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 2, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 333-71921
Extreme Networks, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 77-0430270 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3585 Monroe Street 95051 Santa Clara, California (Zip Code) (Address of principal executive offices) |
Registrant's telephone number, including area code: (408) 579-2800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.001 par value
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 the Registrant's knowledge, in definitive proxy or information statements incorporated by reference to Part III of this Form 10-K or any amendment to this Form 10-K. [_]
The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $9,892,125,000 as of September 15, 2000, based upon the closing price on the Nasdaq National Market reported for such date. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose.
109,912,500 shares of the Registrant's Common stock, $.001 par value, were outstanding September 15, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10 (as to directors), 11,12 and 13 of Part III incorporate by reference information from the Registrant's Proxy Statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for the Registrant's 2000 Annual Meeting of Stockholders.
EXTREME NETWORKS, INC.
FORM 10-K
INDEX
Page ---- PART I Item 1. Business 3 Item 2. Properties 14 Item 3. Legal Proceedings 14 Item 4. Submission of Matters to a Vote of Security holders 14 PART II Item 5. Market For Registrant's Common Equity and Related Stockholder Matters 16 Item 6. Selected Consolidated Financial Data 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item7A. Quantitative and Qualitative Disclosures About Market Risk 30 Item 8. Financial Statements and Supplementary Data 32 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 49 PART III Item 10. Directors and Executive Officers of the Registrant 49 Item 11. Executive Compensation 49 Item 12. Security Ownership of Certain Beneficial Owners and Management 50 Item 13. Certain Relationships and Related Transactions 50 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 50 SIGNATURES 53 |
PART I
Item 1. Business.
When used in this Report, the words "may," "should," "believes," "expects," "anticipates," "estimates" and similar expressions are intended to identify forward-looking statements. Such statements, which include statements concerning the availability and functionality of products under development, product mix, pricing trends, the mix of export sales, sales to significant customers and the availability and cost of products from the Company's suppliers, are subject to risks and uncertainties, including those set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Factors That May Affect Our Results." Our actual results could differ materially from those projected in these forward-looking statements which could have a material adverse effect on our business, operating results and financial condition. These forward-looking statements speak only as of the date hereof and there may be events in the future that we are not able to predict accurately or over which we have no control.
Overview
Extreme Networks, Inc. ("Extreme" or "the Company") is a leading provider of broadband ethernet networking solutions for the Internet economy. The key advantages of our ethernet switching solutions are increased performance, the ability to easily grow, or "scale," in size as customer needs change, flexible allocation of network resources, ease of use and lower cost of ownership. These advantages are obtained through the use of custom semiconductors, known as ASICs, in our products and through designs that are common and uniform across our product line. The routing of network traffic, a function referred to as Layer 3 switching, is done primarily with ASICs in our products, and consequently, is faster than the software implementations used in many competing products. Traditional Layer 3 products rely primarily on software which can slow traffic speeds below those which could otherwise be achieved and result in message packets being lost when network traffic is high. Our products incorporate an ASIC-based, wire-speed architecture and are designed to avoid the loss of message packets in the switch, or "non-blocking." As a result, our products are less expensive than software-based routers, yet offer improved performance throughout the network.
Industry Background
Businesses and other organizations have become increasingly dependent on the internet as their central communications infrastructure to provide connectivity for internal and external communications. New mission-critical computing applications, such as enterprise resource planning, large enterprise databases and sophisticated on-line connections with vendors, as well as the increased use of traditional applications, such as e-mail, require significant information technology resources. The emergence of the desktop browser as a user interface has enabled bandwidth-intensive applications that contain voice, video and graphics to be used extensively through intranets and externally through extranets. These new applications, combined with the growth in business-to- business e-commerce and other on-line transactions, mobile communications and application service providers for example, are further burdening the network infrastructure.
Today's Networking Environments
LANs. LANs have traditionally been designed for client/server applications, where traffic patterns were predictable and traffic loads are relatively stable. In this environment, the majority of traffic remained within a given workgroup, with only a small percentage traveling across the high traffic portion of a LAN which interconnects all or a large part of the LAN. The increased use of data-intensive, mission-critical applications, the widespread implementations of intranets and extranets, and the ubiquity of Internet technologies have created unpredictable traffic patterns, and unpredictable traffic loads within the LAN. In addition, as users utilize the desktop browser and Internet technologies to access significant amounts of information from servers located inside and outside of the organization, a much higher percentage of traffic crosses the enterprise LAN backbone. For example, an employee can make a simple request that may require data to be downloaded and analyzed from multiple data warehouses outside his or her local workgroup, resulting in increased traffic across the LAN. Similarly, multiple users could request a multimedia presentation from a company intranet or from the Internet consuming tremendous amounts of network capacity. Either of these situations could result in users overwhelming a company's enterprise LAN unknowingly. As a result, the increased traffic, bandwidth-intensive applications and unpredictable traffic patterns are straining traditional LAN environments and reducing the performance of mission-critical applications.
Early LANs supported limited numbers of users and used a variety of protocols to organize the transmission of data, including Ethernet, Token Ring or AppleTalk technologies. As the number of users and the amount of traffic on a network grew, network performance began to decline. In this shared environment, each desktop received and was burdened by the communication of every other desktop. The need to improve network performance was initially addressed by adding network devices known as bridges or hubs
that separated the entire LAN into smaller workgroups. This arrangement was effective in supporting the traditional client/server environment where the majority of traffic remained within the workgroup. As applications became more bandwidth-intensive and users increasingly communicated outside of their workgroup, bridges and hubs were unable to process this traffic effectively. To mitigate this problem, Layer 2 switches were developed to provide a dedicated link for each desktop and eliminate the unnecessary flow of information to every desktop. In addition to the evolution of new devices, the need for increased backbone speeds led to the development of new and faster technologies such as FDDI, Fast Ethernet and ATM. However, each of these technologies employs different protocols, further complicating the LAN by requiring software-based routers that use expensive CPUs and software tables to route this multi-protocol traffic. Today, it is not uncommon to find multiple protocols and devices across the enterprise network.
A network must be scalable in the following four dimensions:
Speed. Speed refers to the number of bits per second that can be transmitted across the network. Today's network applications increasingly require speeds of up to 100 Mbps to the desktop. Hence, the backbone and server connections that aggregate traffic from desktops require speeds well in excess of 100 Mbps. Wire speed refers to the ability of a network device to process an incoming data stream at the highest possible rate without loss of packets. Wire speed routing refers to the ability to perform Layer 3 switching at the maximum possible rate.
Bandwidth. Bandwidth refers to the volume of traffic that a network or a network device can handle before traffic is "blocked," or unable to get through without interruption. When traffic was more predictable, the amount of traffic across a network link or through a network device grew basically in line with the number of users on the network. With today's data-intensive applications accessed in random patterns from within and outside of the network, users can spike traffic unpredictably, consuming significant bandwidth to the detriment of other users.
Network size. Network size refers to the number of users and servers that are connected to a network. Today's networks must be capable of connecting and supporting up to thousands, and even tens of thousands, of users and servers while providing performance and reliable connectivity.
Quality of service. Quality of service refers to the ability to control the delivery of traffic based upon its level of importance. Mission-critical enterprise and delay-sensitive multimedia applications require specific performance minimums, while traffic such as general e-mail and Internet surfing may not be as critical. In addition to basic standards-based prioritization of traffic according to importance, true end-to-end quality of service would allocate bandwidth to specified applications.
Opportunity for Next Generation Switching Solutions
The emergence of several technology trends is enabling a new generation of networking equipment that can meet the four scalability dimensions of today's enterprise ISPs and metropolitan area networks by accommodating new unpredictable traffic patterns and bandwidth-intensive, mission-critical applications. First, while many new and different technologies have been deployed in existing LANs, Ethernet has become the predominant LAN technology, with over 97% of the market in 1999 and total shipments of over 490 million ports from 1991 to 1999, according to the Dell'Oro Group. Ethernet has evolved from the original 10 Mbps Ethernet to 100 Mbps Fast Ethernet and, in 1998, to 1,000 Mbps Gigabit Ethernet. Today, Gigabit ethernet and 10 gigabit ethernet represent a viable network backbone protocol, enabling broadband connections to be aggregated for network backbone transport across the metropolitan core. Second, growth of the Internet and the subsequent development of application based on Internet technologies have increased the use of the Internet Protocol.
With the wide acceptance of Ethernet and Internet Protocol-based technologies, the need to support a multi-protocol environment is diminished. As a result, the simplified routing functionality can be embedded in application specific integrated circuits, or ASICs, instead of in the software and CPUs used in multi-protocol software-based routers. The resulting device, called a Layer 3 switch,
functions as a less expensive and significantly faster hardware-based router. Layer 3 switches can operate at multi-gigabit speeds and, as hardware routers, can support large networks. However, most Layer 3 switches still block traffic in high utilization scenarios and can only support standards-based traffic prioritization quality of service. While Layer 3 switching dramatically increases network performance, many of today's offerings fail to realize the potential of this technology because of the use of inconsistent hardware, software and management architectures.
To effectively address the needs of today's enterprise ISPs and metro area networks, customers need a solution that is easy to use and implement an can scale in terms of speed, bandwidth, network size and quality of service. Layer 3 switching represents the next critical step in addressing these requirements. However, customers need a Layer 3 solution that provides sufficient bandwidth to support unpredictable traffic spikes without impacting all other users connected to the network. In addition, customers require a quality of service solution that supports industry-standard prioritization and enables network administrators to offer quality of service that maps business processes and network policies. Finally, to simplify their networks, customers need a family of interoperable devices that utilize a consistent hardware, software and management architecture. Through an integrated family of products, network managers can effectively deploy the solution at any point in the network and follow a migration path to a network implemented with a consistent architecture from end-to-end.
The Extreme Networks Solution
Extreme provides broadband ethernet networking solutions that meet the requirements of enterprise,ISPs and Metropolitan Area Networks by providing increased performance, scalability, policy-based quality of service, ease of use and lower cost of ownership. Our products share a common ASIC, software and network management architecture that enables Layer 3 switching at wire speed in each major area of the network. In addition, these products can be utilized by ISPs and content providers for their web-hosting and server co-location operations. Because our products are based on industry standard routing and network management protocols, they are interoperable with existing network infrastructures. We offer policy-based quality of service that controls the delivery of network traffic according to pre-set policies that specify priority and bandwidth limits. All of our switches allow the switch to be managed from any browser-equipped desktop.
The key benefits of Extreme's solutions are:
High performance. Our products provide Broadband and IP services Ethernet together with the non-blocking, wire-speed routing of our ASIC-based Layer 3 switching. Using our products, customers can achieve forwarding rates that are up to 100 times faster than with software-based routers.
Ease of use and implementation. Our products share a common ASIC, software and network management architecture and offer consistent features for each of the key areas of the network. Our standard-based products can be integrated into and installed within existing networks. Customers can upgrade with Extreme products without needing additional training. ExtremeWare software simplifies network management by enabling customers to manage any of our products remotely through a browser interface.
Scalability. Our solutions offer customers the speed and bandwidth they need today with the capability to scale their networks to support demanding applications in the future without the burden of additional training or software or system complexity. Customers who purchase our products can upgrade them to advanced Layer 3 and Layer 4-7 capability because this functionality is built into our ASICs.
Quality of service. Extreme's policy-based quality of service enables customers to prioritize mission-critical applications by providing industry-leading tools for allocating network resources to specific applications. With our policy-based quality of service, customers can use a web-based interface to identify and control the delivery of traffic from specific applications in accordance with specific policies that are set by the customer. The quality of service functionality of our ASICs allows our policy-based quality of service to be performed at wire speed. In addition to providing priority, customers can allocate specified amounts of bandwidth to specific applications or users.
Lower cost of ownership. Our products are less expensive than software-based routers, yet offer higher routing performance. Because they share a common hardware, software and management architecture, we believe our products can substantially reduce the cost and complexity of network management and administration. This uniform architecture creates a simpler network infrastructure which leverages the knowledge and resources businesses have invested in Ethernet and the Internet Protocol, thereby requiring fewer resources and less time to maintain.
The Extreme Networks Strategy
Extreme's objective is to be the leading supplier of end-to-end network solutions. The key elements of our strategy include:
Provide easy to use, high-performance, cost-effective switching solutions. We offer customers easy to use, powerful, cost-effective switching solutions that meet the specific demands of switching environments in enterprise LANs, ISPs and content providers. Our products provide customers with 1,000 Mbps Gigabit Ethernet and the wire speed, non-blocking routing capabilities of ASIC-based Layer 3 switching. We intend to capitalize on our expertise in Ethernet, Internet protocol ("IP") and switching technologies to develop new products based on our common architecture that meet the future requirements of enterprise LANs, ISPs and content providers. These products will offer higher performance with more advanced functionality and features while continuing to reduce total cost of ownership for our customers.
Expand market penetration. We are focused on product sales to new customers across market segments, including ISPs, content providers and metropolitan area networks, or MANs, and on extending our product penetration within existing customers' networks. Once a customer buys our products for one area of their network, our strategy is to then offer that customer products for other areas. As additional products are purchased, a customer obtains the increased benefits of our end-to-end solution by simplifying their networks, extending policy-based quality of service and reducing costs of ownership while increasing performance.
Extend switching technology leadership. Our technological leadership is based on our custom ASICs and software and includes our wire-speed, Layer 3 switching, policy-based quality of service, routing protocols and ExtremeWare software. We intend to invest our engineering resources in ASIC and other development areas and provide leading edge technologies to increase the performance and functionality of our products. We also intend to maintain our active role in industry standards committees such as IEEE and IETF.
Leverage and expand multiple distribution channels. We distribute our products primarily through resellers and selected OEMs and through our field sales team. To quickly reach a broad, worldwide audience, we have more than 250 resellers in 50 countries, including regional networking system resellers, network integrators and wholesale distributors, and have established relationships with select OEMs. We maintain a field sales force primarily to support our resellers and to focus on select strategic and large accounts. We intend to increase the size of our reseller programs and are developing two tier distribution channels in some regions. To complement and support our domestic and international reseller and OEM channels, we expect to increase our worldwide field sales force.
Provide high-quality customer service and support. We seek to enhance customer satisfaction and build customer loyalty through the quality of our service and support. We offer a wide range of standard support programs that include emergency telephone support 24 hours a day, seven days a week and advanced replacement of products. In addition, we have designed our products to allow easy service and administration. For example, we can access all of our switches remotely through a standard web browser to configure, troubleshoot and help maintain our products. We intend to continue to enhance the ease of use of our products and invest in additional support services by increasing staffing and adding new programs for our OEMs and resellers. In addition, we also are committed to providing customer-driven product functionality through feedback from key prospects, consultants, channel and OEM partners and customer surveys.
Products
Extreme provides broadband networking solutions that meet the requirements of enterprise, ISPs and IP carrier and Metropolitan Area Networks by providing increased performance, scalability, policy-based quality of service, ease of use and lower cost of ownership. Our Summit, BlackDiamond and Alpine switches share a common ASIC, software and management architecture that facilitates a relatively short product design and development cycle, thereby reducing the time-to-market for new products and features. This common architecture enables customers to build a broadband networking solution that has consistent functionality, performance and management. The common architecture and end-to-end functionality of our products also reduces the cost and complexity of network administration and management.
The following table identifies our principal hardware and software products:
Product name Product name and date of and date of first shipment Configuration / Description first shipment Configuration / Description The Summit Stackable product family The BlackDiamond Modular Chassis ----------------------------------- -------------------------------- Summit-based products: BlackDiamond 6808 Up to 576 10/100 Mbps Summit4 16 10/100 Mbps September 1998 Ethernet ports or 96 March 1998 Ethernet ports and Gigabit Ethernet ports in 6 Gigabit Ethernet ports one chassis Summit24 24 10/100 Mbps 10 slots to accommodate November 1998 Ethernet ports a variety of up to 8 connectivity and modules and 1 or 2 management 1 Gigabit Ethernet ports modules Summit48 48 10/100 Mbps The Alpine Chassis April 1998 Ethernet ports and ------------------ 2 Gigabit Ethernet ports Alpine 3808 Up to 256 10/100 Mbps April 2000 Ethernet ports or 32 Gigabit Ethernet ports in one chassis Inferno-based products: Summit1i 8 Gigabit Ethernet ports 9 slots to accommodate September 2000 a variety of up to 8 connectivity modules and 1 management module Summit5i 16 Gigabit Ethernet ports September 2000 Summit7i 32 Gigabit Ethernet ports Software December 1999 -------- ExtremeWare Software suite that has standard September 1997 protocols, web-based configuration and Policy-Based Quality of Service ExtremeWare Enterprise An integrated management Manager application suite that protects August 1998 the delivery of provisioned services and applications |
Summit Stackable Products
Products in the Summit family of switches are designed to meet the demanding requirements emerging in intranet and Internet applications. All Summit switches share a common non-blocking switch architecture that provides scalability in four areas: speed, bandwidth, network size and quality of service (QoS). The Summit product family supports a range of gigabit and 10/100 Mbps aggregation for enterprise desktops and servers, large Internet data centers, and broadband points of presence ("POP") in metropolitan area networks and multi-tenant buildings.
The enterprise desktop is the portion of the network where individual end-user workstations are connected to a hub or switch. In this shared environment, each desktop in the workgroup receives and is burdened by the communication of every other desktop in the workgroup. As applications have become more bandwidth intensive and as user traffic has migrated outside the workgroup via the Internet or an intranet or extranet, the hubs are unable to effectively process this traffic, resulting in diminished desktop performance. Replacing the hub with a Layer 3 switch alleviates this problem by providing a dedicated link for each desktop and eliminating unnecessary broadcasts of information to every desktop in the workgroup. Enterprise desktop switching provides the desktop with features typically found only at the network core, such as redundancy, greater speed and the ability to aggregate multiple switch ports into a single high-bandwidth connection. Extreme became an industry leader in Layer 3 switching for the desktop with the introduction of our Summit48 and Summit24 desktop switching products. The Summit48 addresses high-density enterprise desktop connections. This switch features a non-blocking architecture to avoid the loss of data packets. The Summit24, with half the number of ports of the Summit48, is targeted at local wiring closets with moderately dense desktop connections.
Servers run the applications and store the data needed by all network end-users. The traditional network architecture has been shifting toward more centralized server clusters, or server farms, which require the physical deployment of multiple servers in a single central data center. This new architecture is easier to manage and can be configured in a redundant fashion, thereby reducing the risk of
system failure. Additionally, remote offices and telecommuters can access the same server-based data as desktop users, increasing the flexibility of the network to support users wherever they may be located. As more people access the network and as server requests increasingly involve more bandwidth-intensive applications, network traffic to and from servers has increased dramatically, causing bandwidth to be consumed by traffic. Servers also communicate with each other, creating a high volume of server-to-server traffic within the server farm. Recent technology developments allow enterprises to install network interface cards that enable connections using Gigabit Ethernet or the aggregation of multiple 100 Mbps ports on a single card. This development increases the communication speed of the servers. In turn, these servers have created the need for switches that can support their higher server-to-server and server-to-end-user communications speeds. Our Summit4 product addresses server switching constraints by providing switched Gigabit Ethernet and multiple 100 Mbps links to the servers, thereby delivering sufficient bandwidth between servers and to clients on attached segments. In server farms and data centers, the Summit7i maximizes server availability and performance by combining server load-balancing with wire-speed switching.
As metropolitan area networks evolve to handle more data rather than voice, the POP must also progress from serving as a simple transport device to an application services tool. Today's broadband POPs are moving closer to the customer and need to offer services density and scalability without re-engineering discreet narrowband technologies. There is a growing need for consistent scalable services in the multi-tenant market, which according to Cahner's InStat Group will reach $2 billion by 2004. The new Summit1i and Summit5i Gigabit Ethernet switching systems eliminate the limitations associated with multiple narrowband aggregation technologies traditionally used in metropolitan POPs.
BlackDiamond Modular Chassis
The BlackDiamond modular chassis delivers scalability, redundancy and high reliability for core switching in high-density Ethernet/IP enterprise and service provider networks. The BlackDiamond switch includes the fault-tolerant features associated with mission-critical enterprise-class Layer 3 switching, including redundant system management and switch fabric modules, hot-swappable modules and chassis components, load-sharing power supplies and management modules, up to eight 10 Mbps, 100 Mbps, or 1,000 Mbps aggregated links, dual software images and system configurations, spanning tree and multipath routing, and redundant router protocols for enhanced system reliability.
The network core is the most critical point in the network, as it is where the majority of network traffic, including desktop, segment and server traffic, converges. Network core switching involves switching traffic from the desktops, segments and servers within the network. Because of the high-traffic nature of the network core, wire-speed Layer 3 switching, scalability, a non-blocking hardware architecture, fault-tolerant mission-critical features, redundancy, link aggregation, the ability to support a variety of high-density "speeds and feeds" and the ability to accommodate an increasing number of high-capacity backbone connections are critical in core switching.
Alpine Chassis
The Alpine 3808 chassis switch provides a simpler, more resilient broadband infrastructure for metropolitan area networks ("MANs"), service provider data centers, multi-tenant buildings and enterprise wiring closets. The Alpine 3808 is the industry's first broadband provisioning switch based on Ethernet and IP that enables MANs and carriers to deliver more infrastructure bandwidth, slice and dice that bandwidth for optimal usage, and guarantee fixed latency for delay-sensitive services such as video and voice.
ExtremeWare
The ExtremeWare software suite combines industry-standard protocols to provide interoperability with legacy switches and routers, plus Policy-Based Quality of Service (QoS) for bandwidth management and traffic prioritization in today's networks. With ExtremeWare, QoS policies are easy to define and assign to traffic groups. The range of QoS profiles includes minimum bandwidth, maximum bandwidth and relative priority. These QoS profiles are key to optimizing bandwidth management effectiveness. Our policy-based quality of service also enables network managers to define numerous levels of control, or policies, that determine the amount of bandwidth available to a group of users or network devices at a given time.
ExtremeWare Enterprise Manager
ExtremeWare Enterprise Manager is a value-added application suite that makes it easier to perform configuration, troubleshooting and status monitoring, and deploy multi-vendor policy-based management. ExtremeWare Enterprise Manager offers a comprehensive
set of network management tools that are easy to use from a workstation with a Java-enabled web browser. ExtremeWare Enterprise Manager simplifies the task of managing and configuring groups of our switches. With ExtremeWare Enterprise Manager, an entire network of our switches can be managed from a single management console using a standard web browser.
ExtremeWare ServiceWatch
In August 2000 Extreme announced ExtremeWare ServiceWatch. This software is designed to help businesses avoid costly downtime and help to ensure that network services remain up and performing at peak levels. Just like the telephone dial tone that indicates the availability and quality of voice services, ServiceWatch delivers application dial tone to facilitate "always-on" Layer 7 network services. It monitors and manages the response time of mission-critical services such as e-mail, e-commerce and filer transfer activities. If response time starts to degrade, ServiceWatch can be configured to notify the network manager to take corrective action before a problem occurs. ServiceWatch is also used as a bandwidth-capacity planning tool and can help track ISP service level agreements (SLAs) using historical reporting and graphing of service availability and response time.
Sales, Marketing and Distribution
Extreme's sales and marketing strategy is focused on domestic and international resellers, distributors, OEMs and field sales.
Resellers. We have entered into agreements to sell our products through more than 250 resellers in 50 countries. Our resellers include regional networking system resellers, resellers who focus on specific vertical markets, network integrators and wholesale distributors. We provide training and support to our resellers and our resellers generally provide the first level of support to end users of our products. We intend to increase the number of our reseller relationships, to target vertical markets and support a two-tier distribution channel.
OEMs. We have established several key OEM relationships with leaders in the telecommunications, personal computer and computer networking industries. We intend to maintain a limited number of relationships with key strategic OEMs who may offer products or distribution channels that compliment ours. Each of our OEMs resells our products under its own name. We believe that our OEM relationships enhance our ability to sell and provide support to large organizations because certain end-user organizations may prefer to do business with very large suppliers. We anticipate that OEM sales will decline as a percentage of net revenue as we expand our reseller and fields sales efforts.
Field sales. We have designed and established our field sales organization to support and develop leads for our resellers and to establish and maintain a limited number of key accounts and strategic customers. To support these objectives, our field sales force:
. assists end-user customers in finding solutions to complex network system and architecture problems;
. differentiates the features and capabilities of our products from competitive offerings;
. continually monitors and understands the evolving networking needs of enterprise customers;
. promotes our products and ensures direct contact with current and potential customers; and
. monitors the changing requirements of our customers.
As of June 30, 2000, Extreme's worldwide sales and marketing organization included 376 individuals, including managers, sales representatives, and technical and administrative support personnel. We have domestic sales offices located in major metropolitan areas in Arizona, California, Colorado, Connecticut, District of Columbia, Florida, Georgia, Illinois, Kansas, Massachusetts, Maryland, Michigan, North Carolina, New Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Washington and Wisconsin. In addition, we have international sales offices located in Argentina, Australia, Brazil, Chile, Columbia, France, Germany, Hong Kong, Italy, Japan, Korea, The Netherlands, Sweden and United Kingdom.
International sales
We believe that there is a strong international market for our switching products. Our international sales are conducted primarily through our overseas offices and foreign resellers. Sales to customers outside of North America accounted for approximately 45% of our net revenue in fiscal 2000.
Marketing
We have a number of marketing programs to support the sale and distribution of our products and to inform existing and potential customers and our resellers, distributors and OEMs about the capabilities and benefits of our products. Our marketing efforts include participation in industry tradeshows, technical conferences and technology seminars, preparation of competitive analyses, sales training, publication of technical and educational articles in industry journals, maintenance of our web site, advertising and public relations. In addition, we have begun to develop an e-commerce business directed at resellers. We also participate in third-party, independent product tests.
Customer Support and Service
Our customer service and support organization maintains and supports products sold by our field sales force to end users, and provides technical support to our resellers and OEMs. Generally, our resellers and OEMs provide installation, maintenance and support services to their customers and we assist our resellers and OEMs in providing such support.
In addition to designing custom maintenance programs to satisfy specific customer requirements, we also offer several standard maintenance programs to our resellers and customers, including ExtremeAssist Basic, ExtremeAssist1, ExtremeAssist2, ExtremeAssist Premium and ExtremeAssist Elite.
ExtremeAssist Basic. This program is designed for customers who are interested in keeping service and support costs to a minimum but want access to basic support services. Basic service includes access to Extreme's web-accessible knowledge database and software upgrades and bug fixes. The ExtremeAssist program includes eight-hour, five-day technical assistance center telephone support, e-mail inquiries and responses within 24 hours and rapid-response emergency/network down telephone support 24 hours a day, 7 days a week.
ExtremeAssist1. This program is designed for customers who have strong technical networking skills and are interested in keeping service and support costs to a minimum. With ExtremeAssist1, the customers' information technology organizations provide first-level support for configuration, hardware and trouble shooting, while Extreme's technical assistance center provides advanced second-level support on an essential need basis. The ExtremeAssist1 program includes all the features in ExtremeAssist Basic plus 48-hour advanced replacement of hardware.
ExtremeAssist2. This program is designed for network environments that require a high degree of network availability, data integrity and end-user productivity. The ExtremeAssist2 program includes all the features in ExtremeAssist1 plus twelve-hour, five-day technical assistance center telephone support and next business day replacement of hardware.
As switched broadband infrastructures become more vital to a company's ability to compete, networks are doing much more than just sharing and distributing information. Networks have become the brains of day-to-day business operations and are the key to reducing time to market and sharpening a company's competitive edge. Extreme recognizes the critical nature of the switched broadband infrastructure in today's business environment and the ever-expanding demands that will be put on networks in the future. To meet these needs, Extreme has developed a series of comprehensive on-site support plans to fit the needs of the most demanding network environments.
ExtremeAssist Premium. ExtremeAssist Premium is designed to meet and exceed all the essential requirements of supporting and maintaining enterprise LANs. Ideal for mission-critical network environments that require a high degree of network availability, data integrity and end-user productivity. The ExtremeAssist Premium plan includes faster on-site service and spares. The ExtremeAssist Premium program includes all the features in ExtremeAssist2 plus 24 hours a day, 7 days a week on-site emergency network down assistance within 4 hours.
ExtremeAssist Elite. ExtremeAssist Elite is Extreme's most comprehensive support plan for mission-critical switched broadband networks. Elite is limited to the top 20% of Extreme's customer base to ensure a very individualized, flexible and focused approach to providing Elite support services. ExtremeWorks Elite adds dedicated level 3 technical support engineers and our fastest on-site service and spares response time.
We typically provide end users with a one-year hardware and 90-day software warranty. We also offer various training courses for their third-party resellers or end-user customers.
Manufacturing
We outsource the majority of our manufacturing and supply chain management operations, and we conduct quality assurance, manufacturing engineering, documentation control and repairs at our facility in Santa Clara, California. This approach enables us to reduce fixed costs and to provide flexibility in meeting market demand. Where cost-effective, we may begin to perform certain of our non-manufacturing outsourced operations in-house.
Currently, we use three contract manufacturers--Flextronics, located in San Jose, California, to manufacture our Summit1, Summit4, Summit RPS and BlackDiamond products, MCMS, located in Boise, Idaho, to manufacture our Summit24, Summit48, Summit1i, Summit5i and Summit7i products and Solectron, located in Milpitas, California, to manufacture our Alpine products. Each of these manufacturing processes and procedures is ISO 9002 certified. We design and develop the key components of our products, including ASICs and printed circuit boards. In addition, we determine the components that are incorporated in our products and select the appropriate suppliers of such components. Product testing and burn-in is performed by our contract manufacturers using tests we specify and automated testing equipment. We also use comprehensive inspection testing and statistical process controls to assure the quality and reliability of our products. We intend to regularly introduce new products and product enhancements, which will require that we rapidly achieve volume production by coordinating our efforts with those of our suppliers and contract manufacturers. See "Factors That May Affect Our Results--Extreme Needs to Expand Its Manufacturing Operations and Depends on Contract Manufacturers for Substantially All of Its Manufacturing Requirements."
Although we use standard parts and components for our products where possible, we currently purchase several key components used in the manufacture of our products from single or limited sources. Our principal single-sourced components include:
. ASICs;
. microprocessors;
. programmable integrated circuits;
. selected other integrated circuits;
. cables; and
. custom-tooled sheet metal.
Our principal limited-source components include:
. flash memories;
. DRAMs;
. SRAMs; and
. printed circuit boards.
Generally, purchase commitments with our single or limited source suppliers are on a purchase order basis. LSI Logic manufacturers all of our ASICs which are used in all of our switches. Any interruption or delay in the supply of any of these components, or the inability to procure these components from alternate sources at acceptable prices and within a reasonable time, would materially adversely affect our business, operating results and financial condition. In addition, qualifying additional suppliers can be time-consuming and expensive and may increase the likelihood of errors.
We use a rolling nine-month forecast based on anticipated product orders to determine our material requirements. Lead times for materials and components we order vary significantly, and depend on factors such as the specific supplier, contract terms and demand for a component at a given time. See "Factors That May Affect Our Results--Extreme Purchases Several Key Components for Products From Single or Limited Sources and Could Lose Sales if These Sources Fail to Fill Its Needs" and "--Extreme Needs To Expand Its Manufacturing Operations and Depends on Contract Manufacturers for Substantially All of Its Manufacturing Requirements."
Research and Development
We believe that our future success depends on our ability to continue to enhance our existing products and to develop new products that maintain technological competitiveness. We focus our product development activities on solving the needs of enterprise, service providers and IP carrier and Metropolitan Area Network markets. We monitor changing customer needs and work closely with
users, value-added resellers and distributors, and market research organizations to monitor changes in the marketplace. We design our products around current industry standards and will continue to support emerging standards that are consistent with our product strategy.
Our products have been designed to incorporate the same core ASICs and software and system architecture, facilitating a relatively short product design and development cycle and reducing the time to market for new products and features. We have utilized this architectural design to develop and introduce other product models and enhancements since the introduction of our first products in 1997. We intend to continue to utilize this architectural design to develop and introduce additional products and enhancements in the future.
We are undertaking development efforts for our family of products with emphasis on increasing reliability, performance and scalability and reducing the overall network operating costs to end users. This fiscal year we introduced a new generation chipset which was incorporated in a new product family which began shipping in the quarter ended December 31. We are also focusing on cost reduction engineering to reduce the cost of our products. There can be no assurance that our product development efforts will result in commercially successful products, or that our products will not be rendered obsolete by changing technology or new product announcements by other companies. See "Factors That May Affect Our Results--Extreme's Market is Subject to Rapid Technological Change and to Compete, Extreme Must Continually Introduce New Products that Achieve Broad Market Acceptance."
Competition
The market for internet switches is part of the broader market for networking equipment, which is dominated by a few large companies, particularly Cabletron Systems, Cisco Systems, Lucent Technologies and Nortel Networks. Each of these companies has introduced, or has announced its intention to develop, switches that are or may be competitive with our products. For example, in January 1999, Cisco announced its Catalyst 6000 family of chassis-based switches. In addition, there are a number of large telecommunications equipment providers, including Alcatel, Ericsson, Nokia, and Siemens, which have entered the market for network equipment, particularly through acquisitions of public and privately held companies. We expect to face increased competition, particularly price competition, from these and other telecommunications equipment providers. We also expect to compete with other public and private companies that offer switching solutions, such as Alteon Web Systems and Foundry Networks. These vendors may develop products with functionality similar to our products or provide alternative network solutions. Our OEMs may compete with us with their current products or products they may develop, and with the products they purchase from us. Current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to develop and offer competitive products. Furthermore, we compete with numerous companies that offer routers and other technologies and devices that traditionally have managed the flow of traffic on the enterprise or metropolitan area networks.
Many of our current and potential competitors have longer operating histories and substantially greater financial, technical, sales, marketing and other resources, as well as greater name recognition and a larger installed customer base, than we do. As a result, these competitors are able to devote greater resources to the development, promotion, sale and support of their products. In addition, competitors with a large installed customer base may have a significant competitive advantage over us. We have encountered, and expect to continue to encounter, many potential customers who are extremely confident in and committed to the product offerings of our principal competitors, including Cisco Systems and Nortel Networks. Accordingly, such potential customers may not consider or evaluate our products. When such potential customers have considered or evaluated our products, we have in the past lost, and expect in the future to lose, sales to some of these customers as large competitors have offered significant price discounts to secure such sales.
We believe the principal competitive factors in the network switching market are:
. expertise and familiarity with network protocols, network switching and
network management;
. product performance, features, functionality and reliability;
. price/performance characteristics;
. timeliness of new product introductions;
. adoption of emerging industry standards;
. customer service and support;
. size and scope of distribution network;
. brand name;
. access to customers; and
. size of installed customer base.
We believe we compete favorably with our competitors with respect to each of the foregoing factors. However, because many of our existing and potential competitors have longer operating histories, greater name recognition, larger customer bases and substantially greater financial, technical, sales, marketing and other resources, they may have larger distribution channels, stronger brand names, access to more customers and a larger installed customer base than we do. Such competitors may, among other things, be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to distribution partners than we can. To remain competitive, we believe we must, among other things, invest significant resources in developing new products and enhancing our current products and maintain customer satisfaction worldwide. If we fail to do so, our products will not compete favorably with those of our competitors which will materially adversely affect our business. See "Factors That May Affect Our Results--Intense Competition in the Market for Networking Equipment Could Prevent Extreme From Increasing Revenue and Prevent Extreme From Achieving or Sustaining Profitability."
Intellectual Property
We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We have been issued six patents in the U.S. We have filed eight patent applications in the U.S. and selected countries abroad relating to the architecture of our network switches and quality of service features. There can be no assurance that these applications will be approved, that any issued patents will protect our intellectual property or that they will not be challenged by third parties. Furthermore, there can be no assurance that others will not independently develop similar or competing technology or design around any patents that may be issued. We also have five registered trademarks and four pending trademark applications in the U.S.
We also enter into confidentiality or license agreements with our employees, consultants and corporate partners, and control access to and distribution of our software, documentation and other proprietary information. In addition, we provide our software products to end-users primarily under "shrink-wrap" license agreements included within the packaged software. These agreements are not negotiated with or signed by the licensee, and thus these agreements may not be enforceable in some jurisdictions. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. There can be no assurance that these precautions will prevent misappropriation or infringement of our intellectual property. Monitoring unauthorized use of our products is difficult, and we cannot be certain that the steps we have taken will prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States.
The networking industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patent and other intellectual property rights. In particular, leading companies in the data communications and networking markets have extensive patent portfolios with respect to networking technology. From time to time, third parties, including these leading companies, have asserted and may assert exclusive patent, copyright, trademark and other intellectual property rights against us. Indeed, a number of third parties, including leading companies, have asserted patent rights to technologies and related standards that are important to us. We expect to increasingly be subject to infringement claims asserted by third parties as the numbers of products and competitors in the market for network switches grow and the functionality of products overlaps. In this regard, since April, 2000, we have been in communication with one of these leading companies that believes certain of our products require a license under a number of their patents. The third party is willing to grant us a non-exclusive license under the identified patents as well as other patents or technology that we may require. We currently are reviewing the identified patents to examine whether we consider a license necessary. However, there can be no assurance that this license would be obtainable on commercially acceptable terms.
Although we have not been a party to any litigation asserting claims that allege infringement of intellectual property rights, we cannot assure you that we will not be a party to litigation in the future. In addition, we cannot assure you that third parties will not assert additional claims or initiate litigation against us or our manufacturers, suppliers or customers alleging infringement of their proprietary rights with respect to existing or future products.
We may in the future initiate claims or litigation against third parties for infringement of our proprietary rights to determine the
scope and validity of our proprietary rights. Any such claims, with or without merit, could be time-consuming, result in costly litigation and diversion of technical and management personnel or require us to develop non-infringing technology or enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on acceptable terms, if at all. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the proprietary rights on a timely basis, our business, operating results and financial condition could be materially adversely affected.
Employees
As of June 30, 2000, we employed 680 persons, including 376 in sales and marketing, 110 in research and development, 67 in operations, 65 in technical support and 62 in finance and administration. We have never had a work stoppage and no personnel are represented under collective bargaining agreements. We consider our employee relations to be good.
We believe that our future success will depend on our continued ability to attract, integrate, retain, train and motivate highly qualified personnel, and upon the continued service of our senior management and key personnel. None of our personnel is bound by an employment agreement. Competition for qualified personnel is intense, particularly in the San Francisco Bay Area, where our headquarters is located. At times we have experienced difficulties in attracting new personnel. There can be no assurance that we will successfully attract, integrate, retain and motivate a sufficient number of qualified personnel to conduct our business in the future. See "Factors That May Affect Our Results--If Extreme Loses Key Personnel or is Unable to Hire Additional Qualified Personnel as Necessary, It May Not Be Able to Successfully Manage Its Business or Achieve Its Objectives."
Item 2. Properties.
Our principal administrative, sales, marketing and research development facilities are located in an approximately 77,000 square feet facility located in Santa Clara, California. In June 2000, we entered into a five-year operating lease agreement to lease 275,000 square feet in Santa Clara, California to house further physical expansion of our principal operations. We also lease office space in various other geographic locations domestically and internationally for sales and service personnel.
Item 3. Legal Proceedings.
We are not aware of any pending legal proceedings against us that, individually or in the aggregate, would have a material adverse effect on our business, operating results or financial condition. We may in the future be party to litigation arising in the course of our business, including claims that we allegedly infringe third-party trademarks and other intellectual property rights. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant
The following table sets forth information regarding the executive officers of Extreme as of August 31, 2000:
Name Age Position ---- --- -------- Gordon L. Stitt.......................................... 44 President, Chief Executive Officer and Chairman Stephen Haddock.......................................... 42 Vice President and Chief Technical Officer Herb Schneider........................................... 41 Vice President of Engineering Sam Halabi............................................... 35 Vice President of IP Carrier Business Development June Hull................................................ 45 Vice President of Human Resources Allan G. Miller.......................................... 48 Vice President of Manufacturing Operations Vito E. Palermo.......................................... 36 Vice President, Chief Financial Officer and Secretary George Prodan............................................ 47 Vice President of Marketing Harry Silverglide........................................ 54 Vice President of Sales |
Gordon L. Stitt. Mr. Stitt co-founded Extreme in May 1996 and has served as President, Chief Executive Officer and a director of Extreme since its inception. From 1989 to 1996, Mr. Stitt worked at another company he co-founded, Network Peripherals, a designer and manufacturer of high-speed networking technology. He served first as its Vice President of Marketing, then as Vice President and General Manager of the OEM Business Unit. Mr. Stitt holds an MBA from the Haas School of Business of the University of
California, Berkeley and a BSEE/CS from Santa Clara University.
Stephen Haddock. Mr. Haddock co-founded Extreme in May 1996 and has served as Vice President and Chief Technical Officer of Extreme since its inception. From 1989 to 1996, Mr. Haddock worked as Chief Engineer at Network Peripherals. Mr. Haddock is a member of IEEE, an editor of the Gigabit Ethernet Standard and Chairman of the IEEE 802.3ad link aggregation committee. Mr. Haddock holds an MSEE and a BSME from Stanford University.
Herb Schneider. Mr. Schneider co-founded Extreme in May 1996 and has served as Vice President of Engineering of Extreme since its inception. From 1990 to 1996, Mr. Schneider worked as Engineering Manager at Network Peripherals and was responsible for the development of LAN switches. From 1981 to 1990, Mr. Schneider held various positions at National Semiconductor, a developer and manufacturer of semiconductor products, where he was involved in the development of early Ethernet chipsets and FDDI chipsets. Mr. Schneider holds a BSEE from the University of California, Davis.
Sam Halabi. Mr. Halabi has served as Vice President of IP Carrier business development of Extreme since July 2000. Prior to joining Extreme Networks, Mr. Halabi held various marketing positions with leading data communications companies, including Cisco Systems. Mr. Halabi holds a MS in Computer Science from San Jose State University and a BS in Computer Engineering from American University-Beirut.
June Hull. Ms. Hull has served as Vice President of Human Resources since September 1999. From October 1996 to August 1999, she served as Regional Director of Human Resources and Corporate Director of Human Resources at Netscape Communications, an e-commerce company. From April 1989 to September 1996, she served in a variety of senior Human Resource management positions for Apple Computer, Inc.
Allan G. Miller. Mr. Miller has served as Vice President of Manufacturing Operations of Extreme since July 2000. Prior to joining Extreme Networks, Mr. Miller spent 22 years at Amdahl Corporation. He held several senior management positions in manufacturing operations and quality assurance, the most recent was Vice President of Operations. He holds a MS in Mechanical Engineering and a MBA from the University of California at Berkeley and a BS in Mechanical Engineering from California State University, Northridge.
Vito E. Palermo. Mr. Palermo has served as Vice President, Chief Financial Officer and Secretary of Extreme since January 1999. From January 1997 to January 1999, he served as Senior Vice President, Chief Financial Officer and Secretary of Metawave Communications, a wireless communications company. From 1992 to 1996, Mr. Palermo served in various financial management positions at Bay Networks, a networking communications company, most recently serving as Vice President and Corporate Controller and previously serving as Director of Technology Finance, Corporate Financial and Planning Manager, and Manufacturing and Customer Service Controller. Mr. Palermo holds an MBA from St. Mary's College and a BS in Business Administration from California State University.
George Prodan. Mr. Prodan has served as Vice President of Marketing of Extreme since February 1997. From January 1994 to January 1997, he served as Director of Marketing and Senior Director of Worldwide Channels at FORE Systems, a networking equipment company. From April 1991 to December 1993, he served as a product line manager for a division of 3Com, a networking company. He holds an MS in Instructional Communications from Shippensburg State University and a BS in Industrial Arts Education from California State University.
Harry Silverglide. Mr. Silverglide has served as Vice President of Sales of Extreme since January 1997. From May 1995 to January 1997, he served as Vice President of Western Region Sales for Bay Networks. From July 1994 to May 1995, he served as Vice President of Sales for Centillion Networks, a provider of LAN switching products which was acquired by Bay Networks in 1995. From April 1984 to July 1994, he worked in sales and senior sales management positions at Ungermann Bass, a network communications company.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's common stock commenced trading on the Nasdaq National Market on April 9, 1999 under the symbol "EXTR." The following table sets forth the high and low closing prices as reported by Nasdaq. Such prices represent prices between dealers, do not include retail mark-ups, mark-downs or commissions and may not represent actual transactions. All prices have been adjusted to reflect a 2-for-1 stock split effected in August 2000.
Stock Prices High Low ---- --- 1999 Fourth quarter (1)............................................$ 29.03 $ 19.16 2000 First quarter.................................................$ 42.25 $ 22.81 Second quarter................................................$ 49.03 $ 30.66 Third quarter.................................................$ 59.50 $ 38.00 Fourth quarter................................................$ 52.75 $ 21.44 |
At September 14, 2000, there were approximately 284 stockholders of record of the Company's common stock and approximately 36,000 beneficial stockholders. The Company has never declared or paid cash dividends on its capital stock and does not anticipate paying any cash dividends in the foreseeable future. The Company currently intends to retain future earnings for the development of its business.
Item 6. Selected Consolidated Financial Data.
For the Period from May 8, 1996 (Date of Years Ended June 30, Inception) -------------------- 2000 1999 1998 June 30, 1997 ---- ---- ---- ------------- (In thousands, except per share amounts) ---------------------------------------- Consolidated Statements of Operations Data: Net revenue................................................... $ 261,956 $ 98,026 $ 23,579 $ 256 Gross profit (loss)........................................... 135,040 49,506 8,682 (132) Total operating expenses...................................... 118,786 50,951 22,709 7,928 Operating income (loss)....................................... 16,254 (1,445) (14,027) (8,060) Net income (loss)............................................. 20,048 (1,617) (13,936) (7,923) Basic net income (loss) per share (1)......................... $ 0.20 $ (0.09) $ (1.59) $ (2.26) Diluted net income (loss) per share (1)....................... $ 0.18 $ (0.09) $ (1.59) $ (2.26) Weighted average shares outstanding used in computing basic net income (loss) per share (1)........... 100,516 18,924 8,758 3,516 Weighted average shares outstanding used in computing diluted net income (loss) per share (1)......... 111,168 18,924 8,758 3,516 |
As of June 30, ----------------------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Consolidated Balance Sheets Data Cash and cash equivalents..................................... $116,721 $107,143 $ 9,510 Short-term investments........................................ 66,640 16,422 10,995 Working capital............................................... 205,881 119,039 13,796 Total assets.................................................. 515,930 171,803 33,731 Long-term debt, deposit and capital lease obligations, net of current portion.......................... 306 -- 2,634 Total stockholders' equity.................................... $419,021 $141,876 $ 15,869 |
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
When used in this discussion and elsewhere in this Form 10-K, the words "may," "should," "believes," "expects," "anticipates," "estimates" and similar expressions identify forward-looking statements. Such statements, which include statements concerning the availability and functionality of products under development, product mix, pricing trends, the mix of export sales, sales to significant customers and the availability and cost of products from the Company's suppliers, are subject to risks and uncertainties, including those set forth below under "Factors That May Affect Our Results." Our actual results could differ materially from those anticipated in these forward-looking statements which could have a material adverse effect on our business, operating results and financial condition. These forward-looking statements speak only as of the date hereof and there may be events in the future that we are not able to predict accurately or over which we have no control which would affect or alter our expectations.
Overview
From our inception in May 1996 through September 1997, our operating activities related primarily to developing a research and development organization, testing prototype designs, building an ASIC design infrastructure, commencing the staffing of our marketing, sales and field service and technical support organizations, and establishing relationships with resellers and OEMs. We commenced volume shipments of our Summit1 and Summit2, the initial products in our Summit stackable product family, in October 1997, and we began shipping our BlackDiamond modular product family in September 1998. We introduced our new Alpine product family in fiscal 2000 which is based on a new generation chip set. In addition, we also introduced new products within our existing product lines that incorporate this new chip set.
Our revenue is derived primarily from sales of our Summit and BlackDiamond product families and fees for services relating to our products, including maintenance and training. The level of sales to any customer may vary from period to period; however, we expect that significant customer concentration will continue for the foreseeable future. See "Factors That May Affect Our Results--If a Key Reseller, OEM or Other Significant Customer Cancels or Delays a Large Purchase, Extreme's Revenues May Decline and the Price of Its Stock May Fall." For fiscal 2000, there were no customers with sales greater than 10%. For fiscal 1999, Compaq and Hitachi Cable accounted for 21% and 13% of our net revenue, respectively.
We market and sell our products primarily through resellers, distributors and, to a lesser extent, OEMs and our field sales organization. We sell our products through more than 250 resellers in 50 countries. In fiscal 2000, sales to customers outside of North America accounted for approximately 45% of our net revenue. Currently, all of our international sales are denominated in U.S. dollars. We generally recognize product revenue at the time of shipment, unless we have future obligations for installation or have to obtain customer acceptance, in which case revenue is deferred until such obligations have been satisfied. We have established a program which, under specified conditions, enables third party resellers to return products to us. The amount of potential product returns is estimated and provided for in the period of the sale. Service revenue is recognized ratably over the term of the contract period, which is typically 12 months.
We expect to experience rapid erosion of average selling prices of our products due to a number of factors, including competitive
pricing pressures, promotional pricing and rapid technological change. Our gross margins will be affected by such declines and by fluctuations in manufacturing volumes, component costs and the mix of product configurations sold. In addition, our gross margins may fluctuate due to the mix of distribution channels through which our products are sold, including the potential effects of our development of a two-tier distribution channel. We generally realize higher gross margins on sales to resellers and distributors than on sales through our OEMs. Any significant decline in sales to our OEMs or resellers or distributors, or the loss of any of our OEMs or resellers or distributors could materially adversely affect our business, operating results and financial condition. In addition, new product introductions may result in excess or obsolete inventories. Any excess or obsolete inventories may also reduce our gross margins.
We outsource the majority of our manufacturing and supply chain management operations, and we conduct quality assurance, manufacturing engineering, documentation control and repairs at our facility in Santa Clara, California. Accordingly, a significant portion of our cost of revenue consists of payments to our contract manufacturers, Flextronics, MCMS and Solectron. We expect to realize lower per unit product costs as a result of volume efficiencies. However, we cannot assure you when or if such price reductions will occur. The failure to obtain such price reductions could materially adversely affect our gross margins and operating results.
Research and development expenses consist principally of salaries and related personnel expenses, consultant fees and prototype expenses related to the design, development, testing and enhancement of our products. We expense all research and development expenses as incurred. We believe that continued investment in research and development is critical to attaining our strategic objectives and, as a result, we expect these expenses to increase in absolute dollars in the future.
Sales and marketing expenses consist of salaries, commissions and related expenses for personnel engaged in marketing, sales and field service support functions, as well as trade shows and promotional expenses. We intend to pursue sales and marketing campaigns aggressively and therefore expect these expenses to increase significantly in absolute dollars in the future. In addition, we recently hired approximately 200 sales and marketing personnel. We expect to continue to expand our field sales operations to support and develop leads for our resellers and distributors, which will also result in an increase in sales and marketing expenses.
General and administrative expenses consist primarily of salaries and related expenses for executive, finance and administrative personnel, professional fees and other general corporate expenses. We expect general and administrative expenses to increase in absolute dollars as we add personnel, increase spending on our information systems and incur additional costs related to the anticipated growth of our business and operation as a public company.
During fiscal 1998, in connection with the grant of certain stock options to employees, we recorded deferred stock compensation of $437,000 representing the difference between the exercise price and the deemed fair value of our common stock on the date such stock options were granted. Such amount is included as a reduction of stockholders' equity and is being amortized by charges to operations on a graded vesting method. We recorded amortization of deferred stock compensation expense of approximately $119,000, $172,000 and $68,000 for the years ended June 30, 2000, 1999 and 1998, respectively. At June 30, 2000, we had a total of approximately $78,000 remaining to be amortized over the corresponding vesting period of each respective option, generally four years. The amortization expense relates to options awarded to employees in all operating expense categories.
Despite growing revenues in all fiscal years since our inception, fiscal 2000 was the first year we have achieved profitability in each of the four quarters. Our net income has not increased proportionately with the increase in our revenue primarily because of increased expenses relating to our growth in operations and in particular the recent accelerated hiring of sales and marketing personnel. Because of the lengthy sales cycle of our products, there is often a significant delay between the time we incur expenses and the time we realize any related revenue. See "Factors That May Affect Our Results--The Sales Cycle for Extreme's Products is Long and Extreme May Incur Substantial Non-Recoverable Expenses or Devote Significant Resources to Sales that Do Not Occur When Anticipated." To the extent that future revenues do not increase significantly in the same periods in which operating expenses increase, our operating results would be adversely affected. See "Factors That May Affect Our Results--A Number of Factors Could Cause Extreme's Quarterly Financial Results to Be Worse Than Expected, Resulting in a Decline in Its Stock Price."
Due to the Company's issuance of warrants to a networking company as discussed in Note 3, future operating income will be reduced by $7.1 million per quarter for each quarter in fiscal 2001 and for three of the four fiscal quarters in fiscal 2002. Notwithstanding this charge the Company still anticipates being profitable in the first quarter of fiscal 2001.
Results of Operations
The following table sets forth for the years indicated certain financial data as a percentage of net revenue:
Years ended June 30, --------------------------------- 2000 1999 1998 ---- ---- ---- Net revenue............................ 100.0% 100.0% 100.0% Cost of revenue........................ 48.5 49.5 63.2 ----- ----- ----- Gross profit .......................... 51.5 50.5 36.8 Operating expenses: Research and development............. 12.6 17.4 45.2 Sales and marketing.................. 25.6 27.6 40.7 General and administrative........... 4.5 7.0 10.4 Amortization of goodwill and purchased intangibles 2.6 -- -- ----- ----- ------ Total operating expenses..... 45.3 52.0 96.3 ----- ----- ------ Operating income (loss)................ 6.2 (1.5) (59.5) Interest income........................ 5.6 1.9 2.6 Interest expense....................... (.2) (.4) (1.4) Other income (loss), net............... -- -- (.8) ----- ----- ------ Income (loss) before income taxes...... 11.6 .0 (59.1) Provision for income taxes............. 3.9 1.7 -- ----- ----- ------ Net income (loss)...................... 7.7% (1.7)% (59.1)% ===== ===== ====== |
Net Revenue
Net revenue increased from $98.0 million in fiscal 1999 to $262.0 million in fiscal 2000, an increase of $164.0 million. The increase in net revenue for fiscal 2000 resulted primarily from increased sales of our Summit stackable products and our BlackDiamond modular product family, the market's growing acceptance of Extreme's existing and new product offerings, and a significant increase in our sales and marketing organizations.
Net revenue increased from $23.6 million in fiscal 1998 to $98.0 million in fiscal 1999, an increase of $74.4 million. The increase in net revenue for fiscal 1999 resulted primarily from increased sales of our Summit stackable products and the introduction of our BlackDiamond modular product family in September 1998.
Export sales accounted for 45% and 53% of net revenue in fiscal 2000 and fiscal 1999, respectively. We expect that export sales will continue to represent a significant portion of net revenue, although we cannot assure you that export sales as a percentage of net revenue will remain at current levels. All sales transactions are denominated in U.S. dollars.
Gross Profit
Gross profit increased from $49.5 million in fiscal 1999 to $135.0 million in fiscal 2000, an increase of $85.5 million, primarily due to the related increase in revenue. Gross margins increased from 50.5% in fiscal 1999 to 51.5% in fiscal 2000. The increase in gross margin resulted primarily from a shift in product mix, a shift in our channel mix from OEMs to resellers and distributors and improved manufacturing efficiencies, offset in part by lower average selling prices due primarily to increased competition.
Gross profit increased from $8.7 million in fiscal 1998 to $49.5 million in fiscal 1999, an increase of $40.8 million. Gross margins increased from 36.8% in fiscal 1998 to 50.5% in fiscal 1999. The increase in gross margin resulted primarily from reductions in component costs, improved manufacturing efficiencies and a shift in our channel mix from OEMs to resellers, which were offset in part by lower average selling prices due to increased competition.
Research and Development Expenses
Research and development expenses increased from $17.0 million in fiscal 1999 to $33.0 million in fiscal 2000, an increase of $16.0 million. The increase was primarily due to nonrecurring engineering and initial product verification expenses and increased salaries and related personnel expenses due to the hiring of additional engineers. For fiscal 1999 and fiscal 2000, research and development expenses decreased as a percentage of net revenue from 17.4% to 12.6%. This percentage decrease was primarily the result of an increase in our net revenue.
Research and development expenses increased from $10.7 million in fiscal 1998 to $17.0 million in fiscal 1999, an increase of $6.3 million. The increase was primarily due to nonrecurring engineering and initial product verification expenses, the hiring of additional engineers and an increase in depreciation charges due to increases in capital spending on design and simulation software and test equipment. For fiscal 1998 and fiscal 1999, research and development expenses decreased as a percentage of net revenue from 45.2% to 17.4%. This percentage decrease was primarily the result of an increase in our net revenue.
Sales and Marketing Expenses
Sales and marketing expenses increased from $27.1 million in fiscal 1999 to $67.1 million in fiscal 2000, an increase of $40.0 million. This increase was primarily due to the hiring of additional sales, marketing and customer support personnel, increased sales commission expenses resulting from increased revenues, increased tradeshow and promotional expenses and the establishment of new sales offices. For fiscal 1999 and fiscal 2000, sales and marketing expenses decreased as a percentage of net revenue from 27.6% to 25.6%. This percentage decrease was primarily the result of an increase in our net revenue.
We intend to pursue sales and marketing campaigns aggressively and therefore expect these expenses to increase significantly in absolute dollars in the future. In addition, we recently hired approximately 200 sales and marketing personnel. We expect to continue to expand our field sales operations to support and develop leads for our resellers and distributors, which will also result in an increase in sales and marketing expenses.
Sales and marketing expenses increased from $9.6 million in fiscal 1998 to $27.1 million in fiscal 1999, an increase of $17.5 million. This increase was primarily due to the hiring of additional sales and customer support personnel, tradeshow and promotional expenses, increased commission expenses resulting from higher sales, and the establishment of new sales offices. For fiscal 1998 and fiscal 1999, sales and marketing expenses decreased as a percentage of net revenue from 40.7% to 27.6%. This percentage decrease was primarily the result of an increase in our net revenue.
General and Administrative Expenses
General and administrative expenses increased from $6.9 million in fiscal 1999 to $11.9 million in fiscal 2000, an increase of $5.0 million. This increase was due primarily to the hiring of additional finance, information technology, legal and administrative personnel and increased professional fees and occupancy costs. For fiscal 1999 and fiscal 2000, general and administrative expenses decreased as a percentage of net revenue from 7.0% to 4.5%. This percentage decrease was primarily the result of an increase in our net revenue.
General and administrative expenses increased from $2.4 million in fiscal 1998 to $6.9 million in fiscal 1999, an increase of $4.5 million. This increase was due primarily to the hiring of additional finance, information technology and legal and administrative personnel, recruiting expenses, professional fees and increased spending on information systems. For fiscal 1998 and fiscal 1999, general and administrative expenses decreased as a percentage of net revenue from 10.4% to 7.0%. This percentage decrease was primarily the result of an increase in our net revenue.
Amortization of Goodwill and Purchased Intangibles
Amortization of goodwill and purchased intangibles was $7.1 million in fiscal 2000. This amount was due to the Company's issuance of fully earned, non-forfeitable, fully exercisable warrants with a two year life to purchase 3 million shares of the Company's common stock with an exercise price of $39.50 per share as discussed in Note 3 of notes to consolidated financial statements. Future operating income will be reduced by approximately $7.1 million per quarter for each quarter in fiscal 2001 and for three fiscal quarters in fiscal 2002.
Interest Income
Interest income increased from $1.9 million in fiscal 1999 to $14.6 million in fiscal 2000, an increase of $12.7 million. The increase is due to the increased amount of cash and cash equivalents, short-term investments, restricted investments and long-term investments from the proceeds we received from our initial public offering in April 1999 and our secondary public offering in October 1999.
Interest income increased from $.6 million in fiscal 1998 to $1.9 million in fiscal 1999, an increase of $1.3 million. The increase
is due to the increased amount of cash and cash equivalents, short-term investments and long-term investments from the proceeds we received from our initial public offering in April 1999.
Income Taxes
We recorded a tax provision of $10.3 million for the year ended June 30, 2000. The provision for fiscal 2000 results in an effective tax rate of 34% which consists primarily of federal taxes, state income taxes and foreign taxes, offset by the recognition of deferred tax assets. FASB Statement No. 109 provides for the recognition of deferred tax assets if realization of such assets is more likely than not. We intend to evaluate the realizability of the deferred tax assets on a quarterly basis. We incurred significant operating losses for all fiscal years from inception through June 30, 1999. We recorded a tax provision of $1.7 million for the year ended June 30, 1999, which consisted primarily of foreign taxes, federal taxes and state income taxes.
Liquidity and Capital Resources
Cash and cash equivalents and short-term investments increased from $123.6 million at June 30, 1999 to $183.4 million at June 30, 2000, an increase of $59.8 million. The increase is primarily a result of our secondary public offering of common stock in October 1999, which generated net proceeds of $174.0 million, primarily offset by an increase in long-term investments and restricted investments of $108.0 million. Cash provided by operating activities was $24.8 million in fiscal 2000, as compared to cash provided by operating activities of $2.8 million in fiscal 1999. The increase was primarily due to net income, depreciation, amortization and increases in accounts payable, deferred revenue and accrued liabilities, offset by increases in accounts receivable, inventories and other current and noncurrent assets. We expect that accounts receivable will continue to increase to the extent our revenues continue to rise. We expect our inventory levels to increase in connection with our development of a two-tier distribution system, new product introductions and the need to maintain shorter lead times on certain products. Any such increase can be expected to reduce cash, cash equivalents, short-term investments and long-term investments.
