOR Loan, the Administrative Agent shall have determined that dollar deposits
in the principal amounts of such Loans are not generally available in the London
interbank market, or that the rates at which such dollar deposits are being
offered will not adequately and fairly reflect the cost to the Lenders of making
or maintaining their Euro-Dollar Loans during such Interest Period, or that
reasonable means do not exist for ascertaining the London Interbank Offered
Rate, the Administrative Agent shall forthwith give notice thereof to the
Borrower and the Lenders, whereupon until the Administrative Agent notifies the
Borrower that the circumstances giving rise to such suspension no longer exist,
(i) the obligations of the Lenders to make Euro-Dollar Loans, or to continue or
convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended and
(ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan
on the last day of the then current Interest Period applicable thereto. Unless
the Borrower notifies the Administrative Agent at least two Domestic Business
Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date, (i) if such
Fixed Rate Borrowing is a Euro-Dollar Borrowing, such Borrowing shall instead be
made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money
Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing
shall bear interest for each day from and including the first day to but
excluding the last day of the Interest Period applicable thereto at the Base
Rate for such day.
Section 8.02. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency, shall make it unlawful or impossible for any Lender (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Lender shall so notify the Administrative Agent, the Administrative Agent
shall forthwith give notice thereof to the other Lenders and the Borrower,
whereupon until the circumstances giving rise to such suspension no longer exist
(at which time such Lender shall so notify the Borrower and the Administrative
Agent), the obligation of such Lender to make Euro-Dollar Loans, or to continue
or convert outstanding
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Loans as or into Euro-Dollar Loans, shall be suspended. Before giving any notice
to the Administrative Agent pursuant to this Section, such Lender shall
designate a different Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of such Lender, be
otherwise disadvantageous to such Lender. If such notice is given, each
Euro-Dollar Loan of such Lender then outstanding shall be converted to a Base
Rate Loan either (a) on the last day of the then current Interest Period
applicable to such Euro-Dollar Loan if such Lender may lawfully continue to
maintain and fund such Loan as a Euro-Dollar Loan to such day or (b) immediately
if such Lender shall determine that it may not lawfully continue to maintain and
fund such Loan as a Euro-Dollar Loan to such day.
Section 8.03. Increased Cost and Reduced Return. (a) If on or after (x)
the date hereof, in the case of any Euro-Dollar Loan or any obligation to make
Euro-Dollar Loans or (y) the date of the related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall impose, modify or
deem applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
with respect to any Euro-Dollar Loan any such requirement with respect to which
such Lender is entitled to compensation during the relevant Interest Period
under Section 2.16), special deposit, insurance assessment or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (or its Applicable Lending Office) or shall impose on
any Lender (or its Applicable Lending Office) or on the London interbank market
any other condition affecting its Fixed Rate Loans, its Note (if any) or its
obligation to make Fixed Rate Loans, and the result of any of the foregoing is
to increase the cost to such Lender (or its Applicable Lending Office) of making
or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received
or receivable by such Lender (or its Applicable Lending Office) under this
Agreement or under its Note (if any) with respect thereto, by an amount deemed
by such Lender to be material, then, within 15 days after written demand by such
Lender (with a copy to the Administrative Agent), the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
increased cost or reduction.
(b) If any Lender shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
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or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Lender (or its Parent) as a consequence of such Lender's obligations
hereunder to a level below that which such Lender (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Lender to be material, then from time to time, within 15 days after
demand by such Lender (with a copy to the Administrative Agent), the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender (or its Parent) for such reduction.
(c) Each Lender will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Lender to compensation pursuant to this Section and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Lender, be otherwise disadvantageous to such Lender. Any Lender claiming
compensation under this Section shall provide the Borrower with a certificate
setting forth the additional amount or amounts to be paid to it hereunder and in
reasonable detail the event or events entitling such Lender to compensation and
the method of calculation of such compensation, which shall be conclusive in the
absence of manifest error. In determining such amount, such Lender may use any
reasonable averaging and attribution methods. If any Lender shall have
successfully contested the change in law, rule, regulation, interpretation,
administration, request or directive, as the case may be, for which the Borrower
has paid any amount under this Section 8.03 and as result of such contest such
Lender shall have received a refund of such amount (or any portion thereof),
such Lender shall refund to the Borrower such amount or portion thereof, net of
any costs incurred by such Lender with respect to such contest. Nothing in the
immediately preceding sentence shall be construed to require any Lender to
contest any such change. If any Lender claiming any increased cost or reduction
has changed its Applicable Lending Office as provided in this subsection or the
Borrower has elected that the provisions of Section 8.05 shall apply to such
Lender, the calculation of such increased costs or reduction payable by the
Borrower to such Lender pursuant to this Section for any date after the date
such change in Applicable Lending Office or such election has been made shall
take into account the effect of such change or election.
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Section 8.04. Taxes. (a) For the purposes of this Section, the following
terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Lender and the Administrative
Agent, taxes imposed on its income, and franchise or similar taxes imposed on
it, by a jurisdiction under the laws of which such Lender or the Administrative
Agent (as the case may be) is organized or in which its principal executive
office is located or, in the case of each Lender, in which its Applicable
Lending Office is located and (ii) in the case of each Lender, any United States
withholding tax imposed on such payments but only to the extent that such Lender
is subject to United States withholding tax at the time such Lender first
becomes a party to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes and
any other excise or property taxes, or similar charges or levies, which arise
from any payment made pursuant to this Agreement or under any Note or from the
execution or delivery of, or otherwise with respect to, this Agreement or any
Note.
(b) Any and all payments by the Borrower to or for the account of any
Lender or the Administrative Agent hereunder or under any Note shall be made
without deduction for any Taxes or Other Taxes; provided that, if the Borrower
shall be required by law to deduct any Taxes or Other Taxes from any such
payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section) such Lender or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions, (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, (iv) the
Borrower shall also pay to each Lender or the Administrative Agent for the
account of such Lender, at the time interest is paid, all additional amounts
which such Lender specifies as necessary to preserve the after-tax yield the
Lender would have received if such Taxes or Other Taxes had not been imposed and
(v) the Borrower shall furnish to the Administrative Agent, at its address
referred to in Section 9.01, the original or a certified copy of a receipt
evidencing payment thereof.
(c) The Borrower agrees to indemnify each Lender and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any
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jurisdiction on amounts payable under this Section) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be paid within 15 days after such Lender or the
Administrative Agent (as the case may be) makes demand therefor.
(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
or the Administrative Agent (but only so long as such Lender remains lawfully
able to do so), shall provide the Borrower and the Administrative Agent with
Internal Revenue Service form 1001 or 4224, as appropriate, or any successor
form prescribed by the Internal Revenue Service, certifying that such Lender is
entitled to benefits under an income tax treaty to which the United States is a
party which exempts the Lender from United States withholding tax or reduces the
rate of withholding tax on payments of interest for the account of such Lender
or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States.
(e) For any period with respect to which a Lender has failed to provide
the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such
failure is due to a change in treaty, law or regulation occurring subsequent to
the date on which such form originally was required to be provided), such Lender
shall not be entitled to indemnification under Section 8.04(b) or (c) with
respect to Taxes imposed by the United States solely as a result of such
failure; providedthat if a Lender, which is otherwise exempt from or subject to
a reduced rate of withholding tax, becomes subject to Taxes or additional Taxes
because of its failure to deliver a form required hereunder, the Borrower shall
take such steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes or additional Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this Section, then such Lender will change the
jurisdiction of its Applicable Lending Office if, in the sole judgment of such
Lender, such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not disadvantageous to such Lender.
Section 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.
If (i) the obligation of any Lender to make, or to continue or convert
outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to
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Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03 or
8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least
five Euro-Dollar Business Days' prior notice to such Lender through the
Administrative Agent, have elected that the provisions of this Section shall
apply to such Lender, then, unless and until the circumstances giving rise to
such suspension or demand for compensation no longer exist, all Loans which
would otherwise be made by such Lender as (or continued as or converted to)
Euro-Dollar Loans shall instead be Base Rate Loans (on which interest and
principal shall be payable contemporaneously with the related Fixed Rate Loans
of the other Lenders). If such Lender notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer exist, the principal amount of each such Base Rate Loan shall be
converted into a Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other
Lenders.
Section 8.06. Substitution of Lender. If (i) the obligation of any
Lender to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or
(ii) any Lender has demanded compensation under Section 8.03 or 8.04, the
Borrower shall have the right, with the assistance of the Administrative Agent,
to seek a mutually satisfactory substitute financial institution (which may be
one or more of the Lenders) to purchase the outstanding Loans of such Lender and
assume the Commitment of such Lender.
ARTICLE 9
Miscellaneous
Section 9.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to such party: (a) in the
case of the Borrower or the Agents, at the applicable address, facsimile number
or telex number set forth on the signature pages hereof, (b) in the case of any
Lender, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (c) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Administrative Agent and the Borrower. Each
such notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (iii) if given by mail, 72 hours after
such communication is deposited in
52
<PAGE> 58
the mails with first class postage prepaid, addressed as aforesaid or (iv) if
given by any other means, when delivered at the address specified in this
Section; provided that notices to the Administrative Agent under Article 2 or
Article 8 shall not be effective until actually received by the Administrative
Agent at the address specified for the Administrative Agent pursuant to this
Section.
Section 9.02. No Waiver. No failure or delay by either Agent or any
Lender in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
Section 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i)
all reasonable out-of-pocket expenses of the Agents, including (without
duplication) the fees and disbursements of special counsel for the Agents, in
connection with the preparation and administration of this Agreement, any waiver
or consent hereunder or any amendment hereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses
incurred by each Agent and each Lender, including (without duplication) the fees
and disbursements of outside counsel and the allocated cost of inside counsel,
in connection with such Event of Default and collection, bankruptcy, insolvency
and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Agent and each Lender, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto and whether or not such
proceeding is initiated by a party to this Agreement) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder (collectively, "Indemnified Liabilities"); provided
that no Indemnitee shall have the right to be indemnified hereunder for such
Indemnitee's own gross negligence or willful misconduct as determined by a court
of competent jurisdiction.
Section 9.04. Sharing of Set-offs. Each Lender agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest due with
respect to
53
<PAGE> 59
any Loan made by it which is greater than the proportion received by any other
Lender in respect of the aggregate amount of principal and interest due with
respect to any Loans made by such other Lender, the Lender receiving such
proportionately greater payment shall purchase such participations in the Loans
made by the other Lenders and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Loans made by the Lenders shall be shared by the Lenders pro rata; provided that
nothing in this Section shall impair the right of any Lender to exercise any
right of set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of the Borrower other than its
indebtedness hereunder. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Loan whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
Section 9.05. Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request specified
by Section 6.01 to direct the Agent to declare the Loans due and payable
pursuant to the provisions of Section 6.01, each Lender and each of its
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender or such Affiliate to or for
the credit or the account of the Borrower against any and all of the obligations
of the Borrower now or hereafter existing under this Agreement and the Loans
made by such Lender, whether or not such Lender shall have made any demand under
this Agreement and although such obligations may be unmatured. Each Lender
agrees promptly to notify the Borrower after any such set off and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender and its Affiliates under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Lender and its Affiliates may
have.
Section 9.06. Amendments and Waivers. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Required Lenders (and, if the
rights or duties of either Agent are affected thereby, by such Agent); provided
that no such amendment or waiver shall, unless signed by all the Lenders, (i)
except as contemplated by Section 2.15, increase or decrease the Commitment of
any Lender (except for a ratable decrease in the
54
<PAGE> 60
Commitments of all Lenders) or subject any Lender to any obligation in addition
to the obligations to which such Lender is subject hereunder on the Effective
Date, (ii) reduce the principal of or rate of interest on any Loan or any fees
hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any interest thereon or any fees hereunder or for any
scheduled termination of any Commitment or (iv) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Loans, or the
number of Lenders, which shall be required for the Lenders or any of them to
take any action under this Section or any other provision of this Agreement.
Section 9.07. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of all Lenders.
(b) Any Lender may at any time grant to one or more Lenders or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Lender of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agents, such Lender shall remain responsible for the
performance of its obligations hereunder, and the Borrower and the Agents shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. Any agreement pursuant to
which any Lender may grant such a participating interest shall provide that such
Lender shall retain the sole right and responsibility to enforce the obligations
of the Borrower hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of this Agreement;
provided that such participation agreement may provide that such Lender will not
agree to any modification, amendment or waiver of this Agreement described in
clause (i), (ii), or (iii) of Section 9.06 without the consent of the
Participant. The Borrower agrees that each Lender shall be entitled to the
benefits of Section 2.13 and Article 8 without regard to whether it has granted
any participating interests, and that all amounts payable to a Lender for the
account of a Participant under Section 2.13 and Article 8 shall be determined as
if such Lender had not granted a participating interest to such Participant. An
assignment or other transfer which is not permitted by subsection (c) or (d)
below shall be given effect for purposes of this Agreement only to the extent of
a participating interest granted in accordance with this subsection (b).
(c) Any Lender may at any time assign to one or more Eligible Assignees
all, or a proportionate part (equivalent to an initial Commitment of not
55
<PAGE> 61
less than $10,000,000) of all, of its rights and obligations under this
Agreement and the Notes, and each such Eligible Assignee shall assume such
rights and obligations, pursuant to an Assignment and Assumption Agreement in
substantially the form of Exhibit G hereto executed by such Eligible Assignee
and such transferor Lender, with (and subject to) the subscribed consent of the
Borrower and the Administrative Agent (which consents shall not be unreasonably
withheld); provided that if an Eligible Assignee is an Affiliate of such
transferor Lender or was a Lender immediately prior to such assignment, no such
consent shall be required; and provided further that such assignment may, but
need not, include rights of the transferor Lender in respect of outstanding
Money Market Loans. Upon execution and delivery of such instrument and payment
by such Eligible Assignee to such transferor Lender of an amount equal to the
purchase price agreed between such transferor Lender and such Eligible Assignee,
such Eligible Assignee shall be a Lender party to this Agreement and shall have
all the rights and obligations of a Lender with a Commitment as set forth in
such instrument of assumption, and the transferor Lender shall be released from
its obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Lender, the Administrative Agent
and the Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to the Eligible Assignee. In connection with any such assignment,
the transferor Lender shall pay to the Administrative Agent an administrative
fee for processing such assignment in the amount of $2,500. If the Eligible
Assignee is not incorporated under the laws of the United States of America or a
state thereof, it shall deliver to the Borrower and the Agent certification as
to exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 8.04.
(d) Any Lender may at any time assign all or any portion of its rights
under this Agreement and the Notes to a Federal Reserve Bank. No such assignment
shall release the transferor Lender from its obligations hereunder.
(e) No Eligible Assignee, Participant or other transferee of any
Lender's rights shall be entitled to receive any greater payment under Section
8.03 or 8.04 than such Lender would have been entitled to receive with respect
to the rights transferred, unless such transfer is made with the Borrower's
prior written consent or by reason of the provisions of Section 8.02, 8.03 or
8.04 requiring such Lender to designate a different Applicable Lending Office
under certain circumstances or at a time when the circumstances giving rise to
such greater payment did not exist.
(f) The Administrative Agent, on behalf of the Borrower, shall maintain
at the address of the Administrative Agent a copy of each Assignment and
56
<PAGE> 62
Assumption Agreement delivered to it and a record of the names and addresses of
the Lenders and the Commitments of and principal amounts of the Loans owing to,
each Lender from time to time. Such record shall be conclusive, in the absence
of manifest error, and the Borrower, the Administrative Agent and the Lenders
shall treat each Person whose name is recorded as the owner of a Loan or other
obligation hereunder as the owner thereof for all purposes of this Agreement,
notwithstanding any notice to the contrary or anything to the contrary in this
Agreement. Any assignment of any Loan or other right or obligation hereunder
shall be effective, in the absence of manifest error, only upon appropriate
records with respect thereto being made by the Administrative Agent,
notwithstanding anything to the contrary in this Agreement. Such records shall
be available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
Section 9.08. Collateral. Each of the Lenders represents to each Agent
and each of the other Lenders that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
Section 9.09. Governing Law; Submission to Jurisdiction. This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York, without reference to its conflicts of law principles. The
Borrower hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York and of any New York State
court sitting in New York City for purposes of all legal proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
Section 9.10. Counterparts; Integration; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Documentation Agent of
counterparts hereof signed by each of the parties hereto (or, in the case of any
party as to which an executed counterpart shall not have been received, receipt
by the Documentation Agent in form satisfactory to it of telegraphic, telex,
facsimile
57
<PAGE> 63
or other written confirmation from such party of execution of a counterpart
hereof by such party).
