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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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27-0989767
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1740 Technology Drive, Suite 150
San Jose, CA 95110
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(Address of principal executive offices, including zip code)
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(408) 216-8360
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(Registrant's telephone number, including area code)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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o (Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Emerging growth company
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x
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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o
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PAGE
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Item 3
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Item 4
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Item 5
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•
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our future revenue, cost of revenue and operating expenses, as well as changes in the cost of product revenue, component costs, product gross margins and support, entitlements and other services revenue, and changes in research and development, sales and marketing and general and administrative expenses;
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•
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our business plan and our ability to effectively manage our growth;
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•
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anticipated trends, growth rates and challenges in our business and in the markets in which we operate, including the productivity of our sales team;
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•
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our ability to develop new solutions, product features and technology, such as Nutanix Xi Cloud Services, and bring them to market in a timely manner;
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•
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market acceptance of new technology and recently introduced solutions;
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•
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the interoperability and availability of our solutions with and on third-party hardware platforms;
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•
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our plans and objectives for future operations, including plans to continue to invest in our global engineering, research and development, and sales and marketing teams, and the impact of such investments on our operations;
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•
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our ability to increase sales of our solutions;
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•
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our ability to attract new end customers, and retain and grow sales from our existing end customers;
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•
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our ability to maintain and strengthen our relationships with our channel and OEM partners;
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•
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the effects of seasonal trends on our results of operations;
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•
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our expectations concerning relationships with third parties, including our ability to compress and stabilize sales cycles;
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•
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our ability to maintain, protect and enhance our intellectual property;
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•
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our ability to continue to expand internationally;
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•
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the effects of increased competition in our market and our ability to compete effectively;
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•
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anticipated capital expenditures;
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•
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future acquisitions or investments in complementary companies, products, services or technologies and the ability to successfully integrate completed acquisitions;
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•
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our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
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•
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economic and industry trends, projected growth or trend analysis;
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•
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the attraction and retention of qualified employees and key personnel;
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•