Investing activities used cash of $195.0 million in fiscal 2000 due to capital expenditures of $27.2 million, net purchases of investments of $158.8 million and minority investments of $9.0 million. Our investing activities used cash of $29.1 million in fiscal 1999 for net purchases of investments of $21.6 million and capital expenditures of $7.5 million. Our investing activities used cash of $13.5 million in fiscal 1998 for capital expenditures of $2.5 million and net purchases of investments of $11.0 million. We expect capital expenditures of approximately $30.0 million in fiscal 2001. Under the terms of a certain equity investment, upon the attainment of certain technological milestones, we will be obligated to purchase all of the outstanding capital stock in fiscal 2001, payable in any combination of cash or shares of Extreme common stock.
Financing activities provided cash of $179.7 million in fiscal 2000, arising primarily from proceeds from the issuance of common stock in conjunction with our secondary public offering, partially offset by payments of capital lease obligations. Financing activities provided cash of $124.0 million in fiscal 1999, arising primarily from proceeds from the issuance of common stock in conjunction with our initial public offering, partially offset by principal payments on notes payable and capital lease obligations. Financing activities provided cash of $21.2 million in fiscal 1998, primarily from the issuance of convertible preferred stock and proceeds from notes payable, partially offset by principal payments on notes payable and capital lease obligations.
In June 2000, we entered into an operating lease agreement to lease 275,000 square feet to house our primary facility in Santa Clara, California. Our lease payments will vary based on the LIBOR plus a spread which was 7.14% at June 30, 2000. Our lease payments are estimated to be approximately $5.7 million on an annual basis over the lease term. The lease is for five years and can be renewed for two five-year periods, subject to the approval of the lessor. At the expiration or termination of the lease, we have the option to either purchase the property for $80.0 million, or arrange for the sale of the property to a third party for at least $80.0 million with a contingent liability for any deficiency. If the property is not purchased or sold as described above, we will be obligated for an additional lease payment of approximately $68.0 million.
As part of the above lease transaction, the Company restricted $80.0 million of its investment securities as collateral for specified obligations of the lessee under the lease. 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. The lease also requires us to maintain specified financial covenants with which we were in compliance as of June 30, 2000.
We require substantial capital to fund our business, particularly to finance inventories and accounts receivable and for capital expenditures. As a result, we could be required to raise substantial additional capital. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations. We cannot assure you that such additional capital, if required, will be available on acceptable terms, or at all. If we are unable to obtain such additional capital, we may be required to reduce the scope of our planned product development and marketing efforts, which would materially adversely affect our business, financial condition and operating results.
We believe that our current cash and cash equivalents, short-term investments, long-term investments and cash available from credit facilities and future operations will enable us to meet our working capital requirements for at least the next 12 months.
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133", which extended the deferral of the application of FAS 133 to all fiscal quarters of fiscal years beginning after June 15, 2000. In June 15, 2000 the FASB also issued FAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities) an Amendment to FASB Statement No. 133". FAS 138 amends the accounting and reporting standards of Statement 133 for certain derivative instruments and certain hedging activities. The Company will be required to adopt these pronouncements for the year ending June 30, 2001. Because the Company currently holds no derivative financial instruments and does not currently engage in hedging activities, adoption of FAS 133 and 138 are expected to have no material impact on the Company's financial condition or results of operations.
In December 1999, the Staff of the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101. "Revenue Recognition in Financial Statements", which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. The implementation of SAB 101 has recently been deferred to no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The Company is presently evaluating the potential impact of the adoption of SAB 101.
In March 2000, the FASB issued Financial Accounting Standards Board Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation - an interpretation of APB Opinion No. 25" (Interpretation No. 44). Interpretation No. 44 is effective July 1, 2000. The interpretation clarifies the application of APB Opinion No. 25 for certain issues, specifically, (a) the definition of an employee, (b) the criteria for determining whether a plan qualifies as a noncompensatory plan, (c) the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange or stock compensation awards in a business combination. We do not anticipate that the adoption of Interpretation No. 44 will have a material impact on our financial position or the results of our operations.
Factors That May Affect Our Results
Extreme Has a Limited History of Profitability and Cannot Assure You that it Will Continue to Achieve Profitability
Although our revenue has grown in recent quarters, we cannot be certain that we will realize sufficient revenue to achieve continued profitability on a fiscal year basis. Fiscal 2000 was the first year in which Extreme achieved profitability in each of the four quarters. We anticipate continuing to incur significant sales and marketing, product development and general and administrative expenses and, as a result, we will need to generate significantly higher revenue to sustain profitability. In particular, our recent hiring of approximately 200 sales and marketing personnel has substantially increased expenses. We expect that the hiring of such personnel will allow us to increase sales, however, we can not assure you that this will occur and we cannot assure you that operating margins will not be adversely affected by this or other hiring. In addition, the amortization of purchased intangibles and goodwill is estimated to be approximately $27.7 million and $21.0 million in fiscal 2001 and 2002, respectively.
A Number of Factors Could Cause Extreme's Quarterly Financial Results to Be Worse Than Expected, Resulting in a Decline in Its Stock Price
We plan to significantly increase our operating expenses to expand our sales and marketing activities, broaden our customer
support capabilities, develop new distribution channels, fund increased levels of research and development and build our operational infrastructure. We base our operating expenses on anticipated revenue trends and a high percentage of our expenses are fixed in the short term. As a result, any delay in generating or recognizing revenue could cause our quarterly operating results to be below the expectations of public market analysts or investors, which could cause the price of our common stock to fall.
We may experience a delay in generating or recognizing revenue because of a number of reasons. Orders at the beginning of each quarter typically do not equal expected revenue for that quarter and are generally cancelable at any time. Accordingly, we are dependent upon obtaining orders in a quarter for shipment in that quarter to achieve our revenue objectives. In addition, the timing of product releases, purchase orders and product availability could result in significant product shipments at the end of a quarter. Failure to ship these products by the end of a quarter may adversely affect our operating results. Furthermore, our customer agreements typically provide that the customer may delay scheduled delivery dates and cancel orders within specified time frames without significant penalty.
Our quarterly revenue and operating results have varied significantly in the past and may vary significantly in the future due to a number of factors, including:
. fluctuations in demand for our products and services, including seasonality, particularly in Asia and Europe;
. unexpected product returns or the cancellation or rescheduling of significant orders;
. our ability to develop, introduce, ship and support new products and product enhancements and manage product transitions;
. announcements and new product introductions by our competitors; . our ability to develop and support customer relationships with service providers and other potential large customers;
. our ability to achieve required cost reductions;
. our ability to obtain sufficient supplies of sole or limited sourced components for our products;
. unfavorable changes in the prices of the components we purchase;
. our ability to attain and maintain production volumes and quality levels for our products;
. the mix of products sold and the mix of distribution channels through which they are sold; and
. costs relating to possible acquisitions and integration of technologies or businesses.
. the affect of amortization of goodwill and purchased intangibles resulting from existing or new transactions.
Due to the foregoing factors, we believe that period-to-period comparisons of our operating results should not be relied upon as an indicator of our future performance.
Intense Competition in the Market for Networking Equipment Could Prevent Extreme From Increasing Revenue and Prevent Extreme From Sustaining Profitability
The market for Internet switches is intensely competitive. Our principal competitors include Cabletron Systems, Cisco Systems, Foundry Networks, Lucent Technologies and Nortel Networks. Many of our current and potential competitors have longer operating histories and substantially greater financial, technical, sales, marketing and other resources, as well as greater name recognition and larger installed customer bases, than we do. These competitors may have developed, or could in the future, develop new technologies that compete with our products or even render our products obsolete.
To remain competitive, we believe we must, among other things, invest significant resources in developing new products and enhancing our current products and maintaining customer satisfaction. If we fail to do so, our products may not compete favorably with those of our competitors and our revenue and future profitability could be materially adversely affected.
Extreme Expects the Average Selling Prices of Its Products to Decrease Rapidly Which May Reduce Gross Margins or Revenue
The network equipment industry has experienced rapid erosion of average selling prices due to a number of factors, including competitive pricing pressures and rapid technological change. We may experience substantial period-to-period fluctuations in future
operating results due to the erosion of our average selling prices. We anticipate that the average selling prices of our products will decrease in the future in response to competitive pricing pressures, increased sales discounts, new product introductions by us or our competitors, including, for example, competitive products manufactured with low cost merchant silicon, or other factors. Therefore, to maintain our gross margins, we must develop and introduce on a timely basis new products and product enhancements and continually reduce our product costs. Our failure to do so would cause our revenue and gross margins to decline, which could materially adversely affect our operating results and cause the price of our common stock to decline.
Extreme's Market is Subject to Rapid Technological Change and to Compete, Extreme Must Continually Introduce New Products that Achieve Broad Market Acceptance
The network equipment market is characterized by rapid technological change, frequent new product introductions, changes in customer requirements and evolving industry standards. If we do not address these changes by regularly introducing new products, our product line will become obsolete. Developments in routers and routing software could also significantly reduce demand for our product. Alternative technologies could achieve widespread market acceptance and displace Ethernet technology on which our product lines and architecture are based. We cannot assure you that our technological approach will achieve broad market acceptance or that other technologies or devices will not supplant our approach.
When we announce new products or product enhancements that have the potential to replace or shorten the life cycle of our existing products, customers may defer purchasing our existing products. These actions could materially adversely affect our operating results by unexpectedly decreasing sales, increasing our inventory levels of older products and exposing us to greater risk of product obsolescence. The market for switching products is evolving and we believe our ability to compete successfully in this market is dependent upon the continued compatibility and interoperability of our products with products and architectures offered by other vendors. In particular, the networking industry has been characterized by the successive introduction of new technologies or standards that have dramatically reduced the price and increased the performance of switching equipment. To remain competitive we need to introduce products in a timely manner that incorporate or are compatible with these new technologies as they emerge. For example, this fiscal year we introduced a new generation chipset which was incorporated in a new product family which began shipping in the quarter ended March 31, 2000. We cannot assure you that these new products will be commercially successful. We have experienced delays in releasing new products and product enhancements in the past which delayed sales and resulted in lower quarterly revenue than anticipated. We may experience similar delays in product development and release in the future and any delay in product introduction could adversely affect our ability to compete and cause our operating results to be below our expectations or the expectations of public market analysts or investors.
Continued Rapid Growth Will Strain Extreme's Operations and Will Require Extreme to Incur Costs to Upgrade Its Infrastructure
We have experienced a period of rapid growth and expansion which has placed, and continues to place, a significant strain on our resources. Even if we manage this growth effectively, we may make mistakes in operating our business such as inaccurate sales forecasting, incorrect material planning or inaccurate financial reporting, which may result in unanticipated fluctuations in our operating results. Our net revenue increased significantly during the last fiscal year, and from June 30, 1999 to June 30, 2000, the number of our employees increased from 249 to 680. We expect our anticipated growth and expansion to strain our management, operational and financial resources. Our management team has had limited experience managing such rapidly growing companies on a public or private basis. To accommodate this anticipated growth, we will be required to:
. improve existing and implement new operational, information and financial systems, procedures and controls;
. hire, train and manage additional qualified personnel, including sales, marketing personnel and research and development personnel; and
. effectively manage multiple relationships with our customers, suppliers and other third parties.
We may not be able to install adequate control systems in an efficient and timely manner, and our current or planned personnel systems, procedures and controls may not be adequate to support our future operations. In August 1998, we installed a new management information system, which we may continue to modify and improve to meet the increasing needs associated with our growth. The difficulties associated with installing and implementing these new systems, procedures and controls may place a significant burden on our management and our internal resources. In addition, as we grow internationally, we will have to expand our
worldwide operations and enhance our communications infrastructure. Any delay in the implementation of such new or enhanced systems, procedures or controls, or any disruption in the transition to such new or enhanced systems, procedures or controls, could adversely affect our ability to accurately forecast sales demand, manage our supply chain and record and report financial and management information on a timely and accurate basis.
Extreme Must Develop and Expand Its Indirect Distribution Channels to Increase Revenues and Improve Its Operating Results
Our distribution strategy focuses primarily on developing and expanding indirect distribution channels through resellers, distributors and, to a lesser extent, original equipment manufacturers, or OEMs, as well as expanding our field sales organization. If we fail to develop and cultivate relationships with significant resellers, or if these resellers are not successful in their sales efforts, sales of our products may decrease and our operating results would suffer. Many of our resellers also sell products that compete with our products. We are developing a two-tier distribution structure in Europe and the United States which has and will require us to enter into agreements with a small number of stocking distributors. We have entered into two-tier distribution agreements; however, we cannot assure you that we will continue to be able to enter into additional distribution agreements or that we will be able to successfully manage the transition of resellers to a two-tier distribution channel. Our failure to do so could limit our ability to grow or sustain revenue. In addition, our operating results will likely fluctuate significantly depending on the timing and amount of orders from our resellers. We cannot assure you that our resellers will market our products effectively or continue to devote the resources necessary to provide us with effective sales, marketing and technical support.
To support and develop leads for our indirect distribution channels and to expand our direct sales effort, to service providers and content providers, we plan to continue to expand our field sales and support staff significantly. We cannot assure you that this internal expansion will be successfully completed, that the cost of this expansion will not exceed the revenues generated or that our expanded sales and support staff will be able to compete successfully against the significantly more extensive and well-funded sales and marketing operations of many of our current or potential competitors. Our inability to effectively establish our distribution channels or manage the expansion of our sales and support staff would materially adversely affect our ability to grow and increase revenue.
Because Substantially All of Extreme's Revenue is Derived From Sales of Two Product Families, Extreme is Dependent on Widespread Market Acceptance of These Products; Future Performance will Depend on the Introduction and Acceptance of New Products
In fiscal 2000, we derived substantially all of our revenue from sales of our Summit and BlackDiamond product families. We expect that revenue from these product families will account for a substantial portion of our revenue for the foreseeable future. Accordingly, widespread market acceptance of our product families is critical to our future success. Factors that may affect the market acceptance of our products include market acceptance of switching products, and Gigabit Ethernet and Layer 3 switching technologies in particular in the enterprise, service provider and metropolitan area network markets, the performance, price and total cost of ownership of our products, the availability and price of competing products and technologies, and the success and development of our resellers, distributors, OEMs and field sales channels. Many of these factors are beyond our control. Our future performance will also depend on the successful development, introduction and market acceptance of new and enhanced products that address customer requirements in a cost-effective manner. We have in the past experienced delays in product development and such delays may occur in the future. We introduced a new product family in fiscal 2000 which is based on a new generation chip set. In addition, we also introduced new products within our existing product lines that incorporate this new chip set. The introduction of new and enhanced products may cause our customers to defer or cancel orders for existing products. Therefore, to the extent customers defer or cancel orders in the expectation of any new product release, any delay in development or introduction could cause our operating results to suffer. Failure of our existing or future products to maintain and achieve widespread levels of market acceptance may significantly impair our revenue growth.
If a Key Reseller, Distributor, OEM or Other Significant Customer Cancels or Delays a Large Purchase, Extreme's Revenues May Decline and the Price of Its Stock May Fall
To date, a limited number of resellers, distributors, OEMs and other customers have accounted for a significant portion of our revenue. If any of our large customers stop or delay purchases, our revenue and profitability would be adversely affected. For example, in fiscal 1999, Compaq and Hitachi Cable accounted for 21% and 13% of our net revenue, respectively. Because our expense levels are based on our expectations as to future revenue and to a large extent are fixed in the short term, a substantial reduction or delay in sales of our products to, or the loss of any significant reseller, distributor, OEM or other customer, or unexpected returns from
resellers could harm our business, operating results and financial condition. Although our largest customers may vary from period-to-period, we anticipate that our operating results for any given period will continue to depend to a significant extent on large orders from a small number of customers, particularly in light of the high sales price per unit of our products and the length of our sales cycles.
While our financial performance depends on large orders from a few key resellers, distributors, OEMs and other significant customers, we do not have binding commitments from any of them. For example:
. our service provider and enterprise network customers can stop purchasing and our resellers, distributors and OEMs can stop marketing our products at any time;
. our reseller agreements generally are not exclusive and are for one year terms, with no obligation of the resellers to renew the agreements;
. our reseller agreements provide for discounts based on expected or actual volumes of products purchased or resold by the reseller in a given period; and
. our reseller, distributor and OEM agreements generally do not require minimum purchases.
We have established a program which, under specified conditions, enables some third party resellers to return products to us. The amount of potential product returns is estimated and provided for in the period of the sale. Some of our OEM agreements also provide manufacturing rights and access to our source code upon the occurrence of specified conditions of default. If we were to default on these agreements, our OEMs could use our source code to develop and manufacture competing products, which would negatively affect our performance and ability to compete.
The Sales Cycle for Extreme's Products is Long and Extreme May Incur Substantial Non-Recoverable Expenses or Devote Significant Resources to Sales that Do Not Occur When Anticipated
The timing of our sales revenue is difficult to predict because of our reliance on indirect sales channels and the length and variability of our sales cycle. Our products have a relatively high sales price per unit, and often represent a significant and strategic decision by an enterprise regarding its communications infrastructure. Accordingly, the purchase of our products typically involves significant internal procedures associated with the evaluation, testing, implementation and acceptance of new technologies. This evaluation process frequently results in a lengthy sales process, typically ranging from three months to longer than a year, and subjects the sales cycle associated with the purchase of our products to a number of significant risks, including budgetary constraints and internal acceptance reviews. The length of our sales cycle also may vary substantially from customer to customer. While our customers are evaluating our products and before they may place an order with us, we may incur substantial sales and marketing expenses and expend significant management effort. Consequently, if sales forecasted from a specific customer for a particular quarter are not realized in that quarter, we may be unable to compensate for the shortfall, which could harm our operating results.
Extreme Purchases Several Key Components for Products From Single or Limited Sources and Could Lose Sales if These Sources Fail to Fill Its Needs
We currently purchase several key components used in the manufacture of our products from single or limited sources and are dependent upon supply from these sources to meet our needs. Certain components such as tantalum capacitors, SRAM and printed circuit boards have been and may in the future be in short supply. While we have been able to meet our needs to date, we have in the past and are likely in the future to encounter shortages and delays in obtaining these or other components and this could materially adversely affect our ability to meet customer orders. Our principal sole sourced components include:
. ASICs;
. microprocessors;
. programmable integrated circuits;
. selected other integrated circuits;
. cables; and
. custom-tooled sheet metal.
Our principal limited sourced components include:
. flash memories;
. dynamic and static random access memories, commonly known as DRAMs and SRAMs, respectively; and
. printed circuit boards.
We use a rolling six-month forecast based on anticipated product orders to determine our material requirements. Lead times for materials and components we order vary significantly, and depend on factors such as the specific supplier, contract terms and demand for a component at a given time. If orders do not match forecasts, we may have excess or inadequate inventory of certain materials and components, which could materially adversely affect our operating results and financial condition. From time to time we have experienced shortages and allocations of certain components, resulting in delays in filling orders. In addition, during the development of our products we have experienced delays in the prototyping of our ASICs, which in turn has led to delays in product introductions.
Extreme Needs to Expand Its Manufacturing Operations and Depends on Contract Manufacturers for Substantially All of Its Manufacturing Requirements
If the demand for our products continues to grow, we will need to increase our material purchases, contract manufacturing capacity and internal test and quality functions. Any disruptions in product flow could limit our revenue, adversely affect our competitive position and reputation and result in additional costs or cancellation of orders under agreements with our customers.
We rely on third party manufacturing vendors to manufacture our products. We currently subcontract substantially all of our manufacturing to three companies--Flextronics International, Ltd., located in San Jose, California, MCMS, Inc., located in Boise, Idaho and Solectron, located in Milpitas, California. We have experienced a delay in product shipments from contract manufacturers in the past, which in turn delayed product shipments to our customers. We may in the future experience similar or other problems, such as inferior quality and insufficient quantity of product, any of which could materially adversely affect our business and operating results. There can be no assurance that we will effectively manage our contract manufacturers or that these manufacturers will meet our future requirements for timely delivery of products of sufficient quality and quantity. We intend to regularly introduce new products and product enhancements, which will require that we rapidly achieve volume production by coordinating our efforts with those of our suppliers and contract manufacturers. The inability of our contract manufacturers to provide us with adequate supplies of high-quality products or the loss of either of our contract manufacturers would cause a delay in our ability to fulfill orders while we obtain a replacement manufacturer and would have a material adverse effect on our business, operating results and financial condition.
As part of our cost-reduction efforts, we will need to realize lower per unit product costs from our contract manufacturers as a result of volume efficiencies. However, we cannot be certain when or if such price reductions will occur. The failure to obtain such price reductions would adversely affect our gross margins and operating results.
If Extreme Loses Key Personnel or is Unable to Hire Additional Qualified Personnel as Necessary, It May Not Be Able to Successfully Manage Its Business or Achieve Its Objectives
Our success depends to a significant degree upon the continued contributions of our key management, engineering, sales and marketing and manufacturing personnel, many of whom would be difficult to replace. In particular, we believe that our future success is highly dependent on Gordon Stitt, Chairman, President and Chief Executive Officer, Stephen Haddock, Vice President and Chief Technical Officer, and Herb Schneider, Vice President of Engineering. We neither have employment contracts with nor key person life insurance on any of our key personnel.
We believe our future success will also depend in large part upon our ability to attract and retain highly skilled managerial, engineering, sales and marketing, finance and manufacturing personnel. Competition for these personnel is intense, especially in the San Francisco Bay Area, and we have had difficulty hiring employees in the timeframe we desire, particularly software engineers. There can be no assurance that we will be successful in attracting and retaining such personnel. The loss of the services of any of our key personnel, the inability to attract or retain qualified personnel in the future or delays in hiring required personnel, particularly engineers and sales personnel, could make it difficult for us to manage our business and meet key objectives, such as product introductions, on time. In addition, companies in the networking industry whose employees accept positions with competitors frequently claim that competitors have engaged in unfair hiring practices. We have from time to time received claims like this from
other companies and, although to date they have not resulted in material litigation, we cannot assure you that we will not receive additional claims in the future as we seek to hire qualified personnel or that such claims will not result in material litigation. We could incur substantial costs in defending ourselves against any such claims, regardless of the merits of such claims.
Extreme's Products Must Comply With Evolving Industry Standards and Complex Government Regulations or Its Products May Not Be Widely Accepted, Which May Prevent Extreme From Sustaining Its Revenues or Achieving Profitability
The market for network equipment products is characterized by the need to support industry standards as different standards emerge, evolve and achieve acceptance. We will not be competitive unless we continually introduce new products and product enhancements that meet these emerging standards. In the past, we have introduced new products that were not compatible with certain technological changes, and in the future we may not be able to effectively address the compatibility and interoperability issues that arise as a result of technological changes and evolving industry standards. In addition, in the United States, our products must comply with various regulations and standards defined by the Federal Communications Commission and Underwriters Laboratories. Internationally, products that we develop may be required to comply with standards established by telecommunications authorities in various countries as well as with recommendations of the International Telecommunication Union. If we do not comply with existing or evolving industry standards or if we fail to obtain timely domestic or foreign regulatory approvals or certificates we would not be able to sell our products where these standards or regulations apply, which may prevent us from sustaining our revenues or achieving profitability.
Failure to Successfully Integrate Extreme's Expanded Sales and Support Organizations into Its Operation or Educate Them About Its Product Families Will Hurt Its Operating Results.
Our products and services require a sophisticated sales effort targeted at several levels within a prospective customer's organization. Unless we expand our sales force we will not be able to increase revenues. In April 2000, a significant number of former sales and system engineer employees of another networking company joined our operation. We cannot assure you that we will be able to educate these new employees about our product families or integrate these new employees into our company. A failure to do so will hurt our revenue growth and may hurt our operating results.
Extreme Depends Upon International Sales for Much of Its Revenue and Extreme's Ability to Sustain and Increase Its International Sales Depends on Successfully Expanding Its International Operations
Our ability to grow will depend in part on the expansion of international sales and operations which have and are expected to constitute a significant portion of our sales. Sales to customers outside of North America accounted for approximately 53% and 45% of our net revenue in fiscal 1999 and fiscal 2000, respectively. Our international sales primarily depend on our resellers, distributors and OEMs. The failure of our resellers, distributors and OEMs to sell our products internationally would limit our ability to sustain and grow our revenue. In addition, there are a number of risks arising from our international business, including:
. longer accounts receivable collection cycles;
. difficulties in managing operations across disparate geographic areas;
. difficulties associated with enforcing agreements through foreign legal systems;
. payment of operating expenses in local currencies, which subjects us to risks of currency fluctuations;
. import or export licensing requirements;
. potential adverse tax consequences; and
. unexpected changes in regulatory requirements.
Our international sales currently are U.S. dollar-denominated. As a result, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive in international markets. In the future, we may elect to invoice some of our international customers in local currency which will subject us to fluctuations in exchange rates between the U.S. dollar and the particular local currency. If we do so, we may determine to engage in hedging transactions to minimize the risk of such fluctuations. However, if we are not successful in managing such hedging transactions, we could incur losses from hedging activities. Because we currently denominate sales in U.S. dollars, we do not anticipate that the adoption of the Euro as a functional legal currency of certain European countries will materially affect our business.
Extreme May Engage in Future Acquisitions that Dilute the Ownership Interests of Our Stockholders, Cause Us to Incur Debt and Assume Contingent Liabilities
As part of our business strategy, we review acquisition and strategic investment prospects that would complement our current product offerings, augment our market coverage or enhance our technical capabilities, or that may otherwise offer growth opportunities. We are reviewing investments in new businesses and we expect to make investments in and acquire businesses, products or technologies in the future. In the event of any future acquisitions, we could:
. issue equity securities which would dilute current stockholders' percentage ownership;
. incur substantial debt
. assume contingent liabilities; or
. expend significant cash.
These actions by us could materially adversely affect our operating results and/or the price of our common stock. Acquisitions and investment activities also entail numerous risks, including:
. difficulties in the assimilation of acquired operations, technologies or products;
. unanticipated costs associated with the acquisition or investment transaction;
. diversion of management's attention from other business concerns;
. adverse effects on existing business relationships with suppliers and customers;
. risks associated with entering markets in which we have no or limited prior experience
. potential loss of key employees of acquired organizations; and
. substantial charges for amortization of goodwill or purchased intangibles or similar items.
We cannot assure you that we will be able to successfully integrate any businesses, products, technologies or personnel that we might acquire in the future, and our failure to do so could materially adversely affect our business, operating results and financial condition.
Extreme May Need Additional Capital to Fund Its Future Operations And, If It Is Not Available When Needed, Extreme May Need to Reduce Its Planned Development and Marketing Efforts, Which May Reduce Its Revenues and Prevent Extreme From Achieving Profitability
We believe that our existing working capital, proceeds from the initial public offering in April 1999, proceeds from the secondary offering in October 1999 and cash available from credit facilities and future operations will enable us to meet our working capital requirements for at least the next 12 months. However, if cash from future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated uses, we may need additional capital. The development and marketing of new products and the expansion of reseller and distribution channels and associated support personnel is expected to require a significant commitment of resources. In addition, if the market for our products were to develop more slowly than anticipated or if we fail to establish significant market share and achieve a meaningful level of revenues, we may continue to utilize significant amounts of capital. As a result, we could be required to raise substantial additional capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, such securities may have rights, preferences and privileges senior to holders of common stock and the term of such debt could impose restrictions on our operations. We cannot assure you that such additional capital, if required, will be available on acceptable terms, or at all. If we are unable to obtain such additional capital, we may be required to reduce the scope of our planned product development and marketing efforts, which would harm our business, financial condition and operating results.
If Extreme's Products Contain Undetected Software or Hardware Errors, Extreme Could Incur Significant Unexpected Expenses and Lost Sales
Network products frequently contain undetected software or hardware errors when first introduced or as new versions are released. We have experienced such errors in the past in connection with new products and product upgrades. We expect that such errors will be found from time to time in new or enhanced products after commencement of commercial shipments. These problems may materially adversely affect our business by causing us to incur significant warranty and repair costs, diverting the attention of our engineering personnel from our product development efforts and causing significant customer relations problems.
Our products must successfully interoperate with products from other vendors. As a result, when problems occur in a network, it may be difficult to identify the source of the problem. The occurrence of hardware and software errors, whether caused by our products or another vendor's products, could result in the delay or loss of market acceptance of our products and any necessary revisions may result in the incurrence of significant expenses. The occurrence of any such problems would likely have a material adverse effect on our business, operating results and financial condition.
Extreme's Limited Ability to Protect Its Intellectual Property May Adversely Affect Its Ability to Compete
We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. However, we cannot assure you that the actions we have taken will adequately protect our intellectual property rights.
We also enter into confidentiality or license agreements with our employees, consultants and corporate partners, and control access to and distribution of our software, documentation and other proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology.
Provisions in Extreme's Charter or Agreements May Delay or Prevent a Change of Control
Provisions in our certificate of incorporation and bylaws may delay or prevent a change of control or changes in our management. These provisions include:
. the division of the board of directors into three separate classes;
. the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors; and
. the ability of the board of directors to alter our bylaws without getting stockholder approval
Furthermore, we are subject to the provisions of section 203 of the Delaware General Corporation Law. These provisions prohibit large stockholders, in particular those owning 15% or more of the outstanding voting stock, from consummating a merger or combination with a corporation unless this stockholder receives board approval for the transaction or 66 2/3% of the shares of voting stock not owned by the stockholder approve the merger or combination.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Sensitivity
The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we have invested in may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline. To minimize this risk, we maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including commercial paper, other non-government debt securities and money market funds. In general, money market funds are not subject to market risk because the interest paid on such funds fluctuates with the prevailing interest rate. The following table presents the amounts of our cash equivalents and short-term investments that are subject to market risk by range of expected maturity and weighted-average interest rates as of June 30, 2000 and June 30, 1999. This table does not include money market funds because those funds are not subject to market risk.
June 30, 2000: Maturing in ---------------------------------------------------------------- Three months Three months Greater than Fair or less to one year one year Total Value ------- ----------- -------- ----- ----- (In thousands) Included in cash and cash equivalents................. $ 100,696 $ 100,696 $ 100,696 Weighted average interest rate...................... 6.37% Included in short-term investments.................... $ 66,640 $ 66,640 $ 66,640 Weighted average interest rate...................... 6.50% Included in investments............................... $ 44,144 $ 44,144 $ 44,144 Weighted average interest rate...................... 7.29% Maturing in --------------------------------------------------------------- June 30, 1999: Three months Three months Greater than Fair or less to one year one year Total Value ------- ----------- -------- ----- ----- (In thousands) Included in cash and cash equivalents................ $ 93,819 $ 93,819 $ 93,819 Weighted average interest rate..................... 5.12% Included in short-term investments................... $ 16,422 $ 16,422 $ 16,422 Weighted average interest rate..................... 5.04% Included in investments.............................. 300 $ 15,797 $ 16,097 $ 16,097 Weighted average interest rate..................... 6.02% 6.36% |
Exchange Rate Sensitivity
Currently, all of our sales and the majority of our expenses are denominated in U.S. dollars and as a result, we have experienced no significant foreign exchange gains and losses to date. While we have conducted some transactions in foreign currencies during the year ended June 30, 2000 and expect to continue to do so, we do not anticipate that foreign exchange gains or losses will be significant. We have not engaged in foreign currency hedging activities to date, however, we may do so in the future.
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF EXTREME NETWORKS, INC.
Page(s) -------- Report of Ernst & Young LLP, Independent Auditors........................................................................ 33 Consolidated Balance Sheets.............................................................................................. 34 Consolidated Statements of Operations.................................................................................... 35 Consolidated Statement of Stockholders' Equity........................................................................... 36 Consolidated Statements of Cash Flows.................................................................................... 37 Notes to Consolidated Financial Statements............................................................................... 38 |
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Extreme Networks, Inc.
We have audited the accompanying consolidated balance sheets of Extreme Networks, Inc. as of June 30, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended June 30, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Extreme Networks, Inc. at June 30, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Palo Alto, California
July 18, 2000, except for Note 9, as to which the date is August 24, 2000
EXTREME NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
ASSETS
June 30, --------------------- 2000 1999 --------- --------- Current assets: Cash and cash equivalents................................. $ 116,721 $ 107,143 Short-term investments.................................... 66,640 16,422 Accounts receivable, net of allowance for doubtful accounts of $1,237 in 2000 and $1,374 in 1999........... 60,996 20,797 Inventories............................................... 23,801 2,626 Other current assets...................................... 34,326 1,978 --------- --------- Total current assets.............................. 302,484 148,966 Property and equipment, net................................. 26,750 6,506 Restricted investments...................................... 80,000 -- Investments................................................. 44,144 16,097 Goodwill and purchased intangibles.......................... 49,782 -- Other assets................................................ 12,770 234 --------- --------- $ 515,930 $ 171,803 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 39,023 $ 13,418 Accrued compensation...................................... 6,759 2,500 Accrued commissions....................................... 4,282 1,600 Leasehold improvements allowance.......................... 8,424 -- Deferred revenue.......................................... 22,042 1,717 Other accrued liabilities................................. 12,935 7,394 Income tax liability...................................... 3,138 1,650 Capital lease obligations, current portion................ -- 1,648 ---------- ---------- Total current liabilities......................... 96,603 29,927 Long term deposit........................................... 306 -- Commitments (Note 4) Stockholders' equity: Convertible preferred stock, $.001 par value, issuable in series: 2,000,000 shares authorized; no shares issued and outstanding.................................. -- -- Common stock, $.001 par value; 150,000,000 shares authorized; 106,670,964 and 98,690,460 shares issued and June 30, 2000 and 1999, respectively........ 106 98 Additional paid-in capital................................ 423,044 165,569 Deferred stock compensation............................... (78) (197) Accumulated other comprehensive loss...................... (623) (118) Accumulated deficit....................................... (3,428) (23,476) --------- --------- Total stockholders' equity........................ 419,021 141,876 --------- --------- $ 515,930 $ 171,803 ========= ========= |
See accompanying notes to consolidated financial statements.
EXTREME NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Years Ended June 30, ----------------------------------- 2000 1999 1998 ----------- --------- -------- Net revenue....................................... $261,956 $ 98,026 $ 23,579 Cost of revenue................................... 126,916 48,520 14,897 -------- --------- -------- Gross profit...................................... 135,040 49,506 8,682 Operating expenses: Research and development........................ 32,737 17,036 10,668 Sales and marketing............................. 67,146 27,056 9,601 General and administrative...................... 11,852 6,859 2,440 Amortization of goodwill and purchased intangibles.................................... 7,051 -- -- -------- -------- -------- Total operating expenses................... 118,786 50,951 22,709 -------- -------- -------- Operating income (loss)........................... 16,254 (1,445) (14,027) Interest income................................... 14,638 1,855 Interest expense.................................. (490) (398) (326) Other income (loss), net.......................... (33) 21 (196) -------- -------- -------- Income (loss) before income taxes................. 30,369 33 (13,936) Provision for income taxes........................ 10,321 1,650 -- -------- -------- -------- Net income (loss)................................. $ 20,048 $ (1,617) $(13,936) ======== ======== ======== Basic net income (loss) per share................. $ 0.20 $ (0.09) $ (1.59) Diluted net income (loss) per share............... $ 0.18 $ (0.09) $ (1.59) Weighted average shares outstanding used in computing basic net income (loss) per share................................. 100,516 18,924 8,758 Weighted average shares outstanding used in computing diluted net income (loss) per share.......................... 111,168 18,924 8,758 |
See accompanying notes to consolidated financial statements.
EXTREME NETWORKS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Convertible Accumulated Preferred Stock Common Stock Additional Deferred Other --------------- ------------ Paid-In Stock Comprehensive Shares Amount Shares Amount Capital Compensation Loss ------ ------ ------ ------ ------- ------------ ---- Balances at June 30, 1997 ................. 46,932 $ 46 21,620 $ 22 $ 17,160 $ -- $ -- Issuance of warrant for 96,694 shares of Series B convertible preferred stock ..... -- -- -- -- 28 -- -- Issuance of Series C convertible preferred stock to investors for cash (less issuance costs of $416)................... 11,190 12 -- -- 20,105 -- -- Issuance of warrant for 140,352 shares of Series C convertible preferred stock ..... -- -- -- -- 140 -- -- Exercise of options to purchase common stock ............................. -- -- 1,450 2 145 -- -- Deferred stock compensation ............... -- -- -- -- 437 (437) -- Amortization of deferred stock compensation ............................. -- -- -- -- -- 68 -- Net loss .................................. -- -- -- -- -- -- -- ------ ---- ------- ---- ------ ----- ---- Balances at June 30, 1998 ................. 58,122 58 23,070 24 38,015 (369) -- Comprehensive loss: Net loss ................................. -- -- -- -- -- -- -- Other comprehensive loss, net of tax: Change in unrealized loss on investments............................. -- -- -- -- -- -- (112) Foreign currency translation adjustment.. -- -- -- -- -- -- (6) Other comprehensive loss ................. -- -- -- -- -- -- -- Comprehensive loss ........................ -- -- -- -- -- -- -- Issuance of warrants to purchase 80,000 shares of common stock ................... -- -- -- -- 948 -- -- Issuance of common stock in conjunction with initial public offering (less issuance costs of $1,948)................. -- -- 16,100 16 125,306 -- -- Conversion of preferred stock to common stock in conjunction with initial public offering .......................... (58,122) (58) 58,122 58 -- -- -- Exercise of warrants to purchase common stock ............................. -- -- 264 -- -- -- -- Exercise of options to purchase common stock ............................. -- -- 1,134 -- 1,300 -- -- Amortization of deferred stock compensation ............................. -- -- -- -- -- 172 -- ------ ---- ------- ---- ------ ------ ---- Balances at June 30, 1999 ................. -- -- 98,690 98 165,569 (197) (118) Comprehensive income: Net income ............................... -- -- -- -- -- -- -- Other comprehensive loss, net of tax: Change in unrealized loss on investments............................. -- -- -- -- -- -- (503) Foreign currency translation adjustment.. -- -- -- -- -- -- (2) Other comprehensive loss ................. -- -- -- -- -- -- -- Comprehensive income ...................... -- -- -- -- -- -- -- Issuance of common stock in conjunction with secondary public offering(less issuance costs of $910) .................. -- -- 4,748 6 174,022 -- -- Exercise of warrants to purchase common stock ............................. -- -- 370 -- -- -- -- Exercise of options to purchase common stock ............................. -- -- 2,392 2 3,387 -- -- Issuance of common stock under employee stock purchase plan ...................... -- -- 470 -- 3,966 -- -- Issuance of warrants for goodwill and purchased intangibles .................... -- -- -- -- 54,324 -- -- Tax benefit from employee stock transactions ............................. -- -- -- -- 21,600 -- -- Stock compensation for options granted to consultants .............................. -- -- -- -- 176 -- -- Amortization of deferred stock compensation ............................. -- -- -- -- -- 119 -- ------ ---- -------- ---- -------- ----- ----- Balances at June 30, 2000 ................. -- $ -- $106,670 $106 $423,044 $ (78) $(623) ====== ==== ======== ==== ======== ===== ===== Total Accumulated Stockholders' Deficit Equity ------- ------ Balances at June 30, 1997 ................. $ (7,923) $ 9,305 Issuance of warrant for 96,694 shares of Series B convertible preferred stock ..... -- 28 Issuance of Series C convertible preferred stock to investors for cash (less issuance costs of $416)................... -- 20,117 Issuance of warrant for 140,352 shares of Series C convertible preferred stock ..... -- 140 Exercise of options to purchase common stock ............................. -- 147 Deferred stock compensation ............... -- -- Amortization of deferred stock compensation ............................. -- 68 Net loss .................................. (13,936) (13,936) -------- -------- Balances at June 30, 1998 ................. (21,859) 15,869 Comprehensive loss: Net loss ................................. (1,617) (1,617) Other comprehensive loss, net of tax: Change in unrealized loss on investments............................. -- (112) Foreign currency translation adjustment.. -- (6) -------- Other comprehensive loss ................. -- (118) -------- Comprehensive loss ........................ -- (1,735) Issuance of warrants to purchase 80,000 shares of common stock ................... -- 948 Issuance of common stock in conjunction with initial public offering (less ....... issuance costs of $1,948)................. -- 125,322 Conversion of preferred stock to common stock in conjunction with initial public offering .......................... -- -- Exercise of warrants to purchase common stock ............................. -- -- Exercise of options to purchase common stock ............................. -- 1,300 Amortization of deferred stock compensation ............................. -- 172 -------- ------- Balances at June 30, 1999 ................. (23,476) 141,876 Comprehensive income: Net income ............................... 20,048 20,048 Other comprehensive loss, net of tax: Change in unrealized loss on investments............................. -- (503) Foreign currency translation adjustment.. -- (2) -------- Other comprehensive loss ................. -- (505) -------- Comprehensive income ...................... -- 19,543 Issuance of common stock in conjunction with secondary public offering(less issuance costs of $910) .................. -- 174,028 Exercise of warrants to purchase common stock ............................. -- -- Exercise of options to purchase common stock ............................. -- 3,389 Issuance of common stock under employee stock purchase plan....................... -- 3,966 Issuance of warrants for goodwill and purchased intangibles..................... -- 54,324 Tax benefit from employee stock transactions.............................. -- 21,600 Stock compensation for options granted to consultants............................... -- 176 Amortization of deferred stock compensation ............................. -- 119 -------- -------- Balances at June 30, 2000 ................. $ (3,428) $419,021 ======== ======== |
See accompanying notes to consolidated financial statements.
EXTREME NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended June 30, -------------------- 2000 1999 1998 -------- -------- -------- Operating activities Net income (loss)............................................... $ 20,048 $ (1,617) $ (13,936) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation................................................... 6,992 5,733 1,453 Amortization................................................... 7,052 -- -- Warrants issued to a business partner.......................... -- 948 -- Amortization of deferred stock compensation.................... 119 172 68 Loss on equity investments..................................... 248 -- -- Compensation expense for options granted to consultants........ 176 -- -- Changes in operating assets and liabilities: Accounts receivable........................................ (40,199) (12,989) (7,545) Inventories................................................ (21,175) (2,503) (86) Other current and noncurrent assets........................ (18,832) (1,392) (585) Accounts payable........................................... 25,605 3,425 9,244 Accrued compensation....................................... 4,259 2,038 272 Accrued commissions........................................ 2,682 1,127 473 Leasehold improvements allowance........................... 8,424 -- -- Deferred revenue........................................... 20,325 1,434 283 Other accrued liabilities.................................. 4,101 4,727 2,203 Income tax liability....................................... 4,688 1,650 -- Long term deposit.......................................... 306 -- -- Due to shareholder......................................... -- -- (109) ---------- ---------- ----------- Net cash provided by (used in) operating activities............. 24,819 2,753 (8,265) ---------- ---------- ----------- Investing activities Capital expenditures............................................ (27,236) (7,492) (2,511) Purchases and maturities of investments......................... (158,770) (21,636) (10,996) Minority investments............................................ (8,970) -- -- ---------- ---------- ----------- Net cash used in investing activities........................... (194,976) (29,128) (13,507) ---------- ---------- ----------- Financing activities Proceeds from issuance of convertible preferred stock........... -- -- 20,285 Proceeds from issuance of common stock.......................... 181,383 126,622 147 Proceeds from notes payable..................................... -- 783 1,606 Principal payments on notes payable............................. -- (2,784) (241) Principal payments of capital lease obligations................. (1,648) (613) (562) ---------- ---------- ----------- Net cash provided by financing activities....................... 179,735 124,008 21,235 ---------- ---------- ----------- Net increase (decrease) in cash and cash equivalents............ 9,578 97,633 (537) Cash and cash equivalents at beginning of period.................. 107,143 9,510 10,047 ---------- ---------- ----------- Cash and cash equivalents at end of period........................ $ 116,721 $ 107,143 $ 9,510 ========== ========== =========== Supplemental disclosure of cash flow information: Interest paid................................................... $ 744 $ 185 $ 326 Cash paid for taxes............................................. $ 5,828 $ -- $ -- Supplemental schedule of noncash investing and financing activities: Property and equipment acquired under capital lease obligations................................................... $ -- $ 278 $ 1,588 Warrants issued in connection with capital lease................ $ -- $ -- $ 168 Warrants issued for goodwill and purchased intangibles.......... $ 54,324 $ -- $ -- Warrants issued to a business partner........................... $ -- $ 948 $ -- Deferred stock compensation..................................... $ -- $ -- $ 437 Conversion of preferred stock to common stock................... $ -- $ 58 $ -- Tax benefit from disqualifying dispositions..................... $ 21,600 $ -- $ -- |
See accompanying notes to consolidated financial statements.
EXTREME NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) Summary of Significant Accounting Policies
Nature of Operations
Extreme Networks, Inc. ("Extreme" or the "Company") was incorporated in California on May 8, 1996 and was reincorporated in Delaware on March 31, 1999. Extreme is a leading provider of broadband networking solutions for the Internet economy.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Extreme and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated. Investments in which management intends to maintain more than a temporary 20% to 50% interest, or otherwise has the ability to exercise significant influence, are accounted for under the equity method. Investments in which we have less than a 20% interest and/or do not have the ability to exercise significant influence are carried at the lower of cost or estimated realizable value.
Assets and liabilities of foreign operations are translated to U.S. dollars at current rates of exchange, and revenues and expenses are translated using weighted average rates. Foreign currency transaction gains and losses have not been material. Gains and losses from foreign currency translation are included as a separate component of other comprehensive income (loss).
Certain items previously reported in specific financial statement captions have been reclassified to conform to the 2000 presentation. Such reclassifications have not impacted previously reported operating income (loss).
Fiscal Year
Effective July 1, 1999, Extreme changed its fiscal year from June 30/th/ to a 52/53-week fiscal accounting year. The June 30, 2000 year closed on July 2, 2000 and comprised 52 weeks of revenue and expense activity. All references herein to "fiscal 2000" or "2000" represent the fiscal year ended July 2, 2000. Quarterly results are based upon a 13-week reporting period.
Accounting 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 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, inventory reserves, depreciation and amortization, sales returns, warranty costs and income taxes. Actual results could differ from these estimates.
Cash Equivalents and Short-Term Investments
Extreme considers cash and all highly liquid investment securities purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents. Extreme's investments comprise U.S., state and municipal government obligations and corporate securities. Investments with maturities of less than one year are considered short term and investments with maturities greater than one year are considered long term.
To date, all marketable securities have been classified as available-for-sale and are carried at fair value, with unrealized gains and losses, when material, reported net-of-tax as a separate component of other comprehensive income. Realized gains and losses on available-for-sale securities are included in interest income. The cost of securities sold is based on specific identification. Premiums and discounts are amortized over the period from acquisition to maturity and are included in investment income, along with interest and dividends.
Fair Value of Financial Instruments
The carrying amounts of certain of Extreme's financial instruments, including cash and equivalents, 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 2).
Transfer of Financial Assets
The Company from time to time transfers specifically identified accounts receivable balances from customers to financing institutions, on a non-recourse basis. The Company records such transfers as sales of the related accounts receivable when it is considered to have surrendered control of such receivables under the provisions of Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." The impact of the above transaction reduced receivables and increased cash flows from operating activities in the consolidated statements of cash flows.
Inventories
Inventories consist of raw materials and finished goods and are stated at the lower of cost or market (on a first-in, first-out basis).
Inventories consist of:
June 30, 2000 June 30, 1999 ------------- ------------- Raw materials $ 9,501 $ 700 Finished goods 14,300 1,926 ---------------- ---------------- Total $23,801 $2,626 ================ ================ |
Restricted Investments
Extreme restricted $80.0 million of its investment securities as collateral for specified obligations of the lessee under the operating lease. 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. (See Note 4)
Concentration of Credit Risk, Product and Significant Customers and Supplier Information
Financial instruments that potentially subject Extreme to concentration of credit risk consist principally of marketable investments and accounts receivable. Extreme places its investments only with high-credit quality issuers. Extreme will not invest an amount exceeding 10% of the corporation's combined cash, cash equivalent, short-term and long-term investments, in the securities of any one obligor or maker, except for obligations of the United States, obligations of United States agencies and money market accounts. Extreme performs ongoing credit evaluations of its customers and generally does not require collateral. To date, credit losses have been insignificant and within management's expectations. Extreme operates solely within one business segment, the development and marketing of switching solutions for the Internet economy. For fiscal 2000, there were no customers with sales greater than 10%. For fiscal 1999, Compaq and Hitachi Cable accounted for 21% and 13% of our net revenue, respectively.
One supplier currently manufacturers all of Extreme's ASICs which are used in all of Extreme's networking products. Any interruption or delay in the supply of any of these components, or the inability to procure these components from alternate sources at acceptable prices and within a reasonable time, would materially adversely affect Extreme's business, operating results and financial condition. In addition, qualifying additional suppliers can be time-consuming and expensive and may increase the likelihood of errors. Extreme attempts to mitigate these risks by working closely with its ASIC supplier regarding production planning and product introduction timing.
Extreme currently derives substantially all of its revenue from sales of two product families. Extreme expects that revenue from these two product families will account for a substantial portion of its revenue for the foreseeable future. Accordingly, widespread market acceptance of Extreme's product families is critical to their future success.
Property and Equipment
Property and Equipment
Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the assets of approximately three years. Property and equipment consist of the following (in thousands):
June 30, ----------------------------- 2000 1999 ---- ---- Computer and other related equipment.................... $ 27,257 $ 8,661 Office equipment, furniture and fixtures................ 1,905 1,090 Software................................................ 4,956 3,146 Leasehold improvements.................................. 1,802 1,111 --------- -------- 35,920 14,008 Less accumulated depreciation and amortization.......... (9,170) (7,502) --------- -------- Property and equipment, net............................. $ 26,750 $ 6,506 ========= ======== |
Goodwill and Purchased Intangible Assets
We record goodwill when the cost of net assets we acquire exceeds their fair value. Goodwill is amortized on a straight-line basis over lives ranging from 2 to 4 years. The cost of identified intangibles is generally amortized on a straight-line basis over periods ranging from 2 to 4 years. We regularly perform reviews to determine if the carrying value of assets is impaired. The reviews look for the existence of facts or circumstances, either internal or external, which indicate that the carrying value of the asset cannot be recovered. No such impairment has been indicated to date. If, in the future, management determines the existence of impairment indicators, we would use undiscounted cash flows to initially determine whether impairment should be recognized. If necessary, we would perform a subsequent calculation to measure the amount of the impairment loss based on the excess of the carrying value over the fair value of the impaired assets. If quoted market prices for the assets are not available, the fair value would be calculated using the present value of estimated expected future cash flows. The cash flow calculations would be based on management's best estimates, using appropriate assumptions and projections at the time.
The total purchase price of the goodwill and purchased intangible assets was allocated based on an independent appraisal obtained by the Company, to the tangible and intangible assets acquired based on their respective fair values on the date of acquisition as follows (in thousands):
Customer list.............................. $ 4,169 Acquired workforce......................... 4,615 Goodwill................................... 48,050 ----------- $56,834 =========== |
Revenue Recognition
Extreme generally recognizes product revenue at the time of shipment, unless Extreme has future obligations such as installation or has to obtain customer acceptance. When significant obligations remain after products are delivered, revenue is only recognized after such obligations are fulfilled.
Amounts billed in excess of revenue recognized are included as deferred revenue in the accompanying consolidated balance sheets. Extreme has established a program which, under specified conditions, enables third party resellers to return products to us. The amount of potential product returns is estimated and provided for in the period of the sale. Revenue from service obligations is recognized ratably over the term of the contract period, which is typically 12 months. Extreme makes certain sales to partners in two-tier distribution channels. These customers are generally given privileges to return a portion of inventory and participate in various cooperative marketing programs. Extreme defers recognition of revenue on such sales until the product is sold by the distributors and also maintains appropriate accruals and allowances for all other programs.
Upon shipment of products to its customers, Extreme provides for the estimated cost to repair or replace products that may be returned under warranty. Extreme's warranty period is typically 12 months from the date of shipment to the end user.
Advertising
Advertising
We expense advertising costs as incurred. Advertising expenses for the years ended June 30, 2000, 1999 and 1998 were approximately $2.2 million, $1.1 million and $0.4 million, respectively.
Foreign Operations
Extreme's foreign offices consist of sales, marketing and support activities through its foreign subsidiaries and overseas resellers and distributors. Operating income (loss) generated by Extreme's operating foreign subsidiaries and their corresponding identifiable assets were not material in any period presented.
Extreme's export sales represented 45% and 53% of net revenue in 2000 and 1999, respectively. All of the export sales to date have been denominated in U.S. dollars and were derived from sales to Europe and Asia. Extreme recorded export sales over 10% (as a percentage of total net revenue) to the following countries:
Years Ended June 30, -------------------- 2000 1999 ---- ---- Japan..................................................................... 19% 29% All other export sales to countries totaling less than 10% each........... 26% 24% |
Net Income (Loss) Per Share
Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period, less shares subject to repurchase, and excludes any dilutive effects of options, warrants, and convertible securities. Dilutive earnings per common share is calculated by dividing net income by the weighted average number of common shares used in the basic earnings per common share calculation plus the dilutive effect of options and warrants.
The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):
Years Ended June 30, -------------------- 2000 1999 1998 ---- ---- ---- Net income (loss).................................................. $ 20,048 $ (1,617) $ (13,936) ======== ======== ========== Weighted-average shares of common stock outstanding........... 103,734 27,324 22,384 Less: Weighted-average shares subject to repurchase........... (3,218) (8,400) (13,626) ---------- ---------- ---------- Weighted-average shares used in computing basic net income (loss) per common share.............................. 100,516 18,924 8,758 ========== ========== ========== Incremental shares using the treasury stock method 10,652 -- -- Weighted-average shares used in computing diluted net income (loss) per common share.............................. 111,168 18,924 8,758 ---------- ====== ===== Basic net income (loss) per common share........................... $ 0.20 $ (0.09) $ (1.59) ========== ========== ========== Diluted net income (loss) per common share......................... $ 0.18 $ (0.09) $ (1.59) ========== ========== ========== |
Share and per-share data presented reflect the two-for-one stock split effective to stockholders of record on August 10, 2000.
Accounting for Stock-Based Compensation
Extreme's grants of stock options are for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. As permitted under SFAS Statement No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"), Extreme accounts for stock option grants to employees and directors in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and, accordingly, recognizes no compensation expense for stock option grants with an exercise price equal to the fair value of the shares at the date of grant.
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("FAS 131") effective for financial statements for periods beginning after December 15, 1997.
FAS 131 establishes standards for the way that public business enterprises report financial and descriptive information about reportable operating segments in annual financial statements and interim financial reports issued to shareholders. FAS 131 supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise," but retains the requirement to report information about major customers. Extreme has determined that it has a single reportable segment. Management uses one measurement of profitability and does not disaggregate its business for internal reporting.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133", which extended the deferral of the application of FAS 133 to all fiscal quarters of fiscal years beginning after June 15, 2000. In June 15, 2000 the FASB also issued FAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities) an Amendment to FASB Statement No. 133". FAS 138 amends the accounting and reporting standards of Statement 133 for certain derivative instruments and certain hedging activities. The Company will be required to adopt these pronouncements for the year ending June 30, 2001. Because the Company currently holds no derivative financial instruments and does not currently engage in hedging activities, adoption of FAS 133 and 138 are expected to have no material impact on the Company's financial condition or results of operations.
In December 1999, the Staff of the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No.101, "Revenue Recognition in Financial Statements", which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. The implementation of SAB 101 has recently been deferred to no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. Extreme is presently evaluating the potential impact of the adoption of SAB 101.
In March 2000, the FASB issued Financial Accounting Standards Board Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation - an interpretation of APB Opinion No. 25" (Interpretation No. 44). Interpretation No. 44 is effective July 1, 2000. The interpretation clarifies the application of APB Opinion No. 25 for certain issues, specifically, (a) the definition of an employee, (b) the criteria for determining whether a plan qualifies as a noncompensatory plan, (c) the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange or stock compensation awards in a business combination. We do not anticipate that the adoption of Interpretation No. 44 will have a material impact on our financial position or the results of our operations.
2) Financial Instruments
The following is a summary of available-for-sale securities (in thousands):
Unrealized Unrealized Amortized Fair Holding Holding Cost Value Gains Losses ---- ----- ----- ------ June 30, 2000: Money market fund........................................ $ 12,372 $ 12,372 $ -- $ -- Commercial paper......................................... 71,929 71,889 -- (40) U.S. corporate debt securities........................... 107,994 107,410 29 (613) U.S. government agencies................................. 9,800 9,809 11 (2) U.S. tax exempt securities............................... 10,000 10,000 -- -- --------- -------- ------- -------- $ 212,095 $211,480 $ 40 $ (655) ========= ======== ======= ======== Classified as: Cash equivalents.................................... $ 100,736 $100,696 $ -- $ (40) Short-term investments.............................. 66,976 66,640 26 (362) Investments......................................... 44,383 44,144 14 (253) --------- -------- ------- -------- $ 212,095 $211,480 $ 40 $ (655) ========= ======== ======= ======== Unrealized Unrealized Amortized Fair Holding Holding Cost Value Gains Losses ---- ----- ----- ------ June 30, 1999: Money market fund...................................... $ 2 $ 2 $ - $ -- |
Commercial paper.......................... 110,265 110,241 -- (24) U.S. corporate debt securities............ 15,885 15,797 -- (88) U.S. government agencies.................. 300 300 -- -- -------- --------- ----- ------ $126,452 $126,340 $ -- $ (112) ======== ========= ===== ====== Classified as: Cash equivalents..................... $ 93,840 $ 93,821 $ -- $ (19) Short-term investments............... 16,427 16,422 -- (5) Investments.......................... 16,185 16,097 -- (88) -------- -------- ----- ------ $126,452 $126,340 $ -- $ (112) ======== ======== ===== ====== |
3) Business Combinations and Investments
During the fiscal year ended June 30, 2000, Extreme acquired certain assets of a Company for a total cost of approximately $2.5 million of which $1.1 million has been paid. Extreme accounted for the acquisition using the purchase method of accounting, and incurs charges of approximately $157,000 per quarter related to the amortization of goodwill over the estimated useful life of four years. The entire purchase price was allocated to goodwill and purchased intangibles. Extreme recorded approximately $261,000 for amortization related to this acquisition in the year ended June 30, 2000.
In April 2000, Extreme issued fully earned, non-forfeitable, fully exercisable warrants with a two year life to purchase 3 million shares of Extreme's common stock with an exercise price of $39.50 per share to a networking company in consideration of the networking company's selection of Extreme as the preferred vendor of next generation core backbone switching products to a certain group of the networking company's customers. The fair value of the warrants was approximately $54.3 million. The warrants were valued under a Black-Scholes model, using a volatility assumption of 1.04% and a two-year term. The value of the warrants is being amortized over approximately two years, which is the estimated economic life of the acquired intangibles, comprising of customer list, workforce and goodwill.
Extreme made several additional investments during the year ended June 30, 2000 totaling $7.7 million, which are reflected in "Other assets" in the accompanying consolidated balance sheets. Two investments were made in entities in which a related party of Extreme is also a significant investor. These investments totaled $3.4 million, net of Extreme's share of these affiliates' losses of $0.3 million. As these investments are being accounted for under the equity-method, the revenue and operating costs of these entities have not been included in Extreme's results from operations, however Extreme's share of these affiliates' losses have been included in other expense from the closing date of the related transactions forward. Pursuant to the terms of these two agreements, Extreme has certain rights to acquire the remaining shares of these entities under certain conditions for additional consideration. Under the terms of one of these equity investments, Extreme has been granted the right at any time prior to December 31, 2000 to purchase all of the outstanding capital stock and options for shares of Extreme common stock. Upon the attainment of certain technological milestones, the terms of one investment will obligate Extreme to purchase all the outstanding capital stock in fiscal 2001, payable in any combination of cash or shares of Extreme common stock. At June 30, 2000 the possibility of attainment of any of the technical milestones was remote. The remaining $4.3 million of investments at June 30, 2000 are being accounted for under the cost method. We expect to continue to make additional investments in the future.
4) Commitments
Extreme currently has outstanding fiscal year 2001 non-cancelable purchase order commitments for materials of approximately $73.3 million. The fiscal year 2000 purchase orders have been fulfilled and the related invoices have been accrued as of June 30, 2000. This expense is included within cost of revenue in the year ended June 30, 2000.
In June 2000, we entered into an operating lease agreement to lease 275,000 square feet to house our primary facility in Santa Clara, California. Our lease payments will vary based on the LIBOR plus a spread which was 7.14% at June 30, 2000. Our lease payments are estimated to be approximately $5.7 million on an annual basis over the lease term. The lease is for five years and can be renewed for two five-year periods, subject to the approval of the lessor. At the expiration or termination of the lease, we have the option to either purchase the property for $80.0 million, or arrange for the sale of the property to a third party for at least $80.0 million with a contingent liability for any deficiency. If the property is not purchased or sold as described above, we will be obligated for an additional lease payment of approximately $68.0 million.
As part of the above lease transaction, Extreme restricted $80.0 million of its investment securities as collateral for specified obligations of the lessor under the lease. These investment securities are restricted as to withdrawal and are managed by a third party subject to certain limitations under Extreme's investment policy. The lease also requires us to maintain specified financial covenants with which we were in compliance as of June 30, 2000.
Future payments under all noncancelable leases (net of future committed sublease proceeds of $9,161) at June 30, 2000 are as follows (in thousands):
Years ending June 30: 2001...................................... $ 2,691 2002...................................... 2,758 2003...................................... 5,200 2004...................................... 6,504 2005...................................... 6,242 ------- Total minimum payments......................... $23,395 ======= |
Rent expense was approximately $2.9 million, $0.7 million and $0.8 million for 2000, 1999 and 1998, respectively. Sublease income for the years ended 2001, 2002 and 2003 was $3.9 million, $3.9 million and $1.4 million, respectively. These amounts were netted from the amounts in the above schedule.
5) Stockholders' Equity
Common Stock Offering
In April 1999, Extreme completed an initial public offering of 16,100,000 shares of common stock (including the underwriters' over-allotment provision) at a price of $8.50 per share. Concurrent with the initial public offering, all outstanding shares of preferred stock were converted to a total of 58,122,630 shares of common stock. Net proceeds from the offering were approximately $125.3 million net of offering costs.