Section 9.11. Consequences of Effectiveness; Transitional Provisions.
(a) On the Effective Date, the commitments under the Existing Agreement shall
terminate without further action by any party thereto. The Administrative Agent
will promptly notify each of the other parties hereto and to the Existing
Agreement of the effectiveness of this Agreement.
(b) Concurrently with the effectiveness of this Agreement, the Borrower
shall (i) prepay in full (including accrued and unpaid interest thereon to, but
excluding, the Effective Date) (x) all "Money Market Loans" outstanding under
the Existing Agreement made by "Banks" under the Existing Agreement which are
not Lenders hereunder and (y) all Committed Loans outstanding under the Existing
Agreement and (ii) surrender, or cause to be surrendered, for cancellation any
"Letters of Credit" issued and outstanding under the Existing Agreement. Any
"Money Market Loans" outstanding under the Existing Agreement on the Effective
Date made by Lenders parties to this Agreement shall remain outstanding as Money
Market Loans hereunder on the terms previously established with respect thereto
under the Existing Agreement. Concurrently with the effectiveness of this
Agreement, the Borrower shall pay all accrued and unpaid letter of credit and
facility fees under the Existing Agreement to, but excluding, the Effective
Date.
(c) The Lenders which are parties to the Existing Agreement, comprising
the "Required Banks" as defined therein, hereby waive any requirement of notice
of termination of the "Commitments" as defined therein pursuant to Section 2.09
thereof and any restriction on prepayment of "Money Market Loans" as defined
therein to the extent necessary to give effect to the subsections (a) and (b)
above, provided that any such prepayment of such Money Market Loans shall be
subject to Section 2.13 of the Existing Agreement.
Section 9.12. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENTS AND
THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.13. Confidentiality. Each of the Agents and the Lenders shall
keep confidential any information provided by Borrower or any Subsidiary or
Affiliate of the Borrower and clearly identified as confidential; provided that
58
<PAGE> 64
nothing herein shall prevent any Agent or any Lender from disclosing such
information (i) to its officers, directors, employees, agents, attorneys,
auditors (internal or independent), accountants and Affiliates who have a need
to know such information in accordance with customary banking practices and who
receive such information having been made subject to the restrictions set forth
in this Section, (ii) upon the order of a court or administrative agency, (iii)
upon request or demand of any regulatory agency or authority having jurisdiction
over such party and authority to compel disclosure of such information, (iv)
which has become publicly available without breach of any agreement between the
parties hereto, including this Agreement, (v) as necessary for the exercise of
any remedy under this Agreement, (vi) subject to provisions similar to those
contained in this Section, to any prospective Participant or Eligible Assignee,
(vii) when required to do so in accordance with the provisions of any applicable
law, (viii) to the extent reasonably required in connection with any litigation
or proceeding between the Borrower and any Agent, any Lender or their respective
Affiliates or (ix) as to any Lender or any of its Affiliates, as expressly
permitted under the terms of any document or agreement regarding confidentiality
to which the Borrower or any Subsidiary is party or is deemed party with such
Lender or such Affiliate.
59
<PAGE> 65
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CISCO SYSTEMS, INC.
By: [SIG]
-------------------------------------
Name: David Rogan
Title: Treasurer
Address: Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
Telephone: 408-526-8211
Facsimile: 408-526-4545
Website:
http://www.cisco.com
Attention: Treasurer
CITICORP USA, INC., as Administrative
Agent
By:
-------------------------------------
Name:
Title:
Address: Citibank, N.A.
1 Court Street/7th Floor,
Zone 1
Long Island City, NY 11120
Telephone: 718-248-4520
Facsimile: 718-248-4844
Attention: Christopher Di Biase
<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CISCO SYSTEMS, INC.
By:
-------------------------------------
Name: David Rogan
Title: Treasurer
Address: Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
Telephone: 408-526-8211
Facsimile: 408-526-4545
Website:
http://www.cisco.com
Attention: Treasurer
CITICORP USA, INC., as Administrative
Agent
By: [SIG]
-------------------------------------
Name: Anita J. Brickell
Title: Attorney-in-Fact
Address: Citibank, N.A.
1 Court Street/7th Floor,
Zone 1
Long Island City, NY 11120
Telephone: 718-248-4520
Facsimile: 718-248-4844
Attention: Christopher Di Biase
<PAGE> 67
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CISCO SYSTEMS, INC.
By: [SIG]
-------------------------------------
Name: David Rogan
Title: Treasurer
Address: Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
Telephone: 408-526-8211
Facsimile: 408-526-4545
Website:
http://www.cisco.com
Attention: Treasurer
CITICORP USA, INC., as Administrative
Agent
By:
-------------------------------------
Name:
Title:
Address: Citibank, N.A.
1 Court Street/7th Floor,
Zone 1
Long Island City, NY 11120
Telephone: 718-248-4520
Facsimile: 718-248-4844
Attention: Christopher Di Biase
<PAGE> 68
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CISCO SYSTEMS, INC.
By:
-------------------------------------
Name: David Rogan
Title: Treasurer
Address: Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
Telephone: 408-526-8211
Facsimile: 408-526-4545
Website:
http://www.cisco.com
Attention: Treasurer
CITICORP USA, INC., as Administrative
Agent
By: [SIG]
-------------------------------------
Name: Anita J. Brickell
Title: Attorney-in-Fact
Address: Citibank, N.A.
1 Court Street/7th Floor,
Zone 1
Long Island City, NY 11120
Telephone: 718-248-4520
Facsimile: 718-248-4844
Attention: Christopher Di Biase
<PAGE> 69
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Documentation Agent
By: [SIG]
-------------------------------------
Name: Jeffrey Hwang
Title: Vice President
Address: J.P. Morgan
60 Wall Street
New York, NY 10260
Telex: 177615 MGT UT
Telephone: 212-648-7638
Facsimile: 212-648-5014
Attention:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, as Co-Agent
By:
-------------------------------------
Name:
Title:
Address:
Telephone:
Facsimile:
Attention:
THE CHASE MANHATTAN BANK, as
Co-Agent
By:
-------------------------------------
Name:
Title:
Address: 270 Park Avenue, 10th Floor
New York, NY 10017
Telephone: 212-270-5730
Facsimile: 212-270-5172
Attention:
<PAGE> 70
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Documentation Agent
By:
-------------------------------------
Name:
Title:
Address: J.P. Morgan
60 Wall Street
New York, NY 10260
Telex: 177615 MGT UT
Telephone: 212-648-7638
Facsimile: 212-648-5014
Attention:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, as Co-Agent
By: [SIG]
-------------------------------------
Name: Roger J. Fleischmann Jr.
Title: Vice President
Address: 555 California St., 41st Floor
San Francisco, CA 94104
Telephone: 415-622-4571
Facsimile: 415-622-2514
Attention: Michael McCutchin
THE CHASE MANHATTAN BANK, as
Co-Agent
By:
-------------------------------------
Name:
Title:
Address: 270 Park Avenue, 10th Floor
New York, NY 10017
Telephone: 212-270-5730
Facsimile: 212-270-5172
Attention:
<PAGE> 71
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Documentation Agent
By:
-------------------------------------
Name:
Title:
Address: J.P. Morgan
60 Wall Street
New York, NY 10260
Telex: 177615 MGT UT
Telephone: 212-648-7638
Facsimile: 212-648-5014
Attention:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, as Co-Agent
By:
-------------------------------------
Name:
Title:
Address:
Telephone:
Facsimile:
Attention:
THE CHASE MANHATTAN BANK, as
Co-Agent
By: [SIG]
-------------------------------------
Name: Joan F. Garvin
Title: Managing Director
Address: 270 Park Avenue, 10th Floor
New York, NY 10017
Telephone: 212-270-5730
Facsimile: 212-270-5172
Attention:
61
<PAGE> 72
Commitments:
$45,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: [SIG]
-------------------------------------
Name: Jeffrey Hwang
Title: Vice President
$45,000,000 CITICORP USA, INC.
By:
-------------------------------------
Name:
Title:
$40,000,000 BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By:
-------------------------------------
Name:
Title:
$40,000,000 THE CHASE MANHATTAN BANK
By:
-------------------------------------
Name:
Title:
<PAGE> 73
Commitments:
$45,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
-------------------------------------
Name:
Title:
$45,000,000 CITICORP USA, INC.
By: [SIG]
-------------------------------------
Name: Anita J. Brickell
Title: Attorney-in-Fact
$40,000,000 BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By:
-------------------------------------
Name:
Title:
$40,000,000 THE CHASE MANHATTAN BANK
By:
-------------------------------------
Name:
Title:
<PAGE> 74
Commitments:
$45,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
-------------------------------------
Name:
Title:
$45,000,000 CITICORP USA, INC.
By:
-------------------------------------
Name:
Title:
$40,000,000 BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By: [SIG]
-------------------------------------
Name: Roger J. Fleischmann, Jr.
Title: Vice President
$40,000,000 THE CHASE MANHATTAN BANK
By:
-------------------------------------
Name:
Title:
<PAGE> 75
Commitments:
$45,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
-------------------------------------
Name:
Title:
$45,000,000 CITICORP USA, INC.
By:
-------------------------------------
Name:
Title:
$40,000,000 BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By:
-------------------------------------
Name:
Title:
$40,000,000 THE CHASE MANHATTAN BANK
By: [SIG]
-------------------------------------
Name: Joan F. Garvin
Title: Vice President
<PAGE> 76
$30,000,000 BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: [SIG]
-------------------------------------
Name: Michael C. Irwin
Title: Vice President
$30,000,000 DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN
ISLANDS BRANCH
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
$30,000,000 MARINE MIDLAND BANK
By:
-------------------------------------
Name:
Title:
$30,000,000 ROYAL BANK OF CANADA
By:
-------------------------------------
Name:
Title:
<PAGE> 77
$30,000,000 BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By:
-------------------------------------
Name:
Title:
$30,000,000 DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN
ISLANDS BRANCH
By: [SIG]
-------------------------------------
Name: Ralf Hoffmann
Title: Vice President
By: [SIG]
-------------------------------------
Name: Andreas Neumeier
Title: Vice President
$30,000,000 MARINE MIDLAND BANK
By:
-------------------------------------
Name:
Title:
$30,000,000 ROYAL BANK OF CANADA
By:
-------------------------------------
Name:
Title:
<PAGE> 78
$30,000,000 BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By:
-------------------------------------
Name:
Title:
$30,000,000 DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN
ISLANDS BRANCH
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
$30,000,000 MARINE MIDLAND BANK
By: [SIG]
-------------------------------------
Name: William M. Holland
Title: Vice President
$30,000,000 ROYAL BANK OF CANADA
By:
-------------------------------------
Name:
Title:
<PAGE> 79
$30,000,000 BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By:
-------------------------------------
Name:
Title:
$30,000,000 DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN
ISLANDS BRANCH
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
$30,000,000 MARINE MIDLAND BANK
By:
-------------------------------------
Name:
Title:
$30,000,000 ROYAL BANK OF CANADA
By: [SIG]
-------------------------------------
Name: Michael A. Cole
Title: Manager
<PAGE> 80
$30,000,000 THE SUMITOMO BANK, LIMITED
By: [SIG]
-------------------------------------
Name: Kozo Masaki
Title: General Manager
$30,000,000 UNION BANK OF SWITZERLAND
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
$25,000,000 BANKBOSTON, N.A.
By:
-------------------------------------
Name:
Title:
$25,000,000 THE BANK OF NEW YORK
By:
-------------------------------------
Name:
Title:
<PAGE> 81
$30,000,000 THE SUMITOMO BANK, LIMITED
By:
-------------------------------------
Name:
Title:
$30,000,000 UNION BANK OF SWITZERLAND
By: [SIG]
-------------------------------------
Name: Hamilton W. Bullard
Title: Assistant Treasurer
By: [SIG]
-------------------------------------
Name: Bruce T. Richards
Title: Managing Director
$25,000,000 BANKBOSTON, N.A.
By:
-------------------------------------
Name:
Title:
$25,000,000 THE BANK OF NEW YORK
By:
-------------------------------------
Name:
Title:
<PAGE> 82
$30,000,000 THE SUMITOMO BANK, LIMITED
By:
-------------------------------------
Name:
Title:
$30,000,000 UNION BANK OF SWITZERLAND
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
$25,000,000 BANKBOSTON, N.A.
By: [SIG]
-------------------------------------
Name: Daniel G. Head, Jr.
Title: Vice President
$25,000,000 THE BANK OF NEW YORK
By:
-------------------------------------
Name:
Title:
<PAGE> 83
$30,000,000 THE SUMITOMO BANK, LIMITED
By:
-------------------------------------
Name:
Title:
$30,000,000 UNION BANK OF SWITZERLAND
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
$25,000,000 BANKBOSTON, N.A.
By:
-------------------------------------
Name:
Title:
$25,000,000 THE BANK OF NEW YORK
By: [SIG]
-------------------------------------
Name: Bruce C. Miller
Title: Senior Vice President
<PAGE> 84
$25,000,000 CREDITO ITALIANO SpA
By: [SIG]
-------------------------------------
Name: Harmon P. Butler
Title: First Vice President & Deputy
Manager
By: [SIG]
-------------------------------------
Name: Saiyed A. Abbas
Title: Assistant Vice President
$25,000,000 THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By:
-------------------------------------
Name:
Title:
$25,000,000 MELLON BANK, N.A.
By:
-------------------------------------
Name:
Title:
<PAGE> 85
$25,000,000 CREDITO ITALIANO SpA
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
$25,000,000 THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By: [SIG]
-------------------------------------
Name: Ninoos Y. Benjamin
Title: Vice President
$25,000,000 MELLON BANK, N.A.
By:
-------------------------------------
Name:
Title:
<PAGE> 86
$25,000,000 CREDITO ITALIANO SpA
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
$25,000,000 THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By:
-------------------------------------
Name:
Title:
$25,000,000 MELLON BANK, N.A.
By: [SIG]
-------------------------------------
Name: Sean C. Gannon
Title: Assistant Vice President
<PAGE> 87
$25,000,000 WELLS FARGO BANK, N.A.
By: [SIG]
-------------------------------------
Name: Edith R. Lim
Title: Vice President
By: [SIG]
-------------------------------------
Name: Todd W. Wuertz
Title: Assistant Vice President
-----------------
Total: $500,000,000
<PAGE> 88
PRICING SCHEDULE
Each of "Euro-Dollar Margin" and "Facility Fee Rate" for any date, the
rate set forth in the column below such term and in the row corresponding to the
Pricing Level that applies at such date:
<TABLE>
<CAPTION>
EURO-DOLLAR FACILITY FEE
PRICING LEVEL MARGIN RATE
----------------------------------------
<S> <C> <C>
Level I+ .1100% .0500%
----------------------------------------
Level I .1200% .0550%
----------------------------------------
Level II+ .1200% .0550%
----------------------------------------
Level II .1275% .0600%
----------------------------------------
Level III+ .1275% .0600%
----------------------------------------
Level III .1300% .0700%
----------------------------------------
Level IV+ .1300% .0700%
----------------------------------------
Level IV .1700% .0800%
----------------------------------------
Level V+ .1900% .1100%
----------------------------------------
Level V .2500% .1250%
----------------------------------------
Level VI .3500% .2000%
----------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"APPLICABLE NET INCOME" means, at any date, Consolidated Net Income for
the period of four consecutive fiscal quarters reflected in the then most recent
certificate delivered by the Borrower pursuant to Section 5.01(c); provided that
for any period during which a Default exists under Section 5.01(c), Applicable
Net Income shall be deemed to be less than $1,000,000,000.
<PAGE> 89
"APPLICABLE NET QUALIFYING ASSETS" means, at any date, the amount of Net
Qualifying Assets reflected in the then most recent certificate delivered by the
Borrower pursuant to Section 5.01(c); provided that for any period during which
a Default exists under Section 5.01(c), Applicable Net Qualifying Assets shall
be deemed to be less than $2,000,000,000.
"LEVEL I+ PRICING" applies at any date if, at such date (a) the
Borrower's senior unsecured long-term debt securities are rated A+ or higher by
S&P or A1 or higher by Moody's (subject to the concluding paragraph of this
Schedule) and(b) Applicable Net Income is $2,500,000,000 or greater and
Applicable Net Qualifying Assets is $5,000,000,000 or greater and (c) such date
is an Upgrade Date.
"LEVEL I PRICING" applies at any date if, at such date, Test (a) for
Level I+ Pricing is met but either Test (b) or Test (c) is not.