On October 20, 1999, Extreme announced the completion of a secondary public offering of approximately 15 million shares (including the underwriters' over-allotment provision) of its common stock at a price of $38.50 per share. Of these shares, Extreme sold 4,745,416 shares and existing stockholders sold 10,204,584 shares. Extreme raised approximately $174.0 million net of offering costs.
Preferred Stock
The number of shares of preferred stock authorized to be issued at June 30, 2000 is 2,000,000 with a par value of $0.001 per share. The preferred stock may be issued from time to time in one or more series. The board of directors is authorized to provide for the rights, preferences and privileges of the shares of each series and any qualifications, limitations or restrictions on these shares. As of June 30, 2000, no shares of preferred stock had been issued.
Common Stock
In May 1996, Extreme issued 9,450,000 shares of common stock to founders for cash. The common stock is subject to repurchase until vested; vesting with respect to 25% occurs on the first anniversary of the issuance date, with the balance vesting ratably over a period of three years as specified in the purchase agreements. At June 30, 1999, approximately 1,182,000 shares were subject to repurchase at their original issuance price (none at June 30, 2000).
Warrants
In November 1996, Extreme issued warrants to a lease financing company to purchase 420,000 shares of Series A convertible preferred stock with an exercise price of $.17 per share, in consideration for equipment leases and a loan. In July 1997, Extreme issued warrants to the same lease financing company to purchase 96,694 shares of Series B convertible preferred stock with an exercise price of $.69 per share, in consideration for equipment leases. Concurrent with the initial public offering, these warrants converted into the
right to purchase equivalent number of shares of common stock at the same exercise price per share. The warrants may be exercised at any time within a period of (i) 10 years or (ii) 5 years from the effective date of the initial public offering, whichever is longer. In May 1999, 294,000 of these warrants were exercised. In August 1999, 222,694 of these warrants were exercised.
In November 1997, Extreme issued warrants to a lease financing company to purchase 158,102 shares of Series C convertible preferred stock with an exercise price of $1.27, in consideration for a loan. Concurrent with the initial public offering, these warrants converted into the right to purchase equivalent number of shares of common stock at the same exercise price per share. The warrants may be exercised at any time within a period which expires the sooner of (i) 10 years or (ii) 3 years from the effective date of the initial public offering. In August 1999, all of the 158,102 warrants were exercised.
In June 1999, Extreme issued fully vested, non-forfeitable and exercisable warrants to a business partner to purchase 80,000 shares of Extreme's common stock with an exercise price of $29.03 per share. The fair value of these warrants was approximately $948,000. This value was expensed in fiscal 1999 as the warrants were issued in exchange for services rendered.
As discussed in Note 3, in April 2000, Extreme issued fully earned, non-forfeitable, fully exercisable warrants with a two year life to purchase 3 million shares of Extreme's common stock with an exercise price of $39.50 per share.
In June 2000, Extreme issued fully vested, non-forfeitable and exercisable options to consultants to purchase 120,000 shares of Extreme's common stock with an exercise price of $14.02 per share. The fair value of these options was approximately $1.7 million. The options were valued under a Black-Scholes model, using a volatility assumption of 1.04%. This amount will be amortized over two years as the services are rendered. The compensation expense for the year ended June 30, 2000 was $176,000.
Deferred Stock Compensation
During the year ended June 30, 1998, in connection with the grant of certain stock options to employees, Extreme recorded deferred stock compensation of $437,000 representing the difference between the exercise price and the deemed fair value of Extreme's common stock on the date such stock options were granted. Such amount is included as a reduction of stockholders' equity and is being amortized by charges to operations on a graded vesting method. Extreme recorded amortization of deferred stock compensation expense of approximately $119,000, $172,000 and $68,000 for the years ended June 30, 2000, 1999 and 1998, respectively. At June 30, 2000, Extreme had a total of approximately $78,000 remaining to be amortized over the corresponding vesting period of each respective option, generally four years. The amortization expense relates to options awarded to employees in all operating expense categories.
Amended 1996 Stock Option Plan
In January 1999, the board of directors approved an amendment to the 1996 Stock Option Plan (the "Plan") to (i) increase the share reserve by 10,000,000 shares, (ii) to remove certain provisions which are required to be in option plans maintained by California privately-held companies and (iii) to rename the Plan as the "Amended 1996 Stock Option Plan."
Under the Plan, which was originally adopted in September 1996, options may be granted for common stock, pursuant to actions by the board of directors, to eligible participants. A total of 34,028,618 shares have been reserved under the Plan. Options granted are exercisable as determined by the board of directors. Options vest over a period of time as determined by the board of directors, generally four years. The term of the Plan is ten years. Options to purchase approximately 1,470,286 and 4,655,558 shares of common stock have been exercised as of June 30, 2000 and 1999, respectively, but are subject to repurchase until vested. As of June 30, 2000, 3,834,388 shares were available for future grant under the Plan.
2000 Stock Option Plan
In March 2000, the board of directors adopted the 2000 Nonstatutory Stock Option Plan (the "Plan"). Options may be granted for common stock, pursuant to actions by the board of directors, to eligible participants. A total of 4,000,000 shares have been reserved under the Plan. Options vest over a period of time as determined by the board of directors, generally four years. The term of the Plan is ten years.
The following table summarizes stock option activity under all plans:
Weighted- Average Number of Exercise Price Shares Per Share ------ --------- Options outstanding at June 30, 1997........................... 3,151,500 $ .03 Granted..................................................... 3,542,920 $ .65 Exercised................................................... (1,449,550) $ .11 Canceled.................................................... (37,000) $ .18 ------------ Options outstanding at June 30, 1998........................... 5,207,870 $ .42 Granted..................................................... 5,875,516 $ 5.05 Exercised................................................... (1,135,600) $ .93 Canceled.................................................... (190,252) $ 3.34 ------------ Options outstanding at June 30, 1999........................... 9,757,534 $ 3.04 Granted..................................................... 12,404,750 $ 33.99 Exercised................................................... (2,392,472) $ 1.23 Canceled.................................................... (1,374,704) $ 26.91 ------------ Options outstanding at June 30, 2000........................... 18,395,108 $ 22.74 ============ |
Options to purchase 6,721,582 and 9,368,034 shares were exercisable at June 30, 2000 and 1999, respectively, with a weighted-average exercise price of $3.75 and $2.22, respectively.
The following table summarizes significant ranges of outstanding and exercisable options at June 30, 2000:
Options Outstanding Options Exercisable ----------------------------------------------------------- ---------------------------------------- Weighted- Weighted- Weighted- Range of Average Average Average Exercise Number Remaining Exercise Number Exercise Prices Outstanding Contractual Life Price Exercisable Price ------ ----------- ---------------- ----- ----------- ----- (In years) $ 0.01 - 2.88 3,854,758 7.32 $ 1.43 3,854,758 $ 1.43 $ 3.25 - 28.00 3,869,580 8.63 $ 11.15 2,769,948 $ 5.96 $ 28.03 - 32.57 1,896,868 9.25 $ 29.97 8,126 $ 29.03 $ 32.72 - 33.32 4,051,500 9.39 $ 33.30 88,750 $ 33.32 $ 33.57 - 57.50 4,722,402 8.87 $ 37.66 -- $ -- ----------- ----------- $ 0.01 - 57.50 18,395,108 8.65 $ 22.74 6,721,582 $ 3.75 =========== =========== |
1999 Employee Stock Purchase Plan
In January 1999, the board of directors approved the adoption of Extreme's 1999 Employee Stock Purchase Plan (the "1999 Purchase Plan"). A total of 2,000,000 shares of common stock have been reserved for issuance under the 1999 Purchase Plan. The 1999 Purchase Plan permits eligible employees to acquire shares of Extreme's common stock through periodic payroll deductions of up to 15% of total compensation. No more than 1,250 shares may be purchased on any purchase date per employee. Each offering period will have a maximum duration of 12 months. The price at which the common stock may be purchased is 85% of the lesser of the fair market value of Extreme's common stock on the first day of the applicable offering period or on the last day of the respective purchase period. The initial offering period commenced on the effectiveness of the initial public offering and ended on April 30, 2000. Through June 30, 2000, 470,978 shares were purchased under the 1999 Purchase Plan.
Stock-Based Compensation
Extreme has elected to continue to follow APB 25 and related interpretations in accounting for its employee and director stock-based compensation plans. Because the exercise price of Extreme's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense has been recognized.
Pro forma information regarding net income (loss) has been determined as if
Extreme had accounted for its stock-based awards to employees under the fair
value method prescribed by FAS 123. The resulting effect on pro forma net income
(loss) disclosed is not
likely to be representative of the effects on net income (loss) on a pro forma basis in future years, due to subsequent years including additional grants and years of vesting.
Prior to Extreme's initial public offering, the fair value of each option grant was determined on the date of grant using the minimum value method. Subsequent to the offering, the fair value of Extreme's stock-based awards to employees has been estimated using the Black-Scholes option pricing model. 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. The Black-Scholes model requires the input of highly subjective assumptions including the expected stock price volatility. Because Extreme's stock-based awards have characteristics significantly different from those in 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 Extreme's stock-based awards. The following weighted-average assumptions were used to estimate fair value:
Stock Option Plan Employee Stock Purchase Plan --------------------------------------- -------------------------------------- Years Ended June 30, Years Ended June 30, --------------------------------------- -------------------------------------- 2000 1999 1998 2000 1999 1998 --------- ---------- ----------- ---------- ----------- --------- Expected life 3.4 yrs 3.5 yrs 6.0 yrs 0.6yrs 0.7 yrs. -- Volatility 1.12% 55% -- 1.12% 55% -- Risk-free interest rate 6.3% 5.1% 6.0% 5.4% 5.0% -- |
The weighted-average estimated fair value of options granted in the years ended June 30, 2000, 1999 and 1998 was $24.23 $2.21 and $0.19, respectively. The weighted-average estimated fair value of shares granted under the 1999 Purchase Plan in the years ended June 30, 2000 and 1999 was $7.51 and $2.81, respectively.
For purposes of pro forma disclosures, the estimated fair value of options is amortized to pro forma expense over the options' vesting period. Pro forma information follows (in thousands, except per share amounts):
Years Ended June 30, -------------------- 2000 1999 1998 ---- ---- ---- Pro forma net loss under FAS 123................................... $ (31,088) $ (4,066) $ (14,053) Net loss per common share - pro forma under FAS 123: Basic and diluted............................................... $ (0.32) $ (0.22) $ (1.61) |
6) Income Taxes
Due to operating losses and the inability to recognize the benefits therefrom, there was no tax provision for the year ended June 30, 1998.
The provision for income taxes for the years ended June 30, 2000 and 1999 consists of the following (in thousands):
Years Ended June 30, -------------------- 2000 1999 ---- ---- Current: Federal........................................ $ 24,811 $ 350 State.......................................... 2,026 200 Foreign........................................ 306 1,100 --------- -------- Total current ...................................... $ 27,143 $ 1,650 ========= ======== Deferred: Federal $(15,497) $ - State (1,325) - -------- -------- Total deferred $(16,822) $ - ======== ======== Provision for income taxes $ 10,321 $ 1,650 ======== ======== |
The tax benefit resulting from the exercise of nonqualified stock options and the disqualifying dispositions of shares acquired under Extreme's incentive stock option plans was $21,600,000 for the year ended June 30, 2000. Such benefit was credited to additional paid-in capital.
Pretax loss from foreign operations was $10,663,288 and $7,021,204 in the years ended June 30, 2000 and 1999, respectively.
The difference between the provision for income taxes and the amount computed by applying the Federal statutory income tax rate (35 percent) to income before taxes is explained below (in thousands):
Years Ended June 30, -------------------- 2000 1999 1998 ---- ----- ---- Tax at federal statutory rate (benefit)........................ $ 10,666 $ 11 $(4,878) State income tax............................................... 1,018 200 -- Federal alternative minimum taxes.............................. -- 350 -- Foreign taxes.................................................. 69 1,100 -- Unbenefited (utilized) net operating losses.................... (773) (11) 4,878 Tax credits.................................................... (1,576) -- -- Valuation allowance decrease................................... (5,148) -- -- Unbenefited foreign loss....................................... 3,974 -- -- Other.......................................................... 2,091 -- -- ---------- -------- ------- Total..................................................... $ 10,321 $ 1,650 $ -- ========== ======== ======= |
Significant components of Extreme's deferred tax assets are as follows (in thousands):
Years Ended June 30, -------------------- 2000 1999 ---- ---- Deferred tax assets: Net operating loss carryforwards......................................... $ 431 $ 1,647 Tax credit carryforwards................................................. 2,358 2,238 Depreciation............................................................. 1,951 407 Deferred revenue......................................................... 3,545 373 Warrant amortization..................................................... 2,673 -- Other reserves and accruals ............................................. 7,500 3,887 -------- -------- Total deferred tax assets..................................................... 18,458 8,552 Valuation allowance........................................................... -- (8,552) -------- -------- Net deferred tax assets....................................................... $ 18,458 $ -- ======== ======== |
The net valuation allowance decreased by $8,522,000 and $1,019,000 during the years ended June 30, 2000 and 1999, respectively.
As of June 30, 2000, Extreme had net operating loss carryforwards for state tax purposes of approximately $7,500,000. Extreme also had federal and state research and development tax credit carryforwards of approximately $1,000,000 and $1,800,000, respectively. The state net operating loss carryforwards will expire in 2004, if not utilized.
Utilization of the net operating losses and tax credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and tax credits before utilization.
7) Comprehensive Income (Loss)
The following are the components of accumulated other comprehensive loss, net of tax (in thousands):
Years Ended June 30, -------------------- 2000 1999 1998 ---- ----- ---- |
Unrealized gain (loss) on investments...................................... $ (615) $ (112) $ -- Foreign currency translation adjustments................................... (8) (6) -- ------- ------- ------ Accumulated other comprehensive loss.................................... $ (623) $ (118) $ -- ======= ======= ====== |
The following schedule of other comprehensive income (loss) shows the gross current-period gain (loss) and the reclassification adjustment (in thousands):
Years Ended June 30, -------------------- 2000 1999 1998 ---- ----- ---- Unrealized gain (loss) on investments: Unrealized gain (loss) on available-for-sale securities................. $ (508) $ (112) $ -- Less: reclassification adjustment for gain (loss) realized in net income (loss)................................................ 5 -- -- ------ ------ ------ Net unrealized gain (loss) on investments.................................. (503) (112) -- Foreign currency translation adjustments................................... (2) (6) -- ------ ------ ------ Other comprehensive income (loss).......................................... $ (505) $ (118) $ -- ====== ====== ====== |
8) 401(k) Plan
Extreme provides a tax-qualified employee savings and retirement plan, commonly known as a 401(k) plan, which covers our eligible employees. Pursuant to the 401(k) plan, employees may elect to reduce their current annual compensation up to the lesser of 20% or the statutorily prescribed limit, which is $10,000 in calendar year 2000, and have the amount of the reduction contributed to the 401(k) plan.
9) Subsequent Event
On July 19, 2000 Extreme announced a two-for-one stock split in the form of a stock dividend to be paid on August 24, 2000 to stockholders of record on August 10, 2000. All share and per share data have been restated to give retroactive effect to this stock split.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
PART III
Certain information required by Part III is incorporated by reference from the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for the Company's 2000 Annual Meeting of Stockholders (the "Proxy Statement").
Item 10. Directors and Executive Officers of the Registrant.
The information required by this section is incorporated by reference from the information in the section entitled "Proposal 1-Election of Directors" in the Proxy Statement. The required information concerning executive officers of the Company is contained in the section entitled "Executive Officers of the Registrant" in Part I of this Form 10-K.
Item 405 of Regulation S-K calls for disclosure of any known late filing or
failure by an insider to file a report required by Section 16 of the Exchange
Act. This disclosure is contained in the section entitled "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Proxy Statement and is
incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this section is incorporated by reference from the information in the sections entitled "Proposal 1-Election of Directors -- Directors' Compensation", "Executive Compensation" and "Stock Price Performance Graph" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this section is incorporated by reference from the information in the section entitled "Proposal 1- Election of Directors- Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
The information required by this section is incorporated by reference from the information in the section titled "Certain relationships and related transactions" in the Proxy statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as a part of this Form 10-K:
(1) Financial Statements:
Reference is made to the Index to Consolidated Financial Statements of Extreme Networks, Inc. under Item 8 in Part II of this Form 10-K.
(2) Financial Statement Schedules:
The following financial statement schedule of Extreme Networks, Inc. for the years ended June 30, 2000, 1999 and 1998 is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of Extreme Networks, Inc.
Reference Page
Schedule II-- Valuation and Qualifying Accounts....................... 52
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(3) Exhibits:
The exhibits listed below are required by Item 601 of Regulation S-K. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K has been identified.
Exhibit Number Notes Description of Document --------- ----- ----------------------- 2.1 (1) Form of Agreement and Plan of Merger between Extreme Networks, a California corporation, and Extreme Networks, Inc., a Delaware corporation. 3.1 (1) Certificate of Incorporation of Extreme Networks, Inc., a Delaware Corporation. 3.2 (1) Form of Certificate of Amendment of Certificate of Incorporation of Extreme Networks, Inc., a Delaware Corporation. 3.3 (1) Form of Amended and Restated Bylaws of Extreme Networks, Inc., a Delaware Corporation. 4.1 (1) Second Amended and Restated Rights Agreement dated January 12, 1998 between Extreme Network and certain stockholders. 10.1 (1) Form of Indemnification Agreement for directors and officers. 10.2 (1) Amended 1996 Stock Option Plan and forms of agreements thereunder.* 10.3 (1) 1999 Employee Stock Purchase Plan.* 10.4 (1) Sublease, dated June 5, 1997 between NetManage, Inc. and Extreme Networks, Inc., a California corporation, to Master Lease, dated September 30, 1994, between Cupertino Industrial Associates and NetManage, Inc. 10.5 (1) Sublease, dated January 1, 1999 between Apple Computer, Inc., a California corporation, and Extreme Networks, Inc., a California corporation, to Lease Agreement, as amended. 50 |
10.6 Form of Warrant to Purchase Common Stock between 3Com Corporation and Extreme Networks, Inc. 10.7 Form of 2000 Nonstatutory Stock Option Plan.* 10.8 Form of Lease Agreement (Land) dated June 1, 2000 by and between BNP Leasing Corporation, a Delaware corporation ("BNPLC") and Extreme Networks, Inc. a Delaware corporation ("Extreme"). 10.9 Form of Lease Agreement (Improvements) dated June 1, 2000, executed by and between BNPLC and Extreme. 10.10 Form of Purchase Agreement (Land) dated to be effective as of June 1, 2000, executed by and between BNPLC and Extreme. 10.11 Form of Purchase Agreement (Improvements) dated to be effective as of June 1, 2000, executed by and between BNPLC and Extreme. 10.12 Form of Pledge Agreement (Land) dated to be effective as of June 1, 2000, among BNPLC, BNP Paribas (as Agent), and Extreme. 10.13 Form of Pledge Agreement (Improvements) dated to be effective as of June 1, 2000, among BNPLC, BNP Paribas (as Agent), and Extreme. 21.1 Subsidiaries of Registrant. 23.1 Consent of Ernst and Young LLP, Independent Auditors. 24.1 Power of Attorney (see page 53 of this Form 10-K). 27.1 Financial Data Schedule (available in EDGAR format only). _____________ |
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference from the Registrant's Registration Statement on Form S-1 (File No. 333-71921).
(b) Reports on Form 8-K:
No reports on form 8-K were filed by the Company during the three months ended June 30, 2000.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(In thousands)
Reversals Balance at Charged to to costs Balance at beginning costs and and end of Description of period expenses expenses (Deductions) period ----------- ------------ ------------ ---------- -------------- ----------- Allowance for doubtful accounts 2000......................... $1,374 $ -- $ -- $ (137) $ 1,237 1999......................... 433 1,364 -- (423) 1,374 1998......................... -- 470 -- (37) 433 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on September 28, 2000.
EXTREME NETWORKS, INC.
(Registrant)
By: /s/ GORDON L. STITT ------------------------------------- Gordon L. Stitt President Chief Executive Officer Chairman of the Board September 28, 2000 |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Gordon L. Stitt and Vito E. Palermo, and each of them, his or her true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any amendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:
/s/ GORDON L. STITT /s/ PROMOD HAQUE ----------------------------------------------- ----------------------------------------------- Gordon L. Stitt Promod Haque President, Chief Executive Officer Director Chairman of the Board September 28, 2000 September 28, 2000 /s/ VITO E. PALERMO /s/ LAWRENCE K. ORR ----------------------------------------------- ----------------------------------------------- Vito E. Palermo Lawrence K. Orr Vice President & Chief Financial Officer Director (Principal Financial and Accounting Officer) September 28, 2000 September 28, 2000 /s/ CHARLES CARINALLI /s/ PETER WOLKEN ----------------------------------------------- ----------------------------------------------- Charles Carinalli Peter Wolken Director Director September 28, 2000 September 28, 2000 |
EXHIBIT INDEX
Exhibit Number Notes Description of Document --------- ----- ----------------------- 2.1 (1) Form of Agreement and Plan of Merger between Extreme Networks, a California corporation, and Extreme Networks, Inc., a Delaware corporation. 3.1 (1) Certificate of Incorporation of Extreme Networks, Inc., a Delaware Corporation. 3.2 Form of Certificate of Amendment of Certificate of Incorporation of Extreme Networks, Inc., a Delaware (1) Corporation. 3.3 (1) Form of Amended and Restated Bylaws of Extreme Networks, Inc., a Delaware Corporation. 4.1 (1) Second Amended and Restated Rights Agreement dated January 12, 1998 between Extreme Network and certain stockholders. 10.1 (1) Form of Indemnification Agreement for directors and officers. 10.2 (1) Amended 1996 Stock Option Plan and forms of agreements thereunder.* 10.3 (1) 1999 Employee Stock Purchase Plan.* 10.4 (1) Sublease, dated June 5, 1997 between NetManage, Inc. and Extreme Networks, Inc., a California corporation, to Master Lease, dated September 30, 1994, between Cupertino Industrial Associates and NetManage, Inc. 10.5 (1) Sublease, dated January 1, 1999 between Apple Computer, Inc., a California corporation, and Extreme Networks, Inc., a California corporation, to Lease Agreement, as amended. 10.6 Form of Warrant to Purchase Common Stock between 3Com Corporation and Extreme Networks, Inc. 10.7 Form of 2000 Nonstatutory Stock Option Plan.* 10.8 Form of Lease Agreement (Land) dated June 1, 2000 by and between BNP Leasing Corporation, a Delaware corporation ("BNPLC") and Extreme Networks, Inc. a Delaware corporation ("Extreme"). 10.9 Form of Lease Agreement (Improvements) dated June 1, 2000, executed by and between BNPLC and Extreme. 10.10 Form of Purchase Agreement (Land) dated to be effective as of June 1, 2000, executed by and between BNPLC and Extreme. 10.11 Form of Purchase Agreement (Improvements) dated to be effective as of June 1, 2000, executed by and between BNPLC and Extreme. 10.12 Form of Pledge Agreement (Land) dated to be effective as of June 1, 2000, among BNPLC, BNP Paribas (as Agent), and Extreme. 10.13 Form of Pledge Agreement (Improvements) dated to be effective as of June 1, 2000, among BNPLC, BNP Paribas (as Agent), and Extreme. 21.1 Subsidiaries of Registrant. 23.1 Consent of Ernst and Young LLP, Independent Auditors. 24.1 Power of Attorney (see page 53 of this Form 10-K). 27.1 Financial Data Schedule (available in EDGAR format only). ____________ |
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (File No. 333-71921).
EXHIBIT 10.6
WARRANT
THIS WARRANT OR THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT, OR THE SHARES ISSUABLE HEREUNDER, MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION THEREUNDER.
EXTREME NETWORKS, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after April 3, 2002
This certifies that, for value received, 3Com Corporation or registered assigns ("Holder") is entitled, subject to the terms set forth below, to purchase from Extreme Networks, Inc. (the "Company"), a Delaware corporation, 1,500,000 shares (such number of shares being referred to herein as the "Original Amount") of the Common Stock of the Company (the "Common Stock"), as constituted on the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the principal office of the Company referred to below, with the notice of exercise form attached hereto duly executed, and simultaneous payment therefor in lawful money of the United States or otherwise as hereinafter provided, at the Exercise Price as set forth in Section 2 below. The Original Amount, character and Exercise Price of such shares of Common Stock are subject to adjustment as provided below. The term "Warrant" as used herein shall include this Warrant, and any warrants delivered in substitution or exchange therefor as provided herein.
(a) Subject to the terms and conditions set forth herein and compliance with any applicable regulatory requirements, this Warrant shall be exercisable, in whole or in part, at any time during the term commencing on April 3, 2000 and ending at 5:00 p.m., Pacific standard time, on April 3, 2002 (the "Expiration Date"), and, except as otherwise provided herein, shall be void thereafter. This Warrant shall expire earlier upon the closing of an event in which more than fifty percent (50%) of the Company's assets or capital stock is acquired by or merged into another corporation that is not under direct or indirect control of the persons who are the shareholders of the Company immediately prior to such acquisition or merger, provided that Holder is given at least 20 days prior written notice of such acquisition or merger in which to exercise this Warrant in advance of its expiration.
(b) In the event that the Expiration Date of this Warrant falls on a day which is not a Business Day, the Expiration Date shall be adjusted to the Business Day immediately following such Expiration Date. As used herein, the term "Business Day" means each day other
than a Saturday, Sunday or other day on which banks in the location of the principal office of the Company are legally authorized to close.
(a) The purchase rights represented by this Warrant are exercisable
by the Holder in whole or in part subject to compliance with applicable
regulatory requirements, at any time and from time to time, during the term
hereof as described in Section 1 above, by the surrender of this Warrant and the
Notice of Exercise annexed hereto duly completed and executed on behalf of the
Holder, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company), upon payment (i) in cash or
by check acceptable to the Company, (ii) by cancellation by the Holder of
indebtedness of the Company to the Holder, or (iii) by a combination of (i) and
(ii), of an amount equal to the then applicable Exercise Price per share
multiplied by the number of shares then being purchased. For so long as the
Company remains a publicly listed company, the Holder may pay the Exercise Price
of the Warrant (i) by surrendering to the Company shares of the Company's Common
Stock having a value equal to the Exercise Price of the Warrant being exercised
or (ii) by directing the Company to apply toward payment of the Exercise Price
from the number of shares of the Common Stock for which the Warrant is being
exercised, shares of the Common Stock having a value equal to the Exercise Price
of the Warrant being exercised. For purposes of this Section 3, the value of
each share of Common Stock shall be the average of the daily closing prices of
the Common Stock for the five consecutive Trading Days ending on the Trading Day
preceding the date of such exercise. As used herein the term "Trading Days" with
respect to Common Stock means (i) if the Common Stock is quoted on the NASDAQ
Stock Markets, Inc. any similar system of automated dissemination of quotations
of securities prices, days on which trades may be made on such system or (ii) if
the Common Stock is listed or admitted for trading on any national securities
exchange, days on which such national securities exchange is open for business.
(b) This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company, at its expense, shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company, at its expense, will execute and deliver a new Warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised.
(a) The Company will maintain a register (the "Warrant Register") containing the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary.
(b) The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 7(a) above, issuing the Common Stock or other securities then issuable upon the exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter, any such registration, issuance, exchange, or replacement, as the case may be, shall be made at the office of such agent.
(c) This Warrant may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee. Subject to the provisions of this Warrant with respect to compliance with the Securities Act of 1933, as amended (the "Act"), title to this Warrant may be transferred by
endorsement (by the Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery.
(d) On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect to compliance with the Act and with the limitations on assignments and transfers contained in this Section 7, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof.
(e) The Holder of this Warrant, by acceptance hereof, acknowledges that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except in compliance with the registration requirements of the Act, subject, nevertheless, to the disposition of the Holder's property being at all times within its control.
(f) This Warrant and all shares of Common Stock issued upon exercise hereof (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION THEREUNDER.
(a) Whenever the Exercise Price or number of shares purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall issue a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first- class mail, postage prepaid) to the Holder of this Warrant.
(b) In case: (i) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or
(ii) of any capital reorganization of the Company, any stock split or subdivision, or reverse stock split or combination, or any similar event involving the Common Stock, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, or any sale, transfer or other conveyance of all or substantially all of the assets of the Company to another corporation, or
(iii) of any voluntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the Holder or Holders a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which a record is to be taken for determining stockholders entitled to vote upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed at least 10 days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery and (ii) in the case of mailing, on the third business day following the date of such mailing.
(a) This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
(b) No waivers of, or exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.
(a) The Exercise Price and the number of shares purchasable hereunder shall be subject to adjustment from time to time as follows:
(i) The Exercise Price shall be adjusted from time to time in the case of any stock split, subdivision of the number of shares of the Common Stock or similar event involving Common Stock (a "Split") or any reverse stock split, combination or similar event involving the Common Stock (a "Combination") and, accordingly, the Exercise Price shall be proportionately decreased in the case of a Split or increased in the case of a Combination, as of the close of business on the date the Split or Combination becomes effective, computed to the nearest cent.
(ii) In case of any reclassification or change of outstanding shares of Common Stock (except a split or combination, or a change in par value, or a change from par value to no par value, or a change from no par value to par value), or in case of any consolidation or merger to which the Company is a party (other than a consolidation or merger that results in the termination of this Warrant under Section 1 or in which the Company is the surviving corporation and which does not result in any reclassification of or change in the outstanding Common Stock of the Company) or any sale, transfer or other conveyance of all or substantially all of the Company's assets, the Company, or its successor, as the case may be, shall assume, by written instrument executed and delivered to the registered holder of this Warrant at such Holder's address shown on the registration books of the Company the obligation to deliver to the Holder of this Warrant, upon due exercise thereof, the kind and amount of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, sale, transfer or conveyance by a Holder of the number of shares which would have been issued to such Holder had this Warrant been exercised immediately prior thereto.
As evidence of the kind and amount of stock or other securities or property which shall be issuable upon the exercise of this Warrant after any such reclassification, change, consolidation, merger, sale, transfer or conveyance, the Company shall maintain in its records at its principal office a certificate of any firm of independent public accountants (who may be the regular auditors retained by the Company) with respect thereto.
The provisions of this clause (ii) shall similarly apply to successive reclassifications, changes, consolidations, mergers, sales, transfers or conveyances.
Upon any adjustment of the Exercise Price herein above provided for, the number of shares issuable upon exercise of this Warrant shall be changed to the number of shares calculated to the next highest whole share obtained by dividing (A) the aggregate Exercise Price payable for the purchase of all shares issuable upon exercise prior to such adjustment by (B) the Exercise Price in effect immediately after such adjustment.
(iii) Whenever the Exercise Price or the number of shares purchasable upon the exercise of this Warrant is adjusted as herein provided, the Company shall:
(A) forthwith place on file at its office a certificate signed by the chief financial officer of the Company, showing in appropriate detail the facts requiring such adjustment, the computation thereof, the Exercise Price after such adjustment, and the number of shares purchasable upon the exercise of this Warrant after such adjustment with respect to each share originally purchasable upon exercise hereof, and shall exhibit the same from time to time to any holder of this Warrant desiring an inspection thereof, and
(B) within ten (10) days thereafter cause a notice to be mailed to the Holder hereof at its address shown in the registration books of the Company stating that such adjustment has been effected and the adjusted Exercise Price and the number of shares purchasable as aforesaid.
(iv) Irrespective of any adjustments in the Exercise Price or the number of shares or the number or kind of other securities purchasable upon exercise of this Warrant, this Warrant or any Warrant thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issued by the Company.
(b) In the event that the Company (i) issues as a dividend or other similar distribution (an "Extraordinary Dividend") on all of its then outstanding Common Stock, (A) securities of the Company of a class other than Common Stock, (B) rights, warrants or options (individually, a "Right" and collectively, the "Rights") to acquire any securities of the Company (including Common Stock) or (C) evidences of its indebtedness or assets (any securities (other than Rights) issued as an Extraordinary Dividend or issued upon exercise of any Rights issued as an Extraordinary Dividend shall be referred to as "Dividend Securities"):
(x) this Warrant shall thereafter be exercisable for (1) the Original Amount of shares of Common Stock (subject to adjustment as herein provided), (2) such Dividend Securities and Rights as would theretofore have been issued in respect of such shares (adjusted as herein provided) had such shares been outstanding at the time of such Extraordinary Dividend; and
(y) any Right issued as an Extraordinary Dividend shall (1) expire upon the later of (a) the original expiration date of such Right or (b) the 180th day following the exercise of this Warrant, and (2) be exercisable for the Dividend Securities issuable upon exercise of such Right.
(c) In the event that at any time while this Warrant is outstanding, the Company shall offer to sell to all of the holders of Common Stock as a class, rights or options to purchase Common Stock or rights or options to purchase any stock or securities convertible into or exchangeable for Common Stock (such exchangeable or convertible stock or securities being herein called "Convertible Securities"), whether or not such rights or options are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities (determined by dividing (i) the total amount received or receivable by the Company upon
issuance and sale of such rights or options, plus the aggregate amount of additional consideration payable to the Company upon the exercise of all such rights or options, plus, in the case of rights or options which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon the conversion or exchange of all such Convertible Securities, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of all such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of all such rights or options) shall be less than the Exercise Price in effect immediately prior to the initial sale of any such rights or options, the Company shall offer to sell to the Holder, at the price and upon the terms at which such rights or options are offered to holders of its Common Stock, such number of such rights or options as the Holder would have been entitled to purchase had the Holder exercised this Warrant immediately prior to the commencement of the offering of such rights or options.
(d) If any event occurs as to which in the opinion of the Board of Directors of the Company the other provisions of this Section 11 are not strictly applicable or if strictly applicable would not adequately protect from dilution the exercise rights of the Holder in accordance with the intent and principles of such provisions, then the Board of Directors of the Company shall make an equitable adjustment in the application of such provisions, in accordance with such intent and principles of such provisions, so as to protect such exercise rights as aforesaid, but in no event shall such adjustment have the effect of increasing the Exercise Price.
IN WITNESS WHEREOF, Extreme Networks, Inc. has caused this Warrant to be executed by its officers thereunto duly authorized.
Dated as of: April 3, 2000
EXTREME NETWORKS, INC.
By:_____________________________
NOTICE OF EXERCISE
To: Extreme Networks, Inc.
(1) The undersigned hereby elects to purchase ______ shares of Common Stock of Extreme Networks, Inc., pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full.
(2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:
(3) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below:
and does hereby irrevocably constitute and appoint Attorney _____________ to make such transfer on the books of Extreme Networks, Inc., maintained for the purpose, with full power of substitution in the premises.
Dated:__________________
Signature of Holder
EXHIBIT 10.7
EXTREME NETWORKS, INC.
2000 NONSTATUTORY STOCK OPTION PLAN
1.1 Establishment. The Company's 2000 Nonstatutory Stock Option Plan (the "Plan") is established effective as of March ___, 2000.
1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group.
1.3 Term of Plan. The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan and the agreements evidencing Options granted under the Plan have lapsed.
2.1 Definitions. Whenever used herein, the following terms shall have their respective meanings set forth below:
"Board" means the Board of Directors of the Company. If one or more Committees have been appointed by the Board to administer the Plan, "Board" also means such Committee(s).
"Code" means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.
"Committee" means the Compensation Committee or other committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law.
"Company" means Extreme Networks, Inc., a Delaware corporation, or any successor corporation thereto.
"Consultant" means any person, including an advisor, engaged by a Participating Company to render services other than as an Employee or a director.
"Employee" means any person treated as an employee (including an officer or a director who is also treated as an employee) in the records of a Participating Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, as of any date, the value of a share of Stock or other property as determined by the Board, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:
If, on such date, the Stock is listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the
If, on such date, there is no public market for the Stock, the Fair Market Value of a share of Stock shall be as determined by the Board in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse.
"Option" means a right to purchase Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms and conditions of the Plan. Options are intended to be nonstatutory stock options and shall not be treated as incentive stock options within the meaning of Section 422(b) of the Code.
"Option Agreement" means a written agreement between the Company and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares acquired upon the exercise thereof.
"Optionee" means a person who has been granted one or more Options.
"Parent Corporation" means any present or future "parent corporation" of the Company, as defined in Section 424(e) of the Code.
"Participating Company" means the Company or any Parent Corporation or Subsidiary Corporation.
"Participating Company Group" means, at any point in time, all corporations collectively which are then Participating Companies.
"Stock" means the common stock, without par value, of the Company, as adjusted from time to time in accordance with Section 4.2.
"Subsidiary Corporation" means any present or future "subsidiary corporation" of the Company, as defined in Section 424(f) of the Code.
2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term "or" is not intended to be exclusive, unless the context clearly requires otherwise.
3.1 Administration by the Board. The Plan shall be administered by the Board, including any duly appointed Committee of the Board. All questions of interpretation of the Plan or of any Option shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan or such Option. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, determination or election.
3.2 Powers of the Board. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Board shall have the full and final power and authority, in its sole discretion:
to determine the persons to whom, and the time or times at which, Options shall be granted and the number of shares of Stock to be subject to each Option;
to determine the Fair Market Value of shares of Stock or other property;
to determine the terms, conditions and restrictions applicable to each Option (which need not be identical) and any shares acquired upon the exercise thereof, including, without limitation, (i) the exercise price of the Option, (ii) the method of payment for shares purchased upon the exercise of the Option, (iii) the method for satisfaction of any tax withholding obligation arising in connection with the Option or such shares, including by the withholding or delivery of shares of stock, (iv) the timing, terms and conditions of the exercisability of the Option or the vesting of any shares acquired upon the exercise thereof, (v) the time of the expiration of the Option, (vi) the effect of the Optionee's termination of employment or service with the Participating Company Group on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to the Option or such shares not inconsistent with the terms of the Plan;
to approve one or more forms of Option Agreement;
to amend, modify, extend, or renew, or grant a new Option in substitution for, any Option or to waive any restrictions or conditions applicable to any Option or any shares acquired upon the exercise thereof;
to accelerate, continue, extend or defer the exercisability of any Option or the vesting of any shares acquired upon the exercise thereof, including with respect to the period following an Optionee's termination of employment or service with the Participating Company Group;
to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the Board deems necessary or desirable to comply with the laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted Options; and
to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Option Agreement and to make all other determinations and take such other actions with respect to the Plan or any Option as the Board may deem advisable to the extent consistent with the Plan and applicable law.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be 2,000,000 and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof. If an outstanding Option for any reason expires or is terminated or canceled or shares of Stock acquired, subject to repurchase, upon the exercise of an Option are repurchased by the Company, the shares of Stock allocable to the unexercised portion of such Option, or such repurchased shares of Stock, shall again be available for issuance under the Plan.
4.2 Adjustments for Changes in Capital Structure. In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number and class of shares subject to the Plan, and to any outstanding Options and in the exercise price per share of any outstanding Options. If a majority of the shares which are of the same class as the shares that are subject to outstanding Options are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event, as defined in Section 8.1) shares of another corporation (the "New Shares"), the Board may unilaterally amend the outstanding Options to provide that such Options are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Options shall be adjusted in a fair and equitable manner as determined by the Board, in its sole discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded up or down to the nearest whole number, as determined by the Board, and in no event may the exercise price of any Option be decreased to an amount less than the par value, if any, of the stock subject to the Option. The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive.
Eligibility. Options may be granted only to Employees and Consultants; provided, however, that no Option shall be granted to any person (including any officer or director) whose eligibility to receive an Option under the Plan at the time of grant would require the approval of the Company's stockholders pursuant to any applicable law, regulation or rule, including, without limitation, any rule applicable to the listing of the Company's securities on the Nasdaq National Market. For purposes of the foregoing sentence, "Employees"and "Consultants" shall include prospective Employees and prospective Consultants to whom Options are granted in connection with written offers of an employment or other service relationship with the Participating Company Group. Eligible persons may be granted more than one (1) Option
Terms and Conditions of Options. Options shall be evidenced by Option Agreements specifying the number of shares of Stock covered thereby, in such form as the Board shall from time to time establish. Option Agreements may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:
6.1 Exercise Price. The exercise price for each Option shall be established in the sole discretion of the Board; provided, however, that the exercise price per share for an Option shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code.
6.2 Exercise Period. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria, and restrictions as shall be determined by the Board and set forth in the Option Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, and (b) no Option granted to a prospective Employee or prospective Consultant may become exercisable prior to the date on which such person commences service with a Participating Company.
6.3 Payment of Exercise Price.
Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company of shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company) not less than the exercise price, (iii) by the assignment of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a "Cashless Exercise"), (iv) by the Optionee's promissory note in a form approved by the Company, (v) by such other consideration as may be approved by the Board from time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The Board may at any time or from time to time, by adoption of or by amendment to the standard form of Option Agreement described in Section 7, or by other means, grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.
Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender to the Company of shares of Stock to the extent such tender of Stock would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company's stock. Unless otherwise provided by the Board, an Option may not be exercised by tender to the Company of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company.
Cashless Exercise. The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise.
Payment by Promissory Note. No promissory note shall be permitted if the exercise of an Option using a promissory note would be a violation of any law. Any permitted promissory note shall be on such terms as the Board shall determine at the time the Option is granted. The Board shall have the authority to permit or require the Optionee to secure any promissory note used to exercise an Option with the shares of Stock acquired upon the exercise of the Option or with other collateral acceptable to the Company. Unless otherwise provided by the Board, if the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extension of credit in connection with the Company's securities, any promissory note shall comply with such applicable regulations, and the Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with such applicable regulations.
6.4 Tax Withholding. The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable upon the exercise of an Option, or to accept from the Optionee the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to such Option or the shares acquired upon the exercise thereof. Alternatively or in addition, in its sole discretion, the Company shall have the right to require the Optionee, through payroll withholding, cash payment or otherwise, including by means of a Cashless Exercise, to make adequate provision for any such
tax withholding obligations of the Participating Company Group arising in connection with the Option or the shares acquired upon the exercise thereof. The Company shall have no obligation to deliver shares of Stock or to release shares of Stock from an escrow established pursuant to the Option Agreement until the Participating Company Group's tax withholding obligations have been satisfied by the Optionee.
7.1 General. Unless otherwise provided by the Board at the time the Option is granted, an Option shall comply with and be subject to the terms and conditions set forth in the form of Option Agreement adopted by the Board concurrently with its adoption of the Plan and as amended from time to time.
7.2 Authority to Vary Terms. The Board shall have the authority from time to time to vary the terms of the standard form of Option Agreement described in this Section 7 either in connection with the grant or amendment of an individual Option or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Option Agreement shall be in accordance with the terms of the Plan.
8.1 Definitions.
An "Ownership Change Event" shall be deemed to have occurred
if any of the following occurs with respect to the Company: (i) the direct or
indirect sale or exchange in a single or series of related transactions by the
stockholders of the Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, the "Transaction") wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company's voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the "Transferee Corporation(s)"), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.
8.2 Effect of Transfer of Control on Options. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. The Board may, in its
sole discretion, provide in any Option Agreement that in the event the Acquiring
Corporation elects not to assume or substitute for outstanding Options in
connection with a Transfer of Control (or regardless of whether the Acquiring
Corporation so elects), any unexercisable or unvested portion of the outstanding
Option shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the Transfer of Control. The exercise or vesting
of any Option that was permissible solely by reason of this Section 8.2 and the
provisions of such Option Agreement shall be conditioned upon the consummation
of the Transfer of Control. Any Options which are neither assumed or substituted
for by the Acquiring Corporation in connection with the Transfer of Control nor
exercised as of the date of the Transfer of Control shall terminate and cease to
be outstanding effective as of the date of the Transfer of Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Transfer of Control and any consideration received pursuant to the
Transfer of Control with respect to such shares shall continue to be subject to
all applicable provisions of the Option Agreement evidencing such Option except
as otherwise provided in such Option Agreement. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the outstanding
Options immediately prior to an Ownership Change Event described in Section
8.1(a)(i) constituting a Transfer of Control is the surviving or continuing
corporation and immediately after such Ownership Change Event less than fifty
percent (50%) of the total combined voting power of its voting stock is held by
another corporation or by other corporations
that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the outstanding Options shall not terminate unless the Board otherwise provides in its sole discretion.
Nontransferability of Options. During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the Optionee's guardian or legal representative. No Option shall be assignable or transferable by the Optionee, except by will or by the laws of descent and distribution, except as provided in an Option Agreement.
Compliance with Securities Laws. The grant of Options and the issuance of shares of Stock upon exercise of Options shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. Options may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Option may be exercised unless (a) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of any Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
Termination or Amendment of Plan. The Board may terminate or amend the Plan at any time. However, no termination or amendment of the Plan may adversely affect any then outstanding Option or any unexercised portion thereof, without the consent of the Optionee, unless such termination or amendment is necessary to comply with any applicable law, regulation or rule.
_____________, 2000 Board adopts the Plan, with an initial reserve of
2,000,000 shares.
$31,400,000
LEASE AGREEMENT
(Land)
BETWEEN
BNP LEASING CORPORATION
("BNPLC")
AND
EXTREME NETWORKS, INC.
("Extreme")
June 1, 2000
(Santa Clara, California)
[Land]
TABLE OF CONTENTS
Page ---- 1. Term............................................................................................................ 2 (a) Scheduled Term......................................................................................... 2 -------------- (b) Election by Extreme to Terminate After Accelerating the Designated Sale Date........................... 2 ---------------------------------------------------------------------------- (c) Extension of the Term.................................................................................. 3 --------------------- 2. Use and Condition of the Property............................................................................... 3 (a) Use.................................................................................................... 3 --- (b) Condition of the Property.............................................................................. 4 ------------------------- (c) Consideration for and Scope of Waiver.................................................................. 4 ------------------------------------- 3. Rent............................................................................................................ 4 (a) Base Rent Generally.................................................................................... 4 ------------------- (b) Impact of Collateral Upon Formulas..................................................................... 4 ---------------------------------- (c) Calculation of and Due Dates for Base Rent............................................................. 5 ------------------------------------------ (i) Determination of Payment Due Dates, Generally................................................. 5 --------------------------------------------- (ii) Special Adjustments to Base Rent Payment Dates and Periods.................................... 5 ---------------------------------------------------------- (iii) Base Rent Formula for Periods During Which The Collateral Percentage is 100%.................. 6 ---------------------------------------------------------------------------- (iv) Base Rent Formula for Periods During Which The Collateral Percentage is Less Than 100%........ 6 -------------------------------------------------------------------------------------- (d) Additional Rent........................................................................................ 7 --------------- (e) No Demand or Setoff.................................................................................... 7 ------------------- (f) Default Interest and Order of Application.............................................................. 8 ----------------------------------------- 4. Nature of this Agreement......................................................................................... 8 (a) "Net" Lease Generally.................................................................................. 8 --------------------- (b) No Termination......................................................................................... 8 -------------- (c) Tax Reporting.......................................................................................... 9 ------------- (d) Characterization of this Land Lease.................................................................... 9 ----------------------------------- 5. Payment of Executory Costs and Losses Related to the Property................................................... 10 (a) Impositions............................................................................................ 10 ----------- (b) Increased Costs; Capital Adequacy Charges.............................................................. 10 ----------------------------------------- (c) Extreme's Payment of Other Losses; General Indemnification............................................. 11 ---------------------------------------------------------- (d) Exceptions and Qualifications to Indemnities........................................................... 13 -------------------------------------------- 6. Environmental................................................................................................... 14 (a) Environmental Covenants by Extreme..................................................................... 14 ---------------------------------- (b) Right of BNPLC to do Remedial Work Not Performed by Extreme............................................ 14 ----------------------------------------------------------- (c) Environmental Inspections and Reviews.................................................................. 15 ------------------------------------- (d) Communications Regarding Environmental Matters......................................................... 15 ---------------------------------------------- 7. Insurance Required and Condemnation............................................................................. 16 |
[Land]
(a) Liability Insurance.................................................................................... 16 ------------------- (b) Failure to Obtain Insurance............................................................................ 16 --------------------------- (c) Condemnation........................................................................................... 16 ------------ 8. Application of Insurance and Condemnation Proceeds.............................................................. 16 (a) Collection and Application of Insurance and Condemnation Proceeds Generally............................ 17 --------------------------------------------------------------------------- (b) Advances of Escrowed Proceeds to Extreme............................................................... 17 ---------------------------------------- (c) Application of Escrowed Proceeds as a Qualified Prepayment............................................. 17 ---------------------------------------------------------- (d) Special Provisions Applicable After Completion by Extreme of the Initial Renovations................... 18 ------------------------------------------------------------------------------------ (e) Special Provisions Applicable After an Event of Default................................................ 18 ------------------------------------------------------- (f) Extreme's Obligation to Restore........................................................................ 18 ------------------------------- (g) Takings of All or Substantially All of the Property.................................................... 18 --------------------------------------------------- 9. Additional Representations, Warranties and Covenants of Extreme Concerning the Property......................... 18 (a) Compliance with Covenants and Laws..................................................................... 18 ---------------------------------- (b) Operation of the Property.............................................................................. 19 ------------------------- (c) Debts for Construction, Maintenance, Operation or Development.......................................... 20 ------------------------------------------------------------- (d) Repair, Maintenance, Alterations and Additions......................................................... 20 ---------------------------------------------- (e) Permitted Encumbrances and Development Documents....................................................... 20 ------------------------------------------------ (f) Books and Records Concerning the Property.............................................................. 21 ----------------------------------------- 10. Financial Covenants, Reporting Covenants and Other Covenants Incorporated by Reference to Schedule 1............ 21 ---------- 11. Assignment and Subletting by Extreme............................................................................ 21 (a) BNPLC's Consent Required............................................................................... 21 ------------------------ (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters.................................. 21 --------------------------------------------------------------------- (c) Consent Not a Waiver................................................................................... 21 -------------------- 12. Assignment by BNPLC............................................................................................. 21 (a) Restrictions on Transfers.............................................................................. 21 ------------------------- (b) Effect of Permitted Transfer or other Assignment by BNPLC.............................................. 22 --------------------------------------------------------- 13. BNPLC'S Right of Access......................................................................................... 22 14. Events of Default............................................................................................... 23 15. Remedies........................................................................................................ 24 (a) Basic Remedies......................................................................................... 24 -------------- (b) Notice Required So Long As the Purchase Option and Extreme's Initial Remarketing -------------------------------------------------------------------------------- Rights and Obligations Continue Under the Purchase Agreement........................................... 26 -------------------------------------------------- (c) Enforceability......................................................................................... 26 -------------- (d) Remedies Cumulative.................................................................................... 26 ------------------- 16. Default by BNPLC................................................................................................ 27 17. Quiet Enjoyment................................................................................................. 27 18. Surrender Upon Termination...................................................................................... 27 |
[Land]
19. Holding Over by Extreme......................................................................................... 28 20. Independent Obligations Evidenced by the Other Operative Documents.............................................. 28 |
[Land]
Exhibits and Schedules Exhibit A......................................................Legal Description --------- Exhibit B.................................................Insurance Requirements --------- Exhibit C.............................................LIBOR Period Election Form --------- Schedule 1............................Financial Covenants and Other Requirements ---------- [Land] |
LEASE AGREEMENT
(LAND)
This LEASE AGREEMENT (LAND) (this "Land Lease"), is made and dated as of June 1, 2000 (the "Effective Date") by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and EXTREME NETWORKS, INC., a Delaware corporation ("Extreme").
RECITALS
Contemporaneously with the execution of this Land Lease, BNPLC and Extreme are executing a Common Definitions and Provisions Agreement (Land) dated as of the Effective Date (the "Common Definitions and Provisions Agreement (Land)"), which by this reference is incorporated into and made a part of this Land Lease for all purposes. As used in this Land Lease, capitalized terms defined in the Common Definitions and Provisions Agreement (Land) and not otherwise defined in this Land Lease are intended to have the respective meanings assigned to them in the Common Definitions and Provisions Agreement (Improvements).
In anticipation of BNPLC's acquisition of the Land and the existing Improvements thereon under the Acquisition Contract, BNPLC and Extreme have reached agreement as to the terms and conditions upon which BNPLC is willing to lease the Land to Extreme, and by this Land Lease BNPLC and Extreme desire to evidence such agreement.
GRANTING CLAUSES
BNPLC does hereby LEASE, DEMISE and LET unto Extreme for the term hereinafter set forth all right, title and interest of BNPLC, now owned or hereafter acquired, in and to:
(1) the Land;
(2) all easements and other rights appurtenant to the Land, whether now owned or hereafter acquired by BNPLC; and
(3) (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and any abutting land not owned or leased by BNPLC.
BNPLC's interest in all property described in clauses (1) through (3) above are hereinafter referred to collectively as the "Real Property". The Real Property does not include any Improvements (now existing or those to be constructed as provided in the Other Lease Agreement) or BNPLC's rights appurtenant to the Improvements, it being understood that the Other Lease Agreement constitutes a separate lease of the Improvements and the appurtenances thereto, and only the Improvements and the appurtenances thereto, from BNPLC to Extreme.
[Land]
To the extent, but only to the extent, that assignable rights or interests in, to or under the following have been or will be acquired by BNPLC under the Acquisition Contract or acquired by BNPLC pursuant to Paragraph ? below, BNPLC also hereby grants and assigns to Extreme for the term of this Land Lease the right to use and enjoy (and, in the case of contract rights, to enforce) such rights or interests of BNPLC:
(a) the benefits, if any, conferred upon the owner of the Real Property by the Permitted Encumbrances and Development Documents; and
(b) any permits, licenses, franchises, certificates, and other rights and privileges against third parties related to the Real Property.
Such rights and interests of BNPLC, whether now existing or hereafter arising, are hereinafter collectively called the "Personal Property". The Real Property and the Personal Property are hereinafter sometimes collectively called the "Property."
However, the leasehold estate conveyed hereby and Extreme's rights hereunder are expressly made subject and subordinate to the terms and conditions of this Land Lease, the Premises Leases and all other Permitted Encumbrances, and to any other claims or encumbrances not constituting Liens Removable by BNPLC.
GENERAL TERMS AND CONDITIONS
The Property is leased by BNPLC to Extreme and is accepted and is to be used and possessed by Extreme upon and subject to the following terms and conditions:
1 Term.
(i) purchased or caused an Applicable Purchaser to purchase the Property pursuant to the Purchase Agreement and satisfied all of Extreme's other obligations under the Purchase Agreement;
(ii) paid to BNPLC all Base Rent and all other Rent due on or before or accrued through the Designated Sale Date; and
(iii) paid any Breakage Costs caused by BNPLC's sale of the Property pursuant to the Purchase Agreement.
[Land]
2 Use and Condition of the Property.
(ii) other lawful purposes approved in advance and in writing by BNPLC, which approval will not be unreasonably withheld (but Extreme acknowledges that BNPLC's withholding of such approval shall be reasonable if BNPLC determines in good faith that (1) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, or (2) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring Extreme's compliance with the requirements of this Land Lease or other Operative Documents).
Nothing in this subparagraph will prevent a tenant under a Premises Lease, executed prior to the Effective Date, from using the space covered thereby for purposes expressly authorized by the terms and conditions of such Premises Lease.
[Land]
condition in the Land or in Improvements, fixtures and personal property forming a part of the Property or for any violations with respect thereto of Applicable Laws. Further, BNPLC shall not be required to furnish to Extreme any facilities or services of any kind, including water, steam, heat, gas, air conditioning, electricity, light or power.
However, such exclusion of representations and warranties by BNPLC is not intended to impair any representations or warranties made by other parties, the benefit of which may pass to Extreme during the Term because of the definition of Personal Property and Property above.
3 Rent.
[Land]
a0 For all Base Rent Periods subject to a LIBOR Period Election of one month or three months, Base Rent shall be due in one installment on the Base Rent Date upon which the Base Rent Period ends.
b0 For Base Rent Periods subject to a LIBOR Period Election of six months, Base Rent shall be payable in two installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, and with the second installment becoming due on the Base Rent Date upon which the Base Rent Period ends.
c0 For Base Rent Periods subject to a LIBOR Period Election of nine months, Base Rent shall be payable in three installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, with the second installment becoming due on the first Business Day of the sixth calendar month following the commencement of such Base Rent Period, and with the third installment becoming due on the Base Rent Date upon which the Base Rent Period ends.
d0 For Base Rent Periods subject to a LIBOR Period Election of twelve months, Base Rent shall be payable in four installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, with the second installment becoming due on the first Business Day of the sixth calendar month following the commencement of such Base Rent Period, with the third installment becoming due on the first Business Day of the ninth calendar month following the commencement of such Base Rent Period, and with the fourth installment becoming due on the Base Rent Date upon which the Base Rent Period ends.
a0 Any Base Rent Period that begins before, and does not otherwise end before, the first Business Day of the first calendar month following a Failed Collateral Test Date shall end upon but not include such first Business Day, and such first Business Day shall constitute a Base Rent Date, upon which Extreme must pay all accrued, unpaid Base Rent for the Base Rent Period just ended.
b0 In addition to Base Rent due on a the first Business Day of
the first calendar month following a Failed Collateral Test Date,
Extreme must pay the Breakage Costs, if any, resulting from any early
ending of a Base Rent Period pursuant to the preceding clause
3.(c)(ii)a).
c0 If Extreme or any Applicable Purchaser purchases BNPLC's interest in the Property pursuant to the Purchase Agreement, any accrued unpaid Base Rent and all outstanding Additional Rent shall be due on the date of purchase in addition to the purchase price and other sums due BNPLC under the Purchase Agreement.
[Land]
. Stipulated Loss Value on the first day of such Base Rent Period, times
. the sum of (a) the Secured Spread and (b) the Effective Rate/Deposit Rate Difference for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times
. the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by
. three hundred sixty.
Assume, only for the purpose of illustration: that the Collateral Percentage for a hypothetical Base Rent Period is one hundred percent (100%); that prior to the first day of such Base Rent Period Qualified Prepayments have been received by BNPLC, leaving a Stipulated Loss Value of $5,000,000; that the sum of the Secured Spread and the Effective Rate/Deposit Rate Difference is forty-two and one-half basis points (42.5/100 of 1%); and that such Base Rent Period contains exactly thirty days. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal:
$5,000,000 x .425% x 30/360 = $1,770.83
. Stipulated Loss Value on the first day of such Base Rent Period, times
. the sum of:
(A) the product of:
(1) the Collateral Percentage for such Base Rent Period, times
(2) the sum of (a) the Secured Spread and (b) the Effective Rate/Deposit Rate Difference for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, plus
(B) the product of:
(1) one minus the Collateral
Percentage for such Base Rent
Period, times
[Land]
(2) the sum of (a) the Effective Rate with respect to such Base Rent Period, plus (b) the Unsecured Spread for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times
. the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by
. three hundred sixty.
Assume, only for the purpose of illustration: that the Collateral Percentage for a hypothetical Base Rent Period is fifty-five percent (55%); that prior to the first day of such Base Rent Period Qualified Prepayments have been received by BNPLC, leaving a Stipulated Loss Value of $5,000,000; that the Effective Rate for the Base Rent Period is 6%; that the sum of the Secured Spread and the Effective Rate/Deposit Rate Difference is forty-two and one-half basis points (42.5/100 of 1%); that upon the commencement of such Base Rent Period the Unsecured Spread is two hundred twenty-five basis points (225/100 of 1%); and that such Base Rent Period contains exactly thirty days. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal:
$5,000,000 x {(55% x .425%) + ([1 - 55%] x [6% + 2.25%])} x 30/360 = $16,442.41
4 Nature of this Agreement.
[Land]
incurred by BNPLC (including Attorneys' Fees) because of BNPLC's acquisition or ownership of any interest in the Property or because of this Land Lease or the transactions contemplated herein.
However, nothing in this subparagraph 4.(b) shall be construed as a waiver
by Extreme of any right Extreme may have at law or in equity to the following
remedies, whether because of BNPLC's failure to remove a Lien Removable by BNPLC
or because of any other default by BNPLC under this Land Lease that continues
beyond the period for cure provided in Paragraph 16: (i) the recovery of
monetary damages, (ii) injunctive relief in case of the violation, or attempted
or threatened violation, by BNPLC of any of the express covenants, agreements,
conditions or provisions of this Land Lease which are binding upon BNPLC
(including the confidentiality provisions set forth in subparagraph 13.(c)
below), or (iii) a decree compelling performance by BNPLC of any of the express
covenants, agreements, conditions or provisions of this Land Lease which are
binding upon BNPLC.
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covered by this Paragraph, then BNPLC shall promptly furnish a copy of such notice to Extreme. The failure to so provide a copy of the notice to Extreme shall not excuse Extreme from its obligations under this Paragraph; provided, that if none of the officers of Extreme and none of the employees of Extreme responsible for tax matters are aware of the challenge described in the notice and such failure by BNPLC renders unavailable defenses that Extreme might otherwise assert, or precludes actions that Extreme might otherwise take, to minimize its obligations hereunder, then Extreme shall be excused from its obligation to indemnify BNPLC against liabilities, costs, additional taxes and other expenses, if any, which would not have been incurred but for such failure. For example, if BNPLC fails to provide Extreme with a copy of a notice of a challenge by the Internal Revenue Service covered by the indemnities set out in this Land Lease and Extreme is not otherwise already aware of such challenge, and if as a result of such failure BNPLC becomes liable for penalties and interest covered by the indemnities in excess of the penalties and interest that would have accrued if Extreme had been promptly provided with a copy of the notice, then Extreme will be excused from any obligation to BNPLC to pay the excess.
5 Payment of Executory Costs and Losses Related to the Property.
Notwithstanding the foregoing, Extreme may in good faith, by appropriate proceedings, contest the validity, applicability or amount of any asserted Imposition, and pending such contest Extreme shall not be deemed in default under any of the provisions of this Land Lease because of the Imposition if (1) Extreme diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and (2) Extreme promptly causes to be paid any amount adjudged by a court of competent jurisdiction to be due, with all costs, penalties and interest thereon, promptly after such judgment becomes final; provided, however, in any event each such contest shall be concluded and the contested Impositions must be paid by Extreme prior to the earlier of (i) the date that any criminal prosecution is instituted or overtly threatened against BNPLC or its directors, officers or employees because of the nonpayment thereof or (ii) the date any writ or order is issued under which any property owned or leased by BNPLC (including the Property) may be seized or sold or any other action is taken against BNPLC or against any property owned or leased by BNPLC because of the nonpayment thereof, or (iii) any Designated Sale Date upon which, for any reason, Extreme or an Affiliate of Extreme or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a price to BNPLC (when taken
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(i) If after the Effective Date there shall be any increase in the cost to BNPLC's Parent or any other Participant agreeing to make or making, funding or maintaining advances to BNPLC in connection with the Property because of any Banking Rules Change, then Extreme shall from time to time, pay to BNPLC for the account of BNPLC's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate BNPLC's Parent or the Participant for such increased cost. An increase in costs resulting from any imposition or increase of reserve requirements applicable to Collateral held from time to time by BNPLC's Parent or other Participants pursuant to the Pledge Agreement would be an increase covered by the preceding sentence. A certificate as to the amount of such increased cost, submitted to BNPLC and Extreme by BNPLC's Parent or the other Participant, shall be conclusive and binding upon Extreme, absent clear and demonstrable error.
(ii) BNPLC's Parent or any other Participant may demand additional payments ("Capital Adequacy Charges") if BNPLC's Parent or the other Participant determines that any Banking Rules Change affects the amount of capital to be maintained by it and that the amount of such capital is increased by or based upon the existence of advances made or to be made to BNPLC to permit BNPLC to maintain BNPLC's investment in the Property. To the extent that BNPLC's Parent or another Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such investment or advances, Extreme shall pay to BNPLC for the account of BNPLC's Parent or the other Participant, as the case may be, the amount so demanded. Without limiting the foregoing, BNPLC and Extreme hereby acknowledge and agree that the provisions for calculating Base Rent set forth herein reflect the assumption that the Pledge Agreement will cause a zero percent (0%) risk weight to be assigned to a percentage (equal to the Collateral Percentage) of the collective investment of BNPLC and the Participants in the Property pursuant to 12 Code of Federal Regulations, part 225, as from time to time supplemented or amended, or pursuant to any other similar or successor statute or regulation applicable to BNPLC and the Participants. If and so long as such risk weight is increased the assumed amount of zero percent (0%) because of a Banking Rules Change, Capital Adequacy Charges may be collected to yield the same rate of return to BNPLC, BNPLC's Parent and any other Participants (net of their costs of maintaining required capital) that they would have enjoyed from this Land Lease absent such increase.
(iii) Notwithstanding the foregoing provisions of this subparagraph
5.(b), Extreme shall not be obligated to pay any claim for compensation
pursuant to this subparagraph 5.(b) arising or accruing more than six
months prior to the date Extreme is notified that BNPLC or a Participant
intends to make the claim; provided, however, that Extreme shall not be
excused by this subparagraph from providing such compensation for any
period during which notice on behalf of BNPLC or the Participant, as the
case may be, could not be provided because of the retroactive application
of the statute, regulation or other basis for the claim.
(iv) Any amount required to be paid by Extreme under this subparagraph 5.(b) shall be due fifteen days after a notice requesting such payment is received by Extreme.
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(i) All Losses (including Environmental Losses) asserted against or incurred or suffered by BNPLC or other Interested Parties at any time and from time to time by reason of, in connection with or arising out of (A) their ownership or alleged ownership of any interest in the Property or the Rents, (B) the use and operation of the Property, (C) the negotiation, administration or enforcement of the Operative Documents, (D) the making of the Funding Advances, (E) the breach by Extreme of this Land Lease or any other document executed by Extreme in connection herewith, (F) any failure of the Property or Extreme itself to comply with Applicable Laws, (G) Permitted Encumbrances, (H) Hazardous Substance Activities, including those occurring prior to Effective Date, (I) any obligations under the Acquisition Contract that survive the closing under the Acquisition Contract, or (K) any bodily or personal injury or death or property damage occurring in or upon or in the vicinity of the Property through any cause whatsoever, shall be paid by Extreme, and Extreme shall indemnify and defend BNPLC and other Interested Parties from and against all such Losses.
(iii) Costs and expenses for which Extreme shall be responsible pursuant to this subparagraph 5.(c) will include appraisal fees, filing and recording fees, inspection fees, survey fees, taxes, brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees and Attorneys' Fees incurred by BNPLC with respect to the Property, whether such costs and expenses are incurred at the time of execution of this Land Lease or at any time during the Term.
(iv) Extreme's obligations under this subparagraph 5.(c) shall survive the termination or expiration of this Land Lease. Any amount to be paid by Extreme under this subparagraph 5.(c) shall be due fifteen days after a notice requesting such payment is received by Extreme.
(v) If an Interested Party notifies Extreme of any claim or
proceeding included in, or any investigation or allegation concerning,
Losses for which Extreme is responsible pursuant to this subparagraph
5.(c), Extreme shall assume on behalf of the Interested Party and conduct
with due diligence and in good faith the investigation and defense thereof
and the response thereto with counsel selected by Extreme, but reasonably
satisfactory to the Interested Party; provided, that the Interested Party
shall have the right to be represented by advisory counsel of its own
selection and at its own expense; and provided further, that if any such
claim, proceeding, investigation or allegation involves both Extreme and
the Interested Party and the Interested Party shall have reasonably
concluded that there are legal defenses
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available to it which are inconsistent with or in addition to those available to Extreme, then the Interested Party shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, proceeding, investigation or allegation on its own behalf, and Extreme shall pay or reimburse the Interested Party for all Attorney's Fees incurred by the Interested Party because of the selection of such separate counsel. If Extreme fails to assume promptly (and in any event within fifteen days after being notified of the applicable claim, proceeding, investigation or allegation) the defense of the Interested Party, then the Interested Party may contest (or settle, with the prior consent of Extreme, which consent will not be unreasonably withheld) the claim, proceeding, investigation or allegation at Extreme's expense using counsel selected by the Interested Party. Moreover, if any such failure by Extreme continues for forty-five days or more after Extreme is notified of any such claim, proceeding, investigation or allegation, the Interested Party may elect not to contest or continue contesting the same and instead, in accordance with the written advice of counsel, settle (or pay in full) all claims related thereto without Extreme's consent and without releasing Extreme from any obligations to the Interested Party under this subparagraph 5.(c).
(i) BNPLC acknowledges and agrees that nothing in subparagraph 4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require Extreme to pay or reimburse (w) any costs or expenses incurred by any Interested Party (including BNPLC or any transferee of BNPLC) to accomplish any Permitted Transfers described in clauses (1), (2), (3), (4) or (6) of the definition thereof in the Common Definitions and Provisions Agreement (Land), (x) Excluded Taxes, (y) Losses incurred or suffered by any Interested Party that are proximately caused by (and attributed by any applicable principles of comparative fault to) the Established Misconduct of that Interested Party, or (z) Losses incurred or suffered in connection with the execution of the Participation Agreement or Pledge Agreement by Participants (or supplements making them parties thereto) or in connection with any negotiation or due diligence Participants may undertake before entering into the Participation Agreement or Pledge Agreement. Further, without limiting BNPLC's rights (as provided in other provisions of this Land Lease and other Operative Documents) to include the following in the calculation of Stipulated Loss Value and the Break Even Price or to collect Base Rent, a Supplemental Payment and other amounts, the calculation of which depends upon Stipulated Loss Value or the Break Even Price, BNPLC acknowledges and agrees that nothing in subparagraph 4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require Extreme to pay or reimburse an Interested Party for costs paid by BNPLC with the proceeds of the Initial Funding Advance as part of the Transaction Expenses.
Further, if an Interested Party receives a written notice of Losses that
such Interested Party believes are covered by the indemnity in subparagraph
5.(c)(i), then such Interested Party will be expected to promptly furnish a
copy of such notice to Extreme. The failure to so provide a copy of the
notice to Extreme shall not excuse Extreme from its obligations under
subparagraph 5.(c)(i); provided, that if Extreme is unaware of the matters
described in the notice and such failure renders unavailable defenses that
Extreme might otherwise assert, or precludes actions that Extreme might
otherwise take, to minimize its obligations, then Extreme shall be excused
from its obligation to indemnify such Interested Party (and any Affiliate
of such Interested Party) against the Losses, if any, which would not have
been incurred or suffered but for such failure. For example, if BNPLC fails
to provide Extreme with a copy of a notice of an obligation covered by the
indemnity set out in subparagraph 5.(c)(i) and Extreme is not otherwise
already aware of such obligation, and if as a result of such failure BNPLC
becomes liable for penalties and interest covered by the indemnity in
excess of the penalties and interest that would have accrued if Extreme had
been promptly
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provided with a copy of the notice, then Extreme will be excused from any obligation to BNPLC (or any Affiliate of BNPLC) to pay the excess.
6 Environmental.
(i) Extreme shall not conduct or permit others to conduct Hazardous Substance Activities, except Permitted Hazardous Substance Use and Remedial Work.
(ii) Extreme shall not discharge or permit the discharge of anything on or from the Property that would require any permit under applicable Environmental Laws, other than (1) storm water runoff, (2) waste water discharges through a publicly owned treatment works, (3) discharges that are a necessary part of any Remedial Work, and (4) other similar discharges consistent with the definition herein of Permitted Hazardous Substance Use, in each case in strict compliance with Environmental Laws.
(iii) Following any discovery that Remedial Work is required by Environmental Laws or otherwise believed by BNPLC to be reasonably required, and to the extent not inconsistent with the other provisions of this Land Lease, Extreme shall promptly perform and diligently and continuously pursue such Remedial Work, in each case in strict compliance with Environmental Laws.
(iv) If requested by BNPLC in connection with any Remedial Work required by this subparagraph, Extreme shall retain independent environmental consultants acceptable to BNPLC to evaluate any significant new information generated during Extreme's implementation of the Remedial Work and to discuss with Extreme whether such new information indicates the need for any additional measures that Extreme should take to protect the health and safety of persons (including employees, contractors and subcontractors and their employees) or to protect the environment. Extreme shall implement any such additional measures to the extent required with respect to the Property by Environmental Laws or otherwise believed by BNPLC to be reasonably required and to the extent not inconsistent with the other provisions of this Land Lease.
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investigation to confirm whether Extreme is complying with the requirements of this Paragraph 6. Extreme grants to BNPLC and to BNPLC's agents, employees, consultants and contractors the right to enter upon the Property during reasonable hours and after reasonable notice to inspect the Property and to perform such tests as BNPLC deems necessary or appropriate to review or investigate Hazardous Substances in, on, under or about the Property or any discharge or suspected discharge of Hazardous Substances into groundwater or surface water from the Property. Extreme shall promptly reimburse BNPLC for the fees of its environmental consultants and the costs of any such inspections and tests; provided, however, BNPLC's right to such reimbursement shall be limited to the following circumstances: (1) a breach of this Paragraph 6 by Extreme shall, in fact, have occurred or an Event of Default shall have occurred and be continuing at the time BNPLC engages the consultants or first initiates the inspections and tests; (2) BNPLC shall have engaged the consultants or undertaken the tests and inspections to establish the condition of the Property just prior to any conveyance of the Property pursuant to the Option Agreement or to the expiration of this Land Lease; (3) BNPLC shall have engaged the consultants or undertaken the inspections and tests to satisfy any regulatory requirements applicable to BNPLC or its Affiliates; or (4) BNPLC shall have engaged the consultants or undertaken the tests because BNPLC was notified of a violation of Environmental Laws concerning the Property by any governmental authority or owner of other land in the vicinity of the Land.
(i) Extreme shall immediately advise BNPLC of (1) any discovery of any event or circumstance which would render any of the representations of Extreme herein or in the Closing Certificate concerning environmental matters materially inaccurate or misleading if made at the time of such discovery and assuming that Extreme was aware of all relevant facts, (2) any Remedial Work (or change in Remedial Work) required or undertaken by Extreme or its Affiliates in response to any (A) discovery of any Hazardous Substances on, under or about the Property other than Permitted Hazardous Substances or (B) any claim for damages resulting from Hazardous Substance Activities, (3) Extreme's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property which could cause the Property or any part thereof to be subject to any ownership, occupancy, transferability or use restrictions under Environmental Laws, or (4) any investigation or inquiry of any failure or alleged failure by Extreme to comply with Environmental Laws affecting the Property by any governmental authority responsible for enforcing Environmental Laws. In such event, Extreme shall deliver to BNPLC within thirty days after BNPLC's request, a preliminary written environmental plan setting forth a general description of the action that Extreme proposes to take with respect thereto, if any, to bring the Property into compliance with Environmental Laws or to correct any breach by Extreme of this Paragraph 6, including any proposed Remedial Work, the estimated cost and time of completion, the name of the contractor and a copy of the construction contract, if any, and such additional data, instruments, documents, agreements or other materials or information as BNPLC may request.
(ii) Extreme shall provide BNPLC with copies of all material written communications with federal, state and local governments, or agencies relating to the matters listed in the preceding clause (i). Extreme shall also provide BNPLC with copies of any correspondence from third Persons which threaten litigation over any significant failure or alleged significant failure of Extreme to maintain or operate the Property in accordance with Environmental Laws.
(iii) Prior to Extreme's submission of a Material Environmental Communication to any governmental or regulatory agency or third party, Extreme shall, to the extent practicable, deliver to BNPLC a draft of the proposed submission (together with the proposed date of submission), and in good faith assess and consider any comments of BNPLC regarding the same. Promptly after BNPLC's request, Extreme shall meet with BNPLC to discuss the submission, shall provide any additional information
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requested by BNPLC and shall provide a written explanation to BNPLC addressing the issues raised by comments (if any) of BNPLC regarding the submission, including a reasoned analysis supporting any decision by Extreme not to modify the submission in accordance with comments of BNPLC.
7 Insurance Required and Condemnation.
8. Application of Insurance and Condemnation Proceeds.
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BNPLC from Extreme or third parties, shall be applied as follows:
(i First, proceeds covered by this Paragraph 8 will be used to reimburse BNPLC for any costs and expenses, including Attorneys' Fees, that BNPLC incurred to collect the proceeds.
(ii Second, the proceeds remaining after such reimbursement to BNPLC (hereinafter, the "Remaining Proceeds") will be applied, as hereinafter more particularly provided, either as a Qualified Prepayment or to reimburse Extreme or BNPLC for the actual out-of-pocket costs of repairing or restoring the Property. Until, however, any Remaining Proceeds received by BNPLC are applied by BNPLC as a Qualified Prepayment or applied by BNPLC to reimburse costs of repairs to or restoration of the Property pursuant to this Paragraph 8, BNPLC shall hold and maintain such Remaining Proceeds as Escrowed Proceeds in an interest bearing account, and all interest earned on such account shall be added to and made a part of such Escrowed Proceeds.
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when any Event of Default shall have occurred and be continuing, BNPLC shall be entitled to receive and collect all condemnation or other proceeds governed by this Paragraph 8 and to apply all Remaining Proceeds, when and to the extent deemed appropriate by BNPLC in its sole discretion, either (A) to the reimbursement of Extreme or BNPLC for the out-of-pocket cost of repairing or restoring the Property, or (B) as Qualified Prepayments.
(i increase the value of the Property or the remainder thereof by restoring the same (in a manner consistent with the requirements and limitations imposed by this Land Lease and the other Operative Documents or otherwise acceptable to BNPLC), or decrease Stipulated Loss Value by tendering a payment to BNPLC for application as a Qualified Prepayment, as necessary to cause the then current AS IS market value of the Property to be not less than Stipulated Loss Value; and
(ii restore the Property or the remainder thereof to a reasonably safe and sightly condition.
9. Additional Representations, Warranties and Covenants of Extreme Concerning the Property. Extreme represents, warrants and covenants as follows:
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in a manner that would result in such use becoming a nonconforming use under applicable zoning ordinances or similar laws, rules or regulations; (iv) execute or file any subdivision plat affecting the Property; or (v) consent to the annexation of the Property to any municipality. If during the Term (A) a change in the zoning or other Applicable Laws affecting the permitted use or development of the Property shall occur that (in BNPLC's good faith judgment) reduces the value of the Property, or (B) conditions or circumstances on or about the Property are discovered (such as the presence of an endangered species) which substantially impede development and thereby (in BNPLC's good faith judgment) reduce the value of the Property, then Extreme shall upon demand pay BNPLC an amount equal to such reduction (as determined by BNPLC in good faith) for application as a Qualified Prepayment. Extreme shall not permit any drilling or exploration for, or extraction, removal or production of, minerals from the surface or subsurface of the Property, and Extreme shall not do anything that could reasonably be expected to significantly reduce the market value of the Property. If Extreme receives a notice or claim from any federal, state or other governmental authority that the Property is not in compliance with any Applicable Law, or that any action may be taken against BNPLC because the Property does not comply with any Applicable Law, Extreme shall promptly furnish a copy of such notice or claim to BNPLC.
Notwithstanding the foregoing, Extreme may in good faith, by appropriate proceedings, contest the validity, applicability or amount of any asserted mechanic's or materialmen's lien and pending such contest Extreme shall not be deemed in default under this subparagraph because of the contested lien if (1) within sixty days after being asked to do so by BNPLC, Extreme bonds over to BNPLC's reasonable satisfaction all such contested liens against the Property alleged to secure an amount in excess of $500,000 (individually or in the aggregate), (2) Extreme diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and (3) Extreme promptly causes to be paid any amount adjudged by a court of competent jurisdiction to be due, with all costs and interest thereon, promptly after such judgment becomes final; provided, however, that in any event each such contest shall be concluded and the lien, interest and costs must be paid by Extreme prior to the earlier of (i) the date that any criminal prosecution is instituted or overtly threatened against BNPLC or its directors, officers or employees because of the nonpayment thereof, (ii) the date that any writ or order is issued under which the
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12. Assignment by BNPLC.
13. BNPLC'S Right Of Access.
(a During the Term, BNPLC and BNPLC's representatives may (subject to subparagraphs 13.(c) and 13.(d)) enter the Property at any reasonable time after five Business Days advance written notice to Extreme for the purpose of making inspections or performing any work BNPLC is authorized to undertake by the next subparagraph or for the purpose confirming whether Extreme has complied with the requirements of this Land Lease or the other Operative Documents.
(b If Extreme fails to perform any act or to take any action required of it by this Land Lease or the Closing Certificate, or to pay any money which Extreme is required by this Land Lease or the Closing Certificate to pay, and if such failure or action constitutes an Event of Default or renders BNPLC or any director, officer, employee or Affiliate of BNPLC at risk of criminal prosecution or renders BNPLC's interest in the Property or any part thereof at risk of forfeiture by forced sale or otherwise, then in addition to any other remedies specified herein or otherwise available, BNPLC may, perform or cause to be performed such act or take such action or pay such money. Any expenses so incurred by BNPLC, and any money so paid by BNPLC, shall be a demand obligation owing by Extreme to BNPLC. Further, BNPLC, upon making such payment, shall be subrogated to all
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(c Extreme shall have no obligation to provide proprietary information (as defined in the next sentence) to BNPLC, except and to the extent that (1) BNPLC reasonably determines that BNPLC cannot accomplish the purposes of BNPLC's inspection of the Property or exercise of other rights granted pursuant to the various express provisions of this Land Lease and the other Operative Documents without evaluating such information. For purposes of this Land Lease "proprietary information" includes Extreme's intellectual property, trade secrets and other confidential information of value to Extreme about, among other things, Extreme's manufacturing processes, products, marketing and corporate strategies, but in no event will "proprietary information" include any disclosure of substances and materials (and their chemical composition) which are or previously have been present in, on or under the Property at the time of any inspections by BNPLC, nor will "proprietary information" include any additional disclosures reasonably required to permit BNPLC to determine whether the presence of such substances and materials has constituted a violation of Environmental Laws. In addition, under no circumstances shall Extreme have any obligation to disclose to BNPLC or any other party any proprietary information of Extreme (including, without limitation, any pending applications for patents or trademarks, any research and design and any trade secrets) except if and to the limited extent reasonably necessary to comply with the express provisions of this Land Lease or the other Operative Documents.
(d So long as Extreme remains in possession of the Property, BNPLC or BNPLC's representative will, before making any inspection or performing any work on the Property authorized by this Land Lease, if then requested to do so by Extreme to maintain Extreme's security: (i) sign in at Extreme's security or information desk if Extreme has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification, (iii) permit an employee of Extreme to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security requirements of Extreme that do not, individually or in the aggregate, significantly interfere with inspections or work of BNPLC authorized by this Land Lease.
14. Events of Default. Each of the following events shall be an "Event of Default" by Extreme under this Land Lease:
(a Extreme shall fail to pay when due any installment of Rent due hereunder and such failure shall continue for three (3) Business Days after Extreme is notified in writing thereof.
(b Extreme shall fail to cause any representation or warranty of Extreme contained herein or in the Closing Certificate that was false or misleading in any material respect when made to be made true and not misleading (other than as described in the other clauses of this Paragraph 14), or Extreme shall fail to comply with any term, provision or covenant of this Land Lease or the Closing Certificate (other than as described in the other clauses of this Paragraph 14), and in either case shall not cure such failure prior to the earlier of (A) thirty days
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after written notice thereof is sent to Extreme or (B) the date any writ or order is issued for the levy or sale of any property owned by BNPLC (including the Property) or any criminal prosecution is instituted or overtly threatened against BNPLC or any of its directors, officers or employees because of such failure; provided, however, that so long as no such writ or order is issued and no such criminal prosecution is instituted or overtly threatened, the period within which such failure may be cured by Extreme shall be extended for a further period (not to exceed an additional sixty days) as shall be necessary for the curing thereof with diligence, if (but only if) (x) such failure is susceptible of cure but cannot with reasonable diligence be cured within such thirty day period, (y) Extreme shall promptly have commenced to cure such failure and shall thereafter continuously prosecute the curing thereof with reasonable diligence and (z) the extension of the period for cure will not, in any event, cause the period for cure to extend beyond five days prior to the expiration of this Land Lease.
(c Extreme shall abandon the Property.
(d Extreme or any Subsidiary shall fail to make any payment or payments of principal, premium or interest, of Debt of Extreme described in the next sentence when due (taking into consideration the time Extreme may have to cure such failure, if any, under the documents governing such Debt). As used in this clause 14(a)(v), "Debt" shall include only Debt (as defined in the Common Definitions and Provisions Agreement (Land)) of Extreme or any of its Subsidiaries now existing or arising in the future (1) payable to any Interested Party, or (2) payable to any other Person and with respect to which $5,000,000 or more is actually due and payable because of acceleration or otherwise.
(e Extreme: (a) shall generally not, or be unable to, or shall admit in writing its inability to, pay its debts as such debts become due; or (b) shall make an assignment for the benefit of creditors, petition or apply to any tribunal for the appointment of a custodian, receiver or trustee for it or a substantial part of its assets; or (c) shall file any petition or application to commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (d) shall have had any such petition or application filed against it; or (e) by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or trustee for all or any substantial part of its property; or (f) shall suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of sixty days or more.
(f One or more final judgments, decrees or orders for the payment of money in excess of $5,000,000 in the aggregate shall be rendered against Extreme and such judgments, decrees or orders shall continue unsatisfied and in effect for a period of thirty consecutive days without Extreme's having obtained an agreement (or after the expiration or termination of an agreement) of the Persons entitled to enforce such judgment, decrees or orders not to enforce the same pending negotiations with Extreme concerning the satisfaction or other discharge of the same. (For purposes of this provision, no judgment, decree or order will be considered "final" until Extreme's right to appeal, if any, shall have expired or been exhausted.)
(g Extreme shall breach the requirements of Paragraph 10, which by reference to Schedule 1 establishes certain financial covenants and other requirements.
(h as of the effective date of this Land Lease, any of the representations or warranties of Extreme contained in subparagraphs 2(A) - (K) of the Closing Certificate shall be false or misleading in any material respect.
(i Extreme shall fail to pay the full amount of any Supplemental Payment required by the Purchase
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Agreement on the Designated Sale Date.
(j Extreme shall fail to comply with any term, provision or condition of the Pledge Agreement after the expiration of any applicable notice and cure period set forth in the Pledge Agreement.
15. Remedies.
(i By notice to Extreme, BNPLC may terminate Extreme's right to possession of the Property. A notice given in connection with unlawful detainer proceedings specifying a time within which to cure a default shall terminate Extreme's right to possession if Extreme fails to cure the default within the time specified in the notice.
(ii Upon termination of Extreme's right to possession and without further demand or notice, BNPLC may re-enter the Property in any manner not prohibited by Applicable Law and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property on the Land may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of Extreme.
(iii Upon termination of Extreme's right to possession, this Land Lease shall terminate and BNPLC may recover from Extreme:
a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination;
b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Extreme proves could have been reasonably avoided;
c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the scheduled Term after the time of award exceeds the amount of such rental loss that Extreme proves could be reasonably avoided; and
d) Any other amount necessary to compensate BNPLC for all the detriment proximately caused by Extreme's failure to perform Extreme's obligations under this Land Lease or which in the ordinary course of things would be likely to result therefrom, including the costs and expenses (including Attorneys' Fees, advertising costs and brokers' commissions) of recovering possession of the Property, removing persons or property therefrom, placing the Property in good order, condition, and repair, preparing and altering the Property for reletting, all other costs and expenses of reletting, and any loss incurred by BNPLC as a result of Extreme's failure to perform Extreme's obligations under the other Operative Documents.
The "worth at the time of award" of the amounts referred to in subparagraph 15.(a)(iii)a) and subparagraph 15.(a)(iii)b) shall be computed by allowing interest at the Default Rate. The "worth
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at the time of award" of the amount referred to in subparagraph 15.(a)(iii)c) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).
e) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law.
(iv BNPLC shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in force even after lessee's breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations). Accordingly, even if Extreme has breached this Land Lease and abandoned the Property, this Land Lease shall continue in effect for so long as BNPLC does not terminate Extreme's right to possession, and BNPLC may enforce all of BNPLC's rights and remedies under this Land Lease, including the right to recover the Rent as it becomes due under this Land Lease. Extreme's right to possession shall not be deemed to have been terminated by BNPLC except pursuant to subparagraph 15.(a)(i) hereof. The following shall not constitute a termination of Extreme's right to possession:
a) Acts of maintenance or preservation or efforts to relet the Property;
b) The appointment of a receiver upon the initiative of BNPLC to protect BNPLC's interest under this Land Lease; or
c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by Extreme.
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BNPLC shall be entitled, to the extent permitted by Applicable Law or in equity, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the covenants, agreements, conditions or provisions of this Land Lease, or to a decree compelling performance of any of the other covenants, agreements, conditions or provisions of this Land Lease to be performed by Extreme, or to any other remedy allowed to BNPLC at law or in equity. Nothing contained in this Land Lease shall limit or prejudice the right of BNPLC to prove for and obtain in proceedings for bankruptcy or insolvency of Extreme by reason of the termination of this Land Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above. Without limiting the generality of the foregoing, nothing contained herein shall modify, limit or impair any of the rights and remedies of BNPLC under the Purchase Documents, and BNPLC shall not be required to give the sixty day notice described in subparagraph 15.(b) as a condition precedent to any acceleration of the Designated Sale Date or to taking any action to enforce the Purchase Documents.
16. Default by BNPLC. If BNPLC should default in the performance of any of its obligations under this Land Lease, BNPLC shall have the time reasonably required, but in no event less than thirty days, to cure such default after receipt of notice from Extreme specifying such default and specifying what action Extreme believes is necessary to cure the default. If Extreme prevails in any litigation brought against BNPLC because of BNPLC's failure to cure a default within the time required by the preceding sentence, then Extreme shall be entitled to an award against BNPLC for the monetary damages proximately caused to Extreme by such default.
Notwithstanding the foregoing, BNPLC's right to cure as provided in this Paragraph 16 will not in any event extend the time within which BNPLC must remove Liens Removable by BNPLC as required by Paragraph 17 beyond the Designated Sale Date.
17. Quiet Enjoyment. Provided Extreme pays the Base Rent and all Additional Rent payable hereunder as and when due and payable and keeps and fulfills all of the terms, covenants, agreements and conditions to be performed by Extreme hereunder, BNPLC shall not during the Term disturb Extreme's peaceable and quiet enjoyment of the Property; however, such enjoyment shall be subject to the terms, provisions, covenants, agreements and conditions of this Land Lease, to Permitted Encumbrances, to Development Documents and to any other claims not constituting Liens Removable by BNPLC. If any Lien Removable by BNPLC is claimed against the Property, BNPLC will remove the Lien Removable by BNPLC promptly. Any breach by BNPLC of this Paragraph shall render BNPLC liable to Extreme for any monetary damages proximately caused thereby, but as more specifically provided in subparagraph 4.(b) above, no such breach shall entitle Extreme to terminate this Land Lease or excuse Extreme from its obligation to pay Rent.
18. Surrender Upon Termination. Unless Extreme or an Applicable Purchaser purchases or has purchased BNPLC's entire interest in the Property pursuant to the terms of the Purchase Agreement and BNPLC's entire interest in the Improvements and other "Property" under (and as defined in) the Other Purchase Agreement, Extreme shall, upon the termination of Extreme's right to occupancy, surrender to BNPLC the Property, including Improvements constructed by Extreme and fixtures and furnishings included in the Property, free of all Hazardous Substances (including Permitted Hazardous Substances) and tenancies and with all Improvements in substantially the same condition as of the date the same were initially completed, excepting only (i) ordinary wear and tear that occurs between the maintenance, repairs and replacements required by other provisions of this Land Lease or the Other Lease Agreement, and (ii) demolition, alterations and additions which are expressly permitted by the terms of this Land Lease or the Other Lease Agreement and which have been completed by Extreme in a good and workmanlike manner in accordance with all Applicable Laws. Any movable furniture or movable personal property belonging to Extreme or any party claiming under Extreme, if not removed at the time of such termination and if
[Land]
BNPLC shall so elect, shall be deemed abandoned and become the property of BNPLC without any payment or offset therefor. If BNPLC shall not so elect, BNPLC may remove such property from the Property and store it at Extreme's risk and expense.
Nothing in this Paragraph 18 will be construed to require Extreme to surrender the Property to BNPLC during the continuation of any breach by BNPLC of any obligation it has under the Purchase Agreement to convey the Property to Extreme or an Applicable Purchaser.
19. Holding Over by Extreme. Should Extreme not purchase BNPLC's right,
title and interest in the Property as provided in the Purchase Agreement, but
nonetheless continue to hold the Property after the termination of this Land
Lease without BNPLC's consent, whether such termination occurs by lapse of time
or otherwise, such holding over shall constitute and be construed as a tenancy
from day to day only, at a daily Base Rent equal to: (i) Stipulated Loss Value
on the day in question, times (ii) the Default Rate for such day; divided by
(iii) three hundred and sixty; subject, however, to all of the terms,
provisions, covenants and agreements on the part of Extreme hereunder. No
payments of money by Extreme to BNPLC after the termination of this Land Lease
shall reinstate, continue or extend the Term of this Land Lease and no extension
of this Land Lease after the termination thereof shall be valid unless and until
the same shall be reduced to writing and signed by both BNPLC and Extreme.
20. Independent Obligations Evidenced by the Other Operative Documents. Extreme acknowledges and agrees that nothing contained in this Land Lease shall limit, modify or otherwise affect any of Extreme's obligations under the other Operative Documents, which obligations are intended to be separate, independent and in addition to, and not in lieu of, the obligations set forth herein. In the event of any inconsistency between the express terms and provisions of the Purchase Documents and the express terms and provisions of this Land Lease, the express terms and provisions of the Purchase Documents shall control. In the event of any inconsistency between the express terms and provisions of the Closing Certificate and the express terms and provisions of this Land Lease, the express terms and provisions of this Land Lease shall control; provided, nothing herein will limit or impair Extreme's obligations under the Closing Certificate following any expiration of termination of this Land Lease.
[The signature pages follow.]
[Land]
IN WITNESS WHEREOF, Extreme and BNPLC have caused this Lease Agreement
(Land) to be executed as of June 1, 2000.
"Extreme"
EXTREME NETWORKS, INC.
By:___________________________
Name:______________________
Title:_____________________
[Continuation of signature pages to Lease Agreement (Land) dated to be effective June 1, 2000]
"BNPLC"
BNP LEASING CORPORATION
By: _______________________________
Lloyd G. Cox, Vice President
Legal Description
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
[Land]
Insurance Requirements
I. LIABILITY INSURANCE:
A. Extreme must maintain commercial general liability ("CGL") insurance on an occurrence basis, affording immediate protection to the limit of not less than $20,000,000 combined single limit for bodily and personal injury, death and property damage in respect of any one occurrence. The CGL insurance must be primary to, and shall receive no contribution from, any insurance policies or self-insurance programs otherwise afforded to or available to the Interested Parties, collectively or individually. Further, the CGL insurance must include blanket contractual liability coverage which insures contractual liability under the indemnifications set forth in this Land Lease (though such coverage or the amount thereof shall in no way limit such indemnifications).
B. Any deductible or self-insured retention applicable to the CGL insurance shall not exceed $500,000.
C. The forms of insurance policies (including endorsements) used to provide the CGL insurance required by this Land Lease, and the insurance company or companies providing the CGL insurance, must be acceptable to BNPLC. BNPLC shall have the right from time to time and at any time to review and approve such policy forms (including endorsements) and the insurance company or companies providing the insurance. Without limiting the generality of the foregoing, BNPLC may reasonably require (and unless and until Extreme is otherwise notified by BNPLC, BNPLC does require) that such insurance be provided under forms and by companies consistent with the following:
(a) ISO additional insured form CG 2026 1185 or equivalent substitute form, without modification (and under the commercial umbrella, if any), designating as additional insureds "BNPLC and other Interested Parties, as defined in the Common Definitions and Provisions Agreement (Land) between Extreme Networks, Inc. and BNP Leasing Corporation dated June 1, 2000)"; and
(b) provisions entitling BNPLC to 30 days' notice from the insurer prior to any cancellation of the CGL coverage.
[Land]
III. OTHER INSURANCE RELATED REQUIREMENTS:
A. BNPLC must be notified in writing immediately by Extreme of claims against Extreme that might cause a reduction below seventy-five percent (75%) of any aggregate limit of any policy.
B. Extreme's CGL insurance must be evidenced by ACORD form 25 "Certificate of Insurance" completed and interlineated in a manner satisfactory to BNPLC to show compliance with the requirements of this Exhibit. Copies of endorsements to the CGL insurance must be attached to such form.
C. Such evidence of required insurance must be delivered upon execution of this Land Lease and new certificate or evidence of insurance must be delivered no later than 10 days prior to expiration of existing policy.
D. Extreme shall not cancel, fail to renew, or make or permit any material reduction in any of the policies or certificates described in this Exhibit without the prior written consent of BNPLC. The certificates (ACORD forms 25) described in this Exhibit must contain the following express provision:
"This is to certify that the policies of insurance described herein have been issued to the insured Extreme Networks, Inc. for whom this certificate is executed and are in force at this time. In the event of cancellation of coverage affecting the certificate holder, at least thirty days prior notice shall be given to the certificate holder."
E. The limits of liability under the liability insurance required by this Land Lease may be provided by a single policy of insurance or by a combination of primary and umbrella policies, but in no event shall the total limits of liability available for any one occurrence or accident be less than those required by this Exhibit.
F. Extreme shall provide copies, certified as complete and correct by an authorized agent of the applicable insurer, of all insurance policies required by this Exhibit within ten days after receipt of a request for such copies from BNPLC.
Exhibit B - Page 2
[Land]
Notice of LIBOR Period Election
BNP Leasing Corporation
12201 Merit Drive
Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Re: Lease Agreement (Improvements) and Lease Agreement (Land), both dated as of June 1, 2000, and both between Extreme Networks, Inc., as tenant, and BNP Leasing Corporation, as landlord
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the two Lease Agreements referenced above. This letter constitutes notice to you that the LIBOR Period Election under both of the Lease Agreements shall be:
________________ month(s),
beginning with the first Base Rent Period that commences on or after:
____________________, ____.
Executed this _____ day of ______________, 20__.
Extreme Networks, Inc.
Name:________________________
Title:_______________________
[cc all Participants]
[Land]
FINANCIAL COVENANTS
[Land]
EXHIBIT 10.9
$48,000,000
LEASE AGREEMENT
(Improvements)
BETWEEN
BNP LEASING CORPORATION
("BNPLC")
AND
EXTREME NETWORKS, INC.
("Extreme")
June 1, 2000
(Santa Clara, California)
[Improvements]
TABLE OF CONTENTS
Page ---- 1. Term..................................................................................................... 2 (a) Scheduled Term...................................................................................... 2 -------------- (b) Election by Extreme to Terminate After Accelerating the Designated Sale Date........................ 2 ---------------------------------------------------------------------------- (c) Extension of the Term............................................................................... 3 --------------------- 2. Use and Condition of the Property........................................................................ 3 (a) Use................................................................................................. 3 --- (b) Condition of the Property........................................................................... 4 ------------------------- (c) Consideration for and Scope of Waiver............................................................... 4 ------------------------------------- 3. Rent..................................................................................................... 4 (a) Base Rent Generally................................................................................. 4 ------------------- (b) Impact of Collateral Upon Formulas.................................................................. 5 ---------------------------------- (c) Calculation of and Due Dates for Base Rent.......................................................... 5 ------------------------------------------ (i) Determination of Payment Due Dates, Generally................................................ 5 --------------------------------------------- (ii) Special Adjustments to Base Rent Payment Dates and Periods................................... 6 ---------------------------------------------------------- (iii) Base Rent Formula for Periods During Which The Collateral Percentage is 100%................. 6 ---------------------------------------------------------------------------- (iv) Base Rent Formula for Periods During Which The Collateral Percentage is Less Than 100%....... 7 -------------------------------------------------------------------------------------- (d) Additional Rent..................................................................................... 8 --------------- (e) Arrangement Fee..................................................................................... 8 --------------- (f) Administrative Agency Fees.......................................................................... 8 -------------------------- (g) No Demand or Setoff................................................................................. 8 ------------------- (h) Default Interest and Order of Application........................................................... 8 ----------------------------------------- 4. Nature of this Agreement................................................................................. 8 (a) "Net" Lease Generally............................................................................... 8 --------------------- (b) No Termination...................................................................................... 8 -------------- (c) Tax Reporting....................................................................................... 9 ------------- (d) Characterization of this Improvements Lease......................................................... 10 ------------------------------------------- 5. Payment of Executory Costs and Losses Related to the Property............................................ 10 (a) Impositions......................................................................................... 10 ----------- (b) Increased Costs; Capital Adequacy Charges........................................................... 11 ----------------------------------------- (c) Extreme's Payment of Other Losses; General Indemnification.......................................... 12 ---------------------------------------------------------- (d) Exceptions and Qualifications to Indemnities........................................................ 13 -------------------------------------------- 6. Initial Renovations...................................................................................... 14 (a) Funds Advanced to Extreme From the Initial Funding Advance.......................................... 14 ---------------------------------------------------------- (b) Quality and Timing of the Initial Renovations....................................................... 14 --------------------------------------------- (c) Control of Work..................................................................................... 14 --------------- (d) Adequacy of Drawings, Specifications and Budgets.................................................... 14 ------------------------------------------------ |
[Improvements]
(e) Existing Condition of the Land and Improvements..................................................... 15 ----------------------------------------------- (f) Clean Up............................................................................................ 15 -------- (g) No Damage for Delays................................................................................ 15 -------------------- (h) No Fee For Construction Management.................................................................. 15 ---------------------------------- 7. Status of Property Acquired With Funds Provided by BNPLC................................................. 15 8. Environmental............................................................................................ 16 (a) Environmental Covenants by Extreme.................................................................. 16 ---------------------------------- (b) Right of BNPLC to do Remedial Work Not Performed by Extreme......................................... 16 ----------------------------------------------------------- (c) Environmental Inspections and Reviews............................................................... 17 ------------------------------------- (d) Communications Regarding Environmental Matters...................................................... 17 ---------------------------------------------- 9. Insurance Required and Condemnation...................................................................... 18 (a) Liability Insurance................................................................................. 18 ------------------- (b) Property Insurance.................................................................................. 18 ------------------ (c) Failure to Obtain Insurance......................................................................... 19 --------------------------- (d) Condemnation........................................................................................ 19 ------------ 10. Application of Insurance and Condemnation Proceeds....................................................... 19 (a) Collection and Application of Insurance and Condemnation Proceeds Generally......................... 19 --------------------------------------------------------------------------- (b) Advances of Escrowed Proceeds to Extreme............................................................ 20 ---------------------------------------- (c) Application of Escrowed Proceeds as a Qualified Prepayment.......................................... 20 ---------------------------------------------------------- (d) Special Provisions Applicable After Completion of Initial Renovations............................... 20 --------------------------------------------------------------------- (e) Special Provisions Applicable After an Event of Default............................................. 20 ------------------------------------------------------- (f) Extreme's Obligation to Restore..................................................................... 21 ------------------------------- (g) Takings of All or Substantially All of the Property................................................. 21 --------------------------------------------------- 11. Additional Representations, Warranties and Covenants of Extreme Concerning the Property.................. 21 (a) Compliance with Covenants and Laws.................................................................. 21 ---------------------------------- (b) Operation of the Property........................................................................... 21 ------------------------- (c) Debts for Construction, Maintenance, Operation or Development....................................... 22 ------------------------------------------------------------- (d) Repair, Maintenance, Alterations and Additions...................................................... 23 ---------------------------------------------- (e) Permitted Encumbrances and Development Documents.................................................... 23 ------------------------------------------------ (f) Books and Records Concerning the Property........................................................... 23 ----------------------------------------- 12. Financial Covenants, Reporting Covenants and Other Covenants Incorporated by Reference to Schedule 1............................................................................... 24 ---------- 13. Assignment and Subletting by Extreme..................................................................... 24 (a) BNPLC's Consent Required............................................................................ 24 ------------------------ (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters............................... 24 --------------------------------------------------------------------- (c) Consent Not a Waiver................................................................................ 24 -------------------- 14. Assignment by BNPLC...................................................................................... 24 (a) Restrictions on Transfers........................................................................... 24 ------------------------- (b) Effect of Permitted Transfer or other Assignment by BNPLC........................................... 25 --------------------------------------------------------- 15. BNPLC's Right of Access.................................................................................. 25 |
[Improvements]
16. Events of Default....................................................................................... 26 17. Remedies................................................................................................ 28 (a) Basic Remedies..................................................................................... 28 -------------- (b) Notice Required So Long As the Purchase Option and Extreme's Initial Remarketing -------------------------------------------------------------------------------- Rights and Obligations Continue Under the Purchase Agreement....................................... 29 ------------------------------------------------------------ (c) Enforceability..................................................................................... 30 -------------- (d) Remedies Cumulative................................................................................ 30 ------------------- 18. Default by BNPLC........................................................................................ 30 19. Quiet Enjoyment......................................................................................... 30 20. Surrender Upon Termination.............................................................................. 31 21. Holding Over by Extreme................................................................................. 31 22. Independent Obligations Evidenced by the Other Operative Documents...................................... 31 |
[Improvements]
Exhibits and Schedules
Exhibit A.......................... Legal Description --------- Exhibit B.......................... Insurance Requirements --------- Exhibit C.......................... LIBOR Period Election Form --------- Schedule 1......................... Financial Covenants and Other Requirements ---------- |
[Improvements]
(IV)
LEASE AGREEMENT
(IMPROVEMENTS)
This LEASE AGREEMENT (IMPROVEMENTS) (this "Improvements Lease") is made and dated as of June 1, 2000 (the "Effective Date") by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and EXTREME NETWORKS, INC., a Delaware corporation ("Extreme").
RECITALS
Contemporaneously with the execution of this Improvements Lease, BNPLC and Extreme are executing a Common Definitions and Provisions Agreement (Improvements) dated as of the Effective Date (the "Common Definitions and Provisions Agreement (Improvements)"), which by this reference is incorporated into and made a part of this Improvements Lease for all purposes. As used in this Improvements Lease, capitalized terms defined in the Common Definitions and Provisions Agreement (Improvements) and not otherwise defined in this Improvements Lease are intended to have the respective meanings assigned to them in the Common Definitions and Provisions Agreement (Improvements).
Pursuant to the Acquisition Contract, which covers the Land described in Exhibit A, BNPLC is acquiring the Land and any appurtenances thereto and all existing Improvements thereon from Seller contemporaneously with the execution of this Improvements Lease.
In anticipation of BNPLC's acquisition of the Land and the existing Improvements thereon under the Acquisition Contract, BNPLC and Extreme have reached agreement as to the terms and conditions upon which BNPLC is willing to lease the existing Improvements and the Improvements to be constructed on the Land as hereinafter provided, and by this Improvements Lease BNPLC and Extreme desire to evidence such agreement.
GRANTING CLAUSES
BNPLC does hereby LEASE, DEMISE and LET unto Extreme for the term hereinafter set forth all right, title and interest of BNPLC, now owned or hereafter acquired, in and to:
(1) any and all Improvements; and
(2) all easements and other rights appurtenant to the Improvements, whether now owned or hereafter acquired by BNPLC.
BNPLC's interest in all property described in clauses (1) and (2) above are hereinafter referred to collectively as the "Real Property". The Real Property does not include the Land itself, it being understood that the Other Lease Agreement constitutes a separate lease of the Land and the appurtenances thereto, and only the Land and the appurtenances thereto, from BNPLC to Extreme.
To the extent, but only to the extent, that assignable rights or interests in, to or under the following have been or will be acquired by BNPLC under the Acquisition Contract or acquired by BNPLC pursuant to Paragraph 7 below, BNPLC also hereby grants and assigns to Extreme for the term of this Improvements Lease the right to use and enjoy (and, in the case of contract rights, to enforce) such rights or interests of BNPLC:
[Improvements]
(a) any goods, equipment, furnishings, furniture and other tangible personal property of whatever nature that are located on the Land and all renewals or replacements of or substitutions for any of the foregoing;
(b) the benefits, if any, conferred upon the owner of the Real Property by the Permitted Encumbrances (including the right to receive rents under and to otherwise enforce the Premises Leases) and Development Documents; and
(c) any permits, licenses, franchises, certificates, and other rights and privileges against third parties related to the Real Property.
Such rights and interests of BNPLC, whether now existing or hereafter arising, are hereinafter collectively called the "Personal Property". The Real Property and the Personal Property are hereinafter sometimes collectively called the "Property."
However, the leasehold estate conveyed hereby and Extreme's rights hereunder are expressly made subject and subordinate to the terms and conditions of this Improvements Lease, the Premises Leases and all other Permitted Encumbrances, and to any other claims or encumbrances not constituting Liens Removable by BNPLC.
GENERAL TERMS AND CONDITIONS
The Property is leased by BNPLC to Extreme and is accepted and is to be used and possessed by Extreme upon and subject to the following terms and conditions:
1 TERM.
(i) purchased or caused an Applicable Purchaser to purchase the Property pursuant to the Purchase Agreement and satisfied all of Extreme's other obligations under the Purchase Agreement;
(ii) paid to BNPLC all Base Rent and all other Rent due on or before or accrued through the Designated Sale Date; and
(iii) paid any Breakage Costs caused by BNPLC's sale of the Property pursuant to the Purchase Agreement.
[Improvements]
2 USE AND CONDITION OF THE PROPERTY.
(i) the making of Initial Renovations as described in Paragraph 6;
(ii) administrative and office space;
(iii) research and development, production, assembly, distribution and warehousing, in each case of products that are of substantially the same type and character as those regularly sold by Extreme in the ordinary course of its business as of the Effective Date;
(iv) cafeteria, library and other support facilities that Extreme may provide to its employees; and
(vi) other lawful purposes (including research and development or production of products that are not of substantially the same type and character as those regularly sold by Extreme in the ordinary course of its business as of the Effective Date) approved in advance and in writing by BNPLC, which approval will not be unreasonably withheld (but Extreme acknowledges that BNPLC's withholding of such approval shall be reasonable if BNPLC determines in good faith that (1) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, or (2) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring Extreme's compliance with the requirements of this Improvements Lease or other Operative Documents).
[Improvements]
Nothing in this subparagraph will prevent a tenant under a Premises Lease, executed prior to the Effective Date, from using the space covered thereby for purposes expressly authorized by the terms and conditions of such Premises Lease.
However, such exclusion of representations and warranties by BNPLC is not intended to impair any representations or warranties made by other parties, the benefit of which may pass to Extreme during the Term because of the definition of Personal Property and Property above.
3 RENT.
[Improvements]
Extreme from time to time, Extreme may report Base Rent as if there had been no such reduction and as if the Collateral from time to time provided in accordance with the requirements of the Pledge Agreement had been maintained in Accounts bearing interest at the Deposit Rate.
a0 For all Base Rent Periods subject to a LIBOR Period Election of one month or three months, Base Rent shall be due in one installment on the Base Rent Date upon which the Base Rent Period ends.
b0 For Base Rent Periods subject to a LIBOR Period Election of six months, Base Rent shall be payable in two installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, and with the second installment becoming due on the Base Rent Date upon which the Base Rent Period ends.
c0 For Base Rent Periods subject to a LIBOR Period Election of nine months, Base Rent shall be payable in three installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, with the second installment becoming due on the first Business Day of the sixth calendar month following the commencement of such Base Rent Period, and with the third installment becoming due on the Base Rent Date upon which the Base Rent Period ends.
d0 For Base Rent Periods subject to a LIBOR Period Election of twelve months, Base Rent shall be payable in four installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, with the second installment becoming due on the first Business Day of the sixth calendar month following the commencement of such Base Rent Period, with the third installment becoming due on the first Business Day of the ninth calendar month following the commencement of such Base Rent Period, and with the fourth installment becoming due on the Base Rent Date upon which the Base Rent Period ends.
a0 Any Base Rent Period that begins before, and does not otherwise end before, the first Business Day of the first calendar month following a Failed Collateral Test Date shall end upon but not include such first Business Day, and such first Business Day shall constitute a Base Rent Date, upon which Extreme must pay all accrued, unpaid Base Rent for the Base Rent Period just ended.
b0 In addition to Base Rent due on a the first Business Day
of the first calendar month following a Failed Collateral Test Date,
Extreme must pay the Breakage Costs, if any, resulting from any early
ending of a Base Rent Period pursuant to the preceding clause
3.(c)(ii)a).
[Improvements]
c0 If Extreme or any Applicable Purchaser purchases BNPLC's interest in the Property pursuant to the Purchase Agreement, any accrued unpaid Base Rent and all outstanding Additional Rent shall be due on the date of purchase in addition to the purchase price and other sums due BNPLC under the Purchase Agreement.
. Stipulated Loss Value on the first day of such Base Rent Period, times
. the sum of (a) the Secured Spread and (b) the Effective Rate/Deposit Rate Difference for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times
. the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by
. three hundred sixty.
Assume, only for the purpose of illustration: that the Collateral Percentage for a hypothetical Base Rent Period is one hundred percent (100%); that prior to the first day of such Base Rent Period Qualified Prepayments have been received by BNPLC, leaving a Stipulated Loss Value of $15,000,000; that the sum of the Secured Spread and the Effective Rate/Deposit Rate Difference is forty-two and one-half basis points (42.5/100 of 1%); and that such Base Rent Period contains exactly thirty days. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal:
$15,000,000 x .425% x 30/360 = $5312.50
(iv) Base Rent Formula for Periods During Which The Collateral Percentage is Less Than 100%. Each installment of Base Rent payable for any Base Rent Period during which the Collateral Percentage is less than one hundred percent (100%) shall equal:
. Stipulated Loss Value on the first day of such Base Rent Period, times
. the sum of:
(A) the product of:
(1) the Collateral Percentage for such Base Rent Period, times
(2) the sum of (a) the Secured Spread and (b) the Effective Rate/Deposit Rate Difference for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, plus
[Improvements]
(B) the product of:
(1) one minus the Collateral Percentage for such Base Rent Period, times
(2) the sum of (a) the Effective Rate with respect to such Base Rent Period, plus (b) the Unsecured Spread for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times
. the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by
. three hundred sixty.
Assume, only for the purpose of illustration: that the Collateral Percentage for a hypothetical Base Rent Period is fifty-five percent (55%); that prior to the first day of such Base Rent Period Qualified Prepayments have been received by BNPLC, leaving a Stipulated Loss Value of $15,000,000; that the Effective Rate for the Base Rent Period is 6%; that the sum of the Secured Spread and the Effective Rate/Deposit Rate Difference is forty-two and one-half basis points (42.5/100 of 1%); that upon the commencement of such Base Rent Period the Unsecured Spread is two hundred twenty-five basis points (225/100 of 1%); and that such Base Rent Period contains exactly thirty days. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal:
$15,000,000 x {(55% x .425%) + ([1 - 55%] x [6% + 2.25%])} x 30/360 = $49,328.12
[Improvements]
4 Nature of this Agreement.
[Improvements]
However, nothing in this subparagraph 4.(b) shall be construed as a waiver by Extreme of any right Extreme may have at law or in equity to the following remedies, whether because of BNPLC's failure to remove a Lien Removable by BNPLC or because of any other default by BNPLC under this Improvements Lease that continues beyond the period for cure provided in Paragraph 18: (i) the recovery of monetary damages, (ii) injunctive relief in case of the violation, or attempted or threatened violation, by BNPLC of any of the express covenants, agreements, conditions or provisions of this Improvements Lease which are binding upon BNPLC (including the confidentiality provisions set forth in subparagraph 15.(c) below), or (iii) a decree compelling performance by BNPLC of any of the express covenants, agreements, conditions or provisions of this Improvements Lease which are binding upon BNPLC.
[Improvements]
rather than as a mortgage or other security device, in any action brought by BNPLC to enforce this Improvements Lease or the Purchase Agreement.
5 Payment of Executory Costs and Losses Related to the Property.
(i) If after the Effective Date there shall be any increase in the cost to BNPLC's Parent or any other Participant agreeing to make or making, funding or maintaining advances to BNPLC in connection with the Property because of any Banking Rules Change, then Extreme shall from time to time, pay to BNPLC for the account of BNPLC's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate BNPLC's Parent or the Participant for such increased cost. An increase in costs resulting from any imposition or increase of reserve requirements applicable to Collateral held from time to time by BNPLC's Parent or other Participants pursuant to the Pledge Agreement would be an increase covered by the preceding sentence. A certificate as to the amount of such increased cost, submitted to BNPLC and Extreme by BNPLC's Parent or the other Participant, shall be conclusive and binding upon Extreme, absent clear and demonstrable error.
(ii) BNPLC's Parent or any other Participant may demand additional payments ("Capital Adequacy Charges") if BNPLC's Parent or the other Participant determines that any Banking Rules Change affects the amount of capital to be maintained by it and that the amount of such capital is increased by or based upon the existence of advances made or to be made to BNPLC to permit BNPLC to maintain BNPLC's investment in the Property. To the extent that BNPLC's Parent or another Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such investment or advances, Extreme shall pay to BNPLC for the account of BNPLC's Parent or the other Participant, as the case may be, the amount so demanded. Without limiting the foregoing, BNPLC and
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Extreme hereby acknowledge and agree that the provisions for calculating Base Rent set forth herein reflect the assumption that the Pledge Agreement will cause a zero percent (0%) risk weight to be assigned to a percentage (equal to the Collateral Percentage) of the collective investment of BNPLC and the Participants in the Property pursuant to 12 Code of Federal Regulations, part 225, as from time to time supplemented or amended, or pursuant to any other similar or successor statute or regulation applicable to BNPLC and the Participants. If and so long as such risk weight is increased above the assumed amount of zero percent (0%) because of a Banking Rules Change, Capital Adequacy Charges may be collected to yield the same rate of return to BNPLC, BNPLC's Parent and any other Participants (net of their costs of maintaining required capital) that they would have enjoyed from this Improvements Lease absent such increase.
(iii) Notwithstanding the foregoing provisions of this subparagraph 5.(b), Extreme shall not be obligated pay any claim for compensation pursuant to this subparagraph 5.(b) arising or accruing more than six months prior to the date Extreme is notified that BNPLC or a Participant intends to make the claim; provided, however, that Extreme shall not be excused by this subparagraph from providing such compensation for any period during which notice on behalf of BNPLC or the Participant, as the case may be, could not be provided because of the retroactive application of the statute, regulation or other basis for the claim.
(iv) Any amount required to be paid by Extreme under this subparagraph 5.(b) shall be due fifteen days after a notice requesting such payment is received by Extreme.
(i) All Losses (including Environmental Losses) asserted against or incurred or suffered by BNPLC or other Interested Parties at any time and from time to time by reason of, in connection with or arising out of (A) their ownership or alleged ownership of any interest in the Property or the Rents, (B) the use and operation of the Property, (C) the negotiation, administration or enforcement of the Operative Documents, (D) the making of Funding Advances, (E) any construction undertaken by Extreme or others on its behalf on or about the Property, (F) any Premises Lease, (G) the breach by Extreme of this Improvements Lease or any other document executed by Extreme in connection herewith, (H) any failure of the Property or Extreme itself to comply with Applicable Laws, (I) Permitted Encumbrances, (J) Hazardous Substance Activities, including those occurring prior to Effective Date, (K) any obligations under the Acquisition Contract that survive the closing under the Acquisition Contract, or (L) any bodily or personal injury or death or property damage occurring in or upon or in the vicinity of the Property through any cause whatsoever, shall be paid by Extreme, and Extreme shall indemnify and defend BNPLC and other Interested Parties from and against all such Losses.
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(iii) Costs and expenses for which Extreme shall be responsible pursuant to this subparagraph 5.(c) will include appraisal fees, filing and recording fees, inspection fees, survey fees, taxes, brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees and Attorneys' Fees incurred by BNPLC with respect to the Property, whether such costs and expenses are incurred at the time of execution of this Improvements Lease or at any time during the Term.
(iv) Extreme's obligations under this subparagraph 5.(c) shall survive the termination or expiration of this Improvements Lease. Any amount to be paid by Extreme under this subparagraph 5.(c) shall be due fifteen days after a notice requesting such payment is received by Extreme.
(v) If an Interested Party notifies Extreme of any claim or
proceeding included in, or any investigation or allegation concerning,
Losses for which Extreme is responsible pursuant to this subparagraph
5.(c), Extreme shall assume on behalf of the Interested Party and conduct
with due diligence and in good faith the investigation and defense thereof
and the response thereto with counsel selected by Extreme, but reasonably
satisfactory to the Interested Party; provided, that the Interested Party
shall have the right to be represented by advisory counsel of its own
selection and at its own expense; and provided further, that if any such
claim, proceeding, investigation or allegation involves both Extreme and
the Interested Party and the Interested Party shall have reasonably
concluded that there are legal defenses available to it which are
inconsistent with or in addition to those available to Extreme, then the
Interested Party shall have the right to select separate counsel to
participate in the investigation and defense of and response to such claim,
proceeding, investigation or allegation on its own behalf, and Extreme
shall pay or reimburse the Interested Party for all Attorney's Fees
incurred by the Interested Party because of the selection of such separate
counsel. If Extreme fails to assume promptly (and in any event within
fifteen days after being notified of the applicable claim, proceeding,
investigation or allegation) the defense of the Interested Party, then the
Interested Party may contest (or settle, with the prior consent of Extreme,
which consent will not be unreasonably withheld) the claim, proceeding,
investigation or allegation at Extreme's expense using counsel selected by
the Interested Party. Moreover, if any such failure by Extreme continues
for forty-five days or more after Extreme is notified of any such claim,
proceeding, investigation or allegation, the Interested Party may elect not
to contest or continue contesting the same and instead, in accordance with
the written advice of counsel, settle (or pay in full) all claims related
thereto without Extreme's consent and without releasing Extreme from any
obligations to the Interested Party under this subparagraph 5.(c).
(i) BNPLC acknowledges and agrees that nothing in subparagraph
4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed
to require Extreme to pay or reimburse (w) any costs or expenses incurred
by any Interested Party (including BNPLC or any transferee of BNPLC) to
accomplish any Permitted Transfers described in clauses (1), (2), (3), (4)
or (6) of the definition thereof in the Common Definitions and Provisions
Agreement (Improvements), (x) Excluded Taxes, (y) Losses
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incurred or suffered by any Interested Party that are proximately caused by (and attributed by any applicable principles of comparative fault to) the Established Misconduct of that Interested Party, or (z) Losses incurred or suffered in connection with the execution of the Participation Agreement or Pledge Agreement by Participants (or supplements making them parties thereto) or in connection with any negotiation or due diligence Participants may undertake before entering into the Participation Agreement or Pledge Agreement. Further, without limiting BNPLC's rights (as provided in other provisions of this Improvements Lease and other Operative Documents) to include the following in the calculation of Stipulated Loss Value and the Break Even Price (as applicable) or to collect Base Rent, a Supplemental Payment and other amounts, the calculation of which depends upon Stipulated Loss Value or the Break Even Price, BNPLC acknowledges and agrees that nothing in subparagraph 4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require Extreme to pay or reimburse an Interested Party for costs paid by BNPLC with the proceeds of the Initial Funding Advance as part of the Transaction Expenses.
Further, if an Interested Party receives a written notice of Losses that
such Interested Party believes are covered by the indemnity in subparagraph
5.(c)(i), then such Interested Party will be expected to promptly furnish a
copy of such notice to Extreme. The failure to so provide a copy of the
notice to Extreme shall not excuse Extreme from its obligations under
subparagraph 5.(c)(i); provided, that if Extreme is unaware of the matters
described in the notice and such failure renders unavailable defenses that
Extreme might otherwise assert, or precludes actions that Extreme might
otherwise take, to minimize its obligations, then Extreme shall be excused
from its obligation to indemnify such Interested Party (and any Affiliate
of such Interested Party) against the Losses, if any, which would not have
been incurred or suffered but for such failure. For example, if BNPLC fails
to provide Extreme with a copy of a notice of an obligation covered by the
indemnity set out in subparagraph 5.(c)(i) and Extreme is not otherwise
already aware of such obligation, and if as a result of such failure BNPLC
becomes liable for penalties and interest covered by the indemnity in
excess of the penalties and interest that would have accrued if Extreme had
been promptly provided with a copy of the notice, then Extreme will be
excused from any obligation to BNPLC (or any Affiliate of BNPLC) to pay the
excess.