"LEVEL II+ PRICING" applies at any date if, at such date (i) (a) the
Borrower's senior unsecured long-term debt securities are rated A or higher by
S&P or A2 or higher by Moody's (subject to the concluding paragraph of this
Schedule) and (b) Applicable Net Income is $2,000,000,000 or greater
andApplicable Net Qualifying Assets is $4,000,000,000 or greater and (c) such
date is an Upgrade Date and (ii) Test (a) for Level I+ Pricing is not met.
"LEVEL II PRICING" applies at any date if, at such date, Test (a) for
Level II+ Pricing is met but either Test (b) or Test (c) is not.
"LEVEL III+ PRICING" applies at any date if, at such date, (i)(a) the
Borrower's senior unsecured long-term debt securities are rated A- or higher by
S&P or A3 or higher by Moody's (subject to the concluding paragraph of this
Schedule) and (b) Applicable Net Income is $1,500,000,000 or greater
andApplicable Net Qualifying Assets is $3,000,000,000 or greater and (c) such
date is an Upgrade Date and (ii) Test (a) for Level II+ Pricing is not met.
"LEVEL III PRICING" applies at any date if, at such date, Test (a) for
Level III+ Pricing is met but either Test (b) or Test (c) is not.
2
<PAGE> 90
"LEVEL IV+ PRICING" applies at any date if, at such date, (i)(a) the
Borrower's senior unsecured long-term debt securities are rated BBB+ or higher
by S&P or Baa1 or higher by Moody's (subject to the concluding paragraph of this
Schedule) and (b) Applicable Net Income is $1,000,000,000 or greater
andApplicable Net Qualifying Assets is $2,500,000,000 or greater and (c) such
date is an Upgrade Date and (ii) Test (a) Level III+ Pricing is not met.
"LEVEL IV PRICING" applies at any date if, at such date, Test (a) for
Level IV+ Pricing is met but either Test (b) or Test (c) is not.
"LEVEL V+ PRICING" applies at any date if, at such date, (i)(a) the
Borrower's senior unsecured long-term debt securities are rated BBB- or higher
by S&P or Baa3 or higher by Moody's (subject to the concluding paragraph of this
Schedule) and (b) Applicable Net Income is $1,000,000,000 or greater
andApplicable Net Qualifying Assets is $2,000,000,000 or greater and (c) such
date is and Upgrade Date and (ii) Test (a) for Level IV+ Pricing is not met.
"LEVEL V PRICING" applies at any date if, at such date, Test (a) for
Level V+ Pricing is met but either Test (b) or Test (c) is not.
"LEVEL VI PRICING" applies at any date if, at such date, no other
Pricing Level applies.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"PRICING LEVEL" refers to each of the respective levels set forth in the
column headed "Pricing Level" in the table above.
"S&P" means Standard & Poor's Ratings Services and its successors.
"TEST" means the respective criteria set forth in clause (or subclause)
(a) or (b) in the definition of a particular Pricing Level above.
"UPGRADE DATE" means any date after the date on which the Borrower
delivers the documents required to be delivered under Section 5.01(c) for the
fiscal quarter ending January 24, 1998.
3
<PAGE> 91
The credit ratings to be utilized for purposes of this Schedule are those
assigned by S&P or Moody's to the senior unsecured long-term debt securities of
the Borrower without third-party credit enhancement (including without
limitation any private rating) and any rating assigned to any other debt
security of the Borrower shall be disregarded. The rating in effect at any date
is that in effect at the close of business on such date. In the case of split
ratings from S&P and Moody's, the rating to be used to determine which Pricing
Level is the higher of the two (e.g. A-/Baa1 meets Test (a) for Level III+
Pricing), provided that if the split is more than one full category, the average
(or the higher of two intermediate ratings) shall be used (e.g., A+/A3 meets
Test (a) for Level II+ Pricing but not for Level I+ Pricing).
4
<PAGE> 92
EXHIBIT A - Note
NOTE
New York, New York
___________ __, 199_
For value received, CISCO SYSTEMS, INC., a California corporation (the
"Borrower"), promises to pay to the order of ______________________ (the
"Lender"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Lender to the Borrower pursuant to the
Credit Agreement referred to below on the maturity date provided for in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of each such Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and interest shall be made
in lawful money of the United States in Federal or other immediately available
funds at the office of Citicorp USA, Inc., 1 Court Street, 7th Floor, Zone 1,
Long Island City, NY, 11120.
All Loans made by the Lender, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Lender and, if the Lender so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Loan then outstanding may be endorsed by the Lender on
the schedule attached hereto, or on a continuation of such schedule attached to
and made a part hereof; provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated
as of July 2, 1997 among Cisco Systems, Inc., the banks listed on the signature
pages thereof, Citicorp USA, Inc., as Administrative Agent, and Morgan Guaranty
Trust Company of New York, as Documentation Agent (as the same may be amended
from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to
5
<PAGE> 93
the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
CISCO SYSTEMS, INC.
By______________________________
Name:
Title:
2
<PAGE> 94
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Type Amount of
of of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
3
<PAGE> 95
EXHIBIT B - Money Market Quote Request
Form of Money Market Quote Request
[Date]
To: Citicorp USA, Inc. (the "Administrative Agent")
From: Cisco Systems, Inc.
Re: Credit Agreement (the "Credit Agreement") dated as of July 2, 1997
among Cisco Systems, Inc., the Lenders listed on the signature pages
thereof, Citicorp USA, Inc., the Administrative Agent, and Morgan
Guaranty Trust Company of New York, as Documentation Agent
We hereby give notice pursuant to Section 2.03 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount(1) Interest Period(2)
- ---------------- ------------------
$
- ----------------
(1) Amount must be $10,000,000 or a larger multiple of $1,000,000.
(2) Not less than one month (LIBOR Auction) or not less than 14 days or more
than 366 days (Absolute Rate Auction), subject to the provisions of the
definition of Interest Period. No more than three different Interest
Periods.
<PAGE> 96
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms
used herein have the meanings assigned to them in the Credit Agreement.
CISCO SYSTEMS, INC.
By____________________________
Name:
Title:
2
<PAGE> 97
EXHIBIT C - Invitation for Money Market Quotes
Form of Invitation for Money Market Quotes
To: [Name of Lender]
Re: Invitation for Money Market Quotes to [Name of Borrower] (the "Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated as of July 2,
1997 among Cisco Systems, Inc., the Lenders parties thereto, Citicorp USA, Inc.,
as Administrative Agent, Morgan Guaranty Trust Company of New York, as
Documentation Agent, we are pleased on behalf of the Borrower to invite you to
submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [1:00 P.M.] [9:30
A.M.] (San Francisco, California time) on [date].
Citicorp USA, Inc., as Administrative Agent
By________________________________
Authorized Officer
<PAGE> 98
EXHIBIT D - Money Market Quote
Form of Money Market Quote
To: Citicorp USA, Inc., as Administrative Agent
Re: Money Market Quote to Cisco Systems, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Lender: ________________________________
2. Person to contact at Quoting Lender:
-----------------------------
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
<TABLE>
<CAPTION>
Principal Interest Money Market [Absolute
Amount** Period*** [Margin****] Rate*****]
<S> <C> <C> <C>
$
$
</TABLE>
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed
$____________.]**
- ----------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal amount
requested. Specify aggregate limitation if the sum of the individual offers
exceeds the
(notes continued on following page)
<PAGE> 99
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of July 2, 1997 among Cisco Systems, Inc., the Lenders listed on the
signature pages thereof, yourselves, as Administrative Agent, and Morgan
Guaranty Trust Company of New York, as Documentation Agent irrevocably obligates
us to make the Money Market Loan(s) for which any offer(s) are accepted, in
whole or in part.
Very truly yours,
[NAME OF LENDER]
Dated:_______________ By:__________________________
Authorized Officer
- ----------
amount the Lender is willing to lend. Bids must be made for $10,000,000 or a
larger multiple of $1,000,000.
*** Not less than one month or not less than 7 days or more than 365 days, as
specified in the related Invitation. No more than five bids are permitted for
each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE> 100
EXHIBIT E - Opinion of Counsel for the Borrower
OPINION OF
COUNSEL FOR THE BORROWER
[LETTERHEAD OF BROBECK, PHLEGER & HARRISON LLP]
______________, 1997
To the Agents and the Lenders
party to the Credit Agreement
referred to below
Re: Cisco Systems, Inc.
-------------------
Ladies and Gentlemen:
This opinion letter is furnished to you pursuant to Section 3.01(b) of
the Credit Agreement dated as of July 2, 1997 (the "CREDIT AGREEMENT") among
Cisco Systems, Inc., a California corporation, as borrower (the "COMPANY"), the
Lenders party thereto (collectively, the "LENDERS"), Citicorp USA, Inc., as
Administrative Agent, Morgan Guaranty Trust Company of New York, as
Documentation Agent and Bank of America National Trust and Savings Association
and the Chase Manhattan Bank, as Co-Agents. We have acted as counsel for the
Company in connection with the Credit Agreement. Unless otherwise defined
herein, terms used herein shall have the meanings assigned to them in the Credit
Agreement.
In connection with this opinion letter, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates, including certificates of public officials, and
other instruments as we have deemed necessary or advisable for purposes of this
opinion letter, including those relating to the authorization, execution and
delivery of the Credit Agreement. In addition, we have examined the following
documents (the items referred to in subclauses (i) and (ii) below herein
referred to as the "CREDIT DOCUMENTS"):
<PAGE> 101
(i) an executed copy of the Credit Agreement;
(ii) the form of Note to be delivered by the Company in favor of
a Lender pursuant to the Credit Agreement;
(iii) the Articles of Incorporation and the Bylaws of the
Company, each as in effect on the date hereof;
(iv) an executed copy of the certificate of the [Assistant]
Secretary of the Company dated July 2, 1997 certifying: a true copy of
the resolutions of the Board of Directors of the Company, adopted on
__________, 1997, authorizing, among other things, the execution,
delivery and performance of the Credit Documents, and the incumbency,
authority and true signatures of the officers of the Company authorized
to sign the Credit Documents and any other documents and certificates
delivered in connection therewith;
(v) an executed copy of the certificate (the "Officer's
Certificate") of the Secretary [and the ______________] of the Company,
dated July 2, 1997 ; and
(vi) such other documents as we have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed.
We have also examined photostatic or facsimile copies of the agreements
identified in Exhibit A to the Officer's Certificate (the "Material Agreements")
[and the consents received from ___________ in connection with the Material
Agreements]. In our examination and review we have assumed the genuineness of
all signatures, the legal capacity of natural persons, the authenticity of the
documents submitted to us as originals, the conformity to the original documents
of all documents submitted to us as certified, facsimile or photostatic copies,
and the authenticity of the originals of such copies. As to any facts material
to the opinions hereinafter expressed which we did not independently establish
or verify, we have relied without investigation upon certificates, statements
and representations of representatives of the Company. Regarding documents
executed by parties other than the Company, we have assumed (i) that each such
other party had the power to enter into and perform all its obligations
thereunder, (ii) the due authorization, execution and delivery of such documents
by each such party, and (iii) that such documents constitute the legal, valid
and binding obligations of each such party.
2
<PAGE> 102
With respect to our opinion in paragraph 1 below, we are relying solely
on our review and examination of the certificate received from the Secretary of
State of the State of California, without further investigation of the corporate
records of the Company.
Based upon and subject to the foregoing, and subject to the further
assumptions, limitations, qualifications and exceptions set forth herein, we are
of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of California with the corporate
power and authority to own its properties and to carry on its business as, to
our knowledge, it is now conducted.
2. The Company has the corporate power and authority to enter into and
perform the Credit Documents, and has taken all necessary corporate action to
authorize the execution, delivery and performance of the Credit Documents.
3. No consents, approvals or authorizations of, or notices to or filings
with, any governmental authority or agency under the laws of the State of
California or the laws of the United States, as presently in effect and
interpreted, are required or necessary on the part of the Company in connection
with the execution and delivery by the Company of the Credit Documents.
4. The Credit Agreement is, and the Notes when executed and delivered by
the Company under the Credit Agreement will be, the legal, valid and binding
obligations of the Company, enforceable by the Agents and the Lenders against
the Company in accordance with their respective terms.
5. The execution or delivery by the Company of the Credit Documents will
not (i) violate or be in conflict with any provision of the Articles of
Incorporation or Bylaws of the Company, (ii) to our knowledge, violate or be in
conflict with any federal or California law having applicability to the Company
as presently in effect and interpreted, (iii) to our knowledge, violate or
contravene any judgment, decree, injunction or order of any federal or
California court, or any arbitrator or governmental agency or authority, having
jurisdiction over the Company or its properties or by which the Company may be
bound, or (iv) constitute a material breach of, or result in a material default
under, any term or provision of any of the Material Agreements.
6. We have no knowledge of any pending litigation or other proceedings
against the Company or its properties before any court, arbitrator or
governmental agency or
3
<PAGE> 103
authority that challenge the legality, validity or enforceability of the Credit
Documents or which, if determined adversely to the Company, would be likely to
have a material adverse effect on the Company.
Whenever a statement herein is qualified by the expressions "known to
us," "to our knowledge," "we are not aware" or a similar phrase with respect to
our knowledge of matters of fact, it is intended to mean that our knowledge is
based upon the records, documents, instruments and certificates described above
and the current actual knowledge of the attorneys in this Firm who have devoted
substantive attention to the transactions contemplated by the Credit Documents
(but not including any constructive or imputed notice of any information) and
that we have not otherwise undertaken any independent investigations for the
purpose of rendering this opinion.
This opinion is limited to the laws of the State of California; the laws
of the State of New York (as to paragraph 4 only); and applicable federal laws
of the United States (as to paragraphs 3 and 5 only), and we express no opinion
herein with respect to the effect or applicability of the laws of other
jurisdictions. Without limiting the generality of the foregoing, the opinion in
paragraph 4 is expressed only as a matter of New York law.
Our opinions in paragraph 3 above and in clause (ii) of paragraph 5
above are limited to laws and regulations normally applicable to transactions of
the type contemplated in the Credit Documents and do not extend to licenses,
permits and approvals necessary for the conduct of the Company's business. In
addition and without limiting the previous sentence, we express no opinion
herein with respect to the effect of any land use, environmental or similar law,
any state or federal antitrust law, state or federal securities laws, or any
local law. Further, we express no opinion as to compliance or noncompliance by
any Lender with any federal, state or other law (i) requiring any Lender to be
licensed as a bank, finance company or other type of financial institution, (ii)
pertaining to matters regulating the assets held by the Lender on the basis of
portfolio requirements or any Lender's capitalization, such as loan limits and
capital adequacy requirements, and (iii) otherwise applicable to any Lender and
relating to its legal or regulatory status or the nature of its business.
The opinions set forth above are subject to the following
qualifications, assumptions, limitations and exceptions:
(a) The enforceability of the Company's obligations under the Credit
Documents may be subject to or limited by (i) bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent transfer and other similar
laws affecting the rights of creditors
4
<PAGE> 104
generally; and (ii) general equitable principles (whether relief is sought in a
proceeding at law or in equity), including, without limitation, concepts of
materiality, reasonableness, good faith, and fair dealing.
(b) We express no opinion as to provisions of the Credit Documents
purporting to establish an evidentiary standard or to authorize conclusive
determinations by any Agent or any Lender or any other Person or allowing any
Agent or any Lender or any other Person to make determinations in its sole
discretion.
(c) We also express no opinion as to:
(1) the enforceability of provisions of the Credit Documents
pursuant to which the Company agrees to make payments without set-off, defense
or counterclaim;
(2) the enforceability of provisions relating to
indemnification, contribution or exculpation, to the extent any such provision
is contrary to public policy or prohibited by law (including, without
limitation, federal and state securities laws);
(3) any provision providing for the exclusive jurisdiction of a
particular court or purporting to waive rights to trial by jury, service of
process or objections to the laying of venue or to forum on the basis of forum
non conveniens, in connection with any litigation arising out of or pertaining
to the Credit Documents;
(4) provisions contained in the Credit Documents purporting to
waive either illegality as a defense to the performance of contract obligations
or any other defense to such performance which cannot, as a matter of law, be
effectively waived;
(5) any provision of the Credit Documents insofar as it provides
that any Person purchasing a participation from a Lender or other Person may
exercise set-off or similar rights with respect to such participation or that a
Lender or other Person may exercise set-off or similar rights other than in
accordance with applicable law;
(6) any provision of the Credit Documents permitting
modification thereof only by means of an agreement in writing signed by the
parties thereto;
(7) any provision of the Credit Documents requiring payment of
attorneys' fees, except to the extent a court determines such fees to be
reasonable; and
5
<PAGE> 105
(8) the effect of the law of any jurisdiction other than the
State of New York which limits the rates of interest legally chargeable or
collectible.