6 Initial Renovations.
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7. Status of Property Acquired With Funds Provided by BNPLC. All Improvements constructed during the term of this Improvements Lease shall be owned by BNPLC and shall constitute "Property" covered by this Improvements Lease. Further, to the extent heretofore or hereafter acquired (in whole or in part) with any portion of the Initial Funding Advance or with other funds for which Extreme has received or hereafter receives reimbursement from the Initial Funding Advance, all furnishings, furniture, chattels, permits, licenses, franchises, certificates and other personal property of whatever nature shall have been acquired on behalf of BNPLC by Extreme, shall be owned by BNPLC and shall constitute "Property" covered by this Improvements
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Lease, as shall all renewals or replacements of or substitutions for any such Property. Extreme shall not authorize or permit the transfer of title to the Improvements or to any other such Property to pass through Extreme or Extreme's Affiliates before it is transferred to BNPLC from contractors, suppliers, vendors or other third Persons. Nothing herein shall constitute authorization of Extreme, as agent, to bind BNPLC to any construction contract or other agreement with a third Person, but any construction contract or other agreement executed by Extreme for the acquisition or construction of Improvements or other components of the Property may provide for the transfer of title as required by the preceding sentence. Upon request of BNPLC, Extreme shall deliver to BNPLC an inventory describing all significant items of Personal Property (and, in the case of tangible personal property, showing the make, model, serial number and location thereof) other than Improvements, with a certification by Extreme that such inventory is true and complete and that all items specified in the inventory are covered by this Improvements Lease free and clear of any Lien other than the Permitted Encumbrances or Liens Removable by BNPLC.
8. Environmental.
(i Extreme shall not conduct or permit others to conduct Hazardous Substance Activities, except Permitted Hazardous Substance Use and Remedial Work.
(ii Extreme shall not discharge or permit the discharge of anything on or from the Property that would require any permit under applicable Environmental Laws, other than (1) storm water runoff, (2) waste water discharges through a publicly owned treatment works, (3) discharges that are a necessary part of any Remedial Work, and (4) other similar discharges consistent with the definition herein of Permitted Hazardous Substance Use, in each case in strict compliance with Environmental Laws.
(iii Following any discovery that Remedial Work is required by Environmental Laws or otherwise believed by BNPLC to be reasonably required, and to the extent not inconsistent with the other provisions of this Improvements Lease, Extreme shall promptly perform and diligently and continuously pursue such Remedial Work, in each case in strict compliance with Environmental Laws.
(iv If requested by BNPLC in connection with any Remedial Work required by this subparagraph, Extreme shall retain independent environmental consultants acceptable to BNPLC to evaluate any significant new information generated during Extreme's implementation of the Remedial Work and to discuss with Extreme whether such new information indicates the need for any additional measures that Extreme should take to protect the health and safety of persons (including employees, contractors and subcontractors and their employees) or to protect the environment. Extreme shall implement any such additional measures to the extent required with respect to the Property by Environmental Laws or otherwise believed by BNPLC to be reasonably required and to the extent not inconsistent with the other provisions of this Improvements Lease.
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(i Extreme shall immediately advise BNPLC of (1) any
discovery of any event or circumstance which would render any of the
representations of Extreme herein or in the Closing Certificate
concerning environmental matters materially inaccurate or misleading
if made at the time of such discovery and assuming that Extreme was
aware of all relevant facts, (2) any Remedial Work (or change in
Remedial Work) required or undertaken by Extreme or its Affiliates in
response to any (A) discovery of any Hazardous Substances on, under or
about the Property other than Permitted Hazardous Substances or (B)
any claim for damages resulting from Hazardous Substance Activities,
(3) Extreme's discovery of any occurrence or condition on any real
property adjoining or in the vicinity of the Property which could
cause the Property or any part thereof to be subject to any ownership,
occupancy, transferability or use restrictions under Environmental
Laws, or (4) any investigation or inquiry of any failure or alleged
failure by Extreme to comply with Environmental Laws affecting the
Property by any governmental authority responsible for enforcing
Environmental Laws. In such event, Extreme shall deliver to BNPLC
within thirty days after BNPLC's request, a preliminary written
environmental plan setting forth a general description of the action
that Extreme proposes to take with respect thereto, if any, to bring
the Property into compliance with Environmental Laws or to correct any
breach by Extreme of this Paragraph 8, including any proposed Remedial
Work, the estimated cost and time of completion, the name of the
contractor and a copy of the construction contract, if any, and such
additional data, instruments, documents, agreements or other materials
or information as BNPLC may request.
(ii Extreme shall provide BNPLC with copies of all material written communications with federal, state and local governments, or agencies relating to the matters listed in the preceding clause
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(i). Extreme shall also provide BNPLC with copies of any correspondence from third Persons which threaten litigation over any significant failure or alleged significant failure of Extreme to maintain or operate the Property in accordance with Environmental Laws.
(iii Prior to Extreme's submission of a Material Environmental Communication to any governmental or regulatory agency or third party, Extreme shall, to the extent practicable, deliver to BNPLC a draft of the proposed submission (together with the proposed date of submission), and in good faith assess and consider any comments of BNPLC regarding the same. Promptly after BNPLC's request, Extreme shall meet with BNPLC to discuss the submission, shall provide any additional information requested by BNPLC and shall provide a written explanation to BNPLC addressing the issues raised by comments (if any) of BNPLC regarding the submission, including a reasoned analysis supporting any decision by Extreme not to modify the submission in accordance with comments of BNPLC.
9. Insurance Required and Condemnation.
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10. Application of Insurance and Condemnation Proceeds.
(i First, proceeds covered by this Paragraph 10 will be used to reimburse BNPLC for any costs and expenses, including Attorneys' Fees, that BNPLC incurred to collect the proceeds.
(ii Second, the proceeds remaining after such reimbursement to BNPLC (hereinafter, the "Remaining Proceeds") will be applied, as hereinafter more particularly provided, either as a Qualified Prepayment or to reimburse Extreme or BNPLC for the actual out-of- pocket costs of repairing or restoring the Property. Until, however, any Remaining Proceeds received by BNPLC are applied by BNPLC as a Qualified Prepayment or applied by BNPLC to reimburse costs of repairs to or restoration of the Property pursuant to this Paragraph 10, BNPLC shall hold and maintain such Remaining Proceeds as Escrowed Proceeds in an interest bearing account, and all interest earned on such account shall be added to and made a part of such Escrowed Proceeds.
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imposed by BNPLC. In no event, however, shall BNPLC be required to pay Escrowed Proceeds to Extreme in excess of the actual out-of-pocket cost to Extreme of the applicable repair or restoration, as evidenced by invoices or other documentation satisfactory to BNPLC, it being understood that BNPLC may retain and apply any such excess as a Qualified Prepayment.
(i promptly restore or improve the Property or the remainder thereof to a value no less than Stipulated Loss Value and to a reasonably safe and sightly condition; or
(ii promptly restore the Property to a reasonably safe and sightly condition and pay to BNPLC for application as a Qualified Prepayment the amount (if any), as determined by BNPLC, needed to reduce Stipulated Loss Value to no more than the then current "AS IS" market value of the Property or remainder thereof.
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11. Additional Representations, Warranties and Covenants of Extreme Concerning the Property. Extreme represents, warrants and covenants as follows:
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this clause "significant value" will mean any fixture or Personal Property that has a value of more than $100,000 or that, when considered together with all other fixtures and Personal Property removed and not replaced by Extreme by items of equal suitability and value, has an aggregate value of $500,000 or more) or (ii) make material new Improvements or alter Improvements in any material respect. Without limiting the foregoing, Extreme will notify BNPLC before making any significant alterations to the Improvements after the completion of any Initial Renovations which Extreme elects to undertake.
13. Assignment and Subletting by Extreme.
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Extreme acknowledges that BNPLC's withholding of such consent or approval shall be reasonable if BNPLC determines in good faith that (1) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, or (2) giving the approval is likely to increase BNPLC's administrative burden of complying with or monitoring Extreme's compliance with the requirements of this Improvements Lease.
14. Assignment by BNPLC.
15. BNPLC's Right of Access.
(a During the Term, BNPLC and BNPLC's representatives may (subject to subparagraphs 15.(c) and 15.(d)) enter the Property at any reasonable time after five Business Days advance written notice to Extreme for the purpose of making inspections or performing any work BNPLC is authorized to undertake by the next subparagraph or for the purpose confirming whether Extreme has complied with the requirements of this Improvements Lease or the other Operative Documents.
(b If Extreme fails to perform any act or to take any action required of it by this Improvements Lease or the Closing Certificate, or to pay any money which Extreme is required by this
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(c Extreme shall have no obligation to provide proprietary information (as defined in the next sentence) to BNPLC, except and to the extent that (1) BNPLC reasonably determines that BNPLC cannot accomplish the purposes of BNPLC's inspection of the Property or exercise of other rights granted pursuant to the various express provisions of this Improvements Lease and the other Operative Documents without evaluating such information. For purposes of this Improvements Lease "proprietary information" includes Extreme's intellectual property, trade secrets and other confidential information of value to Extreme about, among other things, Extreme's manufacturing processes, products, marketing and corporate strategies, but in no event will "proprietary information" include any disclosure of substances and materials (and their chemical composition) which are or previously have been present in, on or under the Property at the time of any inspections by BNPLC, nor will "proprietary information" include any additional disclosures reasonably required to permit BNPLC to determine whether the presence of such substances and materials has constituted a violation of Environmental Laws. In addition, under no circumstances shall Extreme have any obligation to disclose to BNPLC or any other party any proprietary information of Extreme (including, without limitation, any pending applications for patents or trademarks, any research and design and any trade secrets) except if and to the limited extent reasonably necessary to comply with the express provisions of this Improvements Lease or the other Operative Documents.
(d So long as Extreme remains in possession of the Property, BNPLC or BNPLC's representative will, before making any inspection or performing any work on the Property authorized by this Improvements Lease, if then requested to do so by Extreme to maintain Extreme's security: (i) sign in at Extreme's security or information desk if Extreme has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification, (iii) permit an employee of Extreme to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security requirements of Extreme that do not, individually or in the aggregate, significantly interfere with inspections or work of BNPLC authorized by this Improvements Lease.
16. Events of Default. Each of the following events shall be an "Event of Default" by Extreme under this Improvements Lease:
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(a Extreme shall fail to pay when due any installment of Rent due hereunder and such failure shall continue for three (3) Business Days after Extreme is notified in writing thereof.
(b Extreme shall fail to cause any representation or warranty of
Extreme contained herein or in the Closing Certificate that was false or
misleading in any material respect when made to be made true and not misleading
(other than as described in the other clauses of this Paragraph 16), or Extreme
shall fail to comply with any term, provision or covenant of this Improvements
Lease or of the Closing Certificate (other than as described in the other
clauses of this Paragraph 16), and in either case shall not cure such failure
prior to the earlier of (A) thirty days after written notice thereof is sent to
Extreme or (B) the date any writ or order is issued for the levy or sale of any
property owned by BNPLC (including the Property) or any criminal prosecution is
instituted or overtly threatened against BNPLC or any of its directors, officers
or employees because of such failure; provided, however, that so long as no such
writ or order is issued and no such criminal prosecution is instituted or
overtly threatened, the period within which such failure may be cured by Extreme
shall be extended for a further period (not to exceed an additional sixty days)
as shall be necessary for the curing thereof with diligence, if (but only if)
(x) such failure is susceptible of cure but cannot with reasonable diligence be
cured within such thirty day period, (y) Extreme shall promptly have commenced
to cure such failure and shall thereafter continuously prosecute the curing
thereof with reasonable diligence and (z) the extension of the period for cure
will not, in any event, cause the period for cure to extend beyond five days
prior to the expiration of this Improvements Lease.
(c Extreme shall abandon the Property.
(d Extreme or any Subsidiary shall fail to make any payment or payments of principal, premium or interest, of Debt of Extreme described in the next sentence when due (taking into consideration the time Extreme may have to cure such failure, if any, under the documents governing such Debt). As used in this clause 14(a)(v), "Debt" shall include only Debt (as defined in the Common Definitions and Provisions Agreement (Improvements)) of Extreme or any of its Subsidiaries now existing or arising in the future (1) payable to any Interested Party, or (2) payable to any other Person and with respect to which $5,000,000 or more is actually due and payable because of acceleration or otherwise.
(e Extreme: (a) shall generally not, or be unable to, or shall admit in writing its inability to, pay its debts as such debts become due; or (b) shall make an assignment for the benefit of creditors, petition or apply to any tribunal for the appointment of a custodian, receiver or trustee for it or a substantial part of its assets; or (c) shall file any petition or application to commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (d) shall have had any such petition or application filed against it; or (e) by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or trustee for all or any substantial part of its property; or (f) shall suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of sixty days or more.
(f One or more final judgments, decrees or orders for the payment of money in excess of $5,000,000 in the aggregate shall be rendered against Extreme and such judgments, decrees or orders shall continue unsatisfied and in effect for a period of thirty consecutive days without Extreme's having obtained an agreement (or after the expiration or termination of an agreement) of the Persons entitled to enforce such judgment, decrees or orders not to enforce the same pending negotiations with Extreme concerning the satisfaction or other discharge of the same. (For purposes of this provision, no judgment, decree or order will be considered "final" until Extreme's right to appeal, if any, shall have expired or been exhausted.)
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(h as of the effective date of this Improvements Lease, any of the representations or warranties of Extreme contained in subparagraphs 2(A) - (K) of the Closing Certificate shall be false or misleading in any material respect.
(i Extreme shall fail to pay the full amount of any Supplemental Payment required by the Purchase Agreement on the Designated Sale Date.
(j Extreme shall fail to comply with any term, provision or condition of the Pledge Agreement after the expiration of any applicable notice and cure period set forth in the Pledge Agreement.
17. Remedies.
(i By notice to Extreme, BNPLC may terminate Extreme's right to possession of the Property. A notice given in connection with unlawful detainer proceedings specifying a time within which to cure a default shall terminate Extreme's right to possession if Extreme fails to cure the default within the time specified in the notice.
(ii Upon termination of Extreme's right to possession and without further demand or notice, BNPLC may re-enter the Property in any manner not prohibited by Applicable Law and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property in the Improvements may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of Extreme.
(iii) Upon termination of Extreme's right to possession, this Improvements Lease shall terminate and BNPLC may recover from Extreme:
a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination;
b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Extreme proves could have been reasonably avoided;
c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the scheduled Term after the time of award exceeds the amount of such rental loss that Extreme proves could be reasonably avoided; and
d) Any other amount necessary to compensate BNPLC for all the detriment proximately caused by Extreme's failure to perform Extreme's obligations under this Improvements Lease or which in the ordinary course of things would be likely to result therefrom, including the
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costs and expenses (including Attorneys' Fees, advertising costs and brokers' commissions) of recovering possession of the Property, removing persons or property therefrom, placing the Property in good order, condition, and repair, preparing and altering the Property for reletting, all other costs and expenses of reletting, and any loss incurred by BNPLC as a result of Extreme's failure to perform Extreme's obligations under the other Operative Documents.
The "worth at the time of award" of the amounts referred to in subparagraph 17.(a)(iii)a) and subparagraph 17.(a)(iii)b) shall be computed by allowing interest at the Default Rate. The "worth at the time of award" of the amount referred to in subparagraph 17.(a)(iii)c) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).
e) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law.
(iv) BNPLC shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in force even after lessee's breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations). Accordingly, even if Extreme has breached this Improvements Lease and abandoned the Property, this Improvements Lease shall continue in effect for so long as BNPLC does not terminate Extreme's right to possession, and BNPLC may enforce all of BNPLC's rights and remedies under this Improvements Lease, including the right to recover the Rent as it becomes due under this Improvements Lease. Extreme's right to possession shall not be deemed to have been terminated by BNPLC except pursuant to subparagraph 17.(a)(i) hereof. The following shall not constitute a termination of Extreme's right to possession:
a) Acts of maintenance or preservation or efforts to relet the Property;
b) The appointment of a receiver upon the initiative of BNPLC to protect BNPLC's interest under this Improvements Lease; or
c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by Extreme.
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18. Default by BNPLC. If BNPLC should default in the performance of any of its obligations under this Improvements Lease, BNPLC shall have the time reasonably required, but in no event less than thirty days, to cure such default after receipt of notice from Extreme specifying such default and specifying what action Extreme believes is necessary to cure the default. If Extreme prevails in any litigation brought against BNPLC because of BNPLC's failure to cure a default within the time required by the preceding sentence, then Extreme shall be entitled to an award against BNPLC for the monetary damages proximately caused to Extreme by such default.
Notwithstanding the foregoing, BNPLC's right to cure as provided in this Paragraph 18 will not in any event extend the time within which BNPLC must remove Liens Removable by BNPLC as required by Paragraph 19 beyond the Designated Sale Date.
19. Quiet Enjoyment. Provided Extreme pays the Base Rent and all Additional Rent payable hereunder as and when due and payable and keeps and fulfills all of the terms, covenants, agreements and conditions to be performed by Extreme hereunder, BNPLC shall not during the Term disturb Extreme's peaceable and quiet enjoyment of the Property; however, such enjoyment shall be subject to the terms, provisions, covenants, agreements and conditions of this Improvements Lease, to Permitted Encumbrances, to Development Documents and to any other claims not constituting Liens Removable by BNPLC. If any Lien Removable by BNPLC is claimed against the Property, BNPLC will remove the Lien Removable by BNPLC promptly. Any breach by BNPLC of this Paragraph shall render BNPLC liable to Extreme for any monetary damages proximately caused thereby, but as more specifically provided in subparagraph 4.(b) above, no such breach shall entitle Extreme to terminate this Improvements Lease or excuse Extreme from its obligation to pay Rent.
20. Surrender Upon Termination. Unless Extreme or an Applicable Purchaser purchases or has purchased BNPLC's entire interest in the Property pursuant to the terms of the Purchase Agreement and BNPLC's entire interest in the Improvements and other "Property" under (and as defined in) the Other Purchase Agreement,
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Extreme shall, upon the termination of Extreme's right to occupancy, surrender to BNPLC the Property, including Improvements constructed by Extreme and fixtures and furnishings included in the Property, free of all Hazardous Substances (including Permitted Hazardous Substances) and tenancies and with all Improvements in substantially the same condition as of the date the same were initially completed, excepting only (i) ordinary wear and tear that occurs between the maintenance, repairs and replacements required by other provisions of this Improvements Lease or the Other Lease Agreement, and (ii) demolition, alterations and additions which are expressly permitted by the terms of this Improvements Lease or the Other Lease Agreement and which have been completed by Extreme in a good and workmanlike manner in accordance with all Applicable Laws. Any movable furniture or movable personal property belonging to Extreme or any party claiming under Extreme, if not removed at the time of such termination and if BNPLC shall so elect, shall be deemed abandoned and become the property of BNPLC without any payment or offset therefor. If BNPLC shall not so elect, BNPLC may remove such property from the Property and store it at Extreme's risk and expense.
Nothing in this Paragraph 20 will be construed to require Extreme to surrender the Property to BNPLC during the continuation of any breach by BNPLC of any obligation it has under the Purchase Agreement to convey the Property to Extreme or an Applicable Purchaser.
21. Holding Over by Extreme. Should Extreme not purchase BNPLC's right, title and interest in the Property as provided in the Purchase Agreement, but nonetheless continue to hold the Property after the termination of this Improvements Lease without BNPLC's consent, whether such termination occurs by lapse of time or otherwise, such holding over shall constitute and be construed as a tenancy from day to day only, at a daily Base Rent equal to: (i) Stipulated Loss Value on the day in question, times (ii) the Default Rate for such day; divided by (iii) three hundred and sixty; subject, however, to all of the terms, provisions, covenants and agreements on the part of Extreme hereunder. No payments of money by Extreme to BNPLC after the termination of this Improvements Lease shall reinstate, continue or extend the Term of this Improvements Lease and no extension of this Improvements Lease after the termination thereof shall be valid unless and until the same shall be reduced to writing and signed by both BNPLC and Extreme.
22. Independent Obligations Evidenced by the Other Operative Documents. Extreme acknowledges and agrees that nothing contained in this Improvements Lease shall limit, modify or otherwise affect any of Extreme's obligations under the other Operative Documents, which obligations are intended to be separate, independent and in addition to, and not in lieu of, the obligations set forth herein. In the event of any inconsistency between the express terms and provisions of the Purchase Documents and the express terms and provisions of this Improvements Lease, the express terms and provisions of the Purchase Documents shall control. In the event of any inconsistency between the express terms and provisions of the Closing Certificate and the express terms and provisions of this Improvements Lease, the express terms and provisions of this Improvements Lease shall control; provided, nothing herein will limit or impair Extreme's obligations under the Closing Certificate following any expiration of termination of this Improvements Lease.
[The signature pages follow.]
[Improvements]
IN WITNESS WHEREOF, Extreme and BNPLC have caused this Lease Agreement (Improvements) to be executed as of June 1, 2000.
"Extreme"
EXTREME NETWORKS, INC.
By: _________________________________
Name:____________________________
Title:___________________________
[Continuation of signature pages to Lease Agreement (Improvements) dated to be effective June 1, 2000]
"BNPLC"
BNP LEASING CORPORATION
By: _________________________________
Lloyd G. Cox, Vice President
Legal Description
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
Insurance Requirements
I. LIABILITY INSURANCE:
A. Extreme must maintain commercial general liability ("CGL") insurance on an occurrence basis, affording immediate protection to the limit of not less than $20,000,000 combined single limit for bodily and personal injury, death and property damage in respect of any one occurrence. The CGL insurance must be primary to, and shall receive no contribution from, any insurance policies or self-insurance programs otherwise afforded to or available to the Interested Parties, collectively or individually. Further, the CGL insurance must include blanket contractual liability coverage which insures contractual liability under the indemnifications set forth in this Improvements Lease (though such coverage or the amount thereof shall in no way limit such indemnifications).
B. Any deductible or self-insured retention applicable to the CGL insurance shall not exceed $500,000.
C. The forms of insurance policies (including endorsements) used to provide the CGL insurance required by this Improvements Lease, and the insurance company or companies providing the CGL insurance, must be acceptable to BNPLC. BNPLC shall have the right from time to time and at any time to review and approve such policy forms (including endorsements) and the insurance company or companies providing the insurance. Without limiting the generality of the foregoing, BNPLC may reasonably require (and unless and until Extreme is otherwise notified by BNPLC, BNPLC does require) that such insurance be provided under forms and by companies consistent with the following:
(a) ISO additional insured form CG 2026 1185 or equivalent substitute form, without modification (and under the commercial umbrella, if any), designating as additional insureds "BNPLC and other Interested Parties, as defined in the Common Definitions and Provisions Agreement (Improvements) between Extreme Networks, Inc. and BNP Leasing Corporation dated June 1, 2000)"; and
(b) provisions entitling BNPLC to 30 days' notice from the insurer prior to any cancellation to the CGL coverage.
[Improvements]
II. PROPERTY INSURANCE:
A. Extreme must maintain property insurance in "special form" (including theft) or against "all risks," providing the broadest available coverage for all Improvements (as defined in the Common Provisions and Definitions Agreement) and equipment included in the Property, on a blanket basis if multiple buildings are involved, with no exclusions for vandalism, malicious mischief, or sprinkler leakage and all coverage perils normally included within the definitions of extended coverage, vandalism, malicious mischief and, if the Property is in a flood zone, flood. In addition, boiler and machinery coverage must be maintained at all times by endorsement to the property insurance policy or by separate policy.
B. The property insurance required hereby must provide coverage in the amount no less than replacement value (exclusive of land, foundation, footings, excavations and grading) with endorsements for contingent liability from operation of building laws, increased cost of construction and demolition costs which may be necessary to comply with building laws. Subject to the approval of BNPLC, Extreme will be responsible for determining the amount of property insurance to be maintained from time to time, but Extreme must maintain such coverage on an agreed value basis to eliminate the effects of coinsurance.
C. Any deductible or self-insured retention applicable to the property insurance shall not exceed $500,000.
D. The property insurance shall cover not only the value of Extreme's interest in the Improvements, but also the interest of BNPLC, with BNPLC shown as an insured as its interests may appear.
E. The forms of insurance policies (including endorsements) used to provide the property insurance required by this Improvements Lease, and the insurance company or companies providing the property insurance, must be acceptable to BNPLC. BNPLC shall have the right from time to time and at any time to review and approve such policy forms (including endorsements) and the insurance company or companies providing such insurance. Without limiting the generality of the foregoing, BNPLC may reasonably require (and unless and until Extreme is otherwise notified by BNPLC, BNPLC does require) that such insurance be provided under forms and by companies consistent with the following:
(a) a waiver of subrogation in favor of "BNPLC and other Interested Parties, as defined in the Common Definitions and Provisions Agreement (Improvements) between Extreme Networks, Inc. and BNP Leasing Corporation dated June 1, 2000)";
(b) that Extreme's insurance is primary, with any policies of BNPLC or other Interested Parties being excess, secondary and noncontributing;
(c) that the protection afforded to BNPLC by such insurance shall not be reduced or impaired by acts or omissions of Extreme or any other beneficiary or insured; and
Exhibit B - Page 2
[Improvements]
(d) that BNPLC must be notified at least thirty days prior to any cancellation of insurance coverage.
III. OTHER INSURANCE RELATED REQUIREMENTS:
A. BNPLC must be notified in writing immediately by Extreme of claims against Extreme that might cause a reduction below seventy-five percent (75%) of any aggregate limit of any policy.
B. Extreme's property insurance must be evidenced by ACORD form 27 "Evidence of Property Insurance" completed and interlineated in a manner satisfactory to BNPLC to show compliance with the requirements of this Exhibit. Copies of endorsements to the property insurance must be attached to such form.
C. Extreme's CGL insurance must be evidenced by ACORD form 25 "Certificate of Insurance" completed and interlineated in a manner satisfactory to BNPLC to show compliance with the requirements of this Exhibit. Copies of endorsements to the CGL insurance must be attached to such form.
D. Such evidence of required insurance must be delivered upon execution of this Improvements Lease and new certificate or evidence of insurance must be delivered no later than 10 days prior to expiration of existing policy.
E. Extreme shall not cancel, fail to renew, or make or permit any material reduction in any of the policies or certificates described in this Exhibit without the prior written consent of BNPLC. The certificates (ACORD forms 27 and 25) described in this Exhibit must contain the following express provision:
"This is to certify that the policies of insurance described herein have been issued to the insured Extreme Networks, Inc. for whom this certificate is executed and are in force at this time. In the event of cancellation of coverage affecting the certificate holder, at least thirty days prior notice shall be given to the certificate holder."
F. The limits of liability under the liability insurance required by this Improvements Lease may be provided by a single policy of insurance or by a combination of primary and umbrella policies, but in no event shall the total limits of liability available for any one occurrence or accident be less than those required by this Exhibit.
G. Extreme shall provide copies, certified as complete and correct by an authorized agent of the applicable insurer, of all insurance policies required by this Exhibit within ten days after receipt of a request for such copies from BNPLC.
Exhibit B - Page 3
[Improvements]
Notice of LIBOR Period Election
BNP Leasing Corporation
12201 Merit Drive
Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Re: Lease Agreement (Improvements) and Lease Agreement (Land), both dated as of June 1, 2000, and both between Extreme Networks, Inc., as tenant, and BNP Leasing Corporation, as landlord
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the two Lease Agreements referenced above. This letter constitutes notice to you that the LIBOR Period Election under both of the Lease Agreements shall be:
________________ month(s),
beginning with the first Base Rent Period that commences on or after:
______________, ____.
Executed this _____ day of ______________, 20___.
Extreme Networks, Inc.
Name:_________________________________
Title:________________________________
[cc all Participants]
[Improvements]
FINANCIAL COVENANTS
[Improvements]
PURCHASE AGREEMENT
(LAND)
BETWEEN
BNP LEASING CORPORATION
("BNPLC")
AND
EXTREME NETWORKS, INC.
("Extreme")
June 1, 2000
(Santa Clara, California)
Page ---- 1. Extreme's Options and Obligations on the Designated Sale Date........................................ 1 (A) Right to Purchase; Initial Remarketing Rights and Obligations............................... 1 ------------------------------------------------------------- (B) Determinations Concerning Price............................................................. 3 ------------------------------- (C) Designation of the Purchaser................................................................ 4 ---------------------------- (D) Effect of the Purchase Option and Extreme's Initial Remarketing Rights and Obligations on ----------------------------------------------------------------------------------------- Subsequent Title Encumbrances............................................................... 4 ----------------------------- (E) Security for the Purchase Option and Extreme's Initial Remarketing Rights and Obligations... 4 ----------------------------------------------------------------------------------------- (F) Delivery of Books and Records If BNPLC Retains the Property................................. 5 ----------------------------------------------------------- 2. Extreme's Rights and Options After the Designated Sale Date.......................................... 5 (A) Extreme's Extended Right to Remarket........................................................ 5 ------------------------------------ (B) Definition of Minimum Extended Remarketing Price............................................ 5 ------------------------------------------------ (C) BNPLC's Right to Sell....................................................................... 6 --------------------- (D) Extreme's Right to Excess Sales Proceeds.................................................... 7 ---------------------------------------- (E) Permitted Transfers During Extreme's Extended Remarketing Period............................ 7 ---------------------------------------------------------------- 3. Terms of Conveyance Upon Purchase.................................................................... 7 4. Survival and Termination of the Rights and Obligations of Extreme and BNPLC.......................... 8 (A) Status of this Agreement Generally.......................................................... 8 ---------------------------------- (B) Automatic Termination of Extreme's Rights................................................... 8 ----------------------------------------- (C) Termination of Extreme's Extended Remarketing Rights to Permit a Sale by BNPLC.............. 9 ------------------------------------------------------------------------------ (D) Payment Only to BNPLC....................................................................... 9 --------------------- (E) Remedies Under the Other Operative Documents................................................ 9 -------------------------------------------- (F) Occupancy by Extreme Prior to Closing of a Sale............................................. 9 ----------------------------------------------- 5. Security for Extreme's Obligations; Return of Funds.................................................. 9 6. Certain Remedies Cumulative.......................................................................... 10 7. Attorneys' Fees and Legal Expenses................................................................... 10 8. Estoppel Certificate................................................................................. 10 9. Successors and Assigns............................................................................... 10 |
[Land]
Exhibits and Schedules ---------------------- Exhibit A......................................................Legal Description --------- Exhibit B...................Requirements Re: Form of Grant Deed and Ground Lease --------- Exhibit C............................................Bill of Sale and Assignment --------- Exhibit D..........................................Acknowledgment and Disclaimer --------- Exhibit E................................................Secretary's Certificate --------- Exhibit F.................................Certificate Concerning Tax Withholding --------- [Land] |
PURCHASE AGREEMENT
(LAND)
This PURCHASE AGREEMENT (LAND) (this "Agreement") is made and dated as of June 1, 2000 (the "Effective Date") by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and EXTREME NETWORKS, INC., a California corporation ("Extreme").
RECITALS
Contemporaneously with the execution of this Agreement, BNPLC and Extreme are executing a Common Definitions and Provisions Agreement (Land) dated as of the Effective Date (the "Common Definitions and Provisions Agreement (Land)"), which by this reference is incorporated into and made a part of this Agreement for all purposes. As used in this Agreement, capitalized terms defined in the Common Definitions and Provisions Agreement (Land) and not otherwise defined in this Agreement are intended to have the respective meanings assigned to them in the Common Definitions and Provisions Agreement (Land).
Extreme and BNPLC have reached agreement upon the terms and conditions upon which Extreme will purchase or arrange for the purchase of the Property, and by this Agreement they desire to evidence such agreement.
AGREEMENTS
1. Extreme's Options and Obligations on the Designated Sale Date.
(1) Extreme shall have the right (the "Purchase Option") to purchase or cause an Affiliate of Extreme to purchase the Property and BNPLC's interest in Escrowed Proceeds, if any, on the Designated Sale Date for a cash price equal to the Break Even Price (as defined below).
(2) If neither Extreme nor an Affiliate of Extreme purchases the Property and BNPLC's interest in any Escrowed Proceeds on the Designated Sale Date as provided in the preceding
subparagraph 1.(A)(1), then Extreme shall have the following rights and obligations (collectively, "Extreme's Initial Remarketing Rights and Obligations"):
(a) First, Extreme shall have the right (but not the obligation) to cause an Applicable Purchaser who is not an Affiliate of Extreme to purchase the Property and BNPLC's interest in any Escrowed Proceeds on the Designated Sale Date for a cash purchase price (the "Third Party Price") determined as provided below. If, however, the Break Even Price exceeds the sum of any Third Party Price tendered or to be tendered to BNPLC by an Applicable Purchaser and any Supplemental Payment paid by Extreme as described below, then BNPLC may affirmatively elect to decline such tender from the Applicable Purchaser and to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser pursuant to this subparagraph (a "Voluntary Retention of the Property").
(b) Second, if the Third Party Price actually paid by an Applicable Purchaser to BNPLC on the Designated Sale Date exceeds the Break Even Price, Extreme shall be entitled to such excess, subject, however, to BNPLC's right to offset against such excess any and all sums that are then due from Extreme to BNPLC under the other Operative Documents.
(c) Third, if for any reason whatsoever (including a Voluntary Retention of the Property or a decision by Extreme not to exercise its right to purchase or cause an Applicable Purchaser to purchase from BNPLC as described above) neither Extreme nor an Applicable Purchaser pays a net cash price to BNPLC on the Designated Sale Date equal to or in excess of the Break Even Price in connection with a sale of the Property and BNPLC's interest in any Escrowed Proceeds pursuant to this Agreement, then Extreme shall have the obligation to pay to BNPLC on the Designated Sale Date a supplemental payment (the "Supplemental Payment") equal to the lesser of (1) the amount by which the Break Even Price exceeds such net cash price (if any) actually received by BNPLC on the Designated Sale Date (such excess being hereinafter called a "Deficiency") or (2) the Maximum Remarketing Obligation. As used herein, the "Maximum Remarketing Obligation" means a dollar amount determined in accordance with the following provisions:
1) The "Maximum Remarketing Obligation" will equal the product of (i) Stipulated Loss Value on the Designated Sale Date, times (ii) 100% minus the Residual Risk Percentage, provided that both of the following conditions are satisfied:
(x) Extreme shall not have elected to accelerate the Designated Sale Date as provided in clause (2) of the definition of Designated Sale Date in the Common Definitions and Provisions Agreement (Land).
(y) No Event of Default, other than an Issue 97-1 Non-performance-related Subjective Event of Default, shall occur on or be continuing on the Designated Sale Date.
2) If either of the conditions listed in subparagraph
1) preceding are not satisfied, the "Maximum Remarketing Obligation"
will equal the Break Even Price.
If any Supplemental Payment or other amount payable to BNPLC pursuant to this subparagraph 1.(A) is not actually paid to BNPLC on the Designated Sale Date, Extreme shall pay interest on the past due amount computed at the Default Rate from the Designated Sale Date.
[Land]
(a) Extreme may give a notice (a "Remarketing Notice") to BNPLC and to each of the Participants no earlier than one hundred twenty days before the Designated Sale Date and no later than ninety days before the Designated Sale Date, specifying an amount as the Third Party Price that Extreme believes in good faith to constitute reasonably equivalent value for the Property and any Escrowed Proceeds. Once given, a Remarketing Notice shall not be rescinded or modified without BNPLC's written consent.
(b) If BNPLC believes in good faith that the Third Party Price specified by Extreme in a Remarketing Notice does not constitute reasonably equivalent value for the Property and any Escrowed Proceeds, BNPLC may at any time before sixty days prior to the Designated Sale Date respond to the Remarketing Notice with a notice back to Extreme, objecting to the Third Party Price so specified by Extreme. If BNPLC receives a Remarketing Notice, yet does not respond with an objection as provided in the preceding sentence, the Third Party Price suggested by Extreme in the Remarketing Notice will be the Third Party Price for purposes of this Agreement. If, however, BNPLC does respond with an objection as provided in this subparagraph, and if Extreme and BNPLC do not otherwise agree in writing upon a Third Party Price, then the Third Party Price will be the lesser of (I) fair market value of the Property, plus the amount of any Escrowed Proceeds, as determined by a professional independent appraiser selected by BNPLC, or (II) the Break Even Price.
(c) If for any reason, including an acceleration of the Designated Sale Date as provided in the definition thereof in the Common Definitions and Provisions Agreement (Land), Extreme does not deliver a Remarketing Notice to BNPLC within the time period specified above, then the Third Party Price will be an amount determined in good faith by BNPLC as constituting reasonably equivalent value for the Property and any Escrowed Proceeds, but in no event more than the Break Even Price.
If any payment to BNPLC by an Applicable Purchaser hereunder is held to constitute a preference or a voidable transfer under Applicable Law, or must for any other reason be refunded by BNPLC to the Applicable Purchaser or to another Person, and if such payment to BNPLC reduced or had the effect of reducing a Supplemental Payment or increased or had the effect of increasing any excess sale proceeds paid to Extreme pursuant to subparagraph 1(A)(2)(b) or pursuant to subparagraph 2.(D), then Extreme shall pay to BNPLC upon demand an amount equal to the reduction of the Supplemental Payment or to the increase of the excess sale proceeds paid to Extreme, as applicable, and this Agreement shall continue to
[Land]
be effective or shall be reinstated as necessary to permit BNPLC to enforce its right to collect such amount from Extreme.
[Land]
2. Extreme's Rights and Options after the Designated Sale Date.
(1) The Property and BNPLC's interest in Escrowed Proceeds, if any, shall not have been sold on the Designated Sale Date as provided in Paragraph 1 or within the thirty days thereafter as provided in subparagraph 4.(B).
(2) No Voluntary Retention occurred as described in subparagraph 1.(A)(2)(a).
(3) Extreme's Extended Remarketing Right shall not have been terminated pursuant to subparagraph 4.(B) below because of Extreme's failure to make any Supplemental Payment required on the Designated Sale Date.
(4) Extreme's Extended Remarketing Right shall not have been terminated by BNPLC pursuant to subparagraph 4.(C) below to facilitate BNPLC's sale of the Property to a third party in accordance with subparagraph 2.(C).
(5) At least thirty days prior to the date upon which BNPLC is to convey the Property to an Applicable Purchaser because of Extreme's exercise of Extreme's Extended Remarketing Right (the "Final Sale Date"), Extreme shall have notified BNPLC of (x) the date proposed by Extreme as the Final Sale Date (which must be a Business Day), (y) the full legal name of the Applicable Purchaser and such other information as will be required to prepare the Sale Closing Documents, and (z) the amount of the purchase price that the Applicable Purchaser will pay (consistent with the minimum required pursuant to the other provisions of this subparagraph 2.(A)) for the Property.
(3) the sum of all Impositions, insurance premiums and other Losses of every kind suffered or incurred by BNPLC or any other Interested Party with respect to the ownership, operation or maintenance of the Property on or after the Designated Sale Date, together with interest on such Impositions, insurance premiums and other Losses computed at the Default Rate from the date paid or incurred to the Final Sale Date.
[Land]
(1) BNPLC shall not sell the Property to an Affiliate of BNPLC on terms less favorable than those which BNPLC would require from a prospective purchaser not an Affiliate of BNPLC;
(2) If BNPLC receives or desires to make a written proposal (whether in the form of a "letter of intent" or other nonbinding expression of interest or in the form of a more definitive purchase and sale agreement) for a sale of the Property to a prospective purchaser (a "Third Party Sale Proposal"), and if on the basis of such Third Party Sale Proposal BNPLC expects to enter into or to pursue negotiations for a definitive purchase and sale agreement with the prospective purchaser, then prior to executing any such definitive agreement, BNPLC shall submit the Third Party Sale Proposal to Extreme with a notice (the "Third Party Sale Notice") explaining that (A) BNPLC is then prepared to accept a price not below an amount specified in such Third Party Sale Notice (the "Third Party Target Price") if BNPLC and the prospective purchaser reach agreement on other terms and conditions to be incorporated into a definitive purchase and sale agreement, and (B) Extreme's Extended Remarketing Right may be terminated pursuant to subparagraph 4.(C) of this Agreement unless Extreme causes an Applicable Purchaser to consummate a purchase of the Property pursuant to this Paragraph 2 within ninety days after the date of such Third Party Sale Notice.
For a period of ninety days (but only ninety days) after the date of any Third Party Sale Notice, the Minimum Extended Remarketing Price shall be limited in amount so that it does not exceed the Third Party Target Price specified by BNPLC therein. Accordingly, if BNPLC has delivered a Third Party Sale Notice specifying a Third Party Target Price below the Minimum Extended Remarketing Price calculated as provided in subparagraph 2.(B) within the ninety days prior to the Final Sale Date for any sale to an Applicable Purchaser by BNPLC pursuant to this Paragraph 2, then the Minimum Extended Remarketing Price applicable to such sale shall be reduced to the amount of the Third Party Target Price so specified. Such a reduction, however, will apply only to a sale to an Applicable Purchaser actually consummated within the ninety days after the date of the applicable Third Party Sale Notice.
[Land]
subparagraph 2.(C)), then Extreme shall be entitled to the excess; provided, that BNPLC may offset and retain from the excess any and all sums that are then due and unpaid from Extreme to BNPLC under any of the Operative Documents.
4 Survival and Termination of the Rights and Obligations of Extreme and Bnplc.
[Land]
Escrowed Proceeds yet to be applied as provided in the Land Lease that may result from such taking or damage if Extreme purchases the Property and the Escrowed Proceeds as herein provided), (iii) the prohibition, limitation or restriction of Extreme's us e of all or any portion of the Property or any interference with such use by governmental action or otherwise, (iv) any eviction of Extreme or any party claiming under Extreme by paramount title or otherwise, (v) Extreme's prior acquisition or ownership of any interest in the Property, (vi) any default on the part of BNPLC under this Agreement, the Land Lease or any other agreement to which BNPLC is a party, or (vii) any other cause, whether similar or dissimilar to the foregoing, any existing or future law to the contrary notwithstanding. It is the intention of the parties hereto that the obligations of Extreme hereunder (including the obligation to make any Supplemental Payment as provided in Paragraph 1) shall be separate and independent covenants and agreements from BNPLC's obligations under this Agreement or any other agreement between BNPLC and Extreme; provided, however, that nothing in this subparagraph shall excuse BNPLC from its obligation to tender the Sale Closing Documents in substantially the form attached hereto as exhibits when required by Paragraph 3. Further, nothing in this subparagraph shall be construed as a waiver by Extreme of any right Extreme may have at law or in equity to the following remedies, whether because of BNPLC's failure to remove a Lien Removable by BNPLC or because of any other default by BNPLC under this Agreement: (i) the recovery of monetary damages, (ii) injunctive relief in case of the violation, or attempted or threatened violation, by BNPLC of any of the express covenants, agreements, conditions or provisions of this Agreement which are binding upon BNPLC, or (iii) a decree compelling performance by BNPLC of any of the express covenants, agreements, conditions or provisions of this Agreement which are binding upon BNPLC.
[Land] 8
5 Security for Extreme's Obligations; Return of Funds. Extreme's obligations under this Agreement are secured by the Pledge Agreement, reference to which is hereby made for a description of the Collateral covered thereby and the rights and remedies provided to BNPLC thereby. Although the collateral agent appointed for BNPLC as provided in the Pledge Agreement shall be entitled to hold all Collateral as security for the full and faithful performance by Extreme of Extreme's covenants and obligations under this Agreement, the Collateral shall not be considered an advance payment of the Break Even Price or any Supplemental Payment or a measure of BNPLC's damages should Extreme breach this Agreement. If Extreme does breach this Agreement and fails to cure the same within any time specified herein for the cure, BNPLC may, from time to time, without prejudice to any other remedy and without notice to Extreme, require the collateral agent to immediately apply the proceeds of any disposition of the Collateral (and any cash included in the Collateral) to amounts then due hereunder from Extreme. If by a Permitted Transfer BNPLC conveys its interest in the Property before the Designated Sale Date, BNPLC may also assign BNPLC's interest in the Collateral to the transferee. BNPLC shall be entitled to return any Collateral not sold or used to satisfy the obligations secured by the Pledge Agreement directly to Extreme notwithstanding any prior actual or attempted conveyance or assignment by Extreme, voluntary or otherwise, of any right to receive the same; neither BNPLC nor the collateral agent named in the Pledge Agreement shall be responsible for the proper distribution or application by Extreme of any such Collateral returned to Extreme; and any such return of Collateral to Extreme shall discharge any obligation of BNPLC to deliver such Collateral to all Persons claiming an interest in the Collateral. Further, BNPLC shall be entitled to deliver any Escrowed Proceeds it holds on the Designated Sale Date directly to Extreme or to any Applicable Purchaser purchasing BNPLC's interest in the Property and the Escrowed Proceeds pursuant to this Agreement notwithstanding any prior actual or attempted conveyance or assignment by Extreme, voluntary or otherwise, of any right to receive the same; BNPLC shall not be responsible for the proper distribution or application by Extreme or any Applicable Purchaser of any such Escrowed Proceeds paid over to Extreme or the Applicable Purchaser; and any such payment of Escrowed Proceeds to Extreme or an Applicable Purchaser shall discharge any obligation of BNPLC to deliver the same to all Persons claiming an interest therein.
6 Certain Remedies Cumulative. No right or remedy herein conferred upon or reserved to BNPLC is intended to be exclusive of any other right or remedy BNPLC has with respect to the Property, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity or by statute. In addition to other remedies available under this Agreement, either party shall be entitled, to the extent permitted by applicable law, to a decree compelling performance of any of the other party's agreements hereunder.
[Land] 9
7 Attorneys' Fees and Legal Expenses. If either party to this Agreement commences any legal action or other proceeding to enforce any of the terms of this Agreement, or because of any breach by the other party or dispute hereunder, the party prevailing in such action or proceeding shall be entitled to recover from the other party all Attorneys' Fees incurred in connection therewith, whether or not such controversy, claim or dispute is prosecuted to a final judgment. Any such Attorneys' Fees incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from such judgment, and the obligation for such Attorneys' Fees is intended to be severable from other provisions of this Agreement and not to be merged into any such judgment.
8 Estoppel Certificate. Upon request by BNPLC, Extreme shall execute, acknowledge and deliver a written statement certifying that this Agreement is unmodified and in full effect (or, if there have been modifications, that this Agreement is in full effect as modified, and setting forth such modification) and either stating that no default exists hereunder or specifying each such default of which Extreme has knowledge. Any such statement may be relied upon by any Participant or prospective purchaser or assignee of BNPLC with respect to the Property.
9 Successors and Assigns. The terms, provisions, covenants and conditions hereof shall be binding upon Extreme and BNPLC and their respective permitted successors and assigns and shall inure to the benefit of Extreme and BNPLC and all permitted transferees, mortgagees, successors and assignees of Extreme and BNPLC with respect to the Property; provided, that (A) the rights of BNPLC hereunder shall not pass to Extreme or any Applicable Purchaser or any subsequent owner claiming through Extreme or an Applicable Purchaser, (B) BNPLC shall not assign this Agreement or any rights hereunder except pursuant to a Permitted Transfer, and (C) Extreme shall not assign this Agreement or any rights hereunder without the prior written consent of BNPLC.
[Signature pages follow.]
[Land] 10
IN WITNESS WHEREOF, Extreme and BNPLC have caused this Agreement to be executed as of June 1, 2000.
"Extreme"
EXTREME NETWORKS, INC.
By: ______________________________
Name:_________________________
Title:________________________
[Continuation of signature pages to Purchase Agreement (Land) dated to be effective June 1, 2000]
"BNPLC"
BNP LEASING CORPORATION
By: ______________________________
Lloyd G. Cox, Vice President
LEGAL DESCRIPTION
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
[Land]
Requirements Re: Form of Grant Deed and Ground Lease
The form of deed to be used to convey BNPLC's interest in the Land to Extreme or an Applicable Purchaser will depend upon whether BNPLC's interest in the Improvements has been or is being conveyed at the same time to the same party.
Finally, BNPLC's interest in the Land will be conveyed by a deed in the from attached as Exhibit B-4 if BNPLC's interest in the Improvements has been sold pursuant to the Other Purchase Agreement before a sale of BNPLC's interest in the Land under this Agreement, or if BNPLC's interest in the Improvements is being sold contemporaneously with a sale of BNPLC's interest in the Land, but the purchaser of the Improvements is not the same as the purchaser of the Land.
[Land]
CORPORATION GRANT DEED
NAME:[Extreme or the Applicable Purchaser]
ADDRESS: ___________________________
ATTN: ___________________________
CITY: ___________________________
STATE:___________________________
Zip: ___________________________
NAME:[Extreme or the Applicable Purchaser]
ADDRESS: ___________________________
ATTN: ___________________________
CITY: ___________________________
STATE:___________________________
Zip: ___________________________
CORPORATION GRANT DEED
(Covering Land and Improvements)
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP
LEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to
[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest in
the land situated in Santa Clara, California, described on Annex A attached
hereto and hereby made a part hereof and all improvements on such land, together
with the any other right, title and interest of Grantor in and to any easements,
rights-of-way, privileges and other rights appurtenant to such land or the
improvements thereon; provided, however, that this grant is subject to the
encumbrances described on Annex B (the "Permitted Encumbrances"). Grantee hereby
assumes the obligations (including any personal obligations) of Grantor, if any,
created by or under, and agrees to be bound by the terms and conditions of, the
Permitted Encumbrances to the extent that the same concern or apply to the land
or improvements conveyed by this deed.
[Land]
BNP LEASING CORPORATING
Date: As of __________ By: ___________________________ Its: Attest: ___________________________ Its: [Extreme or Applicable Purchaser] Date: As of __________ By: ___________________________ Its: Attest: ___________________________ Its: STATE OF _____________ ) ) SS COUNTY OF ____________ ) |
On ___________________ before me,__________, personally appeared_________ and__________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature_________________________________
[Land] Exhibit B-1 - Page 2
STATE OF _____________ ) ) SS COUNTY OF ____________ ) |
On ___________________ before me,__________, personally appeared__________ and___________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature____________________________
[Land] Exhibit B-1 - Page 3
Annex A
LEGAL DESCRIPTION
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
[Land] Exhibit B-1 - Page 4
Annex B
Permitted Encumbrances
This conveyance is subject to all encumbrances not constituting a "Lien Removable by BNPLC" (as defined in the Common Definitions and Provisions Agreement (Land) incorporated by reference into the Lease Agreement (Land) referenced in the last item of the list below), including the following matters to the extent the same are still valid and in force:
1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.
2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.
3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara
For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000 |
4. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed,
From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records |
Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.
5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983
Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records. |
6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects:A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as
[Land] Exhibit B-1 - Page 5
follows:
Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows:
Parcel 1:
Commencing at the point of intersection of the Westerly line of that
certain 24.74 acre parcel of land shown upon that Record of Survey filed
for recorded August 10, 1979 in Book 447 of Maps, at page 33, Santa Clara
County Records, with a line parallel with and 10 feet Southerly of,
measured at right angles to, the Northerly line of said parcel; thence
along said parallel line N. 89 degrees 25 minutes 00 seconds E. 107.00
feet; thence parallel with said Westerly line S. 0 degrees 00 minutes 27
seconds E. 319.16 feet; thence S. 34 degrees 02 minutes 45 seconds W. 87.51
feet, more or less, to intersection with a line parallel with and 58 feet
Easterly of measured at right angles to, said Westerly line; thence along
last said parallel line S. 0 degrees 00 minutes 27 seconds E. 294.30 feet,
more or less, to intersection with a line parallel with and 5 feet
Northerly of, measured at right angles to, the Northerly line of that real
property conveyed to the City of Santa Clara by that deed filed for record
November 30, 1983 in Book I 111 of Official Records, at page 606, said
County Records; thence along last said parallel line the following three
(3) courses: N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87
degrees 09 minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00
seconds E. 334.69 feet; thence continuing parallel with the Southerly line
of first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet,
more or less, to termination in the Easterly line of that certain parcel of
real property conveyed to MPJ Partnership, by that Grant Deed filed for
record August 25, 1983 in Book H 838 of Official Records, at page 215, said
County Records.
Parcel 2:
A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline.
Parcel 3:
[Land] Exhibit B-1 - Page 6
A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip.
Parcel 4:
A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip.
Parcel 5:
A strip of land 10 feet in width, the centerline of said strip being described as follows:
Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line.
Parcel 6:
A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee.
[Land]
Exhibit B-1 - Page 7
CORPORATION GRANT DEED
NAME: [Extreme or the Applicable Purchaser]
ADDRESS: _______________________________
ATTN: _______________________________
CITY: _______________________________
STATE:_______________________________
Zip: _______________________________
NAME: [Extreme or the Applicable Purchaser]
ADDRESS: _______________________________
ATTN: _______________________________
CITY: _______________________________
STATE:_______________________________
Zip: _______________________________
CORPORATION GRANT DEED
(Covering Land but not the Improvements On the Land)
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP
LEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to
[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest in
the land situated in Santa Clara, California, described on Annex A attached
hereto and hereby made a part hereof (the "Land"), together with the any other
right, title and interest of Grantor in and to any easements, rights-of-way,
privileges and other rights appurtenant to the Land; provided, however, that
this grant is subject to the encumbrances described on Annex B (the "Permitted
Encumbrances") and any reservations or qualifications set forth below. Grantee
hereby assumes the obligations (including any personal obligations) of Grantor,
if any, created by or under, and agrees to be bound by the terms and conditions
of, the Permitted Encumbrances to the extent that the same concern or apply to
the Land.
Although this deed conveys Grantor's interest in the Land itself, this deed does not convey any interest in any buildings or other improvements on the Land (collectively, "Improvements") or any rights or easements appurtenant to Improvements. Grantor retains and reserves all right, title and interest of Grantor in and to Improvements and any rights and easements appurtenant to Improvements, together with a leasehold estate in and to the Land and any rights and easements appurtenant to the Land, which leasehold estate will permit the construction, maintenance and use of Improvements by Grantor and Grantor's successors and assigns on and subject to the terms and conditions set forth in the Ground Lease dated of even date herewith, executed by Grantee, as lessor, and Grantor, as lessee. Reference is made to such Ground Lease, all the terms and conditions of which are incorporated into this deed as if set forth herein.
[Land]
Exhibit B-2 - Page 2
BNP LEASING CORPORATING
Date: As of __________ By: ___________________________ Its: Attest: ___________________________ Its: [Extreme or Applicable Purchaser] Date: As of __________ By: ___________________________ Its: Attest: ___________________________ Its: STATE OF _____________ ) ) SS COUNTY OF ____________ ) |
On ___________________ before me,_________, personally appeared________ and___________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature____________________
[Land]
Exhibit B-2 - Page 2
STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me,_________ , personally appeared________ and____________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature_______________________
[Land]
Exhibit B-2 - Page 3
Annex A
LEGAL DESCRIPTION
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
[Land]
Exhibit B-2 - Page 4
Annex B
Permitted Encumbrances
This conveyance is subject to all encumbrances not constituting a "Lien Removable by BNPLC" (as defined in the Common Definitions and Provisions Agreement (Land) incorporated by reference into the Lease Agreement (Land) referenced in the last item of the list below), including the following matters to the extent the same are still valid and in force:
1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.
2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.
3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara
For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000 |
4. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed,
From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records |
Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.
5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983 Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records.
6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: roadway purposes and public utilities
Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects: A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as [Land] Exhibit B-2 - Page 5 |
follows:
Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows:
Parcel 1:
Commencing at the point of intersection of the Westerly line of that
certain 24.74 acre parcel of land shown upon that Record of Survey filed
for recorded August 10, 1979 in Book 447 of Maps, at page 33, Santa Clara
County Records, with a line parallel with and 10 feet Southerly of,
measured at right angles to, the Northerly line of said parcel; thence
along said parallel line N. 89 degrees 25 minutes 00 seconds E. 107.00
feet; thence parallel with said Westerly line S. 0 degrees 00 minutes 27
seconds E. 319.16 feet; thence S. 34 degrees 02 minutes 45 seconds W. 87.51
feet, more or less, to intersection with a line parallel with and 58 feet
Easterly of measured at right angles to, said Westerly line; thence along
last said parallel line S. 0 degrees 00 minutes 27 seconds E. 294.30 feet,
more or less, to intersection with a line parallel with and 5 feet
Northerly of, measured at right angles to, the Northerly line of that real
property conveyed to the City of Santa Clara by that deed filed for record
November 30, 1983 in Book I 111 of Official Records, at page 606, said
County Records; thence along last said parallel line the following three
(3) courses: N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87
degrees 09 minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00
seconds E. 334.69 feet; thence continuing parallel with the Southerly line
of first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet,
more or less, to termination in the Easterly line of that certain parcel of
real property conveyed to MPJ Partnership, by that Grant Deed filed for
record August 25, 1983 in Book H 838 of Official Records, at page 215, said
County Records.
Parcel 2:
A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline.
Parcel 3:
[Land]
Exhibit B-2 - Page 6
A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip.
Parcel 4:
A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip.
Parcel 5:
A strip of land 10 feet in width, the centerline of said strip being described as follows:
Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line.
Parcel 6:
A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee.
[Land]
Exhibit B-2 - Page 7
GROUND LEASE
This GROUND LEASE (this "Ground Lease"), by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), whose address is 12201 Merit Drive, Suite 860,Dallas, Texas 75251, and [Extreme or the Applicable Purchaser], a ___________ ("Lessor"), whose address is ____________________. as of ____________, ____ (the "GL Effective Date").
RECITALS
GRANTING CLAUSES
NOW, THEREFORE, in consideration of the rent to be paid and the covenants and agreements to be performed by BNPLC, as hereinafter set forth, Lessor does hereby LEASE, DEMISE and LET unto BNPLC for the term hereinafter set forth the Land, together with:
(1 all easements and rights-of-way now owned or hereafter acquired by Lessor for use in connection with the Land or as a means of access thereto; and
(2 all right, title and interest of Lessor, now owned or hereafter acquired, in and to (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any and all sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and any abutting land not owned by Lessor.
The Land and all of the property described in the preceding clauses (1) and (2) are hereinafter referred to collectively as the "Real Property".
To the extent, but only to the extent, that assignable rights or interests in, to or under the following have been or will be acquired by Lessor as the owner of any interest in the Real Property, Lessor also hereby grants and assigns to BNPLC for the term of this Ground Lease (and thereafter, if BNPLC purchases the Real Property from
[Land]
Lessor pursuant to the Repurchase Option described in Paragraph 12) the right to use and enjoy (and, in the case of contract rights, to enforce) such rights or interests of Lessor:
(a) the Permitted Encumbrances; and
Such rights and interests of Lessor, whether now existing or hereafter arising, are hereinafter collectively called the "GL Personal Property". The Real Property and the GL Personal Property are hereinafter sometimes collectively called the "GL Property."
GENERAL TERMS AND CONDITIONS
The GL Property is leased by Lessor to BNPLC and is accepted and is to be used and possessed by BNPLC upon and subject to the following terms and conditions:
1. Ground Lease Term and Early Termination by BNPLC. The term of this Ground Lease (the "Ground Lease Term") shall commence on and include the GL Effective Date and end on last Business Day prior to the thirty-fifth anniversary of the GL Effective Date. However, subject to the prior approval of any Leasehold Mortgagee, BNPLC shall have the right to terminate this Ground Lease by giving a notice to Lessor stating that BNPLC unequivocally elects to terminate effective as of a date specified in such notice, which may be any date more than thirty days after the notice and after the expiration or termination of the Lease pursuant to its terms.
2. No Other Ground Lease Termination. Except as expressly provided herein, this Ground Lease shall not terminate, nor shall Lessor have any right to terminate this Ground Lease, nor shall the obligations of Lessor under this Ground Lease be excused, for any reason whatsoever, including any of the following: (i) any damage to or the destruction of all or any part of the GL Property from whatever cause, (ii) the taking of the GL Property or any portion thereof by eminent domain or otherwise for any reason, (iii) any default on the part of BNPLC under this Ground Lease or under any other agreement to which Lessor and BNPLC are parties, or (iv) any other cause whether similar or dissimilar to the foregoing, any existing or future law to the contrary notwithstanding. It is the intention of the parties hereto that the obligations of Lessor hereunder shall be separate and independent of the covenants and agreements of BNPLC. However, nothing in this Paragraph shall be construed as a waiver by Lessor of any right Lessor may have at law or in equity to recover monetary damages for any default under this Ground Lease by BNPLC.
[Land]
Exhibit B-3 - Page 2
4. Use of GL Property.
(1 After the expiration or any earlier termination of the Lease, if a use of the GL Property by BNPLC or any new Improvements or any removal or modification of Improvements proposed by BNPLC would violate any Permitted Encumbrance, Development Document or Applicable Law unless Lessor or any of its Affiliates, as an owner of adjacent property or otherwise, gave its consent or approval thereto or agreed to join in a modification of a Permitted Encumbrance or Development Document, then Lessor shall give and cause its Affiliates to give such consent or approval or join in such modification.
(2 To the extent, if any, that any Permitted Encumbrance, Development Document or Applicable Law requires the consent or approval of Lessor or any of its Affiliates or of the City of Santa Clara or any other Person to an assignment of this Ground Lease or a transfer of any interest in the GL Property by BNPLC or its successors or assigns, Lessor will without charge give and cause its Affiliates to give such consent or approval and will cooperate in any way reasonably requested by BNPLC to assist BNPLC to obtain such consent or approval from the City or any other Person; provided, however, the assignment or transfer is not then prohibited by the Lease.
(3 Lessor's obligations under this subparagraph 4.(B) shall be binding upon any successor or assign of Lessor with respect to the Land and other properties encumbered by the Permitted Encumbrances or subject to the Development Documents, and such obligations shall survive any sale of Lessor's interest in the GL Property to BNPLC because of BNPLC's exercise of the Repurchase Option (as defined in Paragraph 12).
5. Assignment and Subletting; Pass Through of BNPLC'S Liability Insurance and Indemnity Rights. BNPLC may sublet or assign this Ground Lease without the consent of Lessor or any of its Affiliates, subject only to limitations set forth in the Lease for the benefit of Lessor so long as those limitations
[Land]
Exhibit B-3 - Page 3
remain in force.
To the extent that BNPLC may from time to time after the expiration or earlier termination of the Other Lease Agreement require any subtenant to agree to maintain liability insurance against claims of third parties and agree to make BNPLC an additional or named insured under such insurance, BNPLC shall also require the subtenant to agree to make Lessor an additional or named insured. However, BNPLC shall have no liability to Lessor for a breach by the subtenant of any such agreements, and to the extent that BNPLC's rights as an additional or named insured are subject to exceptions or limitations concerning BNPLC's own acts or omissions or the acts or omissions of anyone other than the subtenant, so too may Lessor's rights as an additional or named insured be subject to exceptions or limitations concerning Lessor's own acts or omissions or the acts or omissions of anyone other than the subtenant.
To the extent that BNPLC may itself from time to time after the expiration or earlier termination of the Other Lease Agreement maintain liability insurance against claims of third parties which may arise because of any occurrence on or alleged to have occurred on or about the GL Property, BNPLC shall cause Lessor to be an additional or named insured under such insurance, provided Lessor pays or reimburses BNPLC for any additional insurance premium required to have Lessor made an insured.
To the extent that BNPLC may from time to time after the expiration or earlier termination of the Other Lease Agreement require any subtenant to agree to indemnify BNPLC against Environmental Losses or other Losses concerning the GL Property, BNPLC shall also require the subtenant to agree to indemnify Lessor. However, BNPLC shall have no liability to Lessor for a breach by the subtenant of any such agreement, and to the extent that BNPLC's rights as an indemnitee of the subtenant are subject to exceptions or limitations concerning BNPLC's own acts or omissions or the acts or omissions of anyone other than the subtenant, so too may Lessor's rights as an indemnitee be subject to exceptions or limitations concerning Lessor's own acts or omissions or the acts or omissions of anyone other than the subtenant.
6. Representations, Warranties and Covenants of Lessor Concerning the Property. Lessor represents, warrants and covenants as follows:
[Land]
Exhibit B-3 - Page 4
Lessor or any Affiliate of Lessor now or hereafter owns, acquires or leases land (other than the Land) that is the subject of a Permitted Encumbrance or Development Document, then Lessor shall, and shall cause its Affiliate to, assume liability for and indemnify BNPLC and other Interested Parties and defend and hold them harmless from and against all Losses (including Losses caused by any decline in the value of the Property or of the Improvements) that they would not have incurred or suffered but for (i) a termination of such Permitted Encumbrance or Development Document, to which Lessor or its Affiliate agreed, or which resulted from a breach thereof by Lessor or its Affiliate, or (ii) a refusal of Lessor or its Affiliate to agree to any waiver or modification requested by BNPLC of restrictions upon the Property or the transfer thereof imposed by such Permitted Encumbrance or Development Document, or (iii) anything done, authorized or suffered by Lessor or its Affiliate in violation of such Permitted Encumbrance or Development Document. Lessor's obligations under this subparagraph 6.(C) shall be binding upon any successor or assign of Lessor or its Affiliates with respect to their interest in properties subject to the Development Documents and Permitted Encumbrances.
7. Insurance and Condemnation.
8. Leasehold Mortgages.
(A0 By Leasehold Mortgage BNPLC may encumber BNPLC's leasehold estate in the GL Property created by this Ground Lease, as well as BNPLC's rights and interests in buildings, fixtures, equipment and Improvements situated on the Land and rents, issues, profits, revenues and other income to be derived by BNPLC therefrom.
(B0 Any Leasehold Mortgagee or other party, including any corporation formed by a Leasehold Mortgagee, may become the legal owner of the leasehold estate created by this Ground Lease, and of the Improvements, equipment, fixtures and other property assigned as additional security pursuant to a Leasehold Mortgage, by foreclosure of a Leasehold Mortgage or as a result of the assignment or conveyance in lieu of foreclosure. Further, any such Leasehold Mortgagee or other party may itself, after becoming the legal owner and holder of the leasehold estate created by this Ground Lease, or of any Improvements, equipment, fixtures and other
Exhibit B-3 - Page 5
[Land]
property assigned as additional security pursuant to a Leasehold Mortgage, convey or pledge the same without the consent of Lessor.
(C0 Lessor shall serve notice of any default by BNPLC hereunder upon any Leasehold Mortgagee. No notice of a default by BNPLC shall be deemed effective until it is so served. Any Leasehold Mortgagee shall have the right to correct or cure any such default within the same period of time after receipt of such notice as is given to BNPLC under this Ground Lease to correct or cure defaults, plus an additional period of thirty days thereafter. Lessor will accept performance by any Leasehold Mortgagee of any covenant, condition or agreement on BNPLC's part to be performed hereunder with the same force and effect as though performed by BNPLC.
(D0 If this Ground Lease should terminate by reason of a disaffirmance or rejection of this Ground Lease by BNPLC or any receiver, liquidator or trustee for the property of BNPLC, or by any governmental authority which had taken possession of the business or property of BNPLC by reason of the insolvency or alleged insolvency of BNPLC, then:
(1 Lessor shall give notice thereof to each Leasehold Mortgagee; and upon request of any Leasehold Mortgagee made within sixty days after Lessor has given such notice, Lessor shall enter into a new ground lease of the GL Property with such Leasehold Mortgagee for the remainder of the Ground Lease Term, at the same Ground Lease Rent and on the same terms and conditions as contained in this Ground Lease.
(2 The estate of the Leasehold Mortgagee, as lessee under the new lease, shall have priority equal to the estate of BNPLC hereunder. That is, there shall be no charge, lien or burden upon the GL Property prior to or superior to the estate granted by such new lease which was not prior to or superior to the estate of BNPLC under this Ground Lease as of the date immediately preceding the termination of this Ground Lease.
(3 Notwithstanding the foregoing, if Lessor shall receive requests to enter into a new ground lease from more than one Leasehold Mortgagee, Lessor shall be required to enter into only one new ground lease, and the new ground lease shall be to the requesting Leasehold Mortgagee who holds the highest priority lien or interest in BNPLC's leasehold estate in the Land. If the liens or security interests of two or more such requesting Leasehold Mortgagees which shared the highest priority just prior to the termination of this Ground Lease, the new ground lease shall name all such Leasehold Mortgagees as co- tenants thereunder.
(E0 If BNPLC has agreed with any Leasehold Mortgagee that such Leasehold Mortgagee's consent will be required to any modification or early termination of this Ground Lease by BNPLC, and if Lessor has been notified of such agreement, such consent will be required.
(F0 No Leasehold Mortgagee will assume any liability under this Ground Lease either by virtue of its Leasehold Mortgage or by any subsequent receipt or collection of rents or profits generated from the GL Property, unless and until the Leasehold Mortgagee acquires BNPLC's leasehold estate in the GL Property at foreclosure or by deed in lieu of foreclosure.
(G0 Although the foregoing provisions concerning Leasehold Mortgages and Leasehold Mortgagees will be self operative, Lessor agrees to include, in addition to the items specified in Paragraph 11, confirmation of the foregoing in any statement provided to a Leasehold Mortgagee or prospective Leasehold Mortgagee pursuant to Paragraph 11.
Exhibit B-3 - Page 6
[Land]
9. Events of Default.
(1 BNPLC shall fail to pay when due any installment of Ground Lease Rent due hereunder and such failure shall continue for sixty days after BNPLC receives notice thereof.
(2 BNPLC shall fail to comply with any term, provision or covenant of this Ground Lease (other than as described in the other clauses of this subparagraph 9.(A)), and shall not cure such failure prior to the earlier of (A) ninety days after notice thereof is sent to BNPLC, or (B) the date any writ or order is issued for the levy or sale of any property owned by Lessor or its Affiliates (including the GL Property) because of such failure or any criminal action is instituted against BNPLC or any of its directors, officers or employees because of such failure; provided, however, that so long as no such writ or order is issued and no such criminal actions is instituted, if such failure is susceptible of cure but cannot with reasonable diligence be cured within such ninety day period, and if BNPLC shall promptly have commenced to cure the same and shall thereafter prosecute the curing thereof with reasonable diligence, the period within which such failure may be cured shall be extended for such further period as shall be necessary for the curing thereof with reasonable diligence.
10. Quiet Enjoyment. Neither Lessor nor any third party lawfully claiming any right or interest in the GL Property shall during the Ground Lease Term disturb BNPLC's peaceable and quiet enjoyment of the GL Property; however, such enjoyment shall be subject to the terms, provisions, covenants, agreements and conditions of this Ground Lease and the Permitted Encumbrances, to which this Ground Lease is subject and subordinate as hereinabove set forth.
11. Estoppel Certificate. Lessor shall from time to time, within ten days after receipt of request by BNPLC, deliver a statement in writing certifying:
(A0 that this Ground Lease is unmodified and in full force and effect (or if modified that this Ground Lease as so modified is in full force and effect);
(B0 that to the knowledge of Lessor BNPLC has not previously assigned or hypothecated its rights or interests under this Ground Lease, except as is described in such statement with as much specificity as Lessor is able to provide;
(C0 the term of this Ground Lease and the Ground Lease Rent then in effect and any additional
Exhibit B-3 - Page 7
[Land]
charges;
(D0 that BNPLC is not in default under any provision of this Ground Lease (or if in default, the nature thereof in detail) and a statement as to any outstanding obligations on the part of Lessor or BNPLC; and
(E0 such other matters as are reasonably requested by BNPLC.
Lessor's failure to deliver such statement within such time shall be conclusive upon BNPLC (i) that this Ground Lease is in full force and effect, without modification except as may be represented by BNPLC, (ii) that there are no uncured defaults in BNPLC's performance hereunder.
[The signature pages follow.]
Exhibit B-3 - Page 8
[Land]
IN WITNESS WHEREOF, this Ground Lease is hereby executed in multiple originals as of the date first written above.
"Lessor"
[Extreme or the Applicable Purchaser]
By: ____________________________________ Name: ___________________________ Title: __________________________
Exhibit B-3 - Page 9
[Land]
[Continuation of signature pages to GROUND LEASE dated as of ___________, ____]
"BNPLC"
BNP LEASING CORPORATION
By: ____________________________________
Name: ___________________________
Title: __________________________
Exhibit B-3 - Page 10
[Land]
STATE OF ___________ ) ) COUNTY OF _____________ ) |
On _____________, _____, before me, ________________________, personally appeared ____________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature ______________________________
Exhibit B-3 - Page 11
[Land]
STATE OF ________ ) ) COUNTY OF __________ ) |
On ___________, _____, before me, ________________________, personally appeared ____________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature ______________________________
Exhibit B-3 - Page 12
[Land]
Legal Description
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
Exhibit B-3 - Page 13
[Land]
Permitted Encumbrances
The leasehold and other interests in the Land hereby conveyed by Lessor are conveyed subject to the following matters to the extent the same are still valid and in force:
[THE SAME LIST OF PERMITTED ENCUMBRANCES ATTACHED TO THE GRANT DEED FROM BNPLC TO EXTREME OR THE APPLICABLE PURCHASER SHALL BE INSERTED HERE.]
Exhibit B-3 - Page 14
[Land]
List of Development Documents
None.
[Land]
Exhibit B-3 - Page 15
DETERMINATION OF FAIR RENTAL VALUE
Each annual payment of Ground Lease Rent will equal the Fair Rental Value, computed as of the most recent Rental Determination Date when such payment becomes due. As used in this Annex:
"Rental Determination Date" means the GL Effective Date and each fifth anniversary of the GL Effective Date.
If Lessor and BNPLC have not agreed upon Fair Rental Value as of any Rental Determination Date within one hundred eighty days after the such date, then Fair Rental Value will be determined as follows:
(a0 Lessor and BNPLC shall each appoint a real estate appraiser who is familiar with rental values for properties in the vicinity of the Land and who has not previously acted for either party. Each party will make the appointment no later than ten days after receipt of notice from the other party that the appraisal process described in this Annex has been invoked. The agreement of the two appraisers as to Fair Rental Value will be binding upon Lessor and BNPLC. If the two appraisers cannot agree upon the Fair Rental Value within ten days following their appointment, they shall within another ten days agree upon a third real estate appraiser. Immediately thereafter, each of the first two appraisers will submit his best estimate of the appropriate Fair Rental Value (together with a written report supporting such estimate) to the third appraiser and the third appraiser will choose between the two estimates. The estimate of Fair Rental Value chosen by the third appraiser as the closest to the prevailing annual fair rental value will be binding upon Lessor and BNPLC. Notification in writing of this estimate shall be made to Lessor and BNPLC within fifteen days following the selection of the third appraiser.
(b0 If appraisers must be selected under the procedure set out above and either BNPLC or Lessor fails to appoint an appraiser or fails to notify the other party of such appointment within fifteen days after receipt of notice that the prescribed time for appointing the appraisers has passed, then the other party's appraiser will determine the Fair Rental Value. All appraisers selected for the appraisal process set out in this Annex will be disinterested, reputable, qualified real estate appraisers with the designation of MAI or equivalent and with at least 5 years experience in appraising properties comparable to the Land.
(c0 If a third appraiser must be chosen under the procedure set out above, he or she will be chosen on the basis of objectivity and competence, not on the basis of his relationship with the other appraisers or the parties to this Ground Lease, and the first two appraisers will be so advised. Although the first two appraisers will be instructed to attempt in good faith to agree upon the third appraiser, if for any reason they cannot agree within the prescribed time, either Lessor and BNPLC may require the first two appraisers to immediately submit its top choice for the third appraiser to the then highest ranking officer of the California Bar Association who will agree to help and who has no attorney/client or other significant
[Land]
Exhibit B-3 - Page 16
relationship to either Lessor or BNPLC. Such officer will have complete discretion to select the most objective and competent third appraiser from between the choices of each of the first two appraisers, and will do so within twenty days after such choices are submitted to him.
(d0 Either Lessor or BNPLC may notify the appraiser selected by the other party to demand the submission of an estimate of Fair Rental Value or a choice of a third appraiser as required under the procedure described above; and if the submission of such an estimate or choice is required but the other party's appraiser fails to comply with the demand within fifteen days after receipt of such notice, then the Fair Rental Value or choice of the third appraiser, as the case may be, selected by the other appraiser (i.e., the notifying party's appraiser) will be binding upon Lessor and BNPLC.
(e0 Lessor and BNPLC shall each bear the expense of the appraiser appointed by it, and the expense of the third appraiser and of any officer of the California Bar Association who participates in the appraisal process described above will be shared equally by Lessor and BNPLC.
[Land]
Exhibit B-3 - Page 17
REPURCHASE OPTION
Subject to the terms of this Annex, BNPLC shall have an option (the "Option") to buy Lessor's fee interest in the GL Property at any time during the term of this Ground Lease for a purchase price (the "Option Price") to Lessor equal to the fair market value of the GL Property, determined as described in the next paragraph.
If BNPLC exercises the Option, which BNPLC may do by notifying Lessor that BNPLC has elected to buy Lessor's interest in the GL Property as provided herein, then:
(a0 To the extent, if any, required as a condition imposed by law to the conveyance of the fee interest in the GL Property to BNPLC, Lessor shall promptly at its expense do whatever is necessary to obtain approvals of a new Parcel Map or lot line adjustments.
(b0 Upon BNPLC's tender of the Option Price to Lessor, Lessor will convey to BNPLC by general warranty deed and assignment, subject only to the Permitted Encumbrances, good and marketable title to the fee estate in the Land , to Lessor's interest in all other GL Property and, to the extent still in force, to Lessor's Extended Remarketing Rights under the Purchase Agreement.
(c0 BNPLC's obligation to close the purchase shall be subject
to the following terms and conditions, all of which are for the benefit
of BNPLC: (1) BNPLC shall have been furnished with evidence
satisfactory to BNPLC that Lessor can convey title as required by the
preceding subparagraph; (2) nothing shall have occurred or been
discovered after BNPLC exercised the Option that could significantly
and adversely affect title to the GL Property or BNPLC's use thereof,
(3) all of the representations of Lessor in this Ground Lease shall
continue to be true as if made effective on the date of the closing
and, with respect to any such representations which may be limited to
the knowledge of Lessor or any of Lessor's representatives, would
continue to be true on the date of the closing if all relevant facts
and circumstances were known to Lessor and such representatives, (4)
BNPLC shall find the Option Price acceptable after it is determined as
provided in this Annex, and (5) BNPLC shall have been tendered the deed
and other documents which are described in this Annex as documents to
be delivered to BNPLC at the closing of BNPLC's purchase.
(d0 Closing of the purchase will be scheduled on the first Business Day following thirty days after the Option Price is established in accordance with the terms and conditions of this Annex and after any approvals described in subparagraph (a) above are obtained, and prior to closing BNPLC's occupancy of the GL Property shall continue to be subject to the terms and conditions of this Ground Lease, including the terms setting forth BNPLC's obligation to pay rent. Closing shall take place at the offices of any title insurance company reasonably selected by BNPLC to insure title under the title insurance policy described below.
[Land]
Exhibit B-3 - Page 18
(e0 Any transfer taxes or notices or registrations required by law in connection with the sale contemplated by this Annex will be the responsibility of Lessor.
(f0 Lessor will deliver a certificate of nonforeign status to BNPLC at closing as needed to comply with the provisions of the Foreign Investors Real Property Tax Act (FIRPTA) or any comparable federal, state or local law in effect at the time.
(g0 Lessor will also pay for and deliver to BNPLC at the closing an owner's title insurance policy in the full amount of the Option Price, issued by a title insurance company designated by BNPLC (or written confirmation from the title company that it is then prepared to issue such a policy), and subject only to standard printed exceptions which the title insurance company refuses to delete or modify in a manner acceptable to BNPLC and to Permitted Encumbrances.
(h0 Lessor shall also deliver at the closing all other documents or things reasonably required to be delivered to BNPLC or by the title insurance company to evidence Lessor's ability to transfer the GL Property to BNPLC.
If Lessor and BNPLC do not otherwise agree upon the amount of the Option Price within twenty days after BNPLC exercises the Option, the Option Price shall be determined in accordance with the following procedure:
(1 Lessor and BNPLC shall each appoint a real estate appraiser who is familiar with properties in the vicinity of the Land and who has not previously acted for either party. Each party will make the appointment no later than ten days after receipt of notice from the other party that the appraisal process described in this Annex has been invoked. The agreement of the two appraisers as to the Option Price will be binding upon Lessor and BNPLC. If the two appraisers cannot agree upon the Option Price within ten days following their appointment, they shall within another ten days agree upon a third real estate appraiser. Immediately thereafter, each of the first two appraisers will submit his best estimate of the appropriate Option Price (together with a written report supporting such estimate) to the third appraiser and the third appraiser will choose between the two estimates. The estimate of Option Price chosen by the third appraiser as the closest to the prevailing fair market value will be binding upon Lessor and BNPLC. Notification in writing of the Option Price shall be made to Lessor and BNPLC within fifteen days following the selection of the third appraiser.
(2 If appraisers must be selected under the procedure set out above and either BNPLC or Lessor fails to appoint an appraiser or fails to notify the other party of such appointment within fifteen days after receipt of notice that the prescribed time for appointing the appraisers has passed, then the other party's appraiser will determine the Option Price. All appraisers selected for the appraisal process set out in this Annex will be disinterested, reputable, qualified real estate appraisers with the designation of MAI or equivalent and with at least 5 years experience in appraising properties comparable to the Land.
(3 If a third appraiser must be chosen under the procedure set out above, he will be chosen on the basis of objectivity and competence, not on the basis of his relationship with the other appraisers or the parties to this Ground Lease, and the first two appraisers will be so advised. Although the first two appraisers will be instructed to attempt in good faith to agree upon the third appraiser, if for any reason they cannot agree within the prescribed time, either Lessor and BNPLC may require the first two appraisers to immediately submit its top choice for the third appraiser to the then highest ranking officer of the California Bar Association who will agree to help and who has no attorney/client or other significant relationship to either Lessor or BNPLC. Such officer
[Land]
Exhibit B-3 - Page 19
will have complete discretion to select the most objective and competent third appraiser from between the choices of each of the first two appraisers, and will do so within ten days after such choices are submitted to him.
(4 Either Lessor or BNPLC may notify the appraiser selected by the other party to demand the submission of an estimate of Option Price or a choice of a third appraiser as required under the procedure described above; and if the submission of such an estimate or choice is required but the other party's appraiser fails to comply with the demand within fifteen days after receipt of such notice, then the Option Price or choice of the third appraiser, as the case may be, selected by the other appraiser (i.e., the notifying party's appraiser) will be binding upon Lessor and BNPLC.
(5 Lessor and BNPLC shall each bear the expense of the appraiser appointed by it, and the expense of the third appraiser and of any officer of the California Bar Association who participates in the appraisal process described above will be shared equally by Lessor and BNPLC.
[Land]
Exhibit B-3 - Page 20
CORPORATION GRANT DEED
NAME: [Extreme or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ |
NAME: [Extreme or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ |
CORPORATION GRANT DEED
(Covering Land but not the Improvements On the Land)
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP
LEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to
[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest in
the land situated in Santa Clara, California, described on Annex A attached
hereto and hereby made a part hereof (the "Land"), together with the any other
right, title and interest of Grantor in and to any easements, rights-of-way,
privileges and other rights appurtenant to the Land; provided, however, that
this grant is subject to the encumbrances described on Annex B (the "Permitted
Encumbrances") and any reservations or qualifications set forth below. Grantee
hereby assumes the obligations (including any personal obligations) of Grantor,
if any, created by or under, and agrees to be bound by the terms and conditions
of, the Permitted Encumbrances to the extent that the same concern or apply to
the Land.
Although this deed conveys Grantor's interest in the Land itself, this deed does not convey any interest in any buildings or other improvements on the Land (collectively, "Improvements") or any rights or easements appurtenant to Improvements. Prior to or contemporaneously with the delivery of this deed, Grantor has conveyed or is conveying the Improvements and appurtenant rights and easements to another party.
[Land]
BNP LEASING CORPORATION
Date: As of ____________ By: ________________________ Its: Attest: ________________________ |
Its:
[Extreme or Applicable Purchaser]
Date: As of ____________ By: _________________________ Its: Attest: ________________________ Its: STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me, ______________, personally appeared ________ and _________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature____________________
[Land]
Exhibit B-4 - Page 2
STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me, _______________, personally appeared __________ and __________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature_____________________
[Land]
Exhibit B-4 - Page 3
Annex A
LEGAL DESCRIPTION
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
[Land]
Exhibit B-4 - Page 4
Annex B
Permitted Encumbrances
This conveyance is subject to all encumbrances not constituting a "Lien Removable by BNPLC" (as defined in the Common Definitions and Provisions Agreement (Land) incorporated by reference into the Lease Agreement (Land) referenced in the last item of the list below), including the following matters to the extent the same are still valid and in force:
1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.
2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.
3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000
4. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed, From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records
Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.
5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983 Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records.
6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects: A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as
[Land]
Exhibit B-4 - Page 5
follows:
Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows:
Parcel 1:
Commencing at the point of intersection of the Westerly line of that
certain 24.74 acre parcel of land shown upon that Record of Survey
filed for recorded August 10, 1979 in Book 447 of Maps, at page 33,
Santa Clara County Records, with a line parallel with and 10 feet
Southerly of, measured at right angles to, the Northerly line of said
parcel; thence along said parallel line N. 89 degrees 25 minutes 00
seconds E. 107.00 feet; thence parallel with said Westerly line S. 0
degrees 00 minutes 27 seconds E. 319.16 feet; thence S. 34 degrees 02
minutes 45 seconds W. 87.51 feet, more or less, to intersection with a
line parallel with and 58 feet Easterly of measured at right angles to,
said Westerly line; thence along last said parallel line S. 0 degrees
00 minutes 27 seconds E. 294.30 feet, more or less, to intersection
with a line parallel with and 5 feet Northerly of, measured at right
angles to, the Northerly line of that real property conveyed to the
City of Santa Clara by that deed filed for record November 30, 1983 in
Book I 111 of Official Records, at page 606, said County Records;
thence along last said parallel line the following three (3) courses:
N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87 degrees 09
minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00 seconds
E. 334.69 feet; thence continuing parallel with the Southerly line of
first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet,
more or less, to termination in the Easterly line of that certain
parcel of real property conveyed to MPJ Partnership, by that Grant Deed
filed for record August 25, 1983 in Book H 838 of Official Records, at
page 215, said County Records.
Parcel 2:
A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline.
Parcel 3:
[Land]
Exhibit B-4 - Page 6
A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip.
Parcel 4:
A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip.
Parcel 5:
A strip of land 10 feet in width, the centerline of said strip being described as follows:
Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line.
Parcel 6:
A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee.
[Land]
Exhibit B-4 - Page 7
BILL OF SALE AND ASSIGNMENT
Reference is made to: (1) that certain Purchase Agreement (Land) between BNP Leasing Corporation ("Assignor") and Extreme Networks, Inc., dated as of June 1, 2000, (the "Purchase Agreement") and (2) that certain Lease Agreement (Land) between Assignor, as landlord, and Extreme Networks, Inc., as tenant, dated as of June __, 2000 (the "Land Lease"). (Capitalized terms used and not otherwise defined in this document are intended to have the meanings assigned to them in the Common Definitions and Provisions Agreement (Land) incorporated by reference into both the Purchase Agreement and Land Lease.)
As contemplated by the Purchase Agreement, Assignor hereby sells, transfers and assigns unto [EXTREME OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE], a _____________ ("Assignee"), all of Assignor's right, title and interest in and to the following property, if any, to the extent such property is assignable:
(a) the Land Lease;
(b) any pending or future award made because of any condemnation affecting the Property or because of any conveyance to be made in lieu thereof, and any unpaid award for damage to the Property and any unpaid proceeds of insurance or claim or cause of action for damage, loss or injury to the Property; and
(c) all other property included within the definition of "Property" as set forth in the Purchase Agreement.
Provided, however, excluded from this conveyance and reserved to Assignor are
any rights or privileges of Assignor under the following ("Excluded Rights"):
(1) the indemnities set forth in the Land Lease, whether such rights are
presently known or unknown, including rights of the Assignor to be indemnified
against environmental claims of third parties as provided in the Land Lease
which may not presently be known, (2) provisions in the Land Lease that
establish the right of Assignor to recover any accrued unpaid rent under the
Land Lease which may be outstanding as of the date hereof, (3) agreements
between Assignor and "BNPLC's Parent" or any "Participant," both as defined in
the Land Lease, or any modification or extension thereof, or (4) any other
instrument being delivered to Assignor contemporaneously herewith pursuant to
the Purchase Agreement. To the extent that this conveyance does include any
rights to receive future payments under the Land Lease, such rights ("Included
Rights") shall be subordinate to Assignor's Excluded Rights, and Assignee hereby
waives any rights to enforce Included Rights until such time as Assignor has
received all payments to which it remains entitled by reason of Excluded Rights.
If any amount shall be paid to Assignee on account of any Included Rights at any
time before Assignor has received all payments to which it is entitled because
of Excluded Rights, such amount shall be held in trust by Assignee for the
benefit of Assignor, shall be segregated from the other funds of Assignee and
shall forthwith be paid over to Assignor to be held by Assignor as collateral
for, or then or at any time thereafter applied in whole or in part by Assignor
against, the payments due to Assignor because of Excluded Rights, whether
matured or unmatured, in such order as Assignor shall elect.
Assignor does for itself and its successors covenant and agree to warrant and defend the title to the property assigned herein against the just and lawful claims and demands of any person claiming under or through a Lien Removable by BNPLC, but not otherwise.
Assignee hereby assumes and agrees to keep, perform and fulfill Assignor's obligations, if any, relating to any permits or contracts, under which Assignor has rights being assigned herein.
[Land]
IN WITNESS WHEREOF, the parties have executed this instrument as of _______________, _____.
BNP LEASING CORPORATION a Delaware
corporation
By:__________________________________
Its:_________________________________
By:__________________________________ Its:_________________________________
[Land]
Exhibit C - Page 2
STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me, _______, personally appeared ______ and _______, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature _________________________
STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me, _______, personally appeared ______ and _______, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature _________________________
[Land]
Exhibit C - Page 3
Annex A
LEGAL DESCRIPTION
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
[Land]
Exhibit C - Page 4
ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this "Certificate") is made as of ___________________, ____, by [Extreme or the Applicable Purchaser, as the case may be], a ___________________ ("Grantee").
Contemporaneously with the execution of this Certificate, BNP Leasing Corporation, a Delaware corporation ("BNPLC"), is executing and delivering to Grantee (1) a corporate grant deed and (2) a Bill of Sale and Assignment (the foregoing documents and any other documents to be executed in connection therewith are herein called the "Conveyancing Documents" and any of the properties, rights or other matters assigned, transferred or conveyed pursuant thereto are herein collectively called the "Subject Property").
The provisions of this Certificate shall be binding on Grantee, its successors and assigns and any other party claiming through Grantee. Grantee hereby acknowledges that BNPLC is entitled to rely and is relying on this Certificate.
EXECUTED as of ________________, ____.
[Extreme or the Applicable Purchaser]
By:_____________________________________
Name:________________________________
Title:_______________________________
[Land]
SECRETARY'S CERTIFICATE
The undersigned, [Secretary or Assistant Secretary] of BNP Leasing Corporation, a Delaware corporation (the "Corporation"), hereby certifies as follows:
1. That he is the duly, elected, qualified and acting Secretary [or Assistant Secretary] of the Corporation and has custody of the corporate records, minutes and corporate seal.
2. That the following named persons have been properly designated, elected and assigned to the office in the Corporation as indicated below; that such persons hold such office at this time and that the specimen signature appearing beside the name of such officer is his or her true and correct signature.
[The following blanks must be completed with the names and signatures of the officers who will be signing the deed and other Sale Closing Documents on behalf
of the Corporation.] Name Title Signature ---- ----- --------- _______________ _________________ _________________________ _______________ _________________ _________________________ |
3. That the resolutions attached hereto and made a part hereof were duly adopted by the Board of Directors of the Corporation in accordance with the Corporation's Articles of Incorporation and Bylaws. Such resolutions have not been amended, modified or rescinded and remain in full force and effect.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of the Corporation on this __, day of ___, __.
[Land]
CORPORATE RESOLUTIONS OF
BNP LEASING CORPORATION
WHEREAS, pursuant to that certain Purchase Agreement (Land) (herein called the "Purchase Agreement") dated as of June 1, 2000, by and between BNP Leasing Corporation (the "Corporation") and [Extreme or the Applicable Purchaser as the case may be] ("Purchaser"), the Corporation agreed to sell and Purchaser agreed to purchase or cause the Applicable Purchaser (as defined in the Purchase Agreement) to purchase the Corporation's interest in the property (the "Property") located in Santa Clara, California more particularly described therein.
NOW THEREFORE, BE IT RESOLVED, that the Board of Directors of the Corporation, in its best business judgment, deems it in the best interest of the Corporation and its shareholders that the Corporation convey the Property to Purchaser or the Applicable Purchaser pursuant to and in accordance with the terms of the Purchase Agreement.
RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed in the name and on behalf of the Corporation to cause the Corporation to fulfill its obligations under the Purchase Agreement.
RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed to take or cause to be taken any and all actions and to prepare or cause to be prepared and to execute and deliver any and all deeds and other documents, instruments and agreements that shall be necessary, advisable or appropriate, in such officer's sole and absolute discretion, to carry out the intent and to accomplish the purposes of the foregoing resolutions.
[Land]
Exhibit E - Page 2
FIRPTA STATEMENT
Section 1445 of the Internal Revenue Code of 1986, as amended, provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. Sections 18805, 18815 and 26131 of the California Revenue and Taxation Code, as amended, provide that a transferee of a California real property interest must withhold income tax if the transferor is a nonresident seller.
To inform [Extreme or the Applicable Purchaser] (the "Transferee") that withholding of tax is not required upon the disposition of a California real property interest by transferor, BNP Leasing Corporation (the "Seller"), the undersigned hereby certifies the following on behalf of the Seller:
1. The Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);
2. The United States employer identification number for the Seller is _____________________;
3.The office address of the Seller is ______________ _________________________ _________________.
4. The Seller is qualified to do business in California.
The Seller understands that this certification may be disclosed to the Internal Revenue Service and/or to the California Franchise Tax Board by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.
The Seller understands that the Transferee is relying on this affidavit in determining whether withholding is required upon said transfer.
Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Seller.
Dated: ___________, ____.
By:_________________________ Name:______________________ Title:_____________________
[Land]
EXHIBIT 10.11
PURCHASE AGREEMENT
(IMPROVEMENTS)
BETWEEN
BNP LEASING CORPORATION
("BNPLC")
AND
EXTREME NETWORKS, INC.
("Extreme")
June 1, 2000
(Santa Clara, California)
Page ---- 1. EXTREME'S OPTIONS AND OBLIGATIONS ON THE DESIGNATED SALE DATE............................................ 1 (A) Right to Purchase; Initial Remarketing Rights and Obligation........................................ 1 ------------------------------------------------------------ (B) Determinations Concerning Price..................................................................... 3 ------------------------------- (C) Designation of the Purchaser........................................................................ 4 ---------------------------- (D) Effect of the Purchase Option and Extreme's Initial Remarketing Rights and Obligations.............. 4 -------------------------------------------------------------------------------------- on Subsequent Title Encumbrances -------------------------------- (E) Security for the Purchase Option and Extreme's Initial Remarketing Rights and Obligations........... 4 ----------------------------------------------------------------------------------------- (F) Delivery of Books and Records If BNPLC Retains the Property......................................... 5 ----------------------------------------------------------- 2. EXTREME'S RIGHTS AND OPTIONS AFTER THE DESIGNATED SALE DATE.............................................. 5 (A) Extreme's Extended Right to Remarket................................................................ 5 ------------------------------------ (B) Definition of Minimum Extended Remarketing Price.................................................... 6 ------------------------------------------------ (C) BNPLC's Right to Sell............................................................................... 6 --------------------- (D) Extreme's Right to Excess Sales Proceeds............................................................ 7 ---------------------------------------- (E) Permitted Transfers During Extreme's Extended Remarketing Period.................................... 7 ---------------------------------------------------------------- 3. TERMS OF CONVEYANCE UPON PURCHASE........................................................................ 7 4. SURVIVAL AND TERMINATION OF THE RIGHTS AND OBLIGATIONS OF EXTREME AND BNPLC.............................. 8 (A) Status of this Agreement Generally.................................................................. 8 ---------------------------------- (B) Automatic Termination of Extreme's Rights........................................................... 8 ----------------------------------------- (C) Termination of Extreme's Extended Remarketing Rights to Permit a Sale by BNPLC...................... 9 ------------------------------------------------------------------------------ (D) Payment Only to BNPLC............................................................................... 9 --------------------- (E) Remedies Under the Other Operative Documents........................................................ 9 -------------------------------------------- (F) Occupancy by Extreme Prior to Closing of a Sale..................................................... 9 ----------------------------------------------- 5. SECURITY FOR EXTREME'S OBLIGATIONS; RETURN OF FUNDS...................................................... 9 6. CERTAIN REMEDIES CUMULATIVE.............................................................................. 10 7. ATTORNEYS' FEES AND LEGAL EXPENSES....................................................................... 10 8. ESTOPPEL CERTIFICATE..................................................................................... 10 9. SUCCESSORS AND ASSIGNS................................................................................... 10 |
Exhibit A..................................................... Legal Description --------- Exhibit B..................................................... Grant Deed Form Requirements --------- Exhibit C..................................................... Bill of Sale and Assignment --------- Exhibit D..................................................... Acknowledgment and Disclaimer --------- Exhibit E..................................................... Secretary's Certificate --------- Exhibit F..................................................... Certificate Concerning Tax Withholding --------- |
PURCHASE AGREEMENT
(IMPROVEMENTS)
This PURCHASE AGREEMENT (IMPROVEMENTS) (this "Agreement") is made and dated as of June 1, 2000 (the "Effective Date") by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and EXTREME NETWORKS, INC., a Delaware corporation ("Extreme").
RECITALS
Contemporaneously with the execution of this Agreement, BNPLC and Extreme are executing a Common Definitions and Provisions Agreement (Improvements) dated as of the Effective Date (the "Common Definitions and Provisions Agreement (Improvements)"), which by this reference is incorporated into and made a part of this Agreement for all purposes. As used in this Agreement, capitalized terms defined in the Common Definitions and Provisions Agreement (Improvements) and not otherwise defined in this Agreement are intended to have the respective meanings assigned to them in the Common Definitions and Provisions Agreement (Improvements).
Extreme and BNPLC have reached agreement upon the terms and conditions upon which Extreme will purchase or arrange for the purchase of the Property, and by this Agreement they desire to evidence such agreement.
AGREEMENTS
1. EXTREME'S OPTIONS AND OBLIGATIONS ON THE DESIGNATED SALE DATE.
(1) Extreme shall have the right (the "Purchase Option") to purchase or cause an Affiliate of Extreme to purchase the Property and BNPLC's interest in Escrowed Proceeds, if any, on the Designated Sale Date for a cash price equal to the Break Even Price (as defined below).
(2) If neither Extreme nor an Affiliate of Extreme purchases the Property and BNPLC's interest in any Escrowed Proceeds on the Designated Sale Date as provided in the preceding
subparagraph 1.(A)(1), then Extreme shall have the following rights and obligations (collectively, "Extreme's Initial Remarketing Rights and Obligations"):
(a) First, Extreme shall have the right (but not the obligation) to cause an Applicable Purchaser who is not an Affiliate of Extreme to purchase the Property and BNPLC's interest in any Escrowed Proceeds on the Designated Sale Date for a cash purchase price (the "Third Party Price") determined as provided below. If, however, the Break Even Price exceeds the sum of any Third Party Price tendered or to be tendered to BNPLC by an Applicable Purchaser and any Supplemental Payment paid by Extreme as described below, then BNPLC may affirmatively elect to decline such tender from the Applicable Purchaser and to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser pursuant to this subparagraph (a "Voluntary Retention of the Property").
(b) Second, if the Third Party Price actually paid by an Applicable Purchaser to BNPLC on the Designated Sale Date exceeds the Break Even Price, Extreme shall be entitled to such excess, subject, however, to BNPLC's right to offset against such excess any and all sums that are then due from Extreme to BNPLC under the other Operative Documents.
(c) Third, if for any reason whatsoever (including a Voluntary Retention of the Property or a decision by Extreme not to exercise its right to purchase or cause an Applicable Purchaser to purchase from BNPLC as described above) neither Extreme nor an Applicable Purchaser pays a net cash price to BNPLC on the Designated Sale Date equal to or in excess of the Break Even Price in connection with a sale of the Property and BNPLC's interest in any Escrowed Proceeds pursuant to this Agreement, then Extreme shall have the obligation to pay to BNPLC on the Designated Sale Date a supplemental payment (the "Supplemental Payment") equal to the lesser of (1) the amount by which the Break Even Price exceeds such net cash price (if any) actually received by BNPLC on the Designated Sale Date (such excess being hereinafter called a "Deficiency") or (2) the Maximum Remarketing Obligation. As used herein, the "Maximum Remarketing Obligation" means a dollar amount determined in accordance with the following provisions:
1) The "Maximum Remarketing Obligation" will equal the product of (i) Stipulated Loss Value on the Designated Sale Date, times (ii) 100% minus the Residual Risk Percentage, provided that both of the following conditions are satisfied:
(x) Extreme shall not have elected to
accelerate the Designated Sale Date as provided in clause
(2) of the definition of Designated Sale Date in the Common
Definitions and Provisions Agreement (Improvements).
(y) No Event of Default, other than an Issue 97-1 Non-performance-related Subjective Event of Default, shall occur on or be continuing on the Designated Sale Date.
2) If either of the conditions listed in subparagraph 1) preceding are not satisfied, the "Maximum Remarketing Obligation" will equal the Break Even Price.
If any Supplemental Payment or other amount payable to BNPLC pursuant to this subparagraph 1.(A) is not actually paid to BNPLC on the Designated Sale Date, Extreme shall pay interest on the past due amount computed at the Default Rate from the Designated Sale Date.
(a) Extreme may give a notice (a "Remarketing Notice") to BNPLC and to each of the Participants no earlier than one hundred twenty days before the Designated Sale Date and no later than ninety days before the Designated Sale Date, specifying an amount as the Third Party Price that Extreme believes in good faith to constitute reasonably equivalent value for the Property and any Escrowed Proceeds. Once given, a Remarketing Notice shall not be rescinded or modified without BNPLC's written consent.
(b) If BNPLC believes in good faith that the Third Party Price specified by Extreme in a Remarketing Notice does not constitute reasonably equivalent value for the Property and any Escrowed Proceeds, BNPLC may at any time before sixty days prior to the Designated Sale Date respond to the Remarketing Notice with a notice back to Extreme, objecting to the Third Party Price so specified by Extreme. If BNPLC receives a Remarketing Notice, yet does not respond with an objection as provided in the preceding sentence, the Third Party Price suggested by Extreme in the Remarketing Notice will be the Third Party Price for purposes of this Agreement. If, however, BNPLC does respond with an objection as provided in this subparagraph, and if Extreme and BNPLC do not otherwise agree in writing upon a Third Party Price, then the Third Party Price will be the lesser of (I) fair market value of the Property, plus the amount of any Escrowed Proceeds, as determined by a professional independent appraiser selected by BNPLC, or (II) the Break Even Price.
(c) If for any reason, including an acceleration of the Designated Sale Date as provided in the definition thereof in the Common Definitions and Provisions Agreement (Improvements), Extreme does not deliver a Remarketing Notice to BNPLC within the time period specified above, then the Third Party Price will be an amount determined in good faith by BNPLC as constituting reasonably equivalent value for the Property and any Escrowed Proceeds, but in no event more than the Break Even Price.
If any payment to BNPLC by an Applicable Purchaser hereunder is held to constitute a preference or a voidable transfer under Applicable Law, or must for any other reason be refunded by BNPLC to the Applicable Purchaser or to another Person, and if such payment to BNPLC reduced or had the effect of reducing a Supplemental Payment or increased or had the effect of increasing any excess sale proceeds paid to Extreme pursuant to subparagraph 1(A)(2)(b) or pursuant to subparagraph 2.(D), then Extreme shall pay to BNPLC upon demand an amount equal to the reduction of the Supplemental Payment or to the increase of the excess sale proceeds paid to Extreme, as applicable, and this Agreement shall continue to be effective or shall be reinstated as necessary to permit BNPLC to enforce its right to collect such amount from Extreme.
2. EXTREME'S RIGHTS AND OPTIONS AFTER THE DESIGNATED SALE DATE.
(1) The Property and BNPLC's interest in Escrowed Proceeds, if any, shall not have been sold on the Designated Sale Date as provided in Paragraph 1 or within the thirty days thereafter as provided in subparagraph 4.(B).
(2) No Voluntary Retention of the Property shall have occurred as described in subparagraph 1.(A)(2)(a).
(3) Extreme's Extended Remarketing Right shall not have been terminated pursuant to subparagraph 4.(B) below because of Extreme's failure to make any Supplemental Payment required on the Designated Sale Date.
(4) Extreme's Extended Remarketing Right shall not have been terminated by BNPLC pursuant to subparagraph 4.(C) below to facilitate BNPLC's sale of the Property to a third party in accordance with subparagraph 2.(C).
(5) At least thirty days prior to the date upon which BNPLC is to convey the Property to an Applicable Purchaser because of Extreme's exercise of Extreme's Extended Remarketing Right (the "Final Sale Date"), Extreme shall have notified BNPLC of (x) the date proposed by Extreme as the Final Sale Date (which must be a Business Day), (y) the full legal name of the Applicable Purchaser and such other information as will be required to prepare the Sale Closing Documents, and (z) the amount of the purchase price that the Applicable Purchaser will pay (consistent with the minimum required pursuant to the other provisions of this subparagraph 2.(A)) for the Property.
(3) the sum of all Impositions, insurance premiums and other Losses of every kind suffered or incurred by BNPLC or any other Interested Party with respect to the ownership, operation or maintenance of the Property on or after the Designated Sale Date, together with interest on such Impositions, insurance premiums and other Losses computed at the Default Rate from the date paid or incurred to the Final Sale Date.
If, however, Losses described in the preceding clause (3) consist of claims against BNPLC or another Interested Party that have not been liquidated prior to the Final Sale Date (and, thus, such Losses have yet to be fixed in
(1) BNPLC shall not sell the Property to an Affiliate of BNPLC on terms less favorable than those which BNPLC would require from a prospective purchaser not an Affiliate of BNPLC;
(2) If BNPLC receives or desires to make a written proposal (whether in the form of a "letter of intent" or other nonbinding expression of interest or in the form of a more definitive purchase and sale agreement) for a sale of the Property to a prospective purchaser (a "Third Party Sale Proposal"), and if on the basis of such Third Party Sale Proposal BNPLC expects to enter into or to pursue negotiations for a definitive purchase and sale agreement with the prospective purchaser, then prior to executing any such definitive agreement, BNPLC shall submit the Third Party Sale Proposal to Extreme with a notice (the "Third Party Sale Notice") explaining that (A) BNPLC is then prepared to accept a price not below an amount specified in such Third Party Sale Notice (the "Third Party Target Price") if BNPLC and the prospective purchaser reach agreement on other terms and conditions to be incorporated into a definitive purchase and sale agreement, and (B) Extreme's Extended Remarketing Right may be terminated pursuant to subparagraph 4.(C) of this Agreement unless Extreme causes an Applicable Purchaser to consummate a purchase of the Property pursuant to this Paragraph 2 within ninety days after the date of such Third Party Sale Notice.
For a period of ninety days (but only ninety days) after the date of any Third Party Sale Notice, the Minimum Extended Remarketing Price shall be limited in amount so that it does not exceed the Third Party Target Price specified by BNPLC therein. Accordingly, if BNPLC has delivered a Third Party Sale Notice specifying a Third Party Target Price below the Minimum Extended Remarketing Price calculated as provided in subparagraph 2.(B) within the ninety days prior to the Final Sale Date for any sale to an Applicable Purchaser by BNPLC pursuant to this Paragraph 2, then the Minimum Extended Remarketing Price applicable to such sale shall be reduced to the amount of the Third Party Target Price so specified. Such a reduction, however, will apply only to a sale to an Applicable Purchaser actually consummated within the ninety days after the date of the applicable Third Party Sale Notice.
4 SURVIVAL AND TERMINATION OF THE RIGHTS AND OBLIGATIONS OF EXTREME AND BNPLC.
BNPLC is a party, or (vii) any other cause, whether similar or dissimilar to the
foregoing, any existing or future law to the contrary notwithstanding. It is the
intention of the parties hereto that the obligations of Extreme hereunder
(including the obligation to make any Supplemental Payment as provided in
Paragraph 1) shall be separate and independent covenants and agreements from
BNPLC's obligations under this Agreement or any other agreement between BNPLC
and Extreme; provided, however, that nothing in this subparagraph shall excuse
BNPLC from its obligation to tender the Sale Closing Documents in substantially
the form attached hereto as exhibits when required by Paragraph 3. Further,
nothing in this subparagraph shall be construed as a waiver by Extreme of any
right Extreme may have at law or in equity to the following remedies, whether
because of BNPLC's failure to remove a Lien Removable by BNPLC or because of any
other default by BNPLC under this Agreement: (i) the recovery of monetary
damages, (ii) injunctive relief in case of the violation, or attempted or
threatened violation, by BNPLC of any of the express covenants, agreements,
conditions or provisions of this Agreement which are binding upon BNPLC, or
(iii) a decree compelling performance by BNPLC of any of the express covenants,
agreements, conditions or provisions of this Agreement which are binding upon
BNPLC.
In additional to the payments required under subparagraph 1.(A), on the Designated Sale Date Extreme must pay all amounts then due to BNPLC under the Improvements Lease or other Operative Documents.
Certificate, and Extreme's obligations hereunder shall not be affected or impaired by any event or circumstance that would excuse Extreme from performance of its obligations under such other Operative Documents.
5 SECURITY FOR EXTREME'S OBLIGATIONS; RETURN OF FUNDS. Extreme's obligations under this Agreement are secured by the Pledge Agreement, reference to which is hereby made for a description of the Collateral covered thereby and the rights and remedies provided to BNPLC thereby. Although the collateral agent appointed for BNPLC as provided in the Pledge Agreement shall be entitled to hold all Collateral as security for the full and faithful performance by Extreme of Extreme's covenants and obligations under this Agreement, the Collateral shall not be considered an advance payment of the Break Even Price or any Supplemental Payment or a measure of BNPLC's damages should Extreme breach this Agreement. If Extreme does breach this Agreement and fails to cure the same within any time specified herein for the cure, BNPLC may, from time to time, without prejudice to any other remedy and without notice to Extreme, require the collateral agent to immediately apply the proceeds of any disposition of the Collateral (and any cash included in the Collateral) to amounts then due hereunder from Extreme. If by a Permitted Transfer BNPLC conveys its interest in the Property before the Designated Sale Date, BNPLC may also assign BNPLC's interest in the Collateral to the transferee. BNPLC shall be entitled to return any Collateral not sold or used to satisfy the obligations secured by the Pledge Agreement directly to Extreme notwithstanding any prior actual or attempted conveyance or assignment by Extreme, voluntary or otherwise, of any right to receive the same; neither BNPLC nor the collateral agent named in the Pledge Agreement shall be responsible for the proper distribution or application by Extreme of any such Collateral returned to Extreme; and any such return of Collateral to Extreme shall discharge any obligation of BNPLC to deliver such Collateral to all Persons claiming an interest in the Collateral. Further, BNPLC shall be entitled to deliver any Escrowed Proceeds it holds on the Designated Sale Date directly to Extreme or to any Applicable Purchaser purchasing BNPLC's interest in the Property and the Escrowed Proceeds pursuant to this Agreement notwithstanding any prior actual or attempted conveyance or assignment by Extreme, voluntary or otherwise, of any right to receive the same; BNPLC shall not be responsible for the proper distribution or application by Extreme or any Applicable Purchaser of any such Escrowed Proceeds paid over to Extreme or the Applicable Purchaser; and any such payment of Escrowed Proceeds to Extreme or an Applicable Purchaser shall discharge any obligation of BNPLC to deliver the same to all Persons claiming an interest therein.
6 CERTAIN REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to BNPLC is intended to be exclusive of any other right or remedy BNPLC has with respect to the Property, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity or by statute. In addition to other remedies available under this Agreement, either party shall be entitled, to the extent permitted by applicable law, to a decree compelling performance of any of the other party's agreements hereunder.
7 ATTORNEYS' FEES AND LEGAL EXPENSES. If either party to this Agreement commences any legal action or other proceeding to enforce any of the terms of this Agreement, or because of any breach by the other party or dispute hereunder, the party prevailing in such action or proceeding shall be entitled to recover from the other party all Attorneys' Fees incurred in connection therewith, whether or not such controversy, claim or dispute is prosecuted to a final judgment. Any such Attorneys' Fees incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from such judgment, and the obligation for such Attorneys' Fees is intended to be severable from other provisions of this Agreement and not to be merged into any such judgment.
8 ESTOPPEL CERTIFICATE. Upon request by BNPLC, Extreme shall execute, acknowledge and deliver a written statement certifying that this Agreement is unmodified and in full effect (or, if there have been modifications, that this Agreement is in full effect as modified, and setting forth such modification) and either stating that no default exists hereunder or specifying each such default of which Extreme has knowledge. Any such statement may be relied upon by any Participant or prospective purchaser or assignee of BNPLC with respect to the Property.
9 SUCCESSORS AND ASSIGNS. The terms, provisions, covenants and conditions hereof shall be binding upon Extreme and BNPLC and their respective permitted successors and assigns and shall inure to the benefit of Extreme and BNPLC and all permitted transferees, mortgagees, successors and assignees of Extreme and BNPLC with respect to the Property; provided, that (A) the rights of BNPLC hereunder shall not pass to Extreme or any Applicable Purchaser or any subsequent owner claiming through Extreme or an Applicable Purchaser, (B) BNPLC shall not assign this Agreement or any rights hereunder except pursuant to a Permitted Transfer, and (C) Extreme shall not assign this Agreement or any rights hereunder without the prior written consent of BNPLC.
[Signature pages follow.]
IN WITNESS WHEREOF, Extreme and BNPLC have caused this Agreement to be executed as of June 1, 2000.
"Extreme"
EXTREME NETWORKS, INC.
By: ___________________________
Name:______________________
Title:_____________________
[Continuation of signature pages to Purchase Agreement (Land) dated to be effective June 1, 2000]
"BNPLC"
BNP LEASING CORPORATION
By: ______________________________
Lloyd G. Cox, Vice President
LEGAL DESCRIPTION
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
Requirements Re: Form of Grant Deed and Ground Lease
The form of deed to be used to convey BNPLC's interest in the Land to Extreme or an Applicable Purchaser will depend upon whether BNPLC's interest in the Improvements has been or is being conveyed at the same time to the same party.
Finally, BNPLC's interest in the Land will be conveyed by a deed in the from attached as Exhibit B-4 if BNPLC's interest in the Improvements has been sold pursuant to the Other Purchase Agreement before a sale of BNPLC's interest in the Land under this Agreement, or if BNPLC's interest in the Improvements is being sold contemporaneously with a sale of BNPLC's interest in the Land, but the purchaser of the Improvements is not the same as the purchaser of the Land.
CORPORATION GRANT DEED
NAME: [Extreme or the Applicable Purchaser]
ADDRESS: _____________________________
ATTN: _____________________________
CITY: _____________________________
STATE: ________________________________
Zip: _____________________________
NAME: [Extreme or the Applicable Purchaser]
ADDRESS: _____________________________
ATTN: _____________________________
CITY: _____________________________
STATE: ________________________________
Zip: _____________________________
CORPORATION GRANT DEED
(Covering Land and Improvements)
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP
LEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to
[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest in
the land situated in Santa Clara, California, described on Annex A attached
hereto and hereby made a part hereof and all improvements on such land, together
with the any other right, title and interest of Grantor in and to any easements,
rights-of-way, privileges and other rights appurtenant to such land or the
improvements thereon; provided, however, that this grant is subject to the
encumbrances described on Annex B (the "Permitted Encumbrances"). Grantee hereby
assumes the obligations (including any personal obligations) of Grantor, if any,
created by or under, and agrees to be bound by the terms and conditions of, the
Permitted Encumbrances to the extent that the same concern or apply to the land
or improvements conveyed by this deed.
BNP LEASING CORPORATION
Date: As of_____________ By: ___________________________ Its: Attest: ___________________________ |
Its:
[Extreme or Applicable Purchaser]
Date: As of_____________ By: ___________________________ Its: Attest: ___________________________ Its: STATE OF _____________ ) ) SS COUNTY OF _____________ ) |
On___________________ before me,_________, personally appeared _________ and________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature________________________________
Exhibit B-1 - Page 2
STATE OF _____________ ) ) SS COUNTY OF _____________ ) |
On___________________ before me,_________, personally appeared _________ and____________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature____________________________
Exhibit B-1 - Page 3
Annex A
LEGAL DESCRIPTION
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
Exhibit B-1 - Page 4
Annex B
Permitted Encumbrances
This conveyance is subject to all encumbrances not constituting a "Lien Removable by BNPLC" (as defined in the Common Definitions and Provisions Agreement (Land) incorporated by reference into the Lease Agreement (Land) referenced in the last item of the list below), including the following matters to the extent the same are still valid and in force:
1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.
2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.
3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000
4. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed, From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records
Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.
5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983
Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records. |
6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects:A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as
Exhibit B-1 - Page 5 follows:
follows:
Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows:
Parcel 1:
Commencing at the point of intersection of the Westerly line of that
certain 24.74 acre parcel of land shown upon that Record of Survey
filed for recorded August 10, 1979 in Book 447 of Maps, at page 33,
Santa Clara County Records, with a line parallel with and 10 feet
Southerly of, measured at right angles to, the Northerly line of said
parcel; thence along said parallel line N. 89 degrees 25 minutes 00
seconds E. 107.00 feet; thence parallel with said Westerly line S. 0
degrees 00 minutes 27 seconds E. 319.16 feet; thence S. 34 degrees 02
minutes 45 seconds W. 87.51 feet, more or less, to intersection with a
line parallel with and 58 feet Easterly of measured at right angles to,
said Westerly line; thence along last said parallel line S. 0 degrees
00 minutes 27 seconds E. 294.30 feet, more or less, to intersection
with a line parallel with and 5 feet Northerly of, measured at right
angles to, the Northerly line of that real property conveyed to the
City of Santa Clara by that deed filed for record November 30, 1983 in
Book I 111 of Official Records, at page 606, said County Records;
thence along last said parallel line the following three (3) courses:
N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87 degrees 09
minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00 seconds
E. 334.69 feet; thence continuing parallel with the Southerly line of
first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet,
more or less, to termination in the Easterly line of that certain
parcel of real property conveyed to MPJ Partnership, by that Grant Deed
filed for record August 25, 1983 in Book H 838 of Official Records, at
page 215, said County Records.
Parcel 2:
A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline.
Parcel 3:
A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on
Exhibit B-1 - Page 6
the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip.
Parcel 4:
A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip.
Parcel 5:
A strip of land 10 feet in width, the centerline of said strip being described as follows:
Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line.
Parcel 6:
A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee.
Exhibit B-1 - Page 7
CORPORATION GRANT DEED
NAME: [Extreme or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ |
NAME: [Extreme or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ |
CORPORATION GRANT DEED
(Covering Improvements but not the Land under the Improvements)
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP
LEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to
[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest in
the buildings and other improvements (the "Improvements") on the land situated
in Santa Clara, California, described on Annex A attached hereto and hereby made
a part hereof (the "Land"), together with the any other right, title and
interest of Grantor in and to any easements, rights-of-way, privileges and other
rights appurtenant to the Improvements; provided, however, that this grant is
subject to the encumbrances described on Annex B (the "Permitted Encumbrances")
and any reservations or qualifications set forth below. Grantee hereby assumes
the obligations (including any personal obligations) of Grantor, if any, created
by or under, and agrees to be bound by the terms and conditions of, the
Permitted Encumbrances to the extent that the same concern or apply to the
Improvements.
Although this deed conveys Grantor's interest in the Improvements, this deed does not convey any interest in the Land under the Improvements or any rights or easements appurtenant to Improvements. Grantor retains and reserves all right, title and interest of Grantor in and to the Land and any rights and easements appurtenant to Land. Further, this deed does not convey any right of access over or right to use the Land, it being understood that the right of Grantee or its successors and assigns to maintain or use the improvements conveyed hereby shall be on and subject to the terms and conditions of any separate ground lease or deed that Grantee may from time to time obtain from the owner of the Land. If Grantee does not obtain a separate deed or ground lease giving Grantee the authority to maintain the Improvements on the Land, Grantee shall remove or abandon the Improvements promptly upon request of the owner of the Land. Nothing herein or in the agreements pursuant to which this deed is being delivered shall be construed as an obligation on the part of Grantor to deliver or cooperate reasonably in obtaining for Grantee any deed or ground lease covering the Land described on Annex A.
BNP LEASING CORPORATION
Date: As of ____________ By: ___________________________ Its: Attest: ___________________________ |
Its:
[Extreme or Applicable Purchaser]
Date: As of ____________ By: ___________________________ Its: Attest: ___________________________ Its: STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me,__________, personally appeared __________ and ______________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature _______________________________
Exhibit B-2 - Page 2
STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me, ___________, personally appeared ________ and ____________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature ______________________________
Exhibit B-2 - Page 3
Annex A
LEGAL DESCRIPTION
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
Exhibit B-2 - Page 4
Annex B
Permitted Encumbrances
This conveyance is subject to all encumbrances not constituting a "Lien Removable by BNPLC" (as defined in the Common Definitions and Provisions Agreement (Improvements) incorporated by reference into the Lease Agreement (Improvements) referenced in the last item of the list below), including the following matters to the extent the same are still valid and in force:
1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.
2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.
3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara
For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000 |
4. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed, From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records
Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.
5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983 Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records.
6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes,
In Favor Of: City of Santa Clara, a municipal corporation
For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects: A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as Exhibit B-2 - Page 5 |
follows:
Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows:
Parcel 1:
Commencing at the point of intersection of the Westerly line of that
certain 24.74 acre parcel of land shown upon that Record of Survey
filed for recorded August 10, 1979 in Book 447 of Maps, at page 33,
Santa Clara County Records, with a line parallel with and 10 feet
Southerly of, measured at right angles to, the Northerly line of said
parcel; thence along said parallel line N. 89 degrees 25 minutes 00
seconds E. 107.00 feet; thence parallel with said Westerly line S. 0
degrees 00 minutes 27 seconds E. 319.16 feet; thence S. 34 degrees 02
minutes 45 seconds W. 87.51 feet, more or less, to intersection with a
line parallel with and 58 feet Easterly of measured at right angles to,
said Westerly line; thence along last said parallel line S. 0 degrees
00 minutes 27 seconds E. 294.30 feet, more or less, to intersection
with a line parallel with and 5 feet Northerly of, measured at right
angles to, the Northerly line of that real property conveyed to the
City of Santa Clara by that deed filed for record November 30, 1983 in
Book I 111 of Official Records, at page 606, said County Records;
thence along last said parallel line the following three (3) courses:
N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87 degrees 09
minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00 seconds
E. 334.69 feet; thence continuing parallel with the Southerly line of
first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet,
more or less, to termination in the Easterly line of that certain
parcel of real property conveyed to MPJ Partnership, by that Grant Deed
filed for record August 25, 1983 in Book H 838 of Official Records, at
page 215, said County Records.
Parcel 2:
A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline.
Parcel 3:
A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on
Exhibit B-2 - Page 6
the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip.
Parcel 4:
A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip.
Parcel 5:
A strip of land 10 feet in width, the centerline of said strip being described as follows:
Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line.
Parcel 6:
A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee.