(d) We wish to point out that any Lender, as the holder of a Note, may
be required to prove the outstanding amount thereof.
The opinions expressed herein are solely for your benefit and for the
benefit of your successors and assigns pursuant to the Credit Agreement in
connection with the above transactions, and such opinions may not be relied on
in any manner or for any purpose by any other Person. In addition, this opinion
is rendered as of the date hereof and speaks only to the Agents and the original
Lenders, and it shall not be deemed to have been updated to any date upon which
any such other Person may rely hereon. Further, we do not undertake to advise
you or such other Person of matters which occur subsequent to the date hereof
and which affect the opinions expressed herein.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
6
<PAGE> 106
EXHIBIT F - Opinion of Special Counsel for the Agents
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENTS
________________, 199_
To the Lenders and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"CREDIT AGREEMENT") dated as of July 2, 1997 among Cisco Systems, Inc., a
California corporation (the "Borrower"), the Lenders listed on the signature
pages thereof (the "Lenders"), Citicorp USA, Inc., as Administrative Agent, and
Morgan Guaranty Trust Company of New York, as Documentation Agent, and have
acted as special counsel for the Agents for the purpose of rendering this
opinion pursuant to Section 3.01(b) of the Credit Agreement. Terms defined in
the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
<PAGE> 107
We have assumed that the execution, delivery and performance by the
Borrower of the Credit Agreement and the Notes are within its corporate powers
and have been duly authorized by all necessary action.
Upon the basis of the foregoing, we are of the opinion that the Credit
Agreement constitutes a valid and binding agreement of the Borrower and, if and
when issued in accordance with the Credit Agreement, each Note will constitute a
valid and binding obligation of the Borrower, in each case enforceable in
accordance with its terms except as the same may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the federal laws of
the United States of America. In giving the foregoing opinion, we express no
opinion as to the effect (if any) of any law of any jurisdiction (except the
State of New York) in which any Lender is located which limits the rate of
interest that such Lender may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 108
EXHIBIT G - Assignment and Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of ____, 1995 among [NAME OF ASSIGNOR] (the
"ASSIGNOR"), [NAME OF ASSIGNEE] (the "ASSIGNEE"), CISCO SYSTEMS, INC. (the
"BORROWER"), and CITICORP USA, INC., as Administrative Agent.
WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT")
relates to the Credit Agreement dated as of July 2, 1997 among the Borrower, the
Assignor and the other Lenders party thereto, as Lenders, the Administrative
Agent, and Morgan Guaranty Trust Company of New York, as Documentation Agent (as
amended from time to time, the "CREDIT AGREEMENT");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower such that the aggregate principal
amount of such Loans outstanding at any time shall not exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under the
Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"),
together with a corresponding portion of its outstanding Committed Loans, and
the Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and
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<PAGE> 109
assumes all of the obligations of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, including the purchase from the Assignor of the
corresponding portion of the principal amount of the Committed Loans made by the
Assignor outstanding at the date hereof. Upon the execution and delivery hereof
by the Assignor, the Assignee, [the Borrower and, the Administrative Agent,] and
the payment of the amounts specified in Section 3 required to be paid on the
date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights
and be obligated to perform the obligations of a Lender under the Credit
Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii)
the Commitment of the Assignor shall, as of the date hereof, be reduced by a
like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.
SECTION 2. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them(1). It is
understood that commitment and/or facility fees accrued to the date hereof are
for the account of the Assignor and such fees accruing from and including the
date hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
[SECTION 3. Consent of the Borrower and the Administrative Agent. This
Agreement is conditioned upon the consent of the Borrower and the Administrative
Agent pursuant to Section 9.07(c) of the Credit Agreement. The execution of this
Agreement by the Borrower and the Administrative Agent is evidence of this
consent. Pursuant to Section 9.07(c), the Borrower agrees, upon the Assignee's
request, to execute and deliver a Note payable to the order of the Assignee to
evidence the assignment and assumption provided for herein.]
SECTION 4. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the
- ----------------
(1) Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generally or by formula
rather than as a fixed sum.
3
<PAGE> 110
solvency, financial condition, or statements of the Borrower, or the validity
and enforceability of the obligations of the Borrower in respect of the Credit
Agreement or any Note. The Assignee acknowledges that it has, independently and
without reliance on the Assignor, and based on such documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial condition of the
Borrower.
SECTION 5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 6. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[NAME OF ASSIGNOR]
By__________________________
Name:
Title:
[NAME OF ASSIGNEE]
By__________________________
Name:
Title:
[CISCO SYSTEMS, INC.
By__________________________
Name:
Title:]
3
<PAGE> 111
[CITICORP USA, INC., as Administrative
Agent
By__________________________
Name:
Title:]
4
<PAGE> 112
NOTE
New York, New York
July 2, 1997
For value received, CISCO SYSTEMS, INC., a California corporation
(the "BORROWER"), promises to pay to the order of BANKBOSTON, N.A. (the
"LENDER"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Lender to the Borrower pursuant to
the Credit Agreement referred to below on the maturity date provided for in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of each such Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and interest shall be made
in lawful money of the United States in Federal or other immediately available
funds at the office of Citicorp USA, Inc., 1 Court Street, 7th Floor, Zone 1,
Long Island City, NY, 11120.
All Loans made by the Lender, the respective types and maturities thereof
and all repayments of the principal thereof shall be recorded by the Lender
and, if the Lender so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding may be endorsed by the Lender on the
schedule attached hereto, or on a continuation of such schedule attached to and
made a part hereof; provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated as
of July 2, 1997 among Cisco Systems, Inc., the banks listed on the signature
pages thereof, Citicorp USA, Inc., as Administrative Agent, and Morgan Guaranty
Trust Company of New York, as Documentation Agent (as the same may be amended
from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof.
CISCO SYSTEMS, INC.
By /s/ D.A. ROGAN
----------------------
Name: David A. Rogan
Title: Treasurer
<PAGE> 113
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
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Amount Type Amount of
of of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
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<S> <C> <C> <C> <C> <C>
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</TABLE>
2
<PAGE> 114
NOTE
New York, New York
July 2, 1997
For value received, CISCO SYSTEMS, INC., a California corporation (the
"BORROWER"), promises to pay to the order of DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH (the "LENDER"), for the account of its Applicable
Lending Office, the unpaid principal amount of each Loan made by the Lender to
the Borrower pursuant to the Credit Agreement referred to below on the maturity
date provided for in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of each such Loan on the dates and at
the rate or rates provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the Unites States in
Federal or other immediately available funds at the office of Citicorp USA,
Inc., 1 Court Street, 7th Floor, Zone 1, Long Island City, NY, 11120.
All Loans made by the Lender, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Lender and, if the Lender so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Loan then outstanding may be endorsed by the Lender
on the schedule attached hereto, or on a continuation of such schedule attached
to and made a part hereof; provided that the failure of the Lender to make any
such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated
as of July 2, 1997 among Cisco systems, Inc., the banks listed on the signature
pages thereof, Citicorp USA, Inc., as Administrative Agent, and Morgan Guaranty
Trust Company of New York, as Documentation Agent (as the same may be amended
from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof.
CISCO SYSTEMS, INC.
By /s/ D. A. ROGAN
------------------------------
NAME: David A. Rogan
Treasurer
<PAGE> 115
LOANS AND PAYMENTS OF PRINCIPAL
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Amount Type Amount of
of of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
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<PAGE> 116
NOTE
New York, New York
July 2, 1997
For value received, CISCO SYSTEMS, INC., a California corporation (the
"BORROWER"), promises to pay to the order of UNION BANK OF SWITZERLAND (the
"LENDER"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Lender to the Borrower pursuant to
the Credit Agreement referred to below on the maturity date provided for in the
Credit Agreement. The Borrower promises to pay interest of the unpaid principal
amount of each such Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and interest shall be made
in lawful money of the United States in Federal or other immediately available
funds at the office of Citicorp USA, Inc., 1 Court Street, 7th Floor, Zone 1,
Long Island City, NY, 11120.
All Loans made by the Lender, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Lender and, if the Lender so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Loan then outstanding may be endorsed by the Lender
on the schedule attached hereto, or on a continuation of such schedule attached
to and made a part hereof; provided that the failure of the Lender to make any
such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated
as of July 2, 1997 among Cisco Systems, Inc., the banks listed on the signature
pages thereof, Citicorp USA, Inc., as Administrative Agent, and Morgan Guaranty
Trust Company of New York, as Documentation Agent (as the same may be amended
from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof.
CISCO SYSTEMS, INC.
By: /s/ D.A. ROGAN
----------------------
NAME: DAVID A. ROGAN
TITLE: TREASURER
<PAGE> 117
LOANS AND PAYMENTS OF PRINCIPAL
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Amount Type Amount of
of of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
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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>
Years Ended
------------------------------------
July 26, July 28, July 30,
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Actual weighted average common shares outstanding
for the period 660,438 638,680 607,757
Weighted average shares assuming exercise of
employees' stock options using average market price 28,881 27,906 22,954
---------- ---------- ----------
Shares used in per-share calculations 689,319 666,586 630,711
========== ========== ==========
Net income applicable to primary income per share $1,048,679 $ 913,324 $ 456,489
========== ========== ==========
Net income per share based on SEC Interpretive
Release No. 34-9083 $ 1.52 $ 1.37 $ 0.72
========== ========== ==========
</TABLE>
-----------
(A) These calculations are submitted in accordance with
Securities Exchange Act of 1934 Release No. 34-9083.
COMPUTATION OF NET INCOME PER SHARE
IN ACCORDANCE WITH INTERPRETIVE RELEASE NO. 34-9083
(In thousands, except per-share amounts)
<TABLE>
<CAPTION>
Years Ended
------------------------------------
July 26, July 28, July 30,
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
FULLY DILUTED EARNINGS PER SHARE:
Actual weighted average common shares outstanding
for the period 660,438 638,680 607,757
Weighted average shares assuming exercise of
employees' stock options using ending market price 34,360 30,058 27,214
---------- ---------- ----------
Shares used in per-share calculations 694,798 668,738 634,971
========== ========== ==========
Net income applicable to fully diluted income per share $1,048,679 $ 913,324 $ 456,489
========== ========== ==========
Net income per share based on SEC Interpretive
Release No. 34-9083 $ 1.51 $ 1.37 $ .72
========== ========== ==========
</TABLE>
-----------
(A) These calculations are submitted in accordance with Securities
Exchange Act of 1934 Release No. 34-9083.
<PAGE> 1
SELECTED FINANCIAL DATA
Five Years Ended July 26, 1997 (in thousands, except per-share amounts)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $6,440,171 $4,096,007 $2,232,652 $1,334,436 $ 714,533
Net income $1,048,679(1) $ 913,324 $ 456,489(2) $ 322,981 $ 176,201
Net income per common share $ 1.52(1) $ 1.37 $ 0.72(2) $ 0.54 $ 0.30
Shares used in per-share calculation 689,319 666,586 630,711 596,539 580,623
Total assets $5,451,984 $3,630,232 $1,991,949 $1,129,034 $ 656,394
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net income and net income per share include purchased research and
development expenses of $508.4 million and realized gains on the sale of a
minority stock investment of $152.7 million. Pro forma net income and net
income per share, excluding these nonrecurring items net of tax, would
have been $1,413,893 and $2.05, respectively.
(2) Net income and net income per share include purchased research and
development expenses of $95.8 million. Pro forma net income and net income
per share, excluding these nonrecurring items net of tax, would have been
$515,723 and $0.82, respectively.
21
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
Financial Condition and Results of Operations
Certain statements contained in this Annual Report on Form 10-K, 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 Annual
Report on Form 10-K, as well as the "Financial Risk Management" and "Future
Growth Subject to Risks" sections contained herein, which identify important
risk factors that could cause actual results to differ from those contained in
the forward-looking statements.
COMPARISON OF 1997 AND 1996
Net sales grew to $6.4 billion in 1997 from $4.1 billion in 1996. The 57.2%
increase in net sales during the year was primarily the result of increasing
unit sales of LAN switching products such as the Catalyst(R) 5000, high-end
routers such as the Cisco 7500 product family, modular access routers such as
the Cisco 4700, and growth in the sales of add-on boards that provide increased
functionality. 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 increased faster than that of the
Company's high-end core router products. These products typically carry lower
average selling prices, thereby contributing to the slowdown in the Company's
overall growth rate in 1997 versus 1996. Additionally, some of the Company's
more established product lines, such as the Cisco 2500 series, have experienced
decelerating growth rates. Sales to international customers decreased to 43.5%
of net sales in 1997 from 48.2% for 1996. The decrease reflects slower sales
growth in certain international markets, particularly Japan, France, and
Germany. Sales growth in these markets has been impacted by certain factors
including weaker economic conditions, delayed government spending, a stronger
dollar versus the local currencies, and slower adoption of networking
technologies.
Gross margins decreased slightly to 65.2% during 1997 from 65.6% 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 small to medium-sized businesses. 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. 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 small to medium-sized
businesses 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, value engineering, 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 by $299 million in 1997
compared with 1996 expenditures, an increase to 10.8% of net sales from 9.7% in
1996. The increase reflects the Company's ongoing research and development
efforts in a wide variety of areas such as voice, video, and data integration,
Digital Subscriber Line (DSL) technologies, dial access, enterprise switching,
security, network management, and high-end routing technologies,
22
<PAGE> 3
among others. 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. The Company also
continues to purchase technology in order to bring a broad range of products to
the market in a timely fashion. If the Company believes that 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 increased by $434 million in fiscal 1997 over
fiscal 1996, an increase to 18.0% of net sales in 1997 from 17.7% in fiscal
1996. The increase 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, and
expanding distribution channels.
General and administrative expenses rose by $45 million in fiscal 1997
over fiscal 1996, a decrease to 3.2% from 3.9% of net sales. The dollar increase
reflects increased personnel costs necessary to support the Company's business
infrastructure, including those associated with its new European Logistics
Center, as well as the further development of its information systems. The
percentage decrease reflects management's continued efforts to control
discretionary spending. 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 fiscal 1997
arose from the acquisitions of Telebit Corporation, Netsys Technologies,
Skystone Systems Corporation, Ardent Communications, and Global Internet
Software Group (see Note 3).
Interest and other income, net, was $109 million in 1997 and $64 million
in 1996. Interest income rose as a result of additional investment income on the
Company's increasing investment balances. The Company currently holds
approximately .3 million shares of common stock in a publicly traded company
with a cost basis significantly below its current market value. Beginning in
fiscal year 1997, the Company began selling its equity stake in this company.
Also in 1997, the Company established the Cisco Systems Foundation ("the
Foundation"). As part of this initiative, the Company donated a portion of this
investment, along with other equity securities, with a combined cost basis of
approximately $2 million and an approximate market value of $72 million at July
26, 1997, to the Foundation. The realized gains on the sale of this investment,
net of the amounts donated to the Foundation, were $153 million in fiscal 1997.
The Company expects to sell its remaining stake in the publicly traded company
in fiscal year 1998 and will realize additional gains, based on an established
hedge on this investment (see Note 5).
COMPARISON OF 1996 AND 1995
Net sales grew to $4.1 billion in 1996 from $2.2 billion in 1995. The 83.5%
increase in net sales during the year was primarily a result of increasing unit
sales of the Cisco 7500 series; continued strong sales of Access business unit
products, including the Cisco 4500 and Cisco 2500 series; and continued market
acceptance of the Company's Workgroup business unit products, particularly the
Catalyst 5000. In connection with the acquisition of StrataCom, Inc., the
Company formed the WAN business unit, which consists
23
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
Financial Condition and Results of Operations
of the IPX(R), BPX(R), IGX(TM), and AXIS product lines. Sales of these products
increased from 1995 levels primarily because of an increase in demand for
Asynchronous Transfer Mode (ATM) cell switching products by public carrier
customers. These increases were partially offset by decreasing unit sales of the
Company's older product lines, comprising mainly the Cisco 7000 series. Sales to
international customers were 48.2% of net sales in 1996 compared with 41.7% in
1995. This increase was attributed to continued expansion into new geographic
markets, as well as growth in existing European and Japanese markets. Sales
growth between 1996 and 1995 increased more substantially in Japan than in other
geographical markets.
Gross margins decreased to 65.6% of net sales in 1996 from 66.7% in 1995.