Exhibit B-2 - Page 7
CORPORATION GRANT DEED
NAME: [Extreme or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ |
NAME: [Extreme or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ |
CORPORATION GRANT DEED
(Covering Improvements but not Land under the Improvements)
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP
LEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to
[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest in
the buildings and other improvements (the "Improvements") on the land situated
in Santa Clara, California, described on Annex A attached hereto and hereby made
a part hereof (the "Land"), together with the any other right, title and
interest of Grantor in and to any easements, rights-of-way, privileges and other
rights appurtenant to the Improvements; provided, however, that this grant is
subject to the encumbrances described on Annex B (the "Permitted Encumbrances")
and any reservations or qualifications set forth below. Grantee hereby assumes
the obligations (including any personal obligations) of Grantor, if any, created
by or under, and agrees to be bound by the terms and conditions of, the
Permitted Encumbrances to the extent that the same concern or apply to the
Improvements.
Although this deed conveys Grantor's interest in the Improvements on the Land, this deed does not convey any interest in the Land itself or any rights or easements appurtenant to Land. Prior to or contemporaneously with the delivery of this deed, Grantor has conveyed or is conveying the Land and appurtenant rights and easements to another party, subject to the terms and conditions of a Ground Lease dated ________, filed or to be filed for record in the Santa Clara County records. Grantor is assigning it's rights as lessee under the Ground Lease to Grantee by a separate instrument dated of even date herewith.
BNP LEASING CORPORATION
Date: As of ____________ By: ________________________________ Its: Attest: ________________________________ |
Its:
[Extreme or Applicable Purchaser]
Date: As of ____________ By: ________________________________ Its: Attest: ________________________________ Its: STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me,_________, personally appeared ___________ and _____________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature _________________________________
Exhibit B-3 - Page 2
STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me, ___________, personally appeared ________ and __________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature _______________________________
Exhibit B-3 - Page 3
Annex A
LEGAL DESCRIPTION
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
Exhibit B-3 - Page 4
Annex B
Permitted Encumbrances
This conveyance is subject to all encumbrances not constituting a "Lien Removable by BNPLC" (as defined in the Common Definitions and Provisions Agreement (Improvements) incorporated by reference into the Lease Agreement (Improvements) referenced in the last item of the list below), including the following matters to the extent the same are still valid and in force:
1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.
2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.
3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara
For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000 |
4. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed, From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records
Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.
5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983 Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records.
6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation
For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects: A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as Exhibit B-3 - Page 5 |
follows:
Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows:
Parcel 1:
Commencing at the point of intersection of the Westerly line of that
certain 24.74 acre parcel of land shown upon that Record of Survey
filed for recorded August 10, 1979 in Book 447 of Maps, at page 33,
Santa Clara County Records, with a line parallel with and 10 feet
Southerly of, measured at right angles to, the Northerly line of said
parcel; thence along said parallel line N. 89 degrees 25 minutes 00
seconds E. 107.00 feet; thence parallel with said Westerly line S. 0
degrees 00 minutes 27 seconds E. 319.16 feet; thence S. 34 degrees 02
minutes 45 seconds W. 87.51 feet, more or less, to intersection with a
line parallel with and 58 feet Easterly of measured at right angles to,
said Westerly line; thence along last said parallel line S. 0 degrees
00 minutes 27 seconds E. 294.30 feet, more or less, to intersection
with a line parallel with and 5 feet Northerly of, measured at right
angles to, the Northerly line of that real property conveyed to the
City of Santa Clara by that deed filed for record November 30, 1983 in
Book I 111 of Official Records, at page 606, said County Records;
thence along last said parallel line the following three (3) courses:
N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87 degrees 09
minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00 seconds
E. 334.69 feet; thence continuing parallel with the Southerly line of
first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet,
more or less, to termination in the Easterly line of that certain
parcel of real property conveyed to MPJ Partnership, by that Grant Deed
filed for record August 25, 1983 in Book H 838 of Official Records, at
page 215, said County Records.
Parcel 2:
A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline.
Parcel 3:
A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on
Exhibit B-3 - Page 6
the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip.
Parcel 4:
A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip.
Parcel 5:
A strip of land 10 feet in width, the centerline of said strip being described as follows:
Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line.
Parcel 6:
A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.
8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee.
Exhibit B-3 - Page 7
BILL OF SALE AND ASSIGNMENT
Reference is made to: (1) that certain Purchase Agreement (Improvements) between BNP Leasing Corporation ("Assignor") and Extreme Networks, Inc., dated as of June 1, 2000, (the "Purchase Agreement") and (2) that certain Lease Agreement (Improvements) between Assignor, as landlord, and Extreme Networks, Inc., as tenant, dated as of June 1, 2000 (the "Improvements Lease"). (Capitalized terms used and not otherwise defined in this document are intended to have the meanings assigned to them in the Common Definitions and Provisions Agreement (Improvements) incorporated by reference into both the Purchase Agreement and Improvements Lease.)
As contemplated by the Purchase Agreement, Assignor hereby sells, transfers and assigns unto [EXTREME OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE], a _____________ ("Assignee"), all of Assignor's right, title and interest in and to the following property, if any, to the extent such property is assignable:
(b) any pending or future award made because of any condemnation affecting the Property or because of any conveyance to be made in lieu thereof, and any unpaid award for damage to the Property and any unpaid proceeds of insurance or claim or cause of action for damage, loss or injury to the Property; and
Provided, however, excluded from this conveyance and reserved to Assignor are
any rights or privileges of Assignor under the following ("Excluded Rights"):
(1) the indemnities set forth in the Improvements Lease, whether such rights are
presently known or unknown, including rights of the Assignor to be indemnified
against environmental claims of third parties as provided in the Improvements
Lease which may not presently be known, (2) provisions in the Improvements Lease
that establish the right of Assignor to recover any accrued unpaid rent under
the Improvements Lease which may be outstanding as of the date hereof, (3)
agreements between Assignor and "BNPLC's Parent" or any "Participant," both as
defined in the Improvements Lease, or any modification or extension thereof, or
(4) any other instrument being delivered to Assignor contemporaneously herewith
pursuant to the Purchase Agreement. To the extent that this conveyance does
include any rights to receive future payments under the Improvements Lease, such
rights ("Included Rights") shall be subordinate to Assignor's Excluded Rights,
and Assignee hereby waives any rights to enforce Included Rights until such time
as Assignor has received all payments to which it remains entitled by reason of
Excluded Rights. If any amount shall be paid to Assignee on account of any
Included Rights at any time before Assignor has received all payments to which
it is entitled because of Excluded Rights, such amount shall be held in trust by
Assignee for the benefit of Assignor, shall be segregated from the other funds
of Assignee and shall forthwith be paid over to Assignor to be held by Assignor
as collateral for, or then or at any time thereafter applied in whole or
in part by Assignor against, the payments due to Assignor because of Excluded Rights, whether matured or unmatured, in such order as Assignor shall elect.
Assignor does for itself and its successors covenant and agree to warrant and defend the title to the property assigned herein against the just and lawful claims and demands of any person claiming under or through a Lien Removable by BNPLC, but not otherwise.
Assignee hereby assumes and agrees to keep, perform and fulfill Assignor's obligations, if any, relating to any permits or contracts, under which Assignor has rights being assigned herein.
IN WITNESS WHEREOF, the parties have executed this instrument as of _______________, _____.
BNP LEASING CORPORATION a Delaware
corporation
By:_____________________________________
Its:____________________________________
By:_____________________________________ Its:____________________________________
Exhibit C - Page 2
STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me,__________ , personally appeared ____________ and ____________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature _______________________________
STATE OF ____________ ) ) SS COUNTY OF ___________ ) |
On ___________________ before me,__________ , personally appeared ___________ and ____________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature _______________________________
Exhibit C - Page 3
Annex A
LEGAL DESCRIPTION
All that certain real property situated in the City of Santa Clara, County of Santa Clara, State of California, described as follows:
Being a portion of that certain 24.740 acre parcel as shown on that certain Record of Survey filed in Book 447 of Maps, at Page 33, Santa Clara County Records, described as follows:
Beginning at the Northwest corner of said 24.740 acre parcel; thence from said point of beginning along the Northerly line of said 24.470 acre parcel N. 89 degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerly lines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in the Southerly line of said 24.740 acre parcel; thence along said Southerly line the following courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00 feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving said Southerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thence along said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet to the point of beginning.
Exhibit C - Page 4
ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this
"Certificate") is made as of ___________________, ____, by [Extreme or the
Applicable Purchaser, as the case may be], a ___________________ ("Grantee").
Contemporaneously with the execution of this Certificate, BNP Leasing Corporation, a Delaware corporation ("BNPLC"), is executing and delivering to Grantee (1) a corporate grant deed and (2) a Bill of Sale and Assignment (the foregoing documents and any other documents to be executed in connection therewith are herein called the "Conveyancing Documents" and any of the properties, rights or other matters assigned, transferred or conveyed pursuant thereto are herein collectively called the "Subject Property").
The provisions of this Certificate shall be binding on Grantee, its successors and assigns and any other party claiming through Grantee. Grantee hereby acknowledges that BNPLC is entitled to rely and is relying on this Certificate.
EXECUTED as of ________________, ____.
[Extreme or the Applicable Purchaser]
By:______________________________________
Name:_________________________________
Title:________________________________
SECRETARY'S CERTIFICATE
The undersigned, [Secretary or Assistant Secretary] of BNP Leasing Corporation, a Delaware corporation (the "Corporation"), hereby certifies as follows:
1. That he is the duly, elected, qualified and acting Secretary [or Assistant Secretary] of the Corporation and has custody of the corporate records, minutes and corporate seal.
2. That the following named persons have been properly designated, elected and assigned to the office in the Corporation as indicated below; that such persons hold such office at this time and that the specimen signature appearing beside the name of such officer is his or her true and correct signature.
[The following blanks must be completed with the names and signatures of the officers who will be signing the deed and other Sale Closing Documents on behalf
of the Corporation.] Name Title Signature ---- ----- --------- ___________________ ________________ _________________________ ___________________ ________________ _________________________ |
3. That the resolutions attached hereto and made a part hereof were duly adopted by the Board of Directors of the Corporation in accordance with the Corporation's Articles of Incorporation and Bylaws. Such resolutions have not been amended, modified or rescinded and remain in full force and effect.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of the Corporation on this __, day of __, _.
CORPORATE RESOLUTIONS OF
BNP LEASING CORPORATION
WHEREAS, pursuant to that certain Purchase Agreement (Improvements) (herein called the "Purchase Agreement") dated as of June 1, 2000, by and between BNP Leasing Corporation (the "Corporation") and [Extreme or the Applicable Purchaser as the case may be] ("Purchaser"), the Corporation agreed to sell and Purchaser agreed to purchase or cause the Applicable Purchaser (as defined in the Purchase Agreement) to purchase the Corporation's interest in the property (the "Property") located in Santa Clara, California more particularly described therein.
NOW THEREFORE, BE IT RESOLVED, that the Board of Directors of the Corporation, in its best business judgment, deems it in the best interest of the Corporation and its shareholders that the Corporation convey the Property to Purchaser or the Applicable Purchaser pursuant to and in accordance with the terms of the Purchase Agreement.
RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed in the name and on behalf of the Corporation to cause the Corporation to fulfill its obligations under the Purchase Agreement.
RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed to take or cause to be taken any and all actions and to prepare or cause to be prepared and to execute and deliver any and all deeds and other documents, instruments and agreements that shall be necessary, advisable or appropriate, in such officer's sole and absolute discretion, to carry out the intent and to accomplish the purposes of the foregoing resolutions.
Exhibit E - Page 2
FIRPTA STATEMENT
Section 1445 of the Internal Revenue Code of 1986, as amended, provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. Sections 18805, 18815 and 26131 of the California Revenue and Taxation Code, as amended, provide that a transferee of a California real property interest must withhold income tax if the transferor is a nonresident seller.
To inform [Extreme or the Applicable Purchaser] (the "Transferee") that withholding of tax is not required upon the disposition of a California real property interest by transferor, BNP Leasing Corporation (the "Seller"), the undersigned hereby certifies the following on behalf of the Seller:
1. The Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);
2. The United States employer identification number for the Seller is _____________________;
3. The office address of the Seller is ______________ _________________________ _________________.
4. The Seller is qualified to do business in California.
The Seller understands that this certification may be disclosed to the Internal Revenue Service and/or to the California Franchise Tax Board by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.
The Seller understands that the Transferee is relying on this affidavit in determining whether withholding is required upon said transfer.
Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Seller.
Dated: ___________, ____.
By:___________________________ Name:_________________________
Title:________________________
EXHIBIT 10.12
PLEDGE AGREEMENT
(LAND)
AMONG
BNP LEASING CORPORATION
("BNPLC")
BNP PARIBAS, AS AGENT
("Agent")
EXTREME NETWORKS, INC.
("Extreme")
AND
PARTICIPANTS AS DESCRIBED HEREIN
June 1, 2000
TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION........................................................................... -1- Section 1.1 Capitalized Terms Used But Not Defined in This Agreement...................................... -1- -------------------------------------------------------- Section 1.2 Definitions................................................................................... -1- ----------- Account.......................................................................................... -1- Account Office................................................................................... -2- Agent............................................................................................ -2- BNPLC............................................................................................ -2- BNPLC's Corresponding Obligations to Participants................................................ -2- Cash Collateral.................................................................................. -2- Certificate of Deposit........................................................................... -2- Collateral....................................................................................... -2- Collateral Imbalance............................................................................. -2- Collateral Percentage............................................................................ -2- Default.......................................................................................... -3- Deposit Taker.................................................................................... -3- Deposit Taker Losses............................................................................. -3- Deposit Taker's Acknowledgment and Agreement..................................................... -3- Disqualified Deposit Taker....................................................................... -3- Event of Default................................................................................. -3- Extreme.......................................................................................... -4- Extreme's Purchase Agreement Obligations......................................................... -4- Initially Qualified Deposit Taker................................................................ -5- Lien............................................................................................. -5- Material Lease Default........................................................................... -5- Minimum Collateral Percentage.................................................................... -5- Minimum Collateral Value......................................................................... -6- Notice of Security Interest...................................................................... -6- Other Liable Party............................................................................... -6- Participants..................................................................................... -6- Participation Agreement.......................................................................... -6- Percentage....................................................................................... -6- Qualified Pledge................................................................................. -6- Secured Obligations.............................................................................. -6- Supplement....................................................................................... -6- Transaction Documents............................................................................ -6- Value............................................................................................ -7- Section 1.3 Attachments.................................................................................. -7- ----------- Section 1.4 Amendment of Defined Instruments............................................................. -7- -------------------------------- Section 1.5 References and Titles........................................................................ -7- --------------------- ARTICLE II SECURITY INTEREST....................................................................................... -7- Section 2.1 Pledge and Grant of Security Interest........................................................ -7- ------------------------------------- Section 2.2 Return of Collateral After the Secured Obligations are Satisfied in Full..................... -8- ------------------------------------------------------------------------ ARTICLE III DETERMINATION OF THE COLLATERAL PERCENTAGE............................................................. -8- Section 3.1 Determination of the Collateral Percentage Generally......................................... -8- ---------------------------------------------------- |
Section 3.2 Limitations on Extreme's Right to Lower the Collateral Percentage............................ -8- ----------------------------------------------------------------- Section 3.3 Minimum Collateral Percentages Dependent Upon the Adjusted EBITDAR Coverage Ratio............ -9- --------------------------------------------------------------------------------- ARTICLE IV PROVISIONS CONCERNING DEPOSIT TAKERS.................................................................. -9- Section 4.1 Qualification of Deposit Takers Generally.................................................... -9- ----------------------------------------- Section 4.2 Existing Deposit Takers...................................................................... -9- ----------------------- Section 4.3 Replacement of Participants Proposed by Extreme.............................................. -10- ----------------------------------------------- Section 4.4 Mandatory Substitution for Disqualified Deposit Takers....................................... -10- ------------------------------------------------------ Section 4.5 Voluntary Substitution of Deposit Takers..................................................... -10- ---------------------------------------- Section 4.6 Delivery of Notice of Security Interest by Extreme and Agent................................. -10- ------------------------------------------------------------ Section 4.7 Constructive Possession of Collateral........................................................ -11- ------------------------------------- Section 4.8 Attempted Setoff by Deposit Takers........................................................... -11- ---------------------------------- Section 4.9 Deposit Taker Losses......................................................................... -11- -------------------- Section 4.10 Losses Resulting from Failure of Deposit Taker to Comply with this Agreement................ -11- ---------------------------------------------------------------------------- ARTICLE V DELIVERY AND MAINTENANCE OF CASH COLLATERAL............................................................ -12- Section 5.1 Delivery of Funds by Extreme................................................................. -12- ---------------------------- Section 5.2 Transition Account........................................................................... -12- ------------------ Section 5.3 Allocation of Cash Collateral Among Deposit Takers........................................... -12- -------------------------------------------------- Section 5.4 Issuance and Redemption of Certificates of Deposit........................................... -13- -------------------------------------------------- Section 5.5 Status of the Accounts Under the Reserve Requirement Regulations............................. -13- ---------------------------------------------------------------- Section 5.6 Acknowledgment by Extreme that Requirements of this Agreement are Commercially Reasonable.... -13- ----------------------------------------------------------------------------------------- ARTICLE VI WITHDRAWAL OF CASH COLLATERAL......................................................................... -14- Section 6.1 Withdrawal of Collateral Prior to the Designated Sale Date................................... -14- ---------------------------------------------------------- Section 6.2 Withdrawal and Application of Cash Collateral to Reduce or Satisfy the Secured ------------------------------------------------------------------------------ Obligations to the Participants............................................................. -14- ------------------------------- Section 6.3 Withdrawal and Application of Cash Collateral to Reduce or Satisfy the Secured ------------------------------------------------------------------------------ Obligations to BNPLC........................................................................ -15- --------------------- Section 6.4 Withdrawal of Cash Collateral From Accounts Maintained by Disqualified Deposit Takers........ -15- ------------------------------------------------------------------------------------- ARTICLE VII REPRESENTATIONS AND COVENANTS OF Extreme............................................................. -15- Section 7.1 Representations of Extreme................................................................... -15- -------------------------- Section 7.2 Covenants of Extreme......................................................................... -16- -------------------- ARTICLE VIII AUTHORIZED ACTION BY AGENT......................................................................... -17- Section 8.1 Power of Attorney............................................................................ -17- ----------------- ARTICLE IX DEFAULT AND REMEDIES................................................................................. -18- Section 9.1 Remedies..................................................................................... -18- -------- ARTICLE X OTHER RECOURSE........................................................................................ -18- Section 10.1 Recovery Not Limited........................................................................ -18- -------------------- ARTICLE XI PROVISIONS CONCERNING AGENT........................................................................... -19- Section 11.1 Appointment and Authority................................................................... -19- ------------------------- Section 11.2 Exculpation, Agent's Reliance, Etc.......................................................... -19- ---------------------------------- Section 11.3 Participant's Credit Decisions.............................................................. -20- ------------------------------ Section 11.4 Indemnity................................................................................... -20- --------- Section 11.5 Agent's Rights as Participant and Deposit Taker............................................. -20- ----------------------------------------------- |
Section 11.6 Investments................................................................................. -20- ----------- Section 11.7 Benefit of Article XI....................................................................... -21- --------------------- Section 11.8 Resignation................................................................................. -21- ----------- ARTICLE XII MISCELLANEOUS........................................................................................ -21- Section 12.1 Provisions Incorporated From Other Operative Documents....................................... -21- ------------------------------------------------------ Section 12.2 Cumulative Rights, etc...................................................................... -21- ---------------------- Section 12.3 Survival of Agreements...................................................................... -21- ---------------------- Section 12.4 Other Liable Party.......................................................................... -22- ------------------ Section 12.5 Termination................................................................................. -22- ----------- |
Attachment 1.........................................................................Form of Certificate of Deposit Attachment 2..................................................................Supplement to Pledge Agreement (Land) Attachment 3.......................................Notice of Extreme's Election to Change the Collateral Percentage Attachment 4............................................................................Notice of Security Interest Attachment 5...............................................................................Examples of Calculations Attachment 6.....................................Notice of Extreme's Requirement to Withdraw Excess Cash Collateral Attachment 7.....................................Notice of Extreme's Requirement of Direct Payments to Participants Attachment 8.....................................Notice of Extreme's Requirement of Direct Payments to Participants Attachment 9........................................................Notice of Extreme's Requirement of a Withdrawal of Cash Collateral from a Disqualified Deposit Taker Schedule 1...............................................................Financial Covenants and Negative Covenants ---------- |
PLEDGE AGREEMENT
(LAND)
This PLEDGE AGREEMENT (LAND) (this "Agreement") is made as of June 1, 2000 (the "Effective Date"), by EXTREME NETWORKS, INC., a California corporation ("Extreme"); BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"); BNP PARIBAS ("BNPLC's Parent"), as a "Participant"; and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants (in such capacity, "Agent").
A. Extreme and BNPLC are parties to: (i) a Common Definitions and
Provisions Agreement (Land) dated as of the Effective Date (the "Common
Definitions and Provisions Agreement (Land)"); and (ii) a Purchase Agreement
(Land) dated as of the Effective Date (the "Purchase Agreement"), pursuant to
which Extreme has agreed to make a "Supplemental Payment" (as defined in the
Common Definitions and Provisions Agreement (Land)), in consideration of the
rights granted to Extreme by the Purchase Agreement.
B. Pursuant to a Participation Agreement dated the date hereof (the
"Participation Agreement"), BNPLC's Parent has agreed with BNPLC to participate
in the risks and rewards to BNPLC of the Purchase Agreement and other Operative
Documents (as defined in the Common Definitions and Provisions Agreement
(Land)), and the parties to this Agreement anticipate that other financial
institutions may become parties to the Participation Agreement as Participants,
agreeing to participate in the risks and rewards to BNPLC of the Purchase
Agreement and other Operative Documents.
C. Extreme may from time to time deliver cash collateral for its obligations to BNPLC under the Purchase Agreement and for BNPLC's corresponding obligations to Participants under the Participation Agreement. This Agreement sets forth the terms and conditions governing such cash collateral.
NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I DEFINITIONS AND INTERPRETATION
"Account" shall mean any deposit account maintained by a Deposit Taker into which Cash Collateral may be deposited at any time, excluding the Transition Account.
"Account Office" shall mean, with respect to any Account maintained by any Deposit Taker, the office of such Deposit Taker in California or New York at which such Account is maintained as specified in the applicable Deposit Taker's Acknowledgment and Agreement.
"Agent" shall have the meaning given to that term in the introductory paragraph hereof.
"BNPLC" shall have the meaning given to that term in the introductory paragraph hereof.
"BNPLC's Corresponding Obligations to Participants" shall mean BNPLC's obligations under the Participation Agreement to pay Participants their respective Percentages of (or amounts equal to their respective Percentages of) sums "actually received by BNPLC" (as defined in the Participation Agreement) in satisfaction of Extreme's Purchase Agreement Obligations; provided, however, any modification of the Participation Agreement executed after the date hereof without Extreme's written consent shall not be considered for purposes of determining BNPLC's Corresponding Obligations to Participants under this Agreement.
"Cash Collateral" shall mean (i) all money of Extreme which Extreme has delivered to Agent for deposit with a Deposit Taker pursuant to this Agreement, and (ii) any additional money delivered to Agent as Collateral pursuant to Section 4.9.
"Collateral" shall have the meaning given to that term in Section 2.1 hereof.
"Collateral Imbalance" shall mean on any date prior to the Designated Sale Date that the Value (without duplication) of Accounts maintained by and Certificates of Deposit issued by the Deposit Taker for any Participant (other than a Disqualified Deposit Taker) does not equal such Participant's Percentage, multiplied by the lesser of (1) the Minimum Collateral Value in effect on such date, or (2) the aggregate Value of all Collateral subject to this Agreement on such date. For purposes of determining whether a Collateral Imbalance exists, the Value of any Accounts maintained by a bank that is acting as Deposit Taker for two or more Participants will be deemed to be held for them in proportion to their respective Percentages, and the Value of any Accounts maintained by a bank as Deposit Taker for both a Participant and BNPLC (as in the case of BNPLC's Parent acting as Deposit Taker for itself, as a Participant, and for BNPLC) will be deemed to be held for the Participant only to the extent necessary to prevent or mitigate a Collateral Imbalance and otherwise for BNPLC.
"Default" means any Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an Event of Default.
"Deposit Taker" for BNPLC shall mean BNPLC's Parent and for each Participant shall mean the Participant itself; provided, that each of BNPLC and the Participants, for itself only, may from time to time designate another Deposit Taker as provided in Sections 4.4 and 4.5 below.
"Deposit Taker Losses" shall mean the Value of any Cash Collateral delivered to a Deposit Taker, but that the Deposit Taker will not (because of the insolvency of the Deposit Taker, offsets by the Deposit Taker in violation of the Deposit Taker's Acknowledgment and Agreement, or otherwise) return to Extreme or return to Agent for disposition or application as provided herein or as required by applicable law.
"Deposit Taker's Acknowledgment and Agreement" shall have the meaning given to that term in subsection 4.1.2 hereof.
"Disqualified Deposit Taker" shall mean any Deposit Taker with whom Agent may decline to deposit Collateral pursuant to Section 4.1.
"Event of Default" shall mean the occurrence of any of the following:
(a) the failure by Extreme to pay all or any part of Extreme's Purchase Agreement Obligations when due, after giving effect to any applicable notice and grace periods expressly provided for in the Purchase Agreement;
(b) the failure by Extreme to provide funds as and when required by Section 5.1 of this Agreement, if within seven Business Days after such failure commences Extreme does not (1) cure such failure by delivering the funds required by Section 5.1, and (2) pay to BNPLC as additional Rent under the Land Lease an amount equal to interest at the Default Rate (as defined in the Land Lease) on such funds for the period from which they were first due to the date of receipt by Agent;
(c) the failure of the pledge or security interest contemplated herein in the Transition Account or any Account, Certificate of Deposit or Cash Collateral to be a Qualified Pledge (regardless of the characterization of the Transition Account or any Accounts, Certificates of Deposit or Cash Collateral as deposit accounts, instruments or general intangibles under the UCC), unless:
(I) such failure would not exist but for a breach of this Agreement by Agent or a breach of a Deposit Taker's Acknowledgment and Agreement by a Deposit Taker, or
(II) within five Business Days after Extreme becomes aware of such failure, Extreme shall (1) notify Agent, BNPLC and the Participants of such failure, and (2) cure such failure, and (3) to the extent required by Section 7.2.9, pay to BNPLC any additional Base Rent that has accrued under the Land Lease because of (or that would have accrued if BNPLC had been aware of) such failure, together with interest at the Default Rate on any such additional Base Rent;
(d) the failure of any representation herein by Extreme to be true (other than a failure described in another clause of this definition of Event of Default), if such failure is not cured within thirty days after Extreme receives written notice thereof from Agent;
(e) the failure of any representation made by Extreme in subsection 7.1.1 to be true, if within fifteen (15) days after Extreme becomes aware of such failure, Extreme does not (1) notify Agent, BNPLC and the Participants of such failure, and (2) cure such failure, and (3) pay to BNPLC any additional Base Rent that has accrued under the Land Lease because of (or that would have accrued if BNPLC had been aware of) such failure, and (4) pay to BNPLC interest at the Default Rate on any such additional Base Rent;
(f) the failure by Extreme timely and properly to observe, keep or perform any covenant, agreement, warranty or condition herein required to be observed, kept or performed (other than a failure described in another clause of this definition of Event of Default), if such failure is not cured within thirty days after Extreme receives written notice thereof from Agent; and
(g) the failure by BNPLC to pay when due on or after the Designated Sale Date any of BNPLC's Corresponding Obligations to Participants, after giving effect to any applicable notice and grace periods expressly provided for in the Participation Agreement.
"Extreme" shall have the meaning given to that term in the introductory paragraph hereof.
"Initially Qualified Deposit Taker" means (1) BNP PARIBAS, acting through any branch, office or agency that can lawfully maintain an Account as a Deposit Taker hereunder, and (2) any of the fifty largest (measured by total assets) U.S. banks, or one of the one hundred largest (measured by total assets) banks in the world, with debt ratings of at least (i) A- (in the case of long term debt) and A-1 (in the case of short term debt) or the equivalent thereof by Standard and Poor's Corporation, and (ii) A3 (in the case of long term debt) and P-2 (in the case of short term debt) or the equivalent thereof by Moody's Investor Service, Inc. The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, Extreme shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the status of any bank as an Initially Qualified Deposit Taker.
"Lien" shall mean, with respect to any property or assets, any right or interest therein of a creditor to secure indebtedness of any kind which is owed to him or any other arrangement with such creditor which provides for the payment of such indebtedness out of such property or assets
or which allows him to have such indebtedness satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or any other charge or encumbrance for security purposes, whether arising by law or agreement or otherwise, but excluding any right of setoff which arises without agreement in the ordinary course of business. "Lien" also means any filed financing statement, any registration with an issuer of uncertificated securities, or any other arrangement which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement is undertaken before or after such Lien exists.
"Material Lease Default" shall mean any of the following:
(2)(a) any failure of Extreme to make any payment required by and when first due under the Land Lease, regardless of whether any period provided in the Land Lease for the cure of such failure by Extreme shall have expired, and (b) any other default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an "Event of Default" under and as defined in the Land Lease, if such other default, event or failure involves a material noncompliance with Applicable Law. (For purposes of this definition, "material" noncompliance with Applicable Law will include any noncompliance, the correction of which has been requested by a governmental authority, or because of which a threat of action against the Property or BNPLC has been asserted by a governmental authority.)
"Minimum Collateral Value" shall mean (1) as of the Designated Sale Date or any prior date, an amount equal to the Collateral Percentage multiplied by the Stipulated Loss Value determined as of that date in accordance with the Land Lease; and (2) as of any date after the Designated Sale Date, an amount equal to the Break Even Price plus any unpaid interest accrued on past due amounts payable pursuant to Paragraph 1(a) of the Purchase Agreement.
"Notice of Security Interest" shall have the meaning given to that term in subsection 4.1.1 hereof.
"Other Liable Party" shall mean any Person, other than Extreme, who may now or may at any time hereafter be primarily or secondarily liable for any of the Secured Obligations or who may now or may at any time hereafter have granted to Agent a pledge of or security interest in any of the Collateral.
"Participants" shall mean BNPLC's Parent and any other financial
institutions which may hereafter become parties to (i) this Agreement by
completing, executing and delivering to Extreme and Agent a Supplement, and
(ii) the Participation Agreement.
"Percentage" shall mean with respect to each Participant and the Deposit Taker for such Participant, such Participant's "Percentage" under and as defined in the Participation Agreement for purposes of computing such Participant's right thereunder to receive payments of (or amounts equal to a percentage of) any sales proceeds or Supplemental Payment received by BNPLC under the Purchase Agreement. Percentages may be adjusted from time to time as provided in the Participation Agreement or as provided in supplements thereto executed as provided in the Participation Agreement.
"Qualified Pledge" means a pledge or security interest that constitutes a valid, perfected, first priority pledge or security interest.
"Secured Obligations" shall mean and include both Extreme's Purchase Agreement Obligations and BNPLC's Corresponding Obligations to Participants.
"Transaction Documents" shall mean, collectively, this Agreement, the Land Lease, the Purchase Agreement and the Participation Agreement.
"Transition Account" shall have the meaning given it in Section 5.2.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of California from time to time, and the Uniform Commercial Code as in effect in any other jurisdiction which governs the perfection or non- perfection of the pledge of and security interests in the Collateral created by this Agreement.
"Value" shall mean with respect to any Account, Certificate of Deposit or Cash Collateral on any date, a dollar value determined as follows (without duplication):
(a) cash shall be valued at its face amount on such date;
(b) an Account shall be valued at the principal balance thereof on such date; and
(c) a Certificate of Deposit shall be valued at the face amount thereof.
beginning of any subdivision are for convenience only and do not constitute any part of any such subdivision and shall be disregarded in construing the language contained in this Agreement. The words "this Agreement", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Article," "this Section" and "this subsection" and similar phrases refer only to the Articles, Sections or subsections hereof in which the phrase occurs. The word "or" is not exclusive, and the word "including" (in all of its forms) means "including without limitation". Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa unless the context otherwise requires.
ARTICLE II SECURITY INTEREST
(a) All Cash Collateral, all Accounts, the Transition Account and all Certificates of Deposit issued from time to time and general intangibles arising therefrom or relating thereto (however, "general intangibles" as used in this clause shall not include any general intangibles not related to Cash Collateral, Accounts, the Transition Account or Certificates of Deposit issued from time to time, and thus will not include, without limitation, any intellectual property of Extreme); and all documents, instruments and agreements evidencing the same; and all extensions, renewals, modifications and replacements of the foregoing; and any interest or other amounts payable in connection therewith; and
(b) All proceeds of the foregoing (including whatever is receivable or received when Collateral or proceeds is invested, sold, collected, exchanged, returned, substituted or otherwise disposed of, whether such disposition is voluntary or involuntary, including rights to payment and return premiums and insurance proceeds under insurance with respect to any Collateral, and all rights to payment with respect to any cause of action affecting or relating to the Collateral).
The pledge, assignment and grant of a security interest made by Extreme hereunder is for security of the Secured Obligations only; the parties to this Agreement do not intend that Extreme's delivery of the Collateral to Agent as herein provided will constitute an advance payment of any Secured Obligations or liquidated damages, nor do the parties intend that the Collateral increase the dollar amount of the Secured Obligations.
ARTICLE III DETERMINATION OF THE COLLATERAL PERCENTAGE
next following Base Rent Period which is at least ten Business Days after the receipt of such notice by Agent, BNPLC and the Participants. Further, if Extreme provides more than one notice of a change in the Collateral Percentage to be effective on a the first day of a particular Base Rent Period, then the latest such notice from Extreme which satisfies the requirements of the preceding sentence (and of Sections 3.2 and 3.3) will control. Without limiting mandatory changes in the Collateral Percentage required by Section 3.3, in no event shall the Collateral Percentage be changed more often than once in any calendar quarter because of any election by Extreme to designate a new Collateral Percentage as provided in this Section. After any Collateral Percentage becomes effective as provided in this Article, it shall remain in effect until a different Collateral Percentage becomes effective as provided in this Article.
3.2.1 any Material Lease Default; 3.2.2 any Event of Default under and as defined in this Agreement; 3.2.3 any Default under and as defined in this Agreement -excluding, |
however, any such Default limited to a failure of Extreme described in clause (c) or clause (e) of the definition of Event of Default above, with respect to which the time for cure specified in clause (c) or clause (e), as applicable, has not expired.
ARTICLE IV PROVISIONS CONCERNING DEPOSIT TAKERS
4.1.2 Such Person must have executed the Acknowledgment and Agreement at the end of such Notice of Security Interest (the "Deposit Taker's Acknowledgment and Agreement") and returned the same to Agent. Further, such Person must have complied with the Deposit Taker's Acknowledgment and Agreement, and the representations set forth therein with respect to such Person must continue to be true and correct.
4.1.3 Such Person must be a commercial bank, organized under the laws of the United States of America or a state thereof or under the laws of another country which is doing business in the United States of America; must be authorized to maintain deposit accounts for others through Account Offices in New York or California (as specified in the Deposit Taker's Acknowledgment and Agreement); and must be an Affiliate of BNPLC or the Participant for whom such Person will act as Deposit Taker or must have a combined capital, surplus and undivided profits of at least $500,000,000.
4.1.4 Such Person must have complied with the provisions in this Agreement applicable to Deposit Takers, including the provisions of Section 5.4 concerning the issuance and redemption of Certificates of Deposit.
the Disqualified Deposit Taker and deposit such Collateral with other Deposit Takers, subject to Section 5.3 below.
ARTICLE V DELIVERY AND MAINTENANCE OF CASH COLLATERAL
deposit, withdrawal, allocation, application and distribution of Cash Collateral by Agent, including the requirements and time periods set forth in the next Article, are commercially reasonable.
ARTICLE VI WITHDRAWAL OF CASH COLLATERAL
Extreme may not withdraw Cash Collateral, except as follows:
6.1.1 Such withdrawal and delivery of the Cash Collateral to Extreme will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value.
6.1.3 No Default or Event of Default shall have occurred and be continuing at the time Extreme gives the notice required by the preceding subsection or on the date upon which the withdrawal is required.
6.1.4 Extreme must pay to Agent any and all costs incurred by Agent in connection with the withdrawal.
6.1.5 Agent shall determine the Accounts from which to make any withdrawal required by Extreme pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance.
6.2.2 the required withdrawal shall be made as determined by Agent, first, from the Accounts maintained by the Deposit Takers for the Participants, and then (to the extent necessary) from the Accounts maintained by the Deposit Taker for BNPLC; and
6.2.3 in any event, no withdrawals or payments directly to Participants shall be required by this Section 6.2 (or permitted over the objection of BNPLC) in excess of those required to satisfy BNPLC's Corresponding Obligations to Participants or to reduce such obligations to zero under the Participation Agreement.
ARTICLE VII REPRESENTATIONS AND COVENANTS OF EXTREME
7.1.1 Extreme is the legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time Extreme acquires rights in the Collateral, will be the legal and beneficial owner thereof). No other Person has (or, in the case of after-acquired Collateral, at the time Extreme acquires rights therein, will have) any right, title, claim or interest (by way of Lien, purchase option or otherwise) in, against or to the Collateral, except for rights created hereunder.
7.1.2 Agent has (or in the case of after-acquired Collateral, at the time Extreme acquires rights therein, will have) a valid, first priority, perfected pledge of and security interest in the Collateral, regardless of the characterization of the Collateral as deposit accounts, instruments or general intangibles under the UCC, but assuming that the representations of each Deposit Taker in its Deposit Taker's Acknowledgment and Agreement are true.
7.1.3 Extreme has delivered to Agent, together with all necessary stock powers, endorsements, assignments and other necessary instruments of transfer, the originals of all documents, instruments and agreements evidencing Accounts, Certificates of Deposit or Cash Collateral.
7.1.4 Extreme's chief executive office is located at the address of Extreme set forth in Article II of the Common Definitions and Provisions Agreement (Land) or at another address in California specified in a notice that Extreme has given to Agent as required by Section 7.2.4.
7.1.5 To the knowledge of Extreme, neither the ownership or the intended use of the Collateral by Extreme, nor the pledge of Accounts or the grant of the security interest by Extreme to Agent herein, nor the exercise by Agent of its rights or remedies hereunder, will (i) violate any provision of (a) Applicable Law, (b) the articles or certificate of incorporation, charter or bylaws of Extreme, or (c) any agreement, judgment, license, order or permit applicable to or binding upon Extreme, or (ii) result in or require the creation of any Lien, charge or encumbrance upon any
assets or properties of Extreme except as expressly contemplated in this Agreement. Except as expressly contemplated in this Agreement, to the knowledge of Extreme no consent, approval, authorization or order of, and no notice to or filing with any court, governmental authority or third party is required in connection with the pledge or grant by Extreme of the security interest contemplated herein or the exercise by Agent of its rights and remedies hereunder.
7.2.1 Extreme, at Extreme's expense, shall promptly procure, execute and deliver to Agent all documents, instruments and agreements and perform all acts which are necessary, or which Agent may reasonably request, to establish, maintain, preserve, protect and perfect the Collateral, the pledge thereof to Agent or the security interest granted to Agent therein and the first priority of such pledge or security interest or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the preceding sentence, Extreme shall (A) procure, execute and deliver to Agent all stock powers, endorsements, assignments, financing statements and other instruments of transfer requested by Agent, (B) deliver to Agent promptly upon receipt all originals of Collateral consisting of instruments, documents and chattel paper, (C) cause the security interest of Agent in any Collateral consisting of securities to be recorded or registered in the books of any financial intermediary or clearing corporation requested by Agent, and (D) reimburse Agent upon request for any legal opinion Agent may elect to obtain from a nationally recognized commercial law firm authorized to practice in New York concerning the enforceability, first priority and perfection of Agent's security interest in any Collateral maintained in New York, if BNPLC or any Participant should at any time elect to use a Deposit Taker that will maintain one or more Accounts in New York.
7.2.2 Extreme shall not use or consent to any use of any Collateral in violation of any provision of this Agreement or any other Transaction Document or any Applicable Law.
7.2.3 Extreme shall pay promptly when due all taxes and other governmental charges, all Liens and all other charges now or hereafter imposed upon, relating to or affecting any Collateral.
7.2.4 Without thirty days' prior written notice to Agent, Extreme shall not change Extreme's name or place of business (or, if Extreme has more than one place of business, its chief executive office).
7.2.5 Extreme shall appear in and defend, on behalf of Agent, any action or proceeding which may affect Extreme's title to or Agent's interest in the Collateral.
7.2.6 Subject to the express rights of Extreme under Article VI, Extreme shall not surrender or lose possession of (other than to Agent or a Deposit Taker pursuant hereto), sell, encumber, lease, rent, option, or otherwise dispose of or transfer any Collateral or right or interest therein, and Extreme shall keep the Collateral free of all Liens.
7.2.7 Extreme will not take any action which would in any manner impair the value or enforceability of Agent's pledge of or security interest in any Collateral, nor will Extreme fail to take any action which is required to prevent (and which Extreme knows is required to prevent) an impairment of the value or enforceability of Agent's pledge of or security interest in any Collateral.
7.2.8 Extreme shall pay (and shall indemnify and hold harmless Agent from and against) all Losses incurred by Agent in connection with or because of (A) the interest acquired by Agent in any Collateral pursuant to this Agreement, or (B) the negotiation or administration of this Agreement, whether such Losses are incurred at the time of execution of this Agreement or at any
time in the future. Costs and expenses included in such Losses may include, without limitation, all filing and recording fees, taxes, UCC search fees and Attorneys' Fees incurred by Agent with respect to the Collateral.
7.2.9 Without limiting the foregoing, within five Business Days after Extreme becomes aware of any failure of the pledge or security interest contemplated herein in the Transition Account or any Account, Certificate of Deposit or Cash Collateral to be a valid, perfected, first priority pledge or security interest (regardless of the characterization of the Transition Account or any Accounts, Certificates of Deposit or Cash Collateral as deposit accounts, instruments or general intangibles under the UCC), Extreme shall notify Agent, BNPLC and the Participants of such failure. In addition, if the failure would not exist but for Extreme's delivery of Cash Collateral to Agent subject to prior Liens or other claims by one or more third parties, or but for the grant by Extreme itself of any Lien or other interest in the Collateral to one or more third parties, then, in addition to any other remedies available to BNPLC or Agent under the circumstances, Extreme must pay to BNPLC any additional Base Rent that has accrued under the Land Lease because of (or that would have accrued if BNPLC had been aware of) the failure, together with interest at the Default Rate on any such additional Base Rent.
ARTICLE VIII AUTHORIZED ACTION BY AGENT
ARTICLE IX DEFAULT AND REMEDIES
(a) Agent may collect, receive, appropriate or realize upon the Collateral or otherwise foreclose or enforce the pledge of or security interests in any or all Collateral in any manner permitted by Applicable Law or in this Agreement; and
(b) Agent may notify any or all Deposit Takers to pay all or any portion of the Collateral held by such Deposit Taker(s) directly to Agent.
Agent shall distribute the proceeds of all Collateral received by Agent after the occurrence of an Event of Default to BNPLC and the Participants for application to the Secured Obligations. If any proceeds of Collateral remain after all Secured Obligations have been paid in full, Agent will deliver or direct the Deposit Takers to deliver such proceeds to Extreme or other Persons entitled thereto. In any case where notice of any sale or disposition of any Collateral is required, Extreme hereby agrees that seven (7) Business Days notice of such sale or disposition is reasonable.
ARTICLE X OTHER RECOURSE
ARTICLE XI PROVISIONS CONCERNING AGENT
In the event of any conflict between the following and other provisions in this Agreement, the following will control:
which case it shall be required to act or to refrain from acting (and shall be fully protected and free from liability to all Participants in so acting or refraining from acting) upon the instructions of the Majority, as defined in the Participation Agreement, including itself as a Participant and BNPLC; provided, however, that Agent shall not be required to take any action which exposes it to a risk of personal liability that it considers unreasonable or which is contrary to this Agreement or the other documents referenced herein or to Applicable Law.
FINAL JUDGMENT RENDERED AGAINST AGENT. Cumulative of the foregoing, each Participant agrees to reimburse Agent promptly upon demand for such Participant's Percentage share of any costs and expenses to be paid to Agent by Extreme hereunder to the extent that Agent is not timely reimbursed by Extreme as provided in subsection 7.2.8. As used in this Section the term "Agent" shall refer not only to the Person designated as such in the introductory paragraph of this Agreement, but also to each director, officer, agent, attorney, employee, representative and Affiliate of such Person.
ARTICLE XII MISCELLANEOUS
[The signature pages follow.]
IN WITNESS WHEREOF, Extreme, BNPLC, Agent and the Participants whose signatures appear below have caused this Agreement to be executed as of June 1, 2000.
"Extreme"
EXTREME NETWORKS, INC.
By:_________________________
Name:____________________
Title:___________________
[Continuation of signature pages to Pledge Agreement (Land) dated to be effective June 1, 2000]
"BNPLC"
BNP LEASING CORPORATION
By: ____________________________
Lloyd G. Cox, Vice President
[Continuation of signature pages to Pledge Agreement (Land) dated to be effective June 1, 2000]
"AGENT"
BNP PARIBAS
By:_______________________
Name:__________________
Title:_________________
"PARTICIPANT"
BNP PARIBAS
By:_______________________
Name:__________________
Title:_________________
CERTIFICATE OF DEPOSIT
(No. _________)
[---------, -----]
[NAME OF THE ISSUING
DEPOSIT TAKER AND THE
ADDRESS OF ITS APPLICABLE
ACCOUNT OFFICE]
Payable to
the order of: BNP PARIBAS, as Agent under the Pledge Agreement (Land) dated
June 1, 2000, among Extreme Networks, Inc., BNP Leasing
Corporation, BNP PARIBAS and any other financial institutions
which are from time to time Participants under such Pledge
Agreement (Land) and BNP PARIBAS, acting in its capacity as agent
for BNPLC and the Participants
The bank issuing this certificate acknowledges and certifies that on the date indicated above the payee deposited the dollar amount indicated above, and that such amount shall be payable as provided above.
[----------, ----]
BNP PARIBAS
Extreme Networks, Inc.
1. Reference is made to the Pledge Agreement (Land) (the "Pledge Agreement") dated June 1, 2000 among Extreme Networks, Inc. ("Extreme"), BNP Leasing Corporation ("BNPLC"), BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (collectively, the "Participants") and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants (in such capacity, "Agent"). Unless otherwise defined herein, all capitalized terms used in this Supplement have the respective meanings given to those terms in the Pledge Agreement.
2. The undersigned hereby certifies to Agent and Extreme that the undersigned has become a party to the Participation Agreement by executing a supplement as provided therein and that its Percentage thereunder is ______%.
3. The undersigned, by executing and delivering this Supplement to Extreme and Agent, hereby agrees to become a party to the Pledge Agreement and agrees to be bound by all of the terms thereof applicable to Participants. The Deposit Taker for the undersigned shall be _________________, until such time as another Deposit Taker for the undersigned shall be designated in accordance with Sections 4.4 or 4.5 of the Pledge Agreement. The undersigned certifies to Agent and Extreme that such Deposit Taker is an Initially Qualified Deposit Taker and satisfies the requirements for a Deposit Taker set forth in Section 4.1 of the Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Supplement as of the day and year indicated above.
[__________________________________________]
By:_________________________________________ Name:_________________________________ Title:________________________________
[---------, -----]
BNP PARIBAS
[address of BNP]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 3.1 of the Pledge Agreement, Extreme elects to change the Collateral Percentage to:
__________ percent (___%),
on the following Base Rent Date (which will be the first day of a new Base Rent Period):
----------, ----
Extreme expects that multiplying the new Collateral Percentage specified above against Stipulated Loss Value of:
____________________________ Dollars ($__________),
will result in an expected new Minimum Collateral Value of:
____________________________ Dollars ($__________).
[NOTE: THE NEXT PARAGRAPH WILL BE INCLUDED ONLY IN A NOTICE OF AN INCREASE IN
THE COLLATERAL PERCENTAGE, BECAUSE OF WHICH EXTREME WILL BE REQUIRED TO DELIVER
ADDITIONAL CASH COLLATERAL TO SATISFY THE MINIMUM COLLATERAL VALUE REQUIREMENTS
IN SECTION 5.1 OF THE PLEDGE AGREEMENT:
Because of the increase in the Collateral Percentage which will result from this notice and the corresponding increase in the Minimum Collateral Value, Extreme will deliver additional Cash Collateral to you as required by Section 5.1 of the Pledge Agreement no later than 12:00 noon (San Francisco time) on the Base Rent Date specified above, in the amount of:
____________________________ Dollars ($__________).]
To assure you that Extreme has satisfied the conditions to its right to change the Collateral Percentage as provided in this notice, and to induce you to rely upon this notice in discharging your responsibilities under the Pledge Agreement, Extreme certifies to you that:
1. Extreme is giving this notice to you, BNPLC and the Participants at least ten Business Days prior to the Base Rent Date specified above, and such Base Rent Date is the commencement of a Base Rent Period.
2. No Event of Default or other event or circumstance that would, pursuant to Section 3.2 of the Pledge Agreement, preclude Extreme from designating the new Collateral Percentage above has occurred and is continuing, and Extreme does not anticipate that on the Base Rent Date specified above there will have occurred and be continuing any such Event of Default or other event or circumstance.
3. The new Collateral Percentage specified by Extreme above is not less than the Minimum Collateral Percentage currently in effect.
EXTREME NETWORKS, INC.
By:____________________________________
Name:_____________________________
Title:____________________________
[cc BNPLC and all Participants]
[---------, -----]
[Name of Deposit Taker]
[Address of Deposit Taker]
1. Reference is made to the Pledge Agreement (Land) (the "Pledge Agreement") dated June 1, 2000 among Extreme Networks, Inc. ("Extreme"), BNP Leasing Corporation ("BNPLC"), BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (collectively, the "Participants") and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants (in such capacity, "Agent"). Unless otherwise defined herein, all capitalized terms used in this Notice have the respective meanings given to those terms in the Pledge Agreement.
2. Extreme has informed Agent that Extreme has established with the addressee of this Notice (the "Deposit Taker") the following non-interest bearing Account(s) to be maintained at the following Account Office(s):
Account Account Account Type Office Number ------------ ------- ------- Time Deposit _______ _______ Time Deposit _______ _______ Time Deposit _______ _______ |
Extreme has further informed Agent that Extreme intends to maintain Cash Collateral in such Account(s), and that to evidence such Account(s) and the amount of Cash Collateral held therein from time to time, Extreme has authorized the Deposit Taker to issue Certificates of Deposit payable to the order of Agent as provided in the Pledge Agreement.
3. Extreme and Agent hereby notify Deposit Taker that, pursuant to the Pledge Agreement, Extreme has granted to Agent, for the ratable benefit of BNPLC and the Participants as security for the Secured Obligations, a pledge of and security interest in all Accounts and other Collateral maintained by Extreme with Deposit Taker, including the Account(s) described in Section 2 above.
4. In furtherance of such grant, Extreme and Agent hereby authorize and direct Deposit Taker to:
(a) hold all Collateral for Agent and as Agent's bailee, separate and apart from all other property and funds of Extreme and all other Persons and to permit no other funds to be deposited or credited to the Account(s);
(b) make a notation in its books and records of the interest of Agent in the Collateral and that the Account(s) and all deposits therein or sums credited thereto are subject to a pledge and security interest in favor of Agent;
(c) issue and redeem Certificates of Deposit evidencing the Account(s), as directed by Agent pursuant to the Pledge Agreement;
(d) take such other steps as Agent may reasonably request to record, maintain, validate and perfect its pledge of and security interest in the Collateral; and
(e) upon receipt of notice from Agent that an Event of Default has occurred, transfer and deliver to Agent or its nominee, together with all necessary endorsements, all or such portion of the Collateral held by Deposit Taker as Agent shall direct; provided, however, that in connection therewith the Deposit Taker may require compliance by Agent with the provisions in Section 5.4 of the Pledge Agreement for redemption of any outstanding Certificates of Deposit which evidence the Account(s).
6. As contemplated by the Pledge Agreement, please acknowledge Deposit Taker's receipt of, and consent to, this notice and confirm the representations and agreements set forth in the Acknowledgment and Agreement attached hereto by executing the same and returning this letter to Agent. For your files, a copy of this letter is enclosed which you may retain. The authorizations and directions set forth herein may not be revoked or modified without the written consent of Agent.
"AGENT"
BNP PARIBAS
By: _________________________________
Name:____________________________
Title:___________________________
"EXTREME"
EXTREME NETWORKS, INC.
By: ___________________________________
Name:______________________________
Title:_____________________________
ACKNOWLEDGMENT AND AGREEMENT
OF DEPOSIT TAKER
Deposit Taker hereby acknowledges receipt of, and consents to, the above notice, acknowledges that it will hold the Collateral for Agent and as Agent's bailee, agrees to comply with the authorizations and directions set forth above and represents to and agrees with Extreme and Agent as follows:
(a) Deposit Taker is a commercial bank, organized under the laws of the United States of America or a state thereof or under the laws of another country which is doing business in the United States of America. Deposit Taker is authorized to maintain deposit accounts for others through the Account Offices specified in the above notice, and Deposit Taker will not move the accounts described in the above notice to other offices without the prior written authorization of Agent and Extreme.
(b) Deposit Taker has a combined capital, surplus and undivided profits of at least $500,000,000.
(c) The information set forth above regarding the Account(s) is accurate. Such Account(s) is (are) currently open and Deposit Taker has no prior notice of any other pledge, security interest, Lien, adverse claim or interest in such Account(s).
(d) Deposit Taker shall promptly notify Extreme and Agent if the representations made by Deposit Taker above cease to be true and correct.
[__________________________________]
By:_________________________________ Name:_________________________ Title:________________________
[Date]
The examples below are provided to illustrate the calculations required for allocations of Cash Collateral in a manner that will avoid a Collateral Imbalance. The examples are not intended to reflect actual numbers under this Agreement or actual Percentages of BNPLC or any of the Participants; nor are the examples intended to provide a formula for the allocations that would be appropriate in every case. The examples also reflect adjustments that would be appropriate if the Collateral Percentage were adjusted from time to time from and after the Effective Date.
EXAMPLE NO. 1
1. Two Participants ("Participant A" and "Participant B") are parties to the Participation Agreement with BNPLC. Participant A's Percentage is 50% and Participant B's Percentage is 45%, leaving BNPLC with a Percentage of 5%.
2. On the Effective Date, the Initial Funding Advance was $12,000,000, resulting in a Stipulated Loss Value of $12,000,000, allocable as follows:
A. BNPLC's Parent (providing BNPLC's share) (5%)...................................... $ 600,000 B. Participant A (50%)................................................................ 6,000,000 C. Participant B (45%)................................................................ 5,400,000 ---------- TOTAL.............................................................................. $12,000,00 |
3. The Minimum Collateral Value on the Effective Date was $7,200,000 (reflecting a Collateral Percentage of 60% times Stipulated Loss Value).
4. On the Effective Date, Extreme had delivered to Agent Cash Collateral of $7,200,000, equal to the Minimum Collateral Value, as required by Section 5.1 of this Agreement.
A. BNPLC's Deposit Taker (5% of Minimum Collateral Value)............................. $ 360,000 B. Participant A's Deposit Taker (50% of Minimum Collateral Value).................... 3,600,000 C. Participant B's Deposit Taker (45% of Minimum Collateral Value)................... 3,240,000 ------------ TOTAL.............................................................................. $ 7,200,000 |
EXAMPLE NO. 2
1. Effective as of the first Base Rent Date, Extreme increased its Collateral Percentage from 60% to
80%, raising the Minimum Collateral Value to $9,600,000. Because of such increase, Extreme also delivered an additional $2,400,000 as Cash Collateral to Agent on the first Base Rent Date, bringing the total of all Cash Collateral delivered by Extreme to $9,600,000 as required by Section 5.1 of this Agreement.
2. Also effective as of the first Base Rent Date, a new Participant approved by Extreme ("Participant C") became a party to this Agreement and the Participation Agreement, taking a Percentage of 20%. Simultaneously, Participant A and Participant B entered into supplements to the Participation Agreement which reduced their Percentages to 40% and 35%, respectively.
A. BNPLC's Deposit Taker (5% of Minimum Collateral Value)................................. $ 480,000 B. Participant A's Deposit Taker (40% of Minimum Collateral Value)........................ 3,840,000 C. Participant B's Deposit Taker (35% of Minimum Collateral Value)........................ 3,360,000 D. Participant C's Deposit Taker (20% of Minimum Collateral Value)....................... 1,920,000 ---------- TOTAL.................................................................................. $9,600,000 |
Thus, to prevent a Collateral Imbalance, Agent would have to allocate the $2,400,000 of additional Cash Collateral it received on the first Base Rent Date as follows:
A. BNPLC's Deposit Taker ($480,000 less $360,000 already on deposit) .................... $ 120,000 B. Participant A's Deposit Taker ($3,840,000 less $3,600,000 already on deposit)......... 240,000 C. Participant B's Deposit Taker ($3,360,000 less $3,240,000 already on deposit)......... 120,000 D. Participant C's Deposit Taker ($1,920,000 less $0 already on deposit)................ $1,920,000 ---------- TOTAL................................................................................. $2,400,000 |
EXAMPLE NO. 3
1. Instead of increasing its Collateral Percentage from 60% to 80%, Extreme increased its Collateral Percentage to 70% on the first Base Rent Date, raising the Minimum Collateral Value to $8,400,000. Because of such increase, Extreme delivered an additional $1,200,000 as additional Cash Collateral to Agent on the first Base Rent Date, bringing the total of all Cash Collateral delivered by Extreme to $8,400,000 as required by Section 5.1 of this Agreement.
A. BNPLC's Deposit Taker (5% of Minimum Collateral Value).............................. $ 420,000 B. Participant A's Deposit Taker (40% of Minimum Collateral Value)..................... 3,360,000 C. Participant B's Deposit Taker (35% of Minimum Collateral Value)..................... 2,940,000 D. Participant C's Deposit Taker (20% of Minimum Collateral Value).................... 1,680,000 ---------- TOTAL............................................................................... $8,400,000 |
Thus, to prevent a Collateral Imbalance, Agent would have to allocate the $1,200,000 of additional Cash Collateral it received on the first Base Rent Date as follows:
A. BNPLC's Deposit Taker ($420,000 less $360,000 already on deposit) ........................ $ 60,000 B. Participant A's Deposit Taker ($3,360,000 less $3,600,000 already on deposit)............. (240,000) C. Participant B's Deposit Taker ($2,940,000 less $3,240,000 already on deposit)............. (300,000) D. Participant C's Deposit Taker ($1,680,000 less $0 already on deposit).................... 1,680,000 ---------- TOTAL..................................................................................... $1,200,000 |
[_________, _____]
BNP PARIBAS
[address of BNP]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Land) referenced above (the "Pledge Agreement"). This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 6.1 of the Pledge Agreement, Extreme requires you to withdraw from the Accounts and return to Extreme the following amount:
__________________ Dollars ($__________)
on the following date:
----------, ----
To assure you that Extreme has satisfied the conditions to its right to require such withdrawal, and to induce you to comply with this notice, Extreme certifies to you that:
1. Your withdrawal and delivery of the amount specified above to Extreme will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value. After giving effect to such withdrawal, the Collateral remaining in the Accounts maintained by the Deposit Takers will be:
__________________ Dollars ($__________),
and the Minimum Collateral Value on the date specified above will equal:
__________________ Dollars ($__________).
Such Minimum Collateral Value equals the Collateral Percentage of:
__________ percent (___%),
times the Stipulated Loss Value of:
__________________ Dollars ($__________).
2. Extreme is giving this notice to you, BNPLC and the Participants at least ten days prior to the date specified above.
3. No Default or Event of Default has occurred and is continuing as of the date of this notice, and Extreme does not anticipate that any Default or Event of Default will have occurred and be continuing on the date upon which the withdrawal is required.
4. Extreme agrees that you may determine the Accounts from which to make any withdrawal required by Extreme pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance.
EXTREME NETWORKS, INC.
By: ______________________________
Name:_______________________
Title:______________________
[cc BNPLC and all Participants]
[_________, _____]
Deposit Takers on the
Attached Distribution List
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Land) referenced above (the "Pledge Agreement"). This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 6.1 of the Pledge Agreement, Extreme requires Agent to withdraw from the Accounts and return to Extreme the amounts listed below on the following date:
__________, ____
Accordingly, on such date, the undersigned intends to withdraw the following amounts from the following Accounts, and with this letter the undersigned is presenting Certificates of Deposit as required in connection with such withdrawal:
Deposit Taker Account No. Amount 1.________________ ___________________ $________ 2.________________ ___________________ $________ 3.________________ ___________________ $________ 4.________________ ___________________ $________ TOTAL WITHDRAWALS: $======== BNP PARIBAS, AS AGENT |
By: ____________________________________ Name:_______________________________ Title:______________________________
[cc BNPLC and Extreme]
[_________, _____]
BNP PARIBAS
[address of BNP]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Land) referenced above (the "Pledge Agreement"). This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 6.2 of the Pledge Agreement, Extreme requires you to withdraw from the Accounts and pay directly to the Participants (in proportion to their respective Percentages) the following amount:
____________________________ Dollars ($__________)
on the following date (which, Extreme acknowledges, must be the Designated Sale Date or a date thereafter prior to an Event of Default):
__________, ____
The amount specified above equals the following percentage (equal to the aggregate of all Participant's Percentages):
___________percent (___%),
times the total of all Cash Collateral presently pledged under the Pledge Agreement:
____________________________ Dollars ($__________).
To assure you that Extreme has satisfied the conditions to its right to require such withdrawal, and to induce you to comply with this notice, Extreme certifies to you that Extreme is giving this notice to you, BNPLC and the Participants at least ten days prior to the date of required withdrawal and payment specified above.
EXTREME NETWORKS, INC.
By:______________________________________
Name:_______________________________
Title:______________________________
[cc BNPLC and all Participants]
Deposit Takers on the
Attached Distribution List
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Land) referenced above (the "Pledge Agreement"). This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 6.2 of the Pledge Agreement, Extreme requires Agent to withdraw from the Accounts and pay to the Participants (in proportion to their respective Percentages) the amounts listed below on the following date:
__________, ____
Accordingly, on such date, the undersigned intends to withdraw the following amounts from the following Accounts, and with this letter the undersigned is presenting Certificates of Deposit as required in connection with such withdrawal:
Deposit Taker Account No. Amount 1._________________ __________________ $__________ 2._________________ __________________ $__________ 3._________________ __________________ $__________ 4._________________ __________________ $__________ TOTAL WITHDRAWALS: $========== |
BNP PARIBAS, AS AGENT
By: __________________________________
Name:_____________________________
Title:____________________________
[cc BNPLC and Extreme]
BNP PARIBAS
[address of BNP]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Land) referenced above (the "Pledge Agreement"). This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 6.3 of the Pledge Agreement, Extreme requires you to withdraw from the Account maintained by the Deposit Taker for BNPLC and pay directly to BNPLC on behalf of Extreme as a payment required by the Purchase Agreement the following amount:
____________________________ Dollars ($__________)
on the following date (which, Extreme acknowledges, must be the Designated Sale Date or a date thereafter prior to an Event of Default):
__________, ____
To assure you that Extreme has satisfied the conditions to its right to require such withdrawal, and to induce you to comply with this notice, Extreme certifies to you that Extreme is giving this notice to you and BNPLC at least ten days prior to the date of required withdrawal and payment specified above.
EXTREME NETWORKS, INC.
By:________________________________
Name:________________________
Title:_______________________
[cc BNPLC]
[_________, _____]
[Name of the Deposit Taker for BNPLC]
[Address of such Deposit Taker]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Land) referenced above (the "Pledge Agreement"). This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 6.3 of the Pledge Agreement, Extreme requires Agent to withdraw from the Account maintained by you, as Deposit Taker for BNPLC, the sum of:
____________________________ Dollars ($__________)
and pay the same to BNPLC as a payment required by the Purchase Agreement on the following date:
__________, ____
Accordingly, on such date, the undersigned intends to withdraw such amount from the following Account maintained by you as Deposit Taker for BNPLC, and with this letter the undersigned is presenting Certificate(s) of Deposit as required in connection with such withdrawal.
BNP PARIBAS, AS AGENT
By: __________________________________
Name:_____________________________
Title:____________________________
[cc BNPLC and Extreme]
[_________, _____]
BNP PARIBAS
[address of BNP]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Land) referenced above (the "Pledge Agreement"). This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 6.4 of the Pledge Agreement, Extreme requires you to withdraw from the following Account maintained by the following Deposit Taker:
Cash Collateral in the following amount:
______________________ Dollars ($__________)
and to deposit such Cash Collateral with other Deposit Takers who are not Disqualified Deposit Takers no later than ten days after the date upon which you receive this notice.
To assure you that Extreme has the right to require such withdrawal, and to induce you to comply with this notice, Extreme certifies to you that the Deposit Taker specified above has become a Disqualified Deposit Taker because it no longer satisfies the requirements listed in Section 4.1 of the Pledge Agreement. Specifically, such Deposit Taker no longer satisfies the following requirements:
[EXTREME MUST INSERT HERE A DESCRIPTION OF WHICH REQUIREMENTS THE DEPOSIT TAKER
NO LONGER SATISFIES AND HOW EXTREME HAS DETERMINED THAT THE REQUIREMENTS ARE NO
LONGER SATISFIED, ALL IN SUFFICIENT DETAIL TO PERMIT THE PARTICIPANT FOR WHOM
SUCH DEPOSIT TAKER HAS BEEN MAINTAINING AN ACCOUNT TO RESPOND IF IT BELIEVES
THAT EXTREME IS IN
ERROR.]
EXTREME NETWORKS, INC.
By:_________________________________
Name:__________________________
Title:_________________________
[cc BNPLC]
[_________, _____]
[Name of the Deposit Taker for BNPLC]
[Address of such Deposit Taker]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Land) referenced above (the "Pledge Agreement"). This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 6.4 of the Pledge Agreement, Extreme has advised Agent that you are a Disqualified Deposit Taker, and Extreme requires Agent to withdraw from the Account maintained by you, as a Deposit Taker under the Pledge Agreement, the sum of:
____________________________ Dollars ($__________)
no later than the following date:
__________, ____
Accordingly, on such date, the undersigned intends to withdraw such amount from the Account maintained by you as Deposit Taker (Account No. __________), and with this letter the undersigned is presenting Certificate(s) of Deposit as required in connection with such withdrawal.
BNP PARIBAS, AS AGENT
By: _______________________________
Name:__________________________
Title:_________________________
[cc BNPLC and Extreme]
[IN PLACE OF THIS PAGE, SUBSTITUTE SCHEDULE 1 ATTACHED TO THE LEASE]
EXHIBIT 10.13
PLEDGE AGREEMENT
(IMPROVEMENTS)
AMONG
BNP LEASING CORPORATION
("BNPLC")
BNP PARIBAS, AS AGENT
("Agent")
EXTREME NETWORKS, INC.
("Extreme")
AND
PARTICIPANTS AS DESCRIBED HEREIN
June 1, 2000
TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS AND INTERPRETATION.......................................................................-1- Section 1.1 Capitalized Terms Used But Not Defined in This Agreement...................................-1- -------------------------------------------------------- Section 1.2 Definitions................................................................................-1- ----------- Account........................................................................................-1- Account Office.................................................................................-2- Agent..........................................................................................-2- BNPLC..........................................................................................-2- BNPLC's Corresponding Obligations to Participants..............................................-2- Cash Collateral................................................................................-2- Certificate of Deposit.........................................................................-2- Collateral.....................................................................................-2- Collateral Imbalance...........................................................................-2- Collateral Percentage..........................................................................-2- Default........................................................................................-3- Deposit Taker..................................................................................-3- Deposit Taker Losses...........................................................................-3- Deposit Taker's Acknowledgment and Agreement...................................................-3- Disqualified Deposit Taker.....................................................................-3- Event of Default...............................................................................-3- Extreme........................................................................................-4- Extreme's Purchase Agreement Obligations.......................................................-4- Initially Qualified Deposit Taker..............................................................-5- Lien...........................................................................................-5- Material Lease Default.........................................................................-5- Minimum Collateral Percentage..................................................................-5- Minimum Collateral Value.......................................................................-6- Notice of Security Interest....................................................................-6- Other Liable Party.............................................................................-6- Participants...................................................................................-6- Participation Agreement........................................................................-6- Percentage.....................................................................................-6- Qualified Pledge...............................................................................-6- Secured Obligations............................................................................-6- Supplement.....................................................................................-6- Transaction Documents..........................................................................-6- Value..........................................................................................-7- Section 1.3 Attachments................................................................................-7- ----------- Section 1.4 Amendment of Defined Instruments...........................................................-7- -------------------------------- Section 1.5 References and Titles......................................................................-7- --------------------- ARTICLE II SECURITY INTEREST...................................................................................-7- Section 2.1 Pledge and Grant of Security Interest......................................................-7- ------------------------------------- Section 2.2 Return of Collateral After the Secured Obligations are Satisfied in Full...................-8- ------------------------------------------------------------------------ ARTICLE III DETERMINATION OF THE COLLATERAL PERCENTAGE.........................................................-8- Section 3.1 Determination of the Collateral Percentage Generally.......................................-8- ---------------------------------------------------- |
Section 3.2 Limitations on Extreme's Right to Lower the Collateral Percentage......................... -8- ----------------------------------------------------------------- Section 3.3 Minimum Collateral Percentages Dependent Upon the Adjusted EBITDAR Coverage Ratio......... -9- --------------------------------------------------------------------------------- ARTICLE IV PROVISIONS CONCERNING DEPOSIT TAKERS............................................................... -9- Section 4.1 Qualification of Deposit Takers Generally................................................. -9- ----------------------------------------- Section 4.2 Existing Deposit Takers................................................................... -9- ----------------------- Section 4.3 Replacement of Participants Proposed by Extreme...........................................-10- ----------------------------------------------- Section 4.4 Mandatory Substitution for Disqualified Deposit Takers....................................-10- ------------------------------------------------------ Section 4.5 Voluntary Substitution of Deposit Takers..................................................-10- ---------------------------------------- Section 4.6 Delivery of Notice of Security Interest by Extreme and Agent..............................-10- ------------------------------------------------------------ Section 4.7 Constructive Possession of Collateral.....................................................-11- ------------------------------------- Section 4.8 Attempted Setoff by Deposit Takers........................................................-11- ---------------------------------- Section 4.9 Deposit Taker Losses......................................................................-11- -------------------- Section 4.10 Losses Resulting from Failure of Deposit Taker to Comply with this Agreement.............-11- ---------------------------------------------------------------------------- ARTICLE V DELIVERY AND MAINTENANCE OF CASH COLLATERAL.........................................................-12- Section 5.1 Delivery of Funds by Extreme..............................................................-12- ---------------------------- Section 5.2 Transition Account........................................................................-12- ------------------ Section 5.3 Allocation of Cash Collateral Among Deposit Takers........................................-12- -------------------------------------------------- Section 5.4 Issuance and Redemption of Certificates of Deposit........................................-13- -------------------------------------------------- Section 5.5 Status of the Accounts Under the Reserve Requirement Regulations..........................-13- ---------------------------------------------------------------- Section 5.6 Acknowledgment by Extreme that Requirements of this Agreement are Commercially Reasonable.-13- ----------------------------------------------------------------------------------------- ARTICLE VI WITHDRAWAL OF CASH COLLATERAL......................................................................-14- Section 6.1 Withdrawal of Collateral Prior to the Designated Sale Date................................-14- ---------------------------------------------------------- Section 6.2 Withdrawal and Application of Cash Collateral to Reduce or Satisfy the Secured Obligations ------------------------------------------------------------------------------------------ to the Participants.......................................................................-14- ------------------ Section 6.3 Withdrawal and Application of Cash Collateral to Reduce or Satisfy the Secured Obligations ------------------------------------------------------------------------------------------ to BNPLC..................................................................................-15- -------- Section 6.4 Withdrawal of Cash Collateral From Accounts Maintained by Disqualified Deposit Takers.....-15- ------------------------------------------------------------------------------------- ARTICLE VII REPRESENTATIONS AND COVENANTS OF Extreme..........................................................-15- Section 7.1 Representations of Extreme................................................................-15- -------------------------- Section 7.2 Covenants of Extreme......................................................................-16- -------------------- ARTICLE VIII AUTHORIZED ACTION BY AGENT......................................................................-17- Section 8.1 Power of Attorney.........................................................................-17- ----------------- ARTICLE IX DEFAULT AND REMEDIES..............................................................................-18- Section 9.1 Remedies..................................................................................-18- -------- ARTICLE X OTHER RECOURSE.....................................................................................-18- Section 10.1 Recovery Not Limited.....................................................................-18- -------------------- ARTICLE XI PROVISIONS CONCERNING AGENT........................................................................-19- Section 11.1 Appointment and Authority................................................................-19- ------------------------- Section 11.2 Exculpation, Agent's Reliance, Etc.......................................................-19- ---------------------------------- Section 11.3 Participant's Credit Decisions...........................................................-20- ------------------------------ Section 11.4 Indemnity................................................................................-20- --------- Section 11.5 Agent's Rights as Participant and Deposit Taker..........................................-20- ----------------------------------------------- |
Section 11.6 Investments..............................................................................-20- ----------- Section 11.7 Benefit of Article XI....................................................................-21- --------------------- Section 11.8 Resignation..............................................................................-21- ----------- ARTICLE XII MISCELLANEOUS.....................................................................................-21- Section 12.1 Provisions Incorporated From Other Operative Documents....................................-21- ------------------------------------------------------ Section 12.2 Cumulative Rights, etc...................................................................-21- ---------------------- Section 12.3 Survival of Agreements...................................................................-21- ---------------------- Section 12.4 Other Liable Party.......................................................................-21- ------------------ Section 12.5 Termination..............................................................................-22- ----------- |
Attachment 1.........................................................................Form of Certificate of Deposit Attachment 2..........................................................Supplement to Pledge Agreement (Improvements) Attachment 3.......................................Notice of Extreme's Election to Change the Collateral Percentage Attachment 4............................................................................Notice of Security Interest Attachment 5...............................................................................Examples of Calculations Attachment 6.....................................Notice of Extreme's Requirement to Withdraw Excess Cash Collateral Attachment 7.....................................Notice of Extreme's Requirement of Direct Payments to Participants Attachment 8.....................................Notice of Extreme's Requirement of Direct Payments to Participants Attachment 9........................................................Notice of Extreme's Requirement of a Withdrawal of Cash Collateral from a Disqualified Deposit Taker Schedule 1...............................................................Financial Covenants and Negative Covenants ---------- |
PLEDGE AGREEMENT
(IMPROVEMENTS)
This PLEDGE AGREEMENT (IMPROVEMENTS) (this "Agreement") is made as of June 1, 2000 (the "Effective Date"), by EXTREME NETWORKS, INC., a California corporation ("Extreme"); BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"); BNP PARIBAS ("BNPLC's Parent"), as a "Participant"; and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants (in such capacity, "Agent").
RECITALS
A. Extreme and BNPLC are parties to: (i) a Common Definitions and Provisions Agreement (Improvements) dated as of the Effective Date (the "Common Definitions and Provisions Agreement (Improvements)"); and (ii) a Purchase Agreement (Improvements) dated as of the Effective Date (the "Purchase Agreement"), pursuant to which Extreme has agreed to make a "Supplemental Payment" (as defined in the Common Definitions and Provisions Agreement (Improvements)), in consideration of the rights granted to Extreme by the Purchase Agreement.
B. Pursuant to a Participation Agreement dated the date hereof (the "Participation Agreement"), BNPLC's Parent has agreed with BNPLC to participate in the risks and rewards to BNPLC of the Purchase Agreement and other Operative Documents (as defined in the Common Definitions and Provisions Agreement (Improvements)), and the parties to this Agreement anticipate that other financial institutions may become parties to the Participation Agreement as Participants, agreeing to participate in the risks and rewards to BNPLC of the Purchase Agreement and other Operative Documents.
C. Extreme may from time to time deliver cash collateral for its obligations to BNPLC under the Purchase Agreement and for BNPLC's corresponding obligations to Participants under the Participation Agreement. This Agreement sets forth the terms and conditions governing such cash collateral.
NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I DEFINITIONS AND INTERPRETATION
"Account" shall mean any deposit account maintained by a Deposit Taker into which Cash Collateral may be deposited at any time, excluding the Transition Account.
"Account Office" shall mean, with respect to any Account maintained by any Deposit Taker, the office of such Deposit Taker in California or New York at which such Account is maintained as specified in the applicable Deposit Taker's Acknowledgment and Agreement.
"Agent" shall have the meaning given to that term in the introductory paragraph hereof.
"BNPLC" shall have the meaning given to that term in the introductory paragraph hereof.
"BNPLC's Corresponding Obligations to Participants" shall mean BNPLC's obligations under the Participation Agreement to pay Participants their respective Percentages of (or amounts equal to their respective Percentages of) sums "actually received by BNPLC" (as defined in the Participation Agreement) in satisfaction of Extreme's Purchase Agreement Obligations; provided, however, any modification of the Participation Agreement executed after the date hereof without Extreme's written consent shall not be considered for purposes of determining BNPLC's Corresponding Obligations to Participants under this Agreement.
"Cash Collateral" shall mean (i) all money of Extreme which Extreme has delivered to Agent for deposit with a Deposit Taker pursuant to this Agreement, and (ii) any additional money delivered to Agent as Collateral pursuant to Section 4.9.
"Collateral" shall have the meaning given to that term in Section 2.1 hereof.
"Collateral Imbalance" shall mean on any date prior to the Designated Sale Date that the Value (without duplication) of Accounts maintained by and Certificates of Deposit issued by the Deposit Taker for any Participant (other than a Disqualified Deposit Taker) does not equal such Participant's Percentage, multiplied by the lesser of (1) the Minimum Collateral Value in effect on such date, or (2) the aggregate Value of all Collateral subject to this Agreement on such date. For purposes of determining whether a Collateral Imbalance exists, the Value of any Accounts maintained by a bank that is acting as Deposit Taker for two or more Participants will be deemed to be held for them in proportion to their respective Percentages, and the Value of any Accounts maintained by a bank as Deposit Taker for both a Participant and BNPLC (as in the case of BNPLC's Parent acting as Deposit Taker for itself, as a Participant, and for BNPLC) will be deemed to be held for the Participant only to the extent necessary to prevent or mitigate a Collateral Imbalance and otherwise for BNPLC.
"Default" means any Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an Event of Default.
"Deposit Taker" for BNPLC shall mean BNPLC's Parent and for each Participant shall mean the Participant itself; provided, that each of BNPLC and the Participants, for itself only, may from time to time designate another Deposit Taker as provided in Sections 4.4 and 4.5 below.
"Deposit Taker Losses" shall mean the Value of any Cash Collateral delivered to a Deposit Taker, but that the Deposit Taker will not (because of the insolvency of the Deposit Taker, offsets by the Deposit Taker in violation of the Deposit Taker's Acknowledgment and Agreement, or otherwise) return to Extreme or return to Agent for disposition or application as provided herein or as required by applicable law.
"Deposit Taker's Acknowledgment and Agreement" shall have the meaning given to that term in subsection 4.1.2 hereof.
"Disqualified Deposit Taker" shall mean any Deposit Taker with whom Agent may decline to deposit Collateral pursuant to Section 4.1.
"Event of Default" shall mean the occurrence of any of the following:
(a) the failure by Extreme to pay all or any part of Extreme's Purchase Agreement Obligations when due, after giving effect to any applicable notice and grace periods expressly provided for in the Purchase Agreement;
(b) the failure by Extreme to provide funds as and when required by Section 5.1 of this Agreement, if within seven Business Days after such failure commences Extreme does not (1) cure such failure by delivering the funds required by Section 5.1, and (2) pay to BNPLC as additional Rent under the Improvements Lease an amount equal to interest at the Default Rate (as defined in the Improvements Lease) on such funds for the period from which they were first due to the date of receipt by Agent;
(c) the failure of the pledge or security interest contemplated herein in the Transition Account or any Account, Certificate of Deposit or Cash Collateral to be a Qualified Pledge (regardless of the characterization of the Transition Account or any Accounts, Certificates of Deposit or Cash Collateral as deposit accounts, instruments or general intangibles under the UCC), unless:
(I) such failure would not exist but for a breach of this Agreement by Agent or a breach of a Deposit Taker's Acknowledgment and Agreement by a Deposit Taker, or
(II) within five Business Days after Extreme becomes aware of such failure, Extreme shall (1) notify Agent, BNPLC and the Participants of such failure, and (2) cure such failure, and (3) to the extent required by Section 7.2.9, pay to BNPLC any additional Base Rent that has accrued under the Improvements Lease because of (or that would have accrued if BNPLC had been aware of) such failure, together with interest at the Default Rate on any such additional Base Rent;
(d) the failure of any representation herein by Extreme to be true (other than a failure described in another clause of this definition of Event of Default), if such failure is not cured within thirty days after Extreme receives written notice thereof from Agent;
(e) the failure of any representation made by Extreme in subsection 7.1.1 to be true, if within fifteen (15) days after Extreme becomes aware of such failure, Extreme does not (1) notify Agent, BNPLC and the Participants of such failure, and (2) cure such failure, and (3) pay to BNPLC any additional Base Rent that has accrued under the
Improvements Lease because of (or that would have accrued if BNPLC had been aware of) such failure, and (4) pay to BNPLC interest at the Default Rate on any such additional Base Rent;
(f) the failure by Extreme timely and properly to observe, keep or perform any covenant, agreement, warranty or condition herein required to be observed, kept or performed (other than a failure described in another clause of this definition of Event of Default), if such failure is not cured within thirty days after Extreme receives written notice thereof from Agent; and
(g) the failure by BNPLC to pay when due on or after the Designated Sale Date any of BNPLC's Corresponding Obligations to Participants, after giving effect to any applicable notice and grace periods expressly provided for in the Participation Agreement.
"Extreme" shall have the meaning given to that term in the introductory paragraph hereof.
"Initially Qualified Deposit Taker" means (1) BNP PARIBAS, acting through any branch, office or agency that can lawfully maintain an Account as a Deposit Taker hereunder, and (2) any of the fifty largest (measured by total assets) U.S. banks, or one of the one hundred largest (measured by total assets) banks in the world, with debt ratings of at least (i) A- (in the case of long term debt) and A-1 (in the case of short term debt) or the equivalent thereof by Standard and Poor's Corporation, and (ii) A3 (in the case of long term debt) and P-2 (in the case of short term debt) or the equivalent thereof by Moody's Investor Service, Inc. The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, Extreme shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the status of any bank as an Initially Qualified Deposit Taker.
"Lien" shall mean, with respect to any property or assets, any right or interest therein of a creditor to secure indebtedness of any kind which is owed to him or any other arrangement with such creditor which provides for the payment of such indebtedness out of such property or assets or which allows him to have such indebtedness satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or any other charge or encumbrance for security purposes, whether arising by law or agreement or otherwise, but excluding any right of setoff which arises without agreement in the ordinary course of business. "Lien" also means any filed financing statement, any registration with an issuer of uncertificated securities, or any other arrangement which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement is undertaken before or after such Lien exists.
"Material Lease Default" shall mean any of the following:
(2)(a) any failure of Extreme to make any payment required by and when first due under the Improvements Lease, regardless of whether any period provided in the Improvements Lease for the cure of such failure by Extreme shall have expired, and (b) any other default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an "Event of Default" under and as defined in the Improvements Lease, if such other default, event or failure involves a material noncompliance with Applicable Law. (For purposes of this definition, "material" noncompliance with Applicable Law will include any noncompliance, the correction of which has been requested by a governmental authority, or because of which a threat of action against the Property or BNPLC has been asserted by a governmental authority.)
"Minimum Collateral Value" shall mean (1) as of the Designated Sale Date or any prior date, an amount equal to the Collateral Percentage multiplied by the Stipulated Loss Value determined as of that date in accordance with the Improvements Lease; and (2) as of any date after the Designated Sale Date, an amount equal to the Break Even Price plus any unpaid interest accrued on past due amounts payable pursuant to Paragraph 1(a) of the Purchase Agreement.
"Notice of Security Interest" shall have the meaning given to that term in subsection 4.1.1 hereof.
"Other Liable Party" shall mean any Person, other than Extreme, who may now or may at any time hereafter be primarily or secondarily liable for any of the Secured Obligations or who may now or may at any time hereafter have granted to Agent a pledge of or security interest in any of the Collateral.
"Participants" shall mean BNPLC's Parent and any other financial
institutions which may hereafter become parties to (i) this Agreement by
completing, executing and delivering to Extreme and Agent a Supplement, and
(ii) the Participation Agreement.
"Participation Agreement" shall have the meaning given to such term in Recital B hereof.
"Percentage" shall mean with respect to each Participant and the Deposit Taker for such Participant, such Participant's "Percentage" under and as defined in the Participation Agreement
for purposes of computing such Participant's right thereunder to receive payments of (or amounts equal to a percentage of) any sales proceeds or Supplemental Payment received by BNPLC under the Purchase Agreement. Percentages may be adjusted from time to time as provided in the Participation Agreement or as provided in supplements thereto executed as provided in the Participation Agreement.
"Qualified Pledge" means a pledge or security interest that constitutes a valid, perfected, first priority pledge or security interest.
"Secured Obligations" shall mean and include both Extreme's Purchase Agreement Obligations and BNPLC's Corresponding Obligations to Participants.
"Transaction Documents" shall mean, collectively, this Agreement, the Improvements Lease, the Purchase Agreement and the Participation Agreement.
"Transition Account" shall have the meaning given it in Section 5.2.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of California from time to time, and the Uniform Commercial Code as in effect in any other jurisdiction which governs the perfection or non- perfection of the pledge of and security interests in the Collateral created by this Agreement.
"Value" shall mean with respect to any Account, Certificate of Deposit or Cash Collateral on any date, a dollar value determined as follows (without duplication):
(a) cash shall be valued at its face amount on such date;
(b) an Account shall be valued at the principal balance thereof on such date; and
(c) a Certificate of Deposit shall be valued at the face amount thereof.
"this Agreement", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Article," "this Section" and "this subsection" and similar phrases refer only to the Articles, Sections or subsections hereof in which the phrase occurs. The word "or" is not exclusive, and the word "including" (in all of its forms) means "including without limitation". Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa unless the context otherwise requires.
ARTICLE II SECURITY INTEREST
(a) All Cash Collateral, all Accounts, the Transition Account and all Certificates of Deposit issued from time to time and general intangibles arising therefrom or relating thereto (however, "general intangibles" as used in this clause shall not include any general intangibles not related to Cash Collateral, Accounts, the Transition Account or Certificates of Deposit issued from time to time, and thus will not include, without limitation, any intellectual property of Extreme); and all documents, instruments and agreements evidencing the same; and all extensions, renewals, modifications and replacements of the foregoing; and any interest or other amounts payable in connection therewith; and
(b) All proceeds of the foregoing (including whatever is receivable or received when Collateral or proceeds is invested, sold, collected, exchanged, returned, substituted or otherwise disposed of, whether such disposition is voluntary or involuntary, including rights to payment and return premiums and insurance proceeds under insurance with respect to any Collateral, and all rights to payment with respect to any cause of action affecting or relating to the Collateral).
The pledge, assignment and grant of a security interest made by Extreme hereunder is for security of the Secured Obligations only; the parties to this Agreement do not intend that Extreme's delivery of the Collateral to Agent as herein provided will constitute an advance payment of any Secured Obligations or liquidated damages, nor do the parties intend that the Collateral increase the dollar amount of the Secured Obligations.
ARTICLE III DETERMINATION OF THE COLLATERAL PERCENTAGE
Collateral Percentage to be effective on a the first day of a particular Base Rent Period, then the latest such notice from Extreme which satisfies the requirements of the preceding sentence (and of Sections 3.2 and 3.3) will control. Without limiting mandatory changes in the Collateral Percentage required by Section 3.3, in no event shall the Collateral Percentage be changed more often than once in any calendar quarter because of any election by Extreme to designate a new Collateral Percentage as provided in this Section. After any Collateral Percentage becomes effective as provided in this Article, it shall remain in effect until a different Collateral Percentage becomes effective as provided in this Article.
3.2.1 any Material Lease Default;
3.2.2 any Event of Default under and as defined in this Agreement; or
3.2.3 any Default under and as defined in this Agreement - excluding, however, any such Default limited to a failure of Extreme described in clause (c) or clause (e) of the definition of Event of Default above, with respect to which the time for cure specified in clause (c) or clause (e), as applicable, has not expired.
ARTICLE IV PROVISIONS CONCERNING DEPOSIT TAKERS
4.1.2 Such Person must have executed the Acknowledgment and Agreement at the end of such Notice of Security Interest (the "Deposit Taker's Acknowledgment and Agreement") and returned the same to Agent. Further, such Person must have complied with the Deposit Taker's Acknowledgment and Agreement, and the representations set forth therein with respect to such Person must continue to be true and correct.
4.1.3 Such Person must be a commercial bank, organized under the laws of the United States of America or a state thereof or under the laws of another country which is doing business
in the United States of America; must be authorized to maintain deposit accounts for others through Account Offices in New York or California (as specified in the Deposit Taker's Acknowledgment and Agreement); and must be an Affiliate of BNPLC or the Participant for whom such Person will act as Deposit Taker or must have a combined capital, surplus and undivided profits of at least $500,000,000.
4.1.4 Such Person must have complied with the provisions in this
Agreement applicable to Deposit Takers, including the provisions of
Section 5.4 concerning the issuance and redemption of Certificates of
Deposit.
"Responsible Participant") must defend, indemnify, and hold harmless BNPLC, Agent and the other Participants from and against any Losses resulting from such failure. Without limiting the foregoing, if the failure of a Deposit Taker for a Responsible Participant to comply strictly with the terms of this Agreement (including, without limitation, the provisions of Section 5.4 concerning the issuance and redemption of Certificates of Deposit and the requirement that any cash deposits be held in a deposit account located in either New York or California) causes, in whole or in part, the security interest of Agent in the Collateral held by such Deposit Taker to be unperfected, then any and all Losses suffered as a result of such nonperfection shall be borne solely by the Responsible Participant and shall not be shared by BNPLC, Agent or the other Participants.
ARTICLE V DELIVERY AND MAINTENANCE OF CASH COLLATERAL
Further, if for any reason a Collateral Imbalance is determined by Agent to exist, Agent shall, as required to rectify or mitigate the Collateral Imbalance, promptly reallocate Collateral among Deposit Takers by withdrawing Cash Collateral from some Accounts and redepositing it in other Accounts. (If any party to
ARTICLE VI WITHDRAWAL OF CASH COLLATERAL
Extreme may not withdraw Cash Collateral, except as follows:
6.1.1 Such withdrawal and delivery of the Cash Collateral to Extreme will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value.
6.1.3 No Default or Event of Default shall have occurred and be continuing at the time Extreme gives the notice required by the preceding subsection or on the date upon which the withdrawal is required.
6.1.4 Extreme must pay to Agent any and all costs incurred by Agent in connection with the withdrawal.
6.1.5 Agent shall determine the Accounts from which to make any withdrawal required by Extreme pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance.
6.2.2 the required withdrawal shall be made as determined by Agent, first, from the Accounts maintained by the Deposit Takers for the Participants, and then (to the extent necessary) from the Accounts maintained by the Deposit Taker for BNPLC; and
6.2.3 in any event, no withdrawals or payments directly to Participants shall be required by this Section 6.2 (or permitted over the objection of BNPLC) in excess of those required to satisfy BNPLC's Corresponding Obligations to Participants or to reduce such obligations to zero under the Participation Agreement.
ARTICLE VII REPRESENTATIONS AND COVENANTS OF EXTREME
7.1.1 Extreme is the legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time Extreme acquires rights in the Collateral, will be the legal and beneficial owner thereof). No other Person has (or, in the case of after-acquired Collateral, at the time Extreme acquires rights therein, will have) any right, title, claim or interest (by way of Lien, purchase option or otherwise) in, against or to the Collateral, except for rights created hereunder.
7.1.2 Agent has (or in the case of after-acquired Collateral, at the time Extreme acquires rights therein, will have) a valid, first priority, perfected pledge of and security interest in the Collateral, regardless of the characterization of the Collateral as deposit accounts, instruments or general intangibles under the UCC, but assuming that the representations of each Deposit Taker in its Deposit Taker's Acknowledgment and Agreement are true.
7.1.3 Extreme has delivered to Agent, together with all necessary stock powers, endorsements, assignments and other necessary instruments of transfer, the originals of all documents, instruments and agreements evidencing Accounts, Certificates of Deposit or Cash Collateral.
7.1.4 Extreme's chief executive office is located at the address of Extreme set forth in Article II of the Common Definitions and Provisions Agreement (Improvements) or at another address in California specified in a notice that Extreme has given to Agent as required by Section 7.2.4.
7.1.5 To the knowledge of Extreme, neither the ownership or the intended use of the Collateral by Extreme, nor the pledge of Accounts or the grant of the security interest by Extreme to Agent herein, nor the exercise by Agent of its rights or remedies hereunder, will (i) violate any provision of (a) Applicable Law, (b) the articles or certificate of incorporation, charter or bylaws of Extreme, or (c) any agreement, judgment, license, order or permit applicable to or binding upon Extreme, or (ii) result in or require the creation of any Lien, charge or encumbrance upon any assets or properties of Extreme except as expressly contemplated in this Agreement. Except as
expressly contemplated in this Agreement, to the knowledge of Extreme no consent, approval, authorization or order of, and no notice to or filing with any court, governmental authority or third party is required in connection with the pledge or grant by Extreme of the security interest contemplated herein or the exercise by Agent of its rights and remedies hereunder.
7.2.1 Extreme, at Extreme's expense, shall promptly procure, execute and deliver to Agent all documents, instruments and agreements and perform all acts which are necessary, or which Agent may reasonably request, to establish, maintain, preserve, protect and perfect the Collateral, the pledge thereof to Agent or the security interest granted to Agent therein and the first priority of such pledge or security interest or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the preceding sentence, Extreme shall (A) procure, execute and deliver to Agent all stock powers, endorsements, assignments, financing statements and other instruments of transfer requested by Agent, (B) deliver to Agent promptly upon receipt all originals of Collateral consisting of instruments, documents and chattel paper, (C) cause the security interest of Agent in any Collateral consisting of securities to be recorded or registered in the books of any financial intermediary or clearing corporation requested by Agent, and (D) reimburse Agent upon request for any legal opinion Agent may elect to obtain from a nationally recognized commercial law firm authorized to practice in New York concerning the enforceability, first priority and perfection of Agent's security interest in any Collateral maintained in New York, if BNPLC or any Participant should at any time elect to use a Deposit Taker that will maintain one or more Accounts in New York.
7.2.2 Extreme shall not use or consent to any use of any Collateral in violation of any provision of this Agreement or any other Transaction Document or any Applicable Law.
7.2.3 Extreme shall pay promptly when due all taxes and other governmental charges, all Liens and all other charges now or hereafter imposed upon, relating to or affecting any Collateral.
7.2.4 Without thirty days' prior written notice to Agent, Extreme shall not change Extreme's name or place of business (or, if Extreme has more than one place of business, its chief executive office).
7.2.5 Extreme shall appear in and defend, on behalf of Agent, any action or proceeding which may affect Extreme's title to or Agent's interest in the Collateral.
7.2.6 Subject to the express rights of Extreme under Article VI, Extreme shall not surrender or lose possession of (other than to Agent or a Deposit Taker pursuant hereto), sell, encumber, lease, rent, option, or otherwise dispose of or transfer any Collateral or right or interest therein, and Extreme shall keep the Collateral free of all Liens.
7.2.7 Extreme will not take any action which would in any manner impair the value or enforceability of Agent's pledge of or security interest in any Collateral, nor will Extreme fail to take any action which is required to prevent (and which Extreme knows is required to prevent) an impairment of the value or enforceability of Agent's pledge of or security interest in any Collateral.
7.2.8 Extreme shall pay (and shall indemnify and hold harmless Agent from and against) all Losses incurred by Agent in connection with or because of (A) the interest acquired by Agent in any Collateral pursuant to this Agreement, or (B) the negotiation or administration of this Agreement, whether such Losses are incurred at the time of execution of this Agreement or at any time in the future. Costs and expenses included in such Losses may include, without limitation, all
filing and recording fees, taxes, UCC search fees and Attorneys' Fees incurred by Agent with respect to the Collateral.
7.2.9 Without limiting the foregoing, within five Business Days after Extreme becomes aware of any failure of the pledge or security interest contemplated herein in the Transition Account or any Account, Certificate of Deposit or Cash Collateral to be a valid, perfected, first priority pledge or security interest (regardless of the characterization of the Transition Account or any Accounts, Certificates of Deposit or Cash Collateral as deposit accounts, instruments or general intangibles under the UCC), Extreme shall notify Agent, BNPLC and the Participants of such failure. In addition, if the failure would not exist but for Extreme's delivery of Cash Collateral to Agent subject to prior Liens or other claims by one or more third parties, or but for the grant by Extreme itself of any Lien or other interest in the Collateral to one or more third parties, then, in addition to any other remedies available to BNPLC or Agent under the circumstances, Extreme must pay to BNPLC any additional Base Rent that has accrued under the Improvements Lease because of (or that would have accrued if BNPLC had been aware of) the failure, together with interest at the Default Rate on any such additional Base Rent.
ARTICLE VIII AUTHORIZED ACTION BY AGENT
ARTICLE IX DEFAULT AND REMEDIES
(a) Agent may collect, receive, appropriate or realize upon the Collateral or otherwise foreclose or enforce the pledge of or security interests in any or all Collateral in any manner permitted by Applicable Law or in this Agreement; and
(b) Agent may notify any or all Deposit Takers to pay all or any portion of the Collateral held by such Deposit Taker(s) directly to Agent.
Agent shall distribute the proceeds of all Collateral received by Agent after the occurrence of an Event of Default to BNPLC and the Participants for application to the Secured Obligations. If any proceeds of Collateral remain after all Secured Obligations have been paid in full, Agent will deliver or direct the Deposit Takers to deliver such proceeds to Extreme or other Persons entitled thereto. In any case where notice of any sale or disposition of any Collateral is required, Extreme hereby agrees that seven (7) Business Days notice of such sale or disposition is reasonable.
ARTICLE X OTHER RECOURSE
ARTICLE XI PROVISIONS CONCERNING AGENT
In the event of any conflict between the following and other provisions in this Agreement, the following will control:
which case it shall be required to act or to refrain from acting (and shall be fully protected and free from liability to all Participants in so acting or refraining from acting) upon the instructions of the Majority, as defined in the Participation Agreement, including itself as a Participant and BNPLC; provided, however, that Agent shall not be required to take any action which exposes it to a risk of personal liability that it considers unreasonable or which is contrary to this Agreement or the other documents referenced herein or to Applicable Law.
FINAL JUDGMENT RENDERED AGAINST AGENT. Cumulative of the foregoing, each Participant agrees to reimburse Agent promptly upon demand for such Participant's Percentage share of any costs and expenses to be paid to Agent by Extreme hereunder to the extent that Agent is not timely reimbursed by Extreme as provided in subsection 7.2.8. As used in this Section the term "Agent" shall refer not only to the Person designated as such in the introductory paragraph of this Agreement, but also to each director, officer, agent, attorney, employee, representative and Affiliate of such Person.
ARTICLE XII MISCELLANEOUS
[The signature pages follow.]
IN WITNESS WHEREOF, Extreme, BNPLC, Agent and the Participants whose signatures appear below have caused this Agreement to be executed as of June 1, 2000.
"Extreme"
EXTREME NETWORKS, INC.
By:_______________________________
Name:__________________________
Title:_________________________
[Continuation of signature pages to Pledge Agreement (Improvements) dated to be effective June 1, 2000]
"BNPLC"
BNP LEASING CORPORATION
By:___________________________
Lloyd G. Cox, Vice President
[Continuation of signature pages to Pledge Agreement (Improvements) dated to be effective June 1, 2000]
"AGENT"
BNP PARIBAS
By:_______________________________
Name:__________________________
Title:_________________________
"PARTICIPANT"
BNP PARIBAS
By:_______________________________
Name:__________________________
Title:_________________________
(No. _________)
[_________, _____]
[NAME OF THE ISSUING
DEPOSIT TAKER AND THE
ADDRESS OF ITS APPLICABLE
ACCOUNT OFFICE]
Payable to the order of: BNP PARIBAS, as Agent under the Pledge Agreement (Improvements) dated June 1, 2000, among Extreme Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Improvements) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants Dollars -------------------------------------------------------------------------------- |
in current funds, without interest, seven days after presentment of this certificate properly endorsed.
The bank issuing this certificate acknowledges and certifies that on the date indicated above the payee deposited the dollar amount indicated above, and that such amount shall be payable as provided above.
[__________, ____]
1. Reference is made to the Pledge Agreement (Improvements) (the "Pledge Agreement") dated June 1, 2000 among Extreme Networks, Inc. ("Extreme"), BNP Leasing Corporation ("BNPLC"), BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (collectively, the "Participants") and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants (in such capacity, "Agent"). Unless otherwise defined herein, all capitalized terms used in this Supplement have the respective meanings given to those terms in the Pledge Agreement.
2. The undersigned hereby certifies to Agent and Extreme that the undersigned has become a party to the Participation Agreement by executing a supplement as provided therein and that its Percentage thereunder is ______%.
3. The undersigned, by executing and delivering this Supplement to Extreme and Agent, hereby agrees to become a party to the Pledge Agreement and agrees to be bound by all of the terms thereof applicable to Participants. The Deposit Taker for the undersigned shall be _________________, until such time as another Deposit Taker for the undersigned shall be designated in accordance with Sections 4.4 or 4.5 of the Pledge Agreement. The undersigned certifies to Agent and Extreme that such Deposit Taker is an Initially Qualified Deposit Taker and satisfies the requirements for a Deposit Taker set forth in Section 4.1 of the Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Supplement as of the day and year indicated above.
[______________________________________]
By:____________________________________ Name:_______________________________ Title:______________________________
[_________, _____]
BNP PARIBAS
[address of BNP]
Re: Pledge Agreement (Improvements) (the "Pledge Agreement") dated June 1, 2000 -- among Extreme Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement referenced above. This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 3.1 of the Pledge Agreement, Extreme elects to change the Collateral Percentage to:
__________ percent (___%),
on the following Base Rent Date (which will be the first day of a new Base Rent Period):
__________, ____
Extreme expects that multiplying the new Collateral Percentage specified above against Stipulated Loss Value of:
____________________________ Dollars ($__________),
will result in an expected new Minimum Collateral Value of:
____________________________ Dollars ($__________).
Because of the increase in the Collateral Percentage which will result from this notice and the corresponding increase in the Minimum Collateral Value, Extreme will deliver additional Cash Collateral to you as required by Section 5.1 of the Pledge Agreement no later than 12:00 noon (San Francisco time) on the Base Rent Date specified above, in the amount of:
____________________________ Dollars ($__________).]
To assure you that Extreme has satisfied the conditions to its right to change the Collateral Percentage as provided in this notice, and to induce you to rely upon this notice in discharging your responsibilities under the Pledge Agreement, Extreme certifies to you that:
1. Extreme is giving this notice to you, BNPLC and the Participants at least ten Business Days prior to the Base Rent Date specified above, and such Base Rent Date is the commencement of a Base Rent Period.
2. No Event of Default or other event or circumstance that would, pursuant to Section 3.2 of the Pledge Agreement, preclude Extreme from designating the new Collateral Percentage above has occurred and is continuing, and Extreme does not anticipate that on the Base Rent Date specified above there will have occurred and be continuing any such Event of Default or other event or circumstance.
3. The new Collateral Percentage specified by Extreme above is not less than the Minimum Collateral Percentage currently in effect.
EXTREME NETWORKS, INC.
By:____________________________________
Name:_______________________________
Title:______________________________
[cc BNPLC and all Participants]
[_________, _____]
[Name of Deposit Taker]
[Address of Deposit Taker]
1. Reference is made to the Pledge Agreement (Improvements) (the "Pledge Agreement") dated June 1, 2000 among Extreme Networks, Inc. ("Extreme"), BNP Leasing Corporation ("BNPLC"), BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (collectively, the "Participants") and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants (in such capacity, "Agent"). Unless otherwise defined herein, all capitalized terms used in this Notice have the respective meanings given to those terms in the Pledge Agreement.
2. Extreme has informed Agent that Extreme has established with the addressee of this Notice (the "Deposit Taker") the following non-interest bearing Account(s) to be maintained at the following Account Office(s):
Account Account Account Type Office Number ---- ------ ------ Time Deposit _________ _________ Time Deposit _________ _________ Time Deposit _________ _________ |
Extreme has further informed Agent that Extreme intends to maintain Cash Collateral in such Account(s), and that to evidence such Account(s) and the amount of Cash Collateral held therein from time to time, Extreme has authorized the Deposit Taker to issue Certificates of Deposit payable to the order of Agent as provided in the Pledge Agreement.
3. Extreme and Agent hereby notify Deposit Taker that, pursuant to the Pledge Agreement, Extreme has granted to Agent, for the ratable benefit of BNPLC and the Participants as security for the Secured Obligations, a pledge of and security interest in all Accounts and other Collateral maintained by Extreme with Deposit Taker, including the Account(s) described in Section 2 above.
4. In furtherance of such grant, Extreme and Agent hereby authorize and direct Deposit Taker to:
(a) hold all Collateral for Agent and as Agent's bailee, separate and apart from all other property and funds of Extreme and all other Persons and to permit no other funds to be deposited or credited to the Account(s);
(b) make a notation in its books and records of the interest of Agent in the Collateral and that the Account(s) and all deposits therein or sums credited thereto are subject to a pledge and security interest in favor of Agent;
(c) issue and redeem Certificates of Deposit evidencing the Account(s), as directed by Agent pursuant to the Pledge Agreement;
(d) take such other steps as Agent may reasonably request to record, maintain, validate and perfect its pledge of and security interest in
(e) upon receipt of notice from Agent that an Event of Default has occurred, transfer and deliver to Agent or its nominee, together with all necessary endorsements, all or such portion of the Collateral held by Deposit Taker as Agent shall direct; provided, however, that in connection therewith the Deposit Taker may require compliance by Agent with the provisions in Section 5.4 of the Pledge Agreement for redemption of any outstanding Certificates of Deposit which evidence the Account(s).
6. As contemplated by the Pledge Agreement, please acknowledge Deposit Taker's receipt of, and consent to, this notice and confirm the representations and agreements set forth in the Acknowledgment and Agreement attached hereto by executing the same and returning this letter to Agent. For your files, a copy of this letter is enclosed which you may retain. The authorizations and directions set forth herein may not be revoked or modified without the written consent of Agent.
"AGENT"
BNP PARIBAS
By:________________________
Name:___________________
Title:__________________
"EXTREME"
EXTREME NETWORKS, INC.
By:________________________
Name:___________________
Title:__________________
ACKNOWLEDGMENT AND AGREEMENT
OF DEPOSIT TAKER
Deposit Taker hereby acknowledges receipt of, and consents to, the above notice, acknowledges that it will hold the Collateral for Agent and as Agent's bailee, agrees to comply with the authorizations and directions set forth above and represents to and agrees with Extreme and Agent as follows:
(a) Deposit Taker is a commercial bank, organized under the laws of the United States of America or a state thereof or under the laws of another country which is doing business in the United States of America. Deposit Taker is authorized to maintain deposit accounts for others through the Account Offices specified in the above notice, and Deposit Taker will not move the accounts described in the above notice to other offices without the prior written authorization of Agent and Extreme.
(b) Deposit Taker has a combined capital, surplus and undivided profits of at least $500,000,000.
(c) The information set forth above regarding the Account(s) is accurate. Such Account(s) is (are) currently open and Deposit Taker has no prior notice of any other pledge, security interest, Lien, adverse claim or interest in such Account(s).
(d) Deposit Taker shall promptly notify Extreme and Agent if the representations made by Deposit Taker above cease to be true and correct.
[________________________________]
By:_____________________________ Name:____________________ Title:___________________
[Date]
The examples below are provided to illustrate the calculations required for allocations of Cash Collateral in a manner that will avoid a Collateral Imbalance. The examples are not intended to reflect actual numbers under this Agreement or actual Percentages of BNPLC or any of the Participants; nor are the examples intended to provide a formula for the allocations that would be appropriate in every case. The examples also reflect adjustments that would be appropriate if the Collateral Percentage were adjusted from time to time from and after the Effective Date.
EXAMPLE NO. 1
1. Two Participants ("Participant A" and "Participant B") are parties to the Participation Agreement with BNPLC. Participant A's Percentage is 50% and Participant B's Percentage is 45%, leaving BNPLC with a Percentage of 5%.
2. On the Effective Date, the Initial Funding Advance was $12,000,000, resulting in a Stipulated Loss Value of $12,000,000, allocable as follows:
TOTAL................................................... $12,000,000
3. The Minimum Collateral Value on the Effective Date was $7,200,000 (reflecting a Collateral Percentage of 60% times Stipulated Loss Value).
4. On the Effective Date, Extreme had delivered to Agent Cash Collateral of $7,200,000, equal to the Minimum Collateral Value, as required by Section 5.1 of this Agreement.
A. BNPLC's Deposit Taker (5% of Minimum Collateral Value)........................ $ 360,000 B. Participant A's Deposit Taker (50% of Minimum Collateral Value)............... 3,600,000 C. Participant B's Deposit Taker (45% of Minimum Collateral Value).............. 3,240,000 ---------- TOTAL..........................................................................$7,200,000 |
EXAMPLE NO. 2
1. Effective as of the first Base Rent Date, Extreme increased its Collateral Percentage from 60% to
80%, raising the Minimum Collateral Value to $9,600,000. Because of such increase, Extreme also delivered an additional $2,400,000 as Cash Collateral to Agent on the first Base Rent Date, bringing the total of all Cash Collateral delivered by Extreme to $9,600,000 as required by Section 5.1 of this Agreement.
2. Also effective as of the first Base Rent Date, a new Participant approved by Extreme ("Participant C") became a party to this Agreement and the Participation Agreement, taking a Percentage of 20%. Simultaneously, Participant A and Participant B entered into supplements to the Participation Agreement which reduced their Percentages to 40% and 35%, respectively.
A. BNPLC's Deposit Taker (5% of Minimum Collateral Value).............. $ 480,000 B. Participant A's Deposit Taker (40% of Minimum Collateral Value)..... 3,840,000 C. Participant B's Deposit Taker (35% of Minimum Collateral Value)..... 3,360,000 D. Participant C's Deposit Taker (20% of Minimum Collateral Value).... 1,920,000 ---------- TOTAL............................................................... $9,600,000 |
Thus, to prevent a Collateral Imbalance, Agent would have to allocate the $2,400,000 of additional Cash Collateral it received on the first Base Rent Date as follows:
A. BNPLC's Deposit Taker ($480,000 less $360,000 already on deposit) .................... $ 120,000 B. Participant A's Deposit Taker ($3,840,000 less $3,600,000 already on deposit)......... 240,000 C. Participant B's Deposit Taker ($3,360,000 less $3,240,000 already on deposit)......... 120,000 D. Participant C's Deposit Taker ($1,920,000 less $0 already on deposit)................ 1,920,000 ---------- TOTAL................................................................................. $2,400,000 |
EXAMPLE NO. 3
1. Instead of increasing its Collateral Percentage from 60% to 80%, Extreme increased its Collateral Percentage to 70% on the first Base Rent Date, raising the Minimum Collateral Value to $8,400,000. Because of such increase, Extreme delivered an additional $1,200,000 as additional Cash Collateral to Agent on the first Base Rent Date, bringing the total of all Cash Collateral delivered by Extreme to $8,400,000 as required by Section 5.1 of this Agreement.
A. BNPLC's Deposit Taker (5% of Minimum Collateral Value).............................. $ 420,000 B. Participant A's Deposit Taker (40% of Minimum Collateral Value)..................... 3,360,000 C. Participant B's Deposit Taker (35% of Minimum Collateral Value)..................... 2,940,000 D. Participant C's Deposit Taker (20% of Minimum Collateral Value).................... 1,680,000 ---------- TOTAL............................................................................... $8,400,000 |
TOTAL............................................................................... $8,400,000 |
Thus, to prevent a Collateral Imbalance, Agent would have to allocate the $1,200,000 of additional Cash Collateral it received on the first Base Rent Date as follows:
A. BNPLC's Deposit Taker ($420,000 less $360,000 already on deposit) .................. $ 60,000 B. Participant A's Deposit Taker ($3,360,000 less $3,600,000 already on deposit)...................................................... (240,000) C. Participant B's Deposit Taker ($2,940,000 less $3,240,000 already on deposit)...................................................... (300,000) D. Participant C's Deposit Taker ($1,680,000 less $0 already on deposit).............. 1,680,000 ---------- TOTAL............................................................................... $1,200,000 |
[________,_____]
BNP PARIBAS
[address of BNP]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Improvements) referenced above (the "Pledge Agreement"). This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 6.1 of the Pledge Agreement, Extreme requires you to withdraw from the Accounts and return to Extreme the following amount:
____________________________ Dollars ($__________)
on the following date:
__________, ____
To assure you that Extreme has satisfied the conditions to its right to require such withdrawal, and to induce you to comply with this notice, Extreme certifies to you that:
1. Your withdrawal and delivery of the amount specified above to Extreme will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value. After giving effect to such withdrawal, the Collateral remaining in the Accounts maintained by the Deposit Takers will be:
____________________________ Dollars ($__________),
and the Minimum Collateral Value on the date specified above will equal:
____________________________ Dollars ($__________).
Such Minimum Collateral Value equals the Collateral Percentage of:
__________ percent (___%),
times the Stipulated Loss Value of:
____________________________ Dollars ($__________).
2. Extreme is giving this notice to you, BNPLC and the Participants at least ten days prior to the date specified above.
3. No Default or Event of Default has occurred and is continuing as of the date of this notice, and Extreme does not anticipate that any Default or Event of Default will have occurred and be continuing on the date upon which the withdrawal is required.
4. Extreme agrees that you may determine the Accounts from which to make any withdrawal required by Extreme pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance.
EXTREME NETWORKS, INC.
By:_______________________
Name:________________
Title:_______________
[cc BNPLC and all Participants]
[_________, _____]
Deposit Takers on the
Attached Distribution List
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Improvements) referenced above (the "Pledge Agreement"). This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 6.1 of the Pledge Agreement, Extreme requires Agent to withdraw from the Accounts and return to Extreme the amounts listed below on the following date:
__________, ____
Accordingly, on such date, the undersigned intends to withdraw the following amounts from the following Accounts, and with this letter the undersigned is presenting Certificates of Deposit as required in connection with such withdrawal:
Deposit Taker Account No. Amount 1.__________________ ____________________ $______________ 2.__________________ ____________________ $______________ 3.__________________ ____________________ $______________ 4.__________________ ____________________ $______________ TOTAL WITHDRAWALS: $============== BNP PARIBAS, AS AGENT |
By:________________________ Name:_________________ Title:________________
[cc BNPLC and Extreme]
[_________, _____]
BNP PARIBAS
[address of BNP]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Improvements) referenced above (the "Pledge Agreement"). This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 6.2 of the Pledge Agreement, Extreme requires you to withdraw from the Accounts and pay directly to the Participants (in proportion to their respective Percentages) the following amount:
____________________________ Dollars ($__________)
on the following date (which, Extreme acknowledges, must be the Designated Sale Date or a date thereafter prior to an Event of Default):
__________, ____
The amount specified above equals the following percentage (equal to the aggregate of all Participant's Percentages):
__________ percent (___%),
times the total of all Cash Collateral presently pledged under the Pledge Agreement:
____________________________ Dollars ($__________).
To assure you that Extreme has satisfied the conditions to its right to require such withdrawal, and to induce you to comply with this notice, Extreme certifies to you that Extreme is giving this notice to you, BNPLC and the Participants at least ten days prior to the date of required withdrawal and payment specified above.
EXTREME NETWORKS, INC.
By:____________________________
Name:____________________
Title:___________________
[cc BNPLC and all Participants]
Deposit Takers on the
Attached Distribution List
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Improvements) referenced above (the "Pledge Agreement"). This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 6.2 of the Pledge Agreement, Extreme requires Agent to withdraw from the Accounts and pay to the Participants (in proportion to their respective Percentages) the amounts listed below on the following date:
__________, ____
Accordingly, on such date, the undersigned intends to withdraw the following amounts from the following Accounts, and with this letter the undersigned is presenting Certificates of Deposit as required in connection with such withdrawal:
Deposit Taker Account No. Amount 1._______________________ ______________________ $_________________________ 2._______________________ ______________________ $_________________________ 3._______________________ ______________________ $_________________________ 4._______________________ ______________________ $_________________________ TOTAL WITHDRAWALS: $_________________________ |
BNP PARIBAS, AS AGENT
By:_________________________________________
Name:________________________________
Title:_______________________________
[cc BNPLC and Extreme]
BNP PARIBAS
[address of BNP]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Improvements) referenced above (the "Pledge Agreement"). This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 6.3 of the Pledge Agreement, Extreme requires you to withdraw from the Account maintained by the Deposit Taker for BNPLC and pay directly to BNPLC on behalf of Extreme as a payment required by the Purchase Agreement the following amount:
____________________________ Dollars ($__________)
on the following date (which, Extreme acknowledges, must be the Designated Sale Date or a date thereafter prior to an Event of Default):
__________, ____
To assure you that Extreme has satisfied the conditions to its right to require such withdrawal, and to induce you to comply with this notice, Extreme certifies to you that Extreme is giving this notice to you and BNPLC at least ten days prior to the date of required withdrawal and payment specified above.
EXTREME NETWORKS, INC.
By:____________________________________
Name:_____________________________
Title:____________________________
[cc BNPLC]
[_________, _____]
[Name of the Deposit Taker for BNPLC]
[Address of such Deposit Taker]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Improvements) referenced above (the "Pledge Agreement"). This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 6.3 of the Pledge Agreement, Extreme requires Agent to withdraw from the Account maintained by you, as Deposit Taker for BNPLC, the sum of:
____________________________ Dollars ($__________)
and pay the same to BNPLC as a payment required by the Purchase Agreement on the following date:
__________, ____
Accordingly, on such date, the undersigned intends to withdraw such amount from the following Account maintained by you as Deposit Taker for BNPLC, and with this letter the undersigned is presenting Certificate(s) of Deposit as required in connection with such withdrawal.
BNP PARIBAS, AS AGENT
By: ________________________________
Name:___________________________
Title:__________________________
[cc BNPLC and Extreme]
[_________, _____]
BNP PARIBAS
[address of BNP]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Improvements) referenced above (the "Pledge Agreement"). This letter constitutes notice to you, as Agent under the Pledge Agreement, that pursuant to Section 6.4 of the Pledge Agreement, Extreme requires you to withdraw from the following Account maintained by the following Deposit Taker:
Cash Collateral in the following amount:
____________________________ Dollars ($__________)
and to deposit such Cash Collateral with other Deposit Takers who are not Disqualified Deposit Takers no later than ten days after the date upon which you receive this notice.
To assure you that Extreme has the right to require such withdrawal, and to induce you to comply with this notice, Extreme certifies to you that the Deposit Taker specified above has become a Disqualified Deposit Taker because it no longer satisfies the requirements listed in Section 4.1 of the Pledge Agreement. Specifically, such Deposit Taker no longer satisfies the following requirements:
[EXTREME MUST INSERT HERE A DESCRIPTION OF WHICH REQUIREMENTS THE DEPOSIT TAKER
NO LONGER SATISFIES AND HOW EXTREME HAS DETERMINED THAT THE REQUIREMENTS ARE NO
LONGER SATISFIED, ALL IN SUFFICIENT DETAIL TO PERMIT THE PARTICIPANT FOR WHOM
SUCH DEPOSIT TAKER HAS BEEN MAINTAINING AN ACCOUNT TO RESPOND IF IT BELIEVES
THAT EXTREME IS IN ERROR.]
EXTREME NETWORKS, INC.
By:______________________________
Name:______________________
Title:_____________________
[cc BNPLC]
[_________, _____]
[Name of the Deposit Taker for BNPLC]
[Address of such Deposit Taker]
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings assigned to them in the Pledge Agreement (Improvements) referenced above (the "Pledge Agreement"). This letter constitutes notice from the undersigned, as Agent under the Pledge Agreement, that pursuant to Section 6.4 of the Pledge Agreement, Extreme has advised Agent that you are a Disqualified Deposit Taker, and Extreme requires Agent to withdraw from the Account maintained by you, as a Deposit Taker under the Pledge Agreement, the sum of:
____________________________ Dollars ($__________)
no later than the following date:
__________, ____
Accordingly, on such date, the undersigned intends to withdraw such amount from the Account maintained by you as Deposit Taker (Account No. __________), and with this letter the undersigned is presenting Certificate(s) of Deposit as required in connection with such withdrawal.
BNP PARIBAS, AS AGENT
By: ______________________________
Name:_________________________
Title:________________________
[cc BNPLC and Extreme]
[IN PLACE OF THIS PAGE, SUBSTITUTE SCHEDULE 1 ATTACHED TO THE LEASE]
EXHIBIT 21.1
NAME LOCATION ---- -------- Extreme Networks International Cayman Islands Extreme Networks Japan K.K. Japan Extreme Networks Hong Kong Limited Hong Kong Extreme Networks IHC, Inc. Delaware Extreme Networks FSC, Inc. Barbados Extreme Networks UK Limited United Kingdom Extreme Networks B.V. The Netherlands Extreme Networks GmbH Germany Extreme Networks Sarl France Extreme Networks Srl Italy Extreme Networks Canada, Inc. Canada Extreme Networks YH Korea IHC Networks AB Sweden Extreme Networks Australia Australia Extreme Networks EMEA Dubai |
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-83729) pertaining to the Amended 1996 Stock Option Plan, 1999 Employee Stock Purchase Plan and an Individual Stock Option Agreement of Extreme Networks, Inc. of our report dated July 18, 2000, except for note 9, as to which the date is August 24, 2000, with respect to the consolidated financial statements and schedule of Extreme Networks, Inc. included in the Annual Report (Form 10-K) for the year ended June 30, 2000.
/s/ Ernst & Young LLP Palo Alto, California September 27, 2000 |
ARTICLE 5 |
MULTIPLIER: 1,000 |
PERIOD TYPE | 12 MOS |
FISCAL YEAR END | JUL 02 2000 |
PERIOD START | JUL 01 1999 |
PERIOD END | JUL 02 2000 |
CASH | 116,721 |
SECURITIES | 190,784 |
RECEIVABLES | 62,233 |
ALLOWANCES | 1,237 |
INVENTORY | 23,801 |
CURRENT ASSETS | 302,484 |
PP&E | 35,920 |
DEPRECIATION | 9,170 |
TOTAL ASSETS | 515,930 |
CURRENT LIABILITIES | 96,603 |
BONDS | 0 |
PREFERRED MANDATORY | 0 |
PREFERRED | 0 |
COMMON | 106 |
OTHER SE | 418,915 |
TOTAL LIABILITY AND EQUITY | 515,930 |
SALES | 261,956 |
TOTAL REVENUES | 261,956 |
CGS | 126,916 |
TOTAL COSTS | 245,702 |
OTHER EXPENSES | 33 |
LOSS PROVISION | 0 |
INTEREST EXPENSE | 490 |
INCOME PRETAX | 30,369 |
INCOME TAX | 10,321 |
INCOME CONTINUING | 20,048 |
DISCONTINUED | 0 |
EXTRAORDINARY | 0 |
CHANGES | 0 |
NET INCOME | 20,048 |
EPS BASIC | 0.20 |
EPS DILUTED | 0.18 |