Gross margins were affected by several factors, including higher material costs
as a result of certain component shortages and the continued shift in revenue
mix to the Company's lower-margin products consisting primarily of products in
the Access and Workgroup business units.
Research and development expenses increased in 1996 by $189 million over
1995 expenditures. This represents an increase to 9.7% of net sales from 9.4% in
1995. The increase reflected the Company's ongoing research and development
efforts, including the further development of the CiscoFusion 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, both from hiring and through acquisitions, as
well as higher expenditures on prototypes and depreciation on new equipment.
Sales and marketing expenses increased by $326 million in 1996 over 1995,
but decreased to 17.7% of net sales in 1996 from 17.9% of net sales in 1995. The
dollar increase in these expenses resulted mainly from an increase in the size
of the Company's direct sales force and its commissions. Other factors affecting
the dollar increase in expenses were additional marketing programs to support
the launch of new products; the entry into new markets as noted by the
significant percentage increase in business outside the U.S.; and expansion of
distribution channels, particularly the two-tier channels associated with the
Company's initial efforts to reach the mass market.
General and administrative expenses rose by $75 million in 1996 over 1995,
a slight increase to 3.9% from 3.8% of net sales in 1996 versus 1995. The dollar
increase reflects increased personnel costs necessary to support the Company's
business infrastructure, the amortization of goodwill related to the acquisition
of LightStream(R), and a one-time write-down of $5 million of LightStream
goodwill. There were also nonrecurring costs related to the acquisition of
StrataCom that totaled $15 million for fiscal 1996. Excluding the effect of
these nonrecurring costs, general and administrative expenses as a percentage of
net sales declined to 3.4%, which reflected management's continued controls over
discretionary spending.
The amount expensed to purchased research and development in fiscal year
1995 reflects the acquisition of LightStream (see Note 3).
Interest and other income, net, was $64 million in 1996 and $40 million in
1995. Interest income rose as a result of additional investment income on the
Company's increasing investment balances.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings per Share"
(EPS), which simplifies existing computational guidelines, revises disclosure
requirements, and increases the comparability of earnings per share on an
international basis. Management has not yet evaluated the effects of this change
in computational guidelines on
24
<PAGE> 5
the Company's EPS. SFAS No. 128 is effective for periods ending after December
15, 1997 and requires restatement of all prior period EPS data presented. The
Company will adopt SFAS No. 128 in its second quarter of fiscal year 1998.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components (revenue, expenses, gains, and losses) in a full set
of general-purpose financial statements. The Company will adopt SFAS No. 130 in
its fiscal year 1999.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," which changes the way public companies
report information about operating segments. SFAS No. 131, which is based on the
management approach to segment reporting, establishes requirements to report
selected segment information quarterly and to report entity-wide disclosures
about products and services, major customers, and the material countries in
which the entity holds assets and reports revenue. Management has not yet
evaluated the effects of this change on its reporting of segment information.
The Company will adopt SFAS No. 131 in its fiscal year 1999.
FINANCIAL RISK MANAGEMENT
The following discussion about the Company's risk management activities includes
"forward-looking statements" that involve risks and uncertainties. Actual
results could differ materially from those projected in the forward-looking
statements.
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 nondollar-denominated sales in Japan, Canada, and Australia and
nondollar-denominated operating expenses in Europe, Latin America, and Asia
where the Company sells primarily in U.S. dollars. The Company has recently
expanded its business activities in Europe. As a result, the Company expects to
see an increase in exposures related to nondollar-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
nonfunctional 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 nonfunctional 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 that these forecasts are over- or understated during periods of currency
volatility, the Company could experience unanticipated currency gains or 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 values of which are 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 fair 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.
25
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
Financial Condition and Results of Operations
The following tables present the hypothetical changes in fair values in
the financial instruments held by the Company at July 26, 1997 that are
sensitive to changes in interest rates. These instruments are not leveraged and
are held for purposes other than trading. The modeling technique used measures
the change in fair values arising from selected potential changes in interest
rates. Market changes reflect immediate hypothetical parallel shifts in the
yield curve of plus or minus 50 basis points (BPS), 100 BPS, and 150 BPS over
six- and twelve-month time horizons. Beginning fair values represent the market
principal plus accrued interest, dividends, and certain interest rate-sensitive
securities considered cash and equivalents for financial reporting purposes at
July 26, 1997. Ending fair values are the market principal plus accrued
interest, dividends, and reinvestment income at six- and twelve-month time
horizons. This table estimates the fair value of the portfolio at a six-month
time horizon (in millions):
<TABLE>
<CAPTION>
VALUATION OF SECURITIES NO CHANGE VALUATION OF SECURITIES
GIVEN AN INTEREST RATE IN INTEREST GIVEN AN INTEREST RATE
ISSUER DECREASE OF X BASIS POINTS RATES INCREASE OF X BASIS POINTS
- --------------------------------------------------------------------------------------------------------------
(150 BPS) (100 BPS) (50 BPS) 50 BPS 100 BPS 150 BPS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. government notes and bonds $ 635 $ 633 $ 631 $ 629 $ 626 $ 624 $ 622
State, municipal, and county
government notes and bonds 1,432 1,421 1,411 1,400 1,389 1,378 1,367
Foreign government notes and bonds 33 33 33 33 33 33 33
Corporate notes and bonds 723 723 722 719 722 722 721
- --------------------------------------------------------------------------------------------------------------
Total $2,823 $2,810 $2,797 $2,781 $2,770 $2,757 $2,743
==============================================================================================================
</TABLE>
This table estimates the fair value of the portfolio at a twelve-month time
horizon (in millions):
<TABLE>
<CAPTION>
VALUATION OF SECURITIES NO CHANGE VALUATION OF SECURITIES
GIVEN AN INTEREST RATE IN INTEREST GIVEN AN INTEREST RATE
ISSUER DECREASE OF X BASIS POINTS RATES INCREASE OF X BASIS POINTS
- --------------------------------------------------------------------------------------------------------------
(150 BPS) (100 BPS) (50 BPS) 50 BPS 100 BPS 150 BPS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. government notes and bonds $ 650 $ 649 $ 648 $ 647 $ 646 $ 645 $ 644
State, municipal, and county
government notes and bonds 1,454 1,446 1,438 1,430 1,422 1,413 1,404
Foreign government notes and bonds 34 34 34 34 34 34 34
Corporate notes and bonds 731 734 738 741 745 748 752
- --------------------------------------------------------------------------------------------------------------
Total $2,869 $2,863 $2,858 $2,852 $2,847 $2,840 $2,834
==============================================================================================================
</TABLE>
A 50-BPS move in the Federal Funds Rate has occurred in 14 of the last 40
quarters; a 100-BPS move in the Federal Funds Rate has occurred in 4 of the last
40 quarters; and a 150-BPS move in the Federal Funds Rate has not occurred in
any of the last 40 quarters.
The following analysis presents the hypothetical change in fair values of
public equity investments held by the Company that are sensitive to changes in
the stock market. These equity securities are held for purposes other than
trading.
26
<PAGE> 7
The modeling technique used measures the hypothetical change in fair
values arising from selected hypothetical changes in each stock's price. Stock
price fluctuations of plus or minus 15%, plus or minus 35%, and plus or minus
50% were selected based on the probability of their occurrence.
This table estimates the fair value of the publicly traded corporate
equities at a twelve-month time horizon (in millions):
<TABLE>
<CAPTION>
VALUATION OF SECURITY FAIR VALUE VALUATION OF SECURITY
GIVEN X% DECREASE IN AS OF GIVEN X% INCREASE IN
EACH STOCK'S PRICE JULY 26, 1997 EACH STOCK'S PRICE
- ----------------------------------------------------------------------------------------------
(50%) (35%) (15%) 15% 35% 50%
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Corporate Equities $48 $62 $81 $95 $110 $128 $143
==============================================================================================
</TABLE>
During fiscal year 1997, the Company began to sell its minority equity position
in a publicly traded company. A hedge, in the form of a cashless collar, was
formed to protect unrealized gains on the investment. Because this investment is
hedged against upward and downward price movement, it has been excluded from the
above analysis (see Note 5).
Within the Company's public equity investment portfolio, a 15% movement in
the stock price has occurred in 75% of the quarters since the shares were
initially offered or in the last three years; a 35% movement in the stock price
has occurred in 45% of the quarters since the shares were initially offered or
in the last three years; and a 50% movement in the stock price has occurred in
15% of the quarters since the shares were initially offered or in the last three
years.
The Company also has interest rate risk associated with leases on its
facilities whose payments are tied to the London Interbank Offered rate (LIBOR),
and has evaluated the hypothetical change in lease obligations held at July 26,
1997 due to changes in the LIBOR rate. The modeling technique used for analysis
measured hypothetical changes in lease obligations arising from selected
hypothetical changes in the LIBOR rate. Market changes reflected immediate
hypothetical parallel shifts in the LIBOR curve of plus or minus 50 BPS, 100
BPS, and 150 BPS over a six-month and a twelve-month period. The results of this
analysis were not material to the Company's financial results.
The Company enters into forward foreign exchange contracts to offset the
impact of currency fluctuations on certain nonfunctional currency assets and
liabilities, primarily denominated in Japanese, Canadian, Australian, and
certain European currencies.
The Company generally enters into forward currency contracts that have
original maturities of one to three months, with none having a maturity greater
than one year in length. The total notional values of forward contracts
purchased and forward contracts sold were $211 million and $268 million,
respectively. The net unrealized gain on forward exchange contracts is $.6
million. Management does not expect gains or losses on these contracts to have a
material impact on the Company's financial results.
FUTURE GROWTH SUBJECT TO RISKS
The networking 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
27
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
Financial Condition and Results of Operations
products of the acquired companies; the risk of diverting management's attention
from normal daily operations of the business; 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 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 the
Company's products or technologies obsolete or noncompetitive.
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 quarters, the
sequential sales growth slowed from prior levels, and a disproportionate share
of the sales occurred in the last month of the quarter. As a consequence,
operating results for a particular quarter are extremely difficult to predict.
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 cannot 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.
Many computer systems were not designed to handle any dates beyond the
year 1999, and therefore computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is concerned
that many enterprises will be devoting a substantial portion of their
information systems spending to resolving this upcoming year 2000 problem. This
may result in spending being diverted from networking solutions over the next
three years. Additionally, the Company will have to devote resources to
providing the year 2000 solution for its own products. The year 2000 issue could
lower demand for the Company's products while increasing the Company's costs.
These combining factors could have a material adverse impact on the Company's
financial results.
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 small to
medium-sized customers have continued to grow at a faster rate than the
Company's higher-margin router and high-performance switching products targeted
toward 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
28
<PAGE> 9
channels, which generally results in lower gross margins. In addition,
increasing third-party and indirect distribution channels generally results 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 demands also depend in
part on its ability to obtain timely deliveries of parts from its suppliers. The
Company has experienced component shortages in the past that have adversely
affected its operations. Although the Company works closely with its suppliers
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 expense levels based
primarily on forecasted revenue levels. Because these expenses are relatively
fixed in the short term, a shortfall in revenue could lead to operating results
being below expectations. The results of operations for 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 networking industry; the overall trend toward industry consolidation; the
introduction and market acceptance of new technologies, including Gigabit Switch
Routing and Tag Switching, currently known as multiprotocol label switching
(MPLS); 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.
The Company's corporate headquarters, including most of its research and
development operations and its manufacturing facilities, are located in the
Silicon Valley area of Northern California, a region known for seismic activity.
Additionally, one of the Company's manufacturing facilities is located near a
river that has experienced flooding in the past. A significant natural disaster,
such as an earthquake or a flood, could have a material adverse impact on the
Company's financial results.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents, short-term investments, and investments were $2.5 billion
at July 26, 1997, an increase of $672 million from 1996. The increase is
primarily a result of cash generated by operations, and to a lesser extent,
through financing activities, mainly the exercise of employee stock options.
These cash flows were partially offset by cash outflows from operating
activities including tax payments of approximately $659 million; cash flows from
investing activities including capital expenditures of approximately $330
million; and cash outflows from financing activities, particularly the Company's
stock repurchase of $323 million.
Accounts receivable increased 87.9% during 1997, while sales grew by
57.2%. Days sales outstanding in receivables increased to 60 days as of July 26,
1997 from 44 days at July 28, 1996. Inventories decreased 15.4% during 1997.
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 because of rapidly changing technology and
customer requirements.
Accounts payable increased by 34.8% during 1997 because of increases in
operating expenses and material purchases to support the growth in net sales.
Other accrued liabilities increased by 57.0%, primarily due to higher deferred
revenue on service contracts.
29
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
Financial Condition and Results of Operations
At July 26, 1997, the Company had a line of credit totaling $500 million,
which expires in July 2002. There have been no borrowings under this agreement
(see Note 6).
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 restricted $363 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 that will require similar restricted securities;
however, the Company does not expect the impact of this activity to be material
to liquidity.
During fiscal 1997, the Company's Board of Directors authorized a stock
repurchase program under which 5 million shares of the Company's stock could be
reacquired. All 5 million shares were repurchased at an aggregate purchase price
of approximately $323 million and subsequently reissued in connection with the
Company's stock plans. However, the Company's ability to repurchase shares has
been restricted and is expected to continue to be restricted from time to time
due to business combinations and limitations under pooling of interests
accounting.
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 fiscal 1998.
30
<PAGE> 11
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
<TABLE>
<CAPTION>
Years Ended July 26, 1997 July 28, 1996 July 30, 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $6,440,171 $4,096,007 $2,232,652
Cost of sales 2,241,378 1,409,862 742,860
- --------------------------------------------------------------------------------------
Gross margin 4,198,793 2,686,145 1,489,792
- --------------------------------------------------------------------------------------
Expenses:
Research and development 698,172 399,291 210,815
Sales and marketing 1,160,269 726,278 399,983
General and administrative 204,661 159,770 85,271
Purchased research and development 508,397 95,760
- --------------------------------------------------------------------------------------
Total operating expenses 2,571,499 1,285,339 791,829
- --------------------------------------------------------------------------------------
OPERATING INCOME 1,627,294 1,400,806 697,963
Realized gains on sale of investment 152,689
Interest and other income, net 108,889 64,019 40,014
- --------------------------------------------------------------------------------------
Income before provision for income taxes 1,888,872 1,464,825 737,977
Provision for income taxes 840,193 551,501 281,488
======================================================================================
NET INCOME $1,048,679 $ 913,324 $ 456,489
======================================================================================
NET INCOME PER COMMON SHARE $ 1.52 $ 1.37 $ 0.72
======================================================================================
Shares used in per-share calculation 689,319 666,586 630,711
======================================================================================
</TABLE>
See notes to consolidated financial statements.
31
<PAGE> 12
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
July 26, 1997 July 28, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 269,608 $ 279,695
Short-term investments 1,005,977 758,489
Accounts receivable, net of allowance for doubtful
accounts of $22,340 in 1997 and $21,074 in 1996 1,170,401 622,859
Inventories, net 254,677 301,188
Deferred income taxes 312,132 101,827
Prepaid expenses and other current assets 88,471 95,582
- --------------------------------------------------------------------------------------------
Total current assets 3,101,266 2,159,640
Investments 1,267,174 832,114
Restricted investments 363,216 228,644
Property and equipment, net 466,352 331,315
Other assets 253,976 78,519
- --------------------------------------------------------------------------------------------
TOTAL ASSETS $ 5,451,984 $ 3,630,232
============================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 207,178 $ 153,683
Income taxes payable 256,224 169,894
Accrued payroll and related expenses 263,269 195,197
Other accrued liabilities 393,438 250,579
- --------------------------------------------------------------------------------------------
Total current liabilities 1,120,109 769,353
Commitments and contingencies (Note 7)
Minority interest 42,253 41,257
Shareholders' equity:
Preferred stock, no par value, 5,000 shares authorized;
none issued or outstanding in 1997 and 1996
Common stock, no par value, 1,200,000 shares authorized;
issued and outstanding: 670,779 shares in 1997
and 649,284 shares in 1996 1,763,200 888,067
Retained earnings 2,487,058 1,777,369
Unrealized gain on investments 49,628 158,848
Cumulative translation adjustments (10,264) (4,662)
- --------------------------------------------------------------------------------------------
Total shareholders' equity 4,289,622 2,819,622
- --------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,451,984 $ 3,630,232
============================================================================================
</TABLE>
See notes to consolidated financial statements.
32
<PAGE> 13
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED JULY 26, 1997 JULY 28, 1996 JULY 30, 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,048,679 $ 913,324 $ 456,489
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 212,200 132,594 74,961
Provision for doubtful accounts 13,318 18,548 15,213
Provision for inventory allowances 123,431 53,025 55,783
Deferred income taxes (185,944) (74,292) (74,856)
Tax benefits from employee stock plans 274,341 198,468 59,348
Adjustment to conform StrataCom fiscal year (11,020)
Purchased research and development from acquisitions 273,532
Change in operating assets and liabilities:
Accounts receivable (558,664) (219,628) (181,083)
Inventories (74,374) (272,408) (104,484)
Prepaid expenses and other current assets 7,332 (67,154) (16,725)
Accounts payable 52,225 93,773 22,605
Income taxes payable 86,230 97,924 27,976
Accrued payroll and related expenses 66,375 101,221 43,485
Other accrued liabilities 114,462 87,331 64,121
- ----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,442,123 1,062,726 442,833
- ----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of short-term investments (1,430,556) (786,197) (341,578)
Proceeds from sales and maturities
of short-term investments 1,276,379 641,974 295,234
Purchases of investments (1,761,952) (809,098) (289,569)
Proceeds from sales and maturities of investments 1,052,363 219,178 228,680
Purchases of restricted investments (351,168) (164,624) (160,396)
Proceeds from sales and maturities of
restricted investments 218,948 115,429 100,472
Acquisition of property and equipment (330,297) (282,840) (151,828)
Acquisition of businesses, net of cash acquired
and purchased research and development (18,642) (17,920)
Other (59,083) 8,337 5,273
- ----------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,404,008) (1,057,841) (331,632)
- ----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Issuance of common stock 280,212 116,554 135,348
Common stock repurchases (322,812) (115,621) (69,881)
Proceeds from sale of subsidiary stock 40,548
Other (5,602) (10,511) 6,007
- ----------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (48,202) (9,578) 112,022
- ----------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and equivalents (10,087) (4,693) 223,223
Cash and equivalents, beginning of period 279,695 284,388 61,165
- ----------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS, END OF PERIOD $ 269,608 $ 279,695 $ 284,388
================================================================================================================
Non-cash investing and financing activities are as follows:
Transfers of securities to restricted investments $ -- $ 3,586 $ 27,249
================================================================================================================
</TABLE>
See notes to consolidated financial statements.
33
<PAGE> 14
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------- UNREALIZED CUMULATIVE TOTAL
NUMBER RETAINED GAIN ON TRANSLATION SHAREHOLDERS'
OF SHARES AMOUNT EARNINGS INVESTMENTS ADJUSTMENTS EQUITY
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES JULY 31, 1994 578,565 $ 282,678 $621,802 $(158) $904,322
Issuance of common stock
under stock option and
purchase plans 15,733 53,660 53,660
Issuance of common stock
in conjunction with
secondary offering by
StrataCom 6,900 81,688 81,688
Tax benefits from
employee stock plans 59,348 59,348
Common stock repurchases (4,188) (2,073) (67,808) (69,881)
Pooling of interests
acquisitions 20,166 33,373 (13,678) 19,695
Change in unrealized $50,948 50,948
gains on investments
Net income 456,489 456,489
Translation adjustments 6,007 6,007
- ------------------------------------------------------------------------------------------------------------------------
BALANCES JULY 30, 1995 617,176 508,674 996,805 50,948 5,849 1,562,276
Issuance of common stock
under stock option and
purchase plans 19,072 116,554 116,554
Tax benefits from
employee stock plans 198,468 198,468
Common stock repurchases (3,060) (3,876) (111,745) (115,621)
Acquisitions of businesses 16,096 68,247 (21,015) 47,232
Change in unrealized
gains on investments 107,900 107,900
Net income 913,324 913,324
Translation adjustments (10,511) (10,511)
- -----------------------------------------------------------------------------------------------------------------------
BALANCES JULY 28, 1996 649,284 888,067 1,777,369 158,848 (4,662) 2,819,622
</TABLE>
See notes to consolidated financial statements.
34
<PAGE> 15
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------- UNREALIZED CUMULATIVE TOTAL
NUMBER RETAINED GAIN ON TRANSLATION SHAREHOLDERS'
OF SHARES AMOUNT EARNINGS INVESTMENTS ADJUSTMENTS EQUITY
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES JULY 28, 1996 649,284 888,067 1,777,369 158,848 (4,662) 2,819,622
Issuance of common stock
under stock option and
purchase plans 18,841 280,212 280,212
Tax benefits from
employee stock plans 274,341 274,341
Common stock repurchases (5,000) (9,590) (313,222) (322,812)
Pooling of interests
acquisitions 3,814 6,504 (14,748) (8,244)
Purchase acquisitions 3,840 323,666 323,666
Change in unrealized
gains on investments (109,220) (109,220)
Adjustment to conform
StrataCom fiscal year (11,020) (11,020)
Net income 1,048,679 1,048,679
Translation adjustments (5,602) (5,602)
- -----------------------------------------------------------------------------------------------------------------------
BALANCES JULY 26, 1997 670,779 $1,763,200 $2,487,058 $49,628 $(10,264) $4,289,622
=======================================================================================================================
</TABLE>
See notes to consolidated financial statements.
35
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Cisco Systems, Inc. (the "Company") provides networking solutions that connect
computing devices and computer networks, allowing people to access or transfer
information without regard to differences in time, place, or type of computer
system. 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. The fiscal years ended July 26, 1997, July 28, 1996, and July
30, 1995 all comprised 52-week years. Prior to fiscal year 1997, the Company's
fiscal year was the 52- or 53-week period ending on the last Sunday in July.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Cisco Systems, Inc. and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
CASH AND EQUIVALENTS The Company considers cash and all highly liquid
investments purchased with an original or remaining maturity of less than three
months at the date of purchase to be cash equivalents. Substantially all of its
cash and equivalents are custodied with three major financial institutions.
SHORT-TERM INVESTMENTS The Company's short-term investments comprise U.S.,
state, and municipal government obligations, and foreign and corporate
securities with maximum maturities of one year. These investments are carried at
fair value. Nearly all short-term investments are held in the Company's name and
custodied with two major financial institutions.
INVENTORIES Inventories are stated at the lower of cost or market. Cost is
computed using standard cost, which approximates actual cost on a first-in,
first-out basis.
INVESTMENTS Investments consist of U.S., state, and municipal government
obligations, and foreign and corporate securities with maturities of more than
one year. These investments are carried at fair value. Nearly all investments
are held in the Company's name and custodied with two major financial
institutions.
RESTRICTED INVESTMENTS Restricted investments consist of U.S. governmental
obligations with maturities of more than one year. These investments are carried
at fair value and are restricted as to withdrawal (see Note 7). Restricted
investments are held in the Company's name and custodied with two major
financial institutions.
FAIR VALUE OF FINANCIAL INSTRUMENTS Carrying amounts of certain of the Company's
financial instruments including cash and equivalents, accrued payroll, and other
accrued liabilities approximate fair value because of their short maturities.
The fair values of investments are determined using quoted market prices for
those securities or similar financial instruments (see Note 5 on investments).
CONCENTRATIONS Cash and equivalents are, for the most part, maintained with
several major financial institutions in the United States. Deposits held with
banks may exceed the amount of insurance provided on such deposits. Generally
these deposits may be redeemed upon demand and therefore, bear minimal risk.
The Company performs ongoing credit evaluations of its customers and
generally does not require collateral from its customers.
The Company receives certain of its custom semiconductor chips for some of
its products from sole suppliers. Additionally, the Company relies on a limited
number of hardware manufacturers. The inability of any supplier or manufacturer
to fulfill supply requirements of the Company could impact future results. The
Company continually monitors exposures in this regard.
REVENUE RECOGNITION The Company generally recognizes product revenue upon
shipment of product. Revenue from service obligations is deferred and recognized
over the lives of the contracts. The Company accrues for warranty costs, sales
returns, and other allowances at the time of shipment based on its experience.
36
<PAGE> 17
DEPRECIATION AND AMORTIZATION Property and equipment are stated at cost and
depreciated on a straight-line basis over the estimated useful lives of the
assets. Such lives vary from two and one-half to five years. Goodwill and other
intangible assets are included in other assets and are carried at cost less
accumulated amortization, which is being provided on a straight-line basis over
the economic lives of the respective assets, generally three to five years.
INCOME TAXES Income tax expense is based on pretax financial accounting income.
Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts.
COMPUTATION OF NET INCOME PER COMMON 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.
FOREIGN CURRENCY TRANSLATION Substantially all of the Company's international
subsidiaries use their local currency as their functional currency. For those
subsidiaries using the local currency as their functional currency, assets and
liabilities are translated at exchange rates in effect at the balance sheet date
and income and expense accounts at average exchange rates during the year.
Resulting translation adjustments are recorded directly to a separate component
of shareholders' equity. Where the U.S. dollar is the functional currency,
translation adjustments are recorded in income.
DERIVATIVES The Company enters into forward exchange contracts to minimize the
short-term impact of foreign currency fluctuations on assets and liabilities
denominated in currencies other than the functional currency of the reporting
entity. All foreign exchange forward contracts are designated as and effective
as a hedge and are highly inversely correlated to the hedged item as required by
generally accepted accounting principles.
Gains and losses on the contracts are included in other income and offset
foreign exchange gains or losses from the revaluation of intercompany balances
or other current assets and liabilities denominated in currencies other than the
functional currency of the reporting entity. Fair values of exchange contracts
are determined using published rates. If a derivative contract terminates prior
to maturity, the investment is shown at its fair value with the resulting
gain/(loss) reflected in operating results.
MINORITY INTEREST Minority interest represents the minority stockholders'
proportionate share of the equity of Nihon Cisco Systems, K.K. At July 26, 1997,
the Company maintained all issued and outstanding common stock, amounting to
73.2% of the voting rights. Each share of preferred stock is convertible into
one share of common stock at any time at the option of the holder.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Estimates are used for, but not limited to, the accounting for doubtful
accounts, depreciation and amortization, sales returns, warranty costs, taxes,
and contingencies. Actual results could differ from these estimates.
RECENT ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS)
No. 128, "Earnings per Share" (EPS), which simplifies existing computational
guidelines, revises disclosure requirements, and increases the comparability of
earnings per share on an international basis. Management has not yet evaluated
the effects of this change in computational guidelines on the Company's EPS.
SFAS No. 128 is effective for periods ending after December 15, 1997 and
requires restatement of all prior period EPS data presented. The Company will
adopt SFAS No. 128 in its second quarter of fiscal year 1998.
37
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components (revenue, expenses, gains, and losses) in a full set
of general-purpose financial statements. The Company will adopt SFAS No. 130 in
its fiscal year 1999.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," which changes the way public companies
report information about operating segments. SFAS No. 131, which is based on the
management approach to segment reporting, establishes requirements to report
selected segment information quarterly and to report entity-wide disclosures
about products and services, major customers, and the material countries in
which the entity holds assets and reports revenue. Management has not yet
evaluated the effects of this change on its reporting of segment information.
The Company will adopt SFAS No. 131 in its fiscal year 1999.
3. BUSINESS COMBINATIONS
Pooling of Interests Combinations
On July 9, 1996, the Company acquired StrataCom, Inc. ("StrataCom"). Under the
terms of the agreement, one share of the Company's common stock was exchanged
for each outstanding share of StrataCom. Approximately 76.4 million shares of
common stock were issued to acquire StrataCom.
The Company also assumed remaining outstanding StrataCom stock options
that were converted to options to purchase approximately 11.5 million shares of
the Company's common stock. The transaction was accounted for as a pooling of
interests in fiscal year 1996; therefore, all prior periods presented were
restated.
Prior to the merger, StrataCom used a calendar year end. Restated
financial statements of the Company combine the July 28, 1996, and July 30, 1995
results of the Company with the June 30, 1996, and July 1, 1995 results of
StrataCom, respectively. No adjustments have been made to conform accounting
policies of the entities. However, StrataCom's historical results have been
adjusted to reflect an increase in income taxes because of the elimination of a
previously provided valuation allowance on its deferred tax asset as of the
earliest period presented. There were no significant intercompany transactions
requiring elimination in any period presented. 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 that are not material to the consolidated
companies have been reflected as an adjustment to retained earnings in the first
quarter of fiscal 1997.
The Company has also completed a number of other pooling acquisitions. The
historical operations of these entities is immaterial to the Company's
consolidated operations on either an individual or an aggregated basis;
therefore, prior period statements have not been restated for these
acquisitions. These transactions are summarized as follows (in millions of
shares):
<TABLE>
<CAPTION>
TOTAL SHARES OF
FISCAL YEAR ACQUIRED COMPANIES CISCO STOCK ISSUED
- -----------------------------------------------------------------------
<S> <C> <C>
1995 Newport Systems Solutions, Inc. 6.6
Kalpana, Inc. 13.6
1996 Combinet, Inc. 3.5
Grand Junction Networks, Inc. 9.2
TGV Software, Inc. 2.4
1997 Nashoba Networks 1.6
Granite Systems, Inc. 2.2
- -----------------------------------------------------------------------
</TABLE>
In conjunction with these poolings, the Company also assumed the outstanding
options of these companies, which were converted to options to purchase
approximately 3.6 million shares of the Company's common stock.
PURCHASE COMBINATIONS
During the three years ended July 26, 1997, the Company made the acquisitions
described in the paragraphs that follow, each of which has been accounted for as
a purchase. The consolidated financial statements include the operating results
of each business from the date of acquisition. Pro forma results of operations
have not been presented, because the effects of these acquisitions were not
material on either an individual or an aggregate basis.
38
<PAGE> 19
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 products from the
acquired companies to technological feasibility are not expected to have a
material impact on the Company's future results of operations or cash flows.
Amounts allocated to goodwill and other intangibles are amortized on a
straight-line basis up to a five-year period.
In January 1995, the Company acquired substantially all of the assets and
assumed the liabilities of LightStream Corporation ("LightStream"), a developer
of enterprise-class ATM switching technology, for $120.0 million in cash and
related acquisition costs of approximately $.5 million.
The purchase price was allocated to the acquired assets and assumed
liabilities based on fair values as follows (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------
<S> <C>
Cash $ 6,320
Accounts receivable 2,777
Other current assets 101
Property and equipment 1,815
Purchased research and development 95,760
Goodwill 19,710
Current liabilities (5,983)
- ----------------------------------------------
Total $120,500
==============================================
</TABLE>
The remaining amounts allocated to goodwill after the $5.1 million write-off in
fiscal 1996 were amortized on a straight-line basis over two years.
In October 1996, the Company acquired substantially all of the assets of
Telebit Corporation ("Telebit") and its Modem ISDN Channel Aggregation
(MICA(TM)) technologies for approximately $200.0 million in cash. The Company
purchased Telebit patents and MICA intellectual property, 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. As
part of this transaction, the Company recorded approximately $174.6 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, the Company exchanged
common stock worth approximately $81.1 million and assumed net liabilities of
approximately $3.8 million for all outstanding shares and options of Netsys. As
part of this transaction, the Company recorded approximately $43.2 million in
purchased research and development expense and $41.7 million of goodwill and
other intangible assets in the second quarter of fiscal 1997.
In July 1997, the Company completed the acquisition of Skystone Systems
Corporation ("Skystone"), an innovator of high-speed Synchronous Optical
Network/Synchronous Digital Hierarchy (SONET/SDH). Under the terms of the
agreement, shares of the Company's common stock worth approximately $69.4
million, and $22.7 million in cash has been exchanged for all outstanding
shares, warrants, and options of Skystone. As part of this transaction, the
Company recorded approximately $89.4 million in purchased research and
development expense.
In July 1997, the Company acquired Ardent Communications ("Ardent"), a
designer of combined communications support for compressed voice, LAN, data, and
video traffic across public and private Frame Relay and ATM networks. Under the
terms of the agreement, shares of the Company's stock worth approximately $165.3
million have been exchanged for the outstanding shares and options of Ardent. As
part of this transaction, the Company recorded approximately $163.6 million in
purchased research and development expense.
Also in July 1997, the Company acquired Global Internet Software Group
("Global Internet"), a wholly owned subsidiary of Global Internet.Com and a
pioneer in the Windows NT network security marketplace. Approximately $40.2
million in cash was exchanged for all of the outstanding shares of Global
Internet. As part of this transaction, the Company recorded approximately $37.6
million in purchased research and development expense.
39
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS COMBINATIONS COMPLETED SUBSEQUENT TO YEAR-END
On July 28, 1997, the Company entered into an agreement to purchase the Dagaz
xDSL business of Integrated Network Corporation ("INC"). The Company agreed to
pay approximately $108.0 million in cash for the xDSL business. As part of this
transaction, the Company assumed approximately .2 million shares of INC stock
options, which will be converted to options to purchase the Company's common
stock. This transaction was completed in August 1997.
4. BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
(IN THOUSANDS) JULY 26, 1997 JULY 28, 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Inventories, net:
Raw materials $ 89,226 $ 134,531
Work in process 114,724 99,723
Finished goods 21,733 51,920
Demonstration systems 28,994 15,014
- ---------------------------------------------------------------------------------------------
Total $ 254,677 $ 301,188
=============================================================================================
Property and equipment, net:
Leasehold improvements $ 88,801 $ 40,927
Computer equipment and related software 394,735 280,777
Production and engineering equipment 108,520 108,477
Office equipment, furniture, fixtures, and other 290,129 145,291
- ---------------------------------------------------------------------------------------------
882,185 575,472
Less accumulated depreciation and amortization (415,833) (244,157)
- ---------------------------------------------------------------------------------------------
Total $ 466,352 $ 331,315
=============================================================================================
Accrued payroll and related expenses:
Accrued wages, paid time off, and related expenses $ 127,779 $ 97,780
Accrued commissions 66,851 33,589
Accrued bonuses 68,639 63,828
- ---------------------------------------------------------------------------------------------
Total $ 263,269 $ 195,197
=============================================================================================
Other accrued liabilities:
Deferred revenue $ 183,268 $ 116,229
Accrued warranties 41,526 32,256
Other liabilities 168,644 102,094
- ---------------------------------------------------------------------------------------------
Total $ 393,438 $ 250,579
=============================================================================================
</TABLE>
40
<PAGE> 21
5. INVESTMENTS
At July 26, 1997 and July 28, 1996, substantially all of the Company's
investments were classified as available for sale. The difference between the
cost and fair value of those investments, net of the tax effect, is shown as a
separate component of shareholders' equity.
The following tables summarize the Company's investment in securities (in
thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
JULY 26, 1997 COST GAINS LOSSES VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. government notes and bonds $ 609,580 $ 1,407 $ (960) $ 610,027
State, municipal, and county
government notes and bonds 1,313,652 6,214 (755) 1,319,111
Foreign government notes and bonds 31,565 29 (111) 31,483
Corporate notes and bonds 562,039 594 (589) 562,044
Corporate equity securities 40,759 89,390 (16,447) 113,702
- ----------------------------------------------------------------------------------------------
Total $2,557,595 $97,634 $(18,862) $2,636,367
==============================================================================================
Reported as:
Short-term investments $1,005,977
Investments 1,267,174
Restricted investments 363,216
- ----------------------------------------------------------------------------------------------
Total $2,636,367
==============================================================================================
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
JULY 28, 1996 COST GAINS LOSSES VALUE
- ----------------------------------------------------------------------------------------------
U.S. government notes and bonds $ 445,539 $ 192 $ (2,911) $ 442,820
State, municipal, and county
government notes and bonds 1,023,399 1,448 (5,860) 1,018,987
Foreign government notes and bonds 2,498 42 2,540
Corporate notes and bonds 62,766 99 (134) 62,731
Corporate equity securities 30,900 357,049 (95,780) 292,169
- ----------------------------------------------------------------------------------------------
Total $1,565,102 $358,830 $(104,685) $1,819,247
==============================================================================================
Reported as:
Short-term investments $ 758,489
Investments 832,114
Restricted investments 228,644
- ----------------------------------------------------------------------------------------------
Total $1,819,247
==============================================================================================
</TABLE>
41
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes debt maturities (including restricted
investments) at July 26, 1997 (in thousands):
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
Less than one year $1,269,663 $1,270,079
Due in 1-2 years 516,523 517,457
Due in 2-5 years 694,504 699,411
Due after 5 years 36,146 35,718
- ---------------------------------------------------------------------------------
Total $2,516,836 $2,522,665
=================================================================================
</TABLE>
During fiscal year 1997, the Company began to sell its minority equity position
in a publicly traded company. A hedge was formed to protect the unrealized gains
the Company had earned while holding this investment. The hedge took the form of
a cashless collar and was constructed as a series of purchased puts and sold
calls, with the cost of the purchased puts exactly offset by the premium earned
on the sold calls. The total face values of the puts and calls at July 26, 1997
were $16.5 million and $21.1 million, respectively. The collar expires over a
period of two years commencing October 1996. Net unrealized gains or losses for
the stock and associated hedge are reflected as a separate component of
shareholders' equity. Realized gains or losses on the combined position have
been reflected in income for the period in which the stock was sold or the hedge
was terminated. Also in fiscal 1997, the Company established the Cisco Systems
Foundation ("the Foundation"). As part of this initiative, the Company donated a
portion of this investment, along with other equity securities, with a combined
cost basis of approximately $2.3 million and an approximate fair value of $71.5
million at July 26, 1997, to the Foundation. The realized gains on the sale of
this investment, net of the amounts donated to the Foundation, were $152.7
million in fiscal 1997. The Company expects to sell its remaining stake in the
publicly traded company in fiscal year 1998 and will realize additional gains.
There were no material realized gains in fiscal years 1996 and 1995. Gross
realized gains and losses on the sale of investments are calculated using the
specific identification method.
6. LINE OF CREDIT
In July 1997, the Company entered into a syndicated credit agreement under the
terms of which a group of banks has committed a maximum of $500.0 million on an
unsecured, revolving basis for cash borrowings of various maturities. The
commitments made under this agreement expire on July 1, 2002. This agreement
replaces an earlier, three-year, $100.0 million credit agreement entered into on
May 22, 1995. Under the terms of the new agreement, borrowings bear interest at
a spread over the London Interbank Offered Rate based on certain financial
criteria and third-party rating assessments or other alternative rates. As of
July 26, 1997, this spread was 20 basis points. A commitment fee of 7 basis
points is assessed against any undrawn amounts. The agreement includes a single
financial covenant that places a variable floor on tangible net worth, as
defined, if certain leverage ratios are exceeded. There have been no borrowings
under this or the previous agreement.
42
<PAGE> 23
7. COMMITMENTS AND CONTINGENCIES
LEASES
The Company has entered into several agreements to lease 221 acres of land
located in San Jose, California, where it has established its headquarters
operations, and 45 acres of land located in Research Triangle Park, North
Carolina, where it has expanded certain research and development and customer
support activities. All of the leases have initial terms of five to seven years
and options to renew for an additional three to five years, subject to certain
conditions. At any time during the terms of these land leases, the Company may
purchase the land. If the Company elects not to purchase the land at the end of
each of the leases, the Company has guaranteed a residual value of $124.1
million.
The Company has also entered into agreements to lease certain buildings to
be constructed on the land described above. The lessors of the buildings have
committed to fund up to a maximum of $341.6 million (subject to reductions based
on certain conditions in the respective leases) for the construction of the
buildings, with the portion of the committed amount actually used to be
determined by the Company. Rent obligations for the buildings commenced on
various dates and will expire at the same time as the land leases.
The Company has an option to renew the building leases for an additional
three to five years, subject to certain conditions. The Company may, at its
option, purchase the buildings during or at the ends of the terms of the leases
at approximately the amount expended by the lessors to construct the buildings.
If the Company does not exercise the purchase options by the ends of the leases,
the Company will guarantee a residual value of the buildings as determined at
the lease inception date of each agreement (approximately $186.6 million at July
26, 1997).
As part of the above lease transactions, the Company restricted $363.2
million of its investment securities as collateral for specified obligations of
the lessor under the leases. These investment securities are restricted as to
withdrawal and are managed by a third party subject to certain limitations under
the Company's investment policy. In addition, the Company must maintain a
minimum consolidated tangible net worth, as defined, of $1 billion.
The Company also leases office space in Santa Clara, California; Chelmsford,
Massachusetts; and for its various U.S. and international sales offices.
Future annual minimum lease payments under all noncancelable operating
leases as of July 26, 1997, are as follows (in thousands):
<TABLE>
- ---------------------------------------------
<S> <C>
1998 $ 65,876
1999 54,531
2000 41,530
2001 29,710
2002 17,895
Thereafter 39,513
- ---------------------------------------------
Total minimum lease payments $249,055
=============================================
</TABLE>
Rent expense totaled $64.4 million, $36.8 million, and $24.0 million for 1997,
1996, and 1995, respectively.
FORWARD EXCHANGE CONTRACTS
The Company conducts business on a global basis in several major international
currencies. As such, it is exposed to adverse movements in foreign currency
exchange rates. The Company enters into forward foreign exchange contracts to
reduce certain currency exposures. These contracts hedge exposures associated
with nonfunctional currency assets and liabilities denominated in Japanese,
Canadian, Australian, and several European currencies. At the present time, the
Company hedges only those currency exposures associated with certain
nonfunctional currency assets and liabilities and does not generally hedge
anticipated foreign currency cash flows.
The Company does not enter into forward exchange contracts for trading
purposes. Gains and losses on the contracts are included in other income and
offset foreign exchange gains or losses from the revaluation of intercompany
balances or other current assets and liabilities denominated in currencies other
than the functional currency
43
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the reporting entity. The Company's forward currency contracts generally
range from one to three months in original maturity. Forward exchange contracts
outstanding and their unrealized gains and (losses) as of July 26, 1997 are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
NOTIONAL NOTIONAL
VALUE VALUE UNREALIZED
PURCHASED SOLD GAIN/(LOSS)
- --------------------------------------------------------------
<S> <C> <C> <C>
Japanese yen $ 36,150 $ (84,483) $ 111
Australian dollar 33,171 (58,072) 521
Canadian dollar -- (42,021) 15
European currencies 142,036 (83,225) (74)
- --------------------------------------------------------------
Total $ 211,357 $(267,801) $ 573
==============================================================
</TABLE>
The Company's forward exchange contracts contain credit risk in that its banking
counterparties may be unable to meet the terms of the agreements. The Company
minimizes such risk by limiting its counterparties to major financial
institutions. In addition, the potential risk of loss with any one party
resulting from this type of credit risk is monitored. Management does not expect
any material losses as a result of default by other parties.
LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to legal proceedings, claims, and
litigation arising in the ordinary course of business. The Company's management
does not expect that the ultimate costs to resolve these matters will have a
material adverse effect on the Company's consolidated financial position,
results of operations, or cash flows.
8. SHAREHOLDERS' EQUITY
The Company's common stock was split two for one on February 16, 1996. All
applicable share and per-share data in these consolidated financial statements
have been restated to give effect to this stock split.
Under the terms of the Company's Articles of Incorporation, the Board of
Directors may determine the rights, preferences, and terms of the Company's
authorized but unissued shares of preferred stock.
9. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK PURCHASE PLAN
The Company has an Employee Stock Purchase Plan ("the Purchase Plan") under
which 9.8 million shares of common stock have been reserved for issuance.
Eligible employees may designate not more than 10% of their cash compensation to
be deducted each pay period for the purchase of common stock under the Purchase
Plan, and participants may purchase not more than $25,000 of common stock in any
one calendar year. On the last business day of each calendar quarter, shares of
common stock are purchased with the employees' payroll deductions over the
immediately preceding six months at a price per share of 85% of the lesser of
the market price of the common stock on the purchase date or the market price on
the first day of the period. The Purchase Plan will terminate no later than
January 3, 2000. In fiscal 1997, 1996, and 1995, 1.4 million, 1.3 million, and
1.5 million shares, respectively, were issued under the Purchase Plan. At July
26, 1997, 2.0 million shares were available for issuance under the Purchase
Plan.
STOCK OPTION PLANS
In November 1996, the Company's shareholders approved the 1996 Stock Incentive
Plan (the "1996 Plan"). This plan was the successor to the Company's 1987 Stock
Option Plan (the "Predecessor Plan"). The 1996 Plan became effective immediately
upon shareholder approval, and all outstanding options under the Predecessor
Plan were transferred to the 1996 Plan. However, all outstanding options under
the Predecessor Plan continue to be governed by the terms and conditions of the
existing option agreements for those grants. The maximum number of shares under
the 1996 Plan was initially limited to the 68.8 million shares transferred from
the Predecessor Plan. Under the terms of the 1996 Plan, the share reserve will
increase each December for the next three fiscal years, beginning with fiscal
1997, by an amount equal to 4.75% of the outstanding shares on the last trading
day of the immediately preceding November. Although the Board has the authority
to set other terms, the options are generally 25% exercisable one year from the
date of grant and then ratably over the following 36 months.
44
<PAGE> 25
Under the Predecessor Plan, the options generally had terms of five years. Under
the 1996 Plan, options expire no later than nine years from the grant date.
A summary of option activity follows (in thousands, except per-share
amounts):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------
OPTIONS AVAILABLE WEIGHTED AVERAGE
FOR GRANT OPTIONS EXERCISE PRICE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCES JULY 31, 1994 19,196 33,508 $ 7.91
Options granted and assumed (36,792) 36,792 16.94
Options exercised (14,232) 2.66
Options canceled 2,207 (2,207) 12.13
Additional shares reserved 12,474
- ------------------------------------------------------------------------------------------------
BALANCES JULY 30, 1995 (2,915) 53,861 15.29
Options granted and assumed (35,170) 35,170 25.33
Options exercised (17,771) 4.74
Options canceled 2,171 (2,171) 20.33
Additional shares reserved 52,170
- ------------------------------------------------------------------------------------------------
BALANCES JULY 28, 1996 16,256 69,089 22.96
Options granted and assumed (42,402) 42,402 48.91
Options exercised (17,483) 12.76
Options canceled 4,673 (4,673) 34.37
Additional shares reserved 31,815
- ------------------------------------------------------------------------------------------------
BALANCES JULY 26, 1997 10,342 89,335 $36.68
================================================================================================
</TABLE>
At July 26, 1997 and July 28, 1996, approximately 24.8 million and 21.7 million
outstanding options, respectively, were exercisable. The weighted average
exercise prices for options were $20.66 and $11.42 at July 26, 1997 and July 28,
1996, respectively.
The Company has, in connection with the acquisition of various companies,
assumed the stock option plans of each acquired company. A total of 4.6 million
shares of the Company's common stock have been reserved for issuance under the
assumed plans, and the related options are included in the preceding table.
The following tables summarize information concerning outstanding and
exercisable options at July 26, 1997 (in thousands, except per-share amounts):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING CONTRACTUAL WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING LIFE (IN YEARS) EXERCISE PRICE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 0.01-16.62 18,807 2.6 $10.48
16.69-34.15 18,136 4.9 25.20
34.32-46.50 21,948 8.2 44.09
47.75-52.25 19,617 8.1 50.47
53.37-75.50 10,827 8.3 61.39
- -----------------------------------------------------------------------------------------------------
Total 89,335 6.4 $36.68
=====================================================================================================
</TABLE>
45
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
------------------------------------
RANGE OF NUMBER WEIGHTED AVERAGE
EXERCISE PRICES EXERCISABLE EXERCISE PRICE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 0.01-16.62 12,290 $ 9.30
16.69-34.15 8,135 24.48
34.32-46.50 2,442 39.18
47.75-52.25 1,236 50.86
53.37-75.50 745 55.51
- ------------------------------------------------------------------------------------------------
Total 24,848 $20.66
================================================================================================
</TABLE>
The Company has adopted SFAS No. 123, "Accounting for Stock-Based Compensation,"
issued in October of 1995. In accordance with SFAS No. 123, the Company applies
APB Opinion 25 and related Interpretations in accounting for its stock option
plans, and accordingly does not record compensation costs. If the Company had
elected, beginning in fiscal 1996, to recognize compensation cost based on the
fair value of the options granted at grant date as prescribed by SFAS No. 123,
net income and net income per common share would have been reduced to the pro
forma amounts shown below (in thousands, except per-share amounts):
<TABLE>
<CAPTION>
1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income--as reported $ 1,048,679 $ 913,324
Net income--pro forma $ 897,939 $ 872,263
Net income per common share--as reported $ 1.52 $ 1.37
Net income per common share--pro forma $ 1.32 $ 1.32
- -----------------------------------------------------------------------------------------------------
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
EMPLOYEE STOCK OPTIONS EMPLOYEE STOCK PURCHASE PLAN
- -----------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expected dividend yield 0.0% 0.0% 0.0% 0.0%
Risk-free interest rate 6.4% 5.9% 5.3% 5.4%
Expected volatility 32.8% 32.9% 44.4% 44.9%
Expected life (in years) 3.1 3.1 0.5 0.5
- -----------------------------------------------------------------------------------------------------
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion the existing models do not necessarily provide a reliable single measure
of the fair value of the Company's options. The weighted average estimated fair
values of employee stock options granted during fiscal 1997 and 1996 were $15.60
and $13.34 per share, respectively.
46
<PAGE> 27
The above pro forma disclosures are not likely to be representative of the
effects on net income and net income per common share in future years, because
they do not take into consideration pro forma compensation expense related to
grants made prior to the Company's fiscal year 1996.
EMPLOYEE 401(k) PLAN
The Company has adopted a plan known as the Cisco Systems, Inc. 401(k) Plan
("the Plan") to provide retirement and incidental benefits for its employees. As
allowed under Section 401(k) of the Internal Revenue Code, the Plan provides
tax-deferred salary deductions for eligible employees.
Employees may contribute from 1% to 15% of their annual compensation to the
Plan, limited to a maximum annual amount as set periodically by the Internal
Revenue Service. The Company matches employee contributions dollar for dollar up
to a maximum of $1,500 per year per person. All matching contributions vest
immediately. In addition, the Plan provides for discretionary contributions as
determined by the Board of Directors. Such contributions to the Plan are
allocated among eligible participants in the proportion of their salaries to the
total salaries of all participants. Company matching contributions to the Plan
totaled $12.6 million in 1997, $6.6 million in 1996, and $3.5 million in 1995.
No discretionary contributions were made in 1997, 1996, or 1995.
10. INCOME TAXES
The provision (benefit) for income taxes consists of (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $ 845,254 $ 514,050 $ 288,656
Deferred (171,571) (64,133) (63,310)
- --------------------------------------------------------------------------------
673,683 449,917 225,346
- --------------------------------------------------------------------------------
State:
Current 153,110 92,291 59,927
Deferred (15,043) (6,907) (9,968)
- --------------------------------------------------------------------------------
138,067 85,384 49,959
- --------------------------------------------------------------------------------
Foreign:
Current 27,773 19,452 7,761
Deferred 670 (3,252) (1,578)
- --------------------------------------------------------------------------------
28,443 16,200 6,183
- --------------------------------------------------------------------------------
Total provision $ 840,193 $ 551,501 $ 281,488
================================================================================
</TABLE>
47
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company paid income taxes of $658.7 million, $335.1 million, and $270.5
million, in fiscal 1997, 1996, and 1995, respectively.
The items accounting for the difference between income taxes computed at the
federal statutory rate and the provision for income taxes follow:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
Effect of:
State taxes, net of federal benefit 4.5 3.6 4.1
Foreign sales corporation (3.3) (2.9) (2.9)
Nondeductible purchased R&D 7.1
Tax-exempt interest (1.0) (1.0) (1.1)
Tax credits (1.3) (0.3) (1.1)
Other, net 3.5 3.2 4.1
- ---------------------------------------------------------------------------------
44.5% 37.6% 38.1%
=================================================================================
</TABLE>
The components of the deferred income tax assets (liabilities) follow (in
thousands):
<TABLE>
<CAPTION>
JULY 26, 1997 JULY 28, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Other nondeductible accruals $ 125,010 $ 66,950
Inventory allowances and capitalization 89,984 44,334
Purchased research and development 81,115 33,806
Allowance for doubtful accounts and returns 38,008 26,632
Accrued state franchise tax 29,231 13,847
Depreciation 11,031 10,451
Deferred revenue 16,629 8,664
Warranty accruals 16,290 8,406
Unrealized gain on investments (29,146) (95,296)
- --------------------------------------------------------------------------------
$ 378,152 $ 117,794
- --------------------------------------------------------------------------------
</TABLE>
The noncurrent portion of the deferred income tax assets, which totaled $66.0
million at July 26, 1997 and $16.0 million at July 28, 1996, is included in
other assets.
The Company's income taxes payable for federal, state, and foreign purposes
have been reduced by the tax benefits 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.
48
<PAGE> 29
11. GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS
The Company operates in a single industry segment encompassing the design,
development, manufacture, marketing, and technical support of networking
products and services.
In 1997, 1996, and 1995, no single customer accounted for 10% or more of the
Company's net sales. International sales, primarily in Europe, the Pacific
region, and Canada, were $2,803 million in 1997, $1,976 million in 1996, and
$931 million in 1995. Export sales, primarily to these regions, were $1,939
million in 1997, $1,530 million in 1996, and $737 million in 1995.
Summarized financial information by geographic region for 1997, 1996, and
1995 is as follows (in thousands):
1997 1996 1995
- --------------------------------------------------------------------------------
Net sales:
United States $ 6,328,720 $ 4,024,482 $ 2,199,940
International 863,855 446,437 194,217
Eliminations (752,404) (374,912) (161,505)
- --------------------------------------------------------------------------------
Total $ 6,440,171 $ 4,096,007 $ 2,232,652
- --------------------------------------------------------------------------------
Operating income:
United States $ 1,581,622 $ 1,379,994 $ 692,174
International 48,750 22,704 4,199
Eliminations (3,078) (1,892) 1,590
- --------------------------------------------------------------------------------
Total $ 1,627,294 $ 1,400,806 $ 697,963
- --------------------------------------------------------------------------------
Identifiable assets:
United States $ 5,041,225 $ 3,467,637
International 505,115 184,291
Eliminations (94,356) (21,696)
- --------------------------------------------------------------------------------
Total $ 5,451,984 $ 3,630,232
================================================================================
49
<PAGE> 30
Report of Independent Accountants
Board of Directors and Shareholders
Cisco Systems, Inc.
San Jose, California
We have audited the accompanying consolidated balance sheets of Cisco
Systems, Inc. and its subsidiaries as of July 26, 1997 and July 28, 1996 and the
related consolidated statements of operations, cash flows, and shareholders'
equity for each of the three years in the period ended July 26, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cisco Systems,
Inc. and its subsidiaries as of July 26, 1997 and July 28, 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended July 26, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Jose, California
August 4, 1997
50
<PAGE> 31
SUPPLEMENTARY FINANCIAL DATA
(unaudited) (in thousands, except per-share amounts)
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------- -------------------------------------------------
JULY 26, APR. 26, JAN. 25, OCT. 26, JULY 28, APR. 28, JAN. 28, OCT. 29,
1997 1997 1997 1996 1996 1996 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $1,765,097 $1,647,871 $1,592,377 $1,434,826 $1,292,150 $1,087,056 $ 918,510 $ 798,291
Gross margin 1,149,057 1,076,532 1,039,858 933,346 839,499 709,902 606,195 530,549
Operating income 286,453 539,130 488,551 313,160 423,872 376,572 321,511 278,851
Income before provision
for income taxes 335,701 600,511 562,914 389,746 442,715 393,244 337,157 291,709
Net income $ 150,957(1) $ 378,321(2) $ 338,459(3) $ 180,942(4) $ 276,551 $ 245,649 $ 209,737 $ 181,387
Net income per
common share $ .22(1) $ .55(2) $ .49(3) $ .26(4) $ .41 $ .37 $ .31 $ .28
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net income and net income per share include purchased research and
development expenses of $290.6 million and realized gains on the sale of a
minority stock investment of $18.0 million. Pro forma net income and net
income per share, excluding these nonrecurring items net of tax, would have
been $383,237 and $0.55, respectively.
(2) Net income and net income per share include realized gains on the sale of a
minority stock investment of $32.3 million. Pro forma net income and net
income per share, excluding this nonrecurring item net of tax, would have
been $357,980 and $0.52, respectively.
(3) Net income and net income per share include purchased research and
development expenses of $43.2 million and realized gains on the sale of a
minority stock investment of $47.3 million. Pro forma net income and net
income per share, excluding these nonrecurring items net of tax, would have
been $351,863 and $0.51, respectively.
(4) Net income and net income per share include purchased research and
development expenses of $174.6 million and realized gains on the sale of a
minority stock investment of $55.1 million. Pro forma net income and net
income per share, excluding these nonrecurring items net of tax, would have
been $320,813 and $0.47, respectively.
STOCK MARKET INFORMATION
The following table presents the ranges of the Company's common stock. Prices
reflect the two-for-one split effective February 1996:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------------
HIGH LOW HIGH LOW HIGH LOW
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ 67.00 $ 50.00 $ 38.62 $ 26.12 $ 15.00 $ 10.43
Second Quarter 74.87 57.62 43.93 32.68 18.31 15.06
Third Quarter 69.75 46.37 52.37 40.56 20.37 16.28
Fourth Quarter 80.37 46.50 58.75 47.12 29.31 19.68
- -----------------------------------------------------------------------------------------------
</TABLE>
Cisco Systems' common stock (Nasdaq symbol CSCO) is traded on the Nasdaq
National Market. The table above reflects the range of high and low closing
prices for each period indicated. The Company has never paid cash dividends on
the common stock and has no present plans to do so. There were approximately
12,880 shareholders of record on July 26, 1997.
51
<PAGE> 32
DIRECTORS
- --------------------------------------------------------------------------------
CAROL BARTZ(3)
Chairman and Chief Executive Officer
Autodesk, Inc.
JOHN T. CHAMBERS(1)(4)(5)(6)
President and Chief Executive Officer
Cisco Systems, Inc.
JAMES F. GIBBONS, Ph.D.(2)(4)
Professor of Electrical Engineering
and Special Consul for Industrial Relations
Stanford University
EDWARD R. KOZEL
Senior Vice President and Chief Technical Officer
Cisco Systems, Inc.
RICHARD M. MOLEY
Senior Vice President
Cisco Systems, Inc.
JOHN P. MORGRIDGE(1)(5)(6)
Chairman
Cisco Systems, Inc.
ROBERT L. PUETTE(2)(3)(4)(5)
President, Chief Executive Officer,
and Chairman of the Board
NetFRAME Systems, Inc.
MASAYOSHI SON
President and Chief Executive Officer
SOFTBANK Corp.
DONALD T. VALENTINE(1)(5)(7)
General Partner
Sequoia Capital
STEVEN M. WEST(3)(7)
President and Chief Executive Officer
Hitachi Data Systems
OFFICERS
- --------------------------------------------------------------------------------
LARRY R. CARTER
Senior Vice President, Finance and Administration
Chief Financial Officer and Secretary
JOHN T. CHAMBERS
President and Chief Executive Officer
GARY DAICHENDT
Senior Vice President, Worldwide Operations
EDWARD R. KOZEL
Senior Vice President and Chief Technical Officer
DONALD J. LISTWIN
Senior Vice President,
Service Provider Line of Business
MARIO MAZZOLA
Senior Vice President,
Enterprise Line of Business
CARL REDFIELD
Senior Vice President, Manufacturing
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston
Boston Equiserve
P.O. Box 8040
Boston, MA 02266-8040
www.equiserve.com
617 575-3120
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
San Jose, California
LEGAL COUNSEL
Brobeck, Phleger & Harrison LLP
Palo Alto, California
NOTICE OF ANNUAL MEETING
Cisco Systems Headquarters
255 West Tasman Drive
San Jose, California
November 13, 1997
10:00 a.m. Pacific Time
INVESTOR RELATIONS
For further information on the company, additional copies of
this report, Form 10-K, or other financial information contact:
Investor Relations
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
408 227-CSCO (2726)
You may also contact us by sending an e-mail to [email protected] or
by visiting the company's Web site at www.cisco.com.
ONLINE ANNUAL REPORT
We invite you to visit our online interactive annual report at
www.cisco.com/annualreport/1997. In this version you will find our shareholders'
letter in multiple languages, a financial section that lets you create
customized charts and graphs, detailed customer profiles, and additional company
and product information. This Web-based report complements our printed report,
giving you a comprehensive understanding of Cisco Systems.
- --------------------------------------------------------------------------------
(1) Member of the Executive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Nomination Committee
(5) Member of the Acquisition Committee
(6) Special Stock Option Committee
(7) Special Technology Committee
- --------------------------------------------------------------------------------
Copyright (C)1997 Cisco Systems, Inc. All rights reserved. Ardent, Cisco IOS,
the Cisco Powered Network logo, Granite, IGX, Kalpana, MICA, Nashoba Networks,
Netsys Technologies, and Skystone are trademarks; and BPX, Catalyst, Cisco,
Cisco Systems, the Cisco Systems logo, Combinet, Grand Junction Networks, IPX,
LightStream, StrataCom, and TGV are registered trademarks of Cisco Systems, Inc.
in the U.S. and certain other countries. All other trademarks mentioned in this
document are the property of their respective owners.
Printed in the U.S.A. on recycled paper. [RECYCLE LOGO]
52
<PAGE> 1
EXHIBIT 21.01
SUBSIDIARIES
Cisco Systems Canada Limited
Cisco Systems Europe, S.A.R.L. (France)
Cisco Systems Import/Export Corporation (U.S. Virgin Islands)
Cisco Systems Belgium, S.A.
Cisco Systems Limited (U.K.)
Cisco Systems Australia PTY. Limited
Nihon Cisco Systems, K.K. (Japan)
Cisco Systems de Mexico, S.A. de C.V.
Cisco Systems New Zealand Limited
Cisco Systems (HK) Limited (Hong Kong)
Cisco Systems GmbH (Germany)
Cisco Systems (Italy) Srl
Cisco Systems GesmbH (Austria)
Cisco do Brasil Ltda. (Brazil)
Cisco Systems (Korea) Ltd.
VZ, Cisco Systems, C.A. (Venezuela)
Cisco Systems South Africa (Pty) Ltd.
Cisco Systems Sweden Aktiebolag
Cisco Systems (Switzerland) AG
Cisco Systems Netherlands, B.V.
Cisco Systems International Netherlands, B.V.
Cisco Systems Czech Republic, s.r.o.
Cisco Systems Spain, S.L.
Cisco Systems Argentina S.A.
Cisco Systems Chile, S.A.
Cisco Sistemas de Redes S.A., (Costa Rica)
Cisco Systems Malaysia, Sdn. Bhd.
Cisco Systems (USA) Pte. Ltd., Singapore
Cisco Systems Thailand, Ltd.
Cisco Systems Peru, S.A.
Cisco Systems Greece, S.A.
Cisco Systems Poland, Sp.zo.o
Cisco Systems Isreal, Ltd.
Cisco Systems Internetworking Iletsim Hizmetlieri Ltd.Sirketi
(Turkey)
Cisco Systems (India), Ltd. (DE,USA)
Cisco Systems Capital Corp. (USA)
Cisco Systems (Taiwan),Ltd.
Cisco Systems (Colombia), Ltda
Cisco Technology, Inc.
Cisco Systems Sales & Service, Inc.
Skystone Systems Company (Canada)
Telebit, Corporation (CA,USA)
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Cisco Systems, Inc. on Form S-3 (File Numbers: 333-17839, 333-20127, 333-24559,
333-33093, 333-33663, 333-36197) and on Form S-8 (File Numbers: 33-34849,
33-40509, 33-44221, 33-70644, 33-71860, 33-83268, 33-87100, 33-87096, 33-63331,
33-64283, 33-64283[Post Eff.], 33-01069, 333-02101, 333-05447, 333-09903,
333-14383, 333-14679, 333-14661, 333-16577, 333-17287, 333-24741, 333-33619,
333-33613, 333-35805) of our reports dated August 4, 1997, on our audits of the
consolidated financial statements and financial statement schedule of Cisco
Systems, Inc. as of July 26, 1997 and July 28, 1996, and for the years ended
July 26, 1997, July 28, 1996, and July 30, 1995, which reports are incorporated
by reference in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
San Jose, California
October 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet, consolidated statement of income and consolidated
statement of cash flows included in the Company's Form 10-K for the period
ending July 26, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-26-1997
<PERIOD-START> JUL-29-1996
<PERIOD-END> JUL-26-1997
<CASH> 269,608
<SECURITIES> 2,636,367
<RECEIVABLES> 1,192,741
<ALLOWANCES> 22,340
<INVENTORY> 254,677
<CURRENT-ASSETS> 3,101,266
<PP&E> 882,185
<DEPRECIATION> 415,833
<TOTAL-ASSETS> 5,451,984
<CURRENT-LIABILITIES> 1,120,109
<BONDS> 0
0
0
<COMMON> 1,763,200
<OTHER-SE> 2,526,422
<TOTAL-LIABILITY-AND-EQUITY> 5,451,984
<SALES> 6,440,171
<TOTAL-REVENUES> 6,440,171
<CGS> 2,241,378
<TOTAL-COSTS> 4,812,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,888,872
<INCOME-TAX> 840,193
<INCOME-CONTINUING> 1,048,679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,048,679
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 0
</TABLE>