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our expectations concerning future shifts in the mix of whether our solutions are sold as an appliance or as software-only, and in the mix of the types of appliances we sell; and
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•
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sufficiency of cash to meet cash needs for at least the next 12 months.
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Page
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As of
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||||||
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July 31, 2017
*As Adjusted |
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April 30, 2018
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||||
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(in thousands, except share and per share data)
|
||||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
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$
|
138,359
|
|
|
$
|
376,789
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Short-term investments
|
210,694
|
|
|
546,675
|
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||
Accounts receivable, net
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178,876
|
|
|
194,323
|
|
||
Deferred commissions—current
|
23,843
|
|
|
30,274
|
|
||
Prepaid expenses and other current assets
|
28,362
|
|
|
36,615
|
|
||
Total current assets
|
580,134
|
|
|
1,184,676
|
|
||
Property and equipment, net
|
58,072
|
|
|
76,322
|
|
||
Deferred commissions—non-current
|
49,684
|
|
|
72,454
|
|
||
Intangible assets, net
|
26,001
|
|
|
47,790
|
|
||
Goodwill
|
16,672
|
|
|
88,324
|
|
||
Other assets—non-current
|
7,649
|
|
|
5,832
|
|
||
Total assets
|
$
|
738,212
|
|
|
$
|
1,475,398
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
73,725
|
|
|
$
|
71,405
|
|
Accrued compensation and benefits
|
57,521
|
|
|
61,221
|
|
||
Accrued expenses and other current liabilities
|
9,707
|
|
|
11,645
|
|
||
Deferred revenue—current
|
170,123
|
|
|
243,770
|
|
||
Total current liabilities
|
311,076
|
|
|
388,041
|
|
||
Deferred revenue—non-current
|
198,933
|
|
|
296,119
|
|
||
Convertible senior notes, net
|
—
|
|
|
422,567
|
|
||
Other liabilities—non-current
|
11,140
|
|
|
14,090
|
|
||
Total liabilities
|
521,149
|
|
|
1,120,817
|
|
||
Commitments and contingencies (Note 7)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, par value of $0.000025 per share— 200,000,000 shares authorized as of July 31, 2017 and April 30, 2018; no shares issued and outstanding as of July 31, 2017 and April 30, 2018
|
—
|
|
|
—
|
|
||
Common stock, par value of $0.000025 per share—1,200,000,000 (1,000,000,000 Class A, 200,000,000 Class B) shares authorized as of July 31, 2017 and April 30, 2018; 154,636,520 (93,570,171 Class A and 61,066,349 Class B) and 170,282,321 (132,152,095 Class A and 38,130,226 Class B) shares issued and outstanding as of July 31, 2017 and April 30, 2018
|
4
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|
|
4
|
|
||
Additional paid-in capital
|
948,134
|
|
|
1,296,575
|
|
||
Accumulated other comprehensive loss
|
(106
|
)
|
|
(1,237
|
)
|
||
Accumulated deficit
|
(730,969
|
)
|
|
(940,761
|
)
|
||
Total stockholders’ equity
|
217,063
|
|
|
354,581
|
|
||
Total liabilities and stockholders’ equity
|
$
|
738,212
|
|
|
$
|
1,475,398
|
|
|
Three Months Ended
April 30, |
|
Nine Months Ended
April 30, |
||||||||||||
|
2017
*As Adjusted |
|
2018
|
|
2017
*As Adjusted
|
|
2018
|
||||||||
|
(in thousands, except share and per share data)
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
160,076
|
|
|
$
|
221,117
|
|
|
$
|
471,825
|
|
|
$
|
663,339
|
|
Support, entitlements and other services
|
45,594
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|
|
68,296
|
|
|
121,620
|
|
|
188,370
|
|
||||
Total revenue
|
205,670
|
|
|
289,413
|
|
|
593,445
|
|
|
851,709
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
62,593
|
|
|
66,680
|
|
|
173,206
|
|
|
235,059
|
|
||||
Support, entitlements and other services
|
20,613
|
|
|
28,935
|
|
|
56,608
|
|
|
77,706
|
|
||||
Total cost of revenue
|
83,206
|
|
|
95,615
|
|
|
229,814
|
|
|
312,765
|
|
||||
Gross profit
|
122,464
|
|
|
193,798
|
|
|
363,631
|
|
|
538,944
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Sales and marketing
|
126,746
|
|
|
169,860
|
|
|
366,745
|
|
|
466,466
|
|
||||
Research and development
|
74,607
|
|
|
81,291
|
|
|
220,802
|
|
|
216,727
|
|
||||
General and administrative
|
15,610
|
|
|
24,929
|
|
|
60,463
|
|
|
56,929
|
|
||||
Total operating expenses
|
216,963
|
|
|
276,080
|
|
|
648,010
|
|
|
740,122
|
|
||||
Loss from operations
|
(94,499
|
)
|
|
(82,282
|
)
|
|
(284,379
|
)
|
|
(201,178
|
)
|
||||
Other income (expense), net
|
303
|
|
|
(4,235
|
)
|
|
(25,830
|
)
|
|
(5,285
|
)
|
||||
Loss before provision for income taxes
|
(94,196
|
)
|
|
(86,517
|
)
|
|
(310,209
|
)
|
|
(206,463
|
)
|
||||
Provision for (benefit from) income taxes
|
2,639
|
|
|
(843
|
)
|
|
3,297
|
|
|
3,329
|
|
||||
Net loss
|
$
|
(96,835
|
)
|
|
$
|
(85,674
|
)
|
|
$
|
(313,506
|
)
|
|
$
|
(209,792
|
)
|
Net loss per share attributable to Class A and Class B common stockholders—basic and diluted
|
$
|
(0.67
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(2.62
|
)
|
|
$
|
(1.30
|
)
|
Weighted average shares used in computing net loss per share attributable to Class A and Class B common stockholders—basic and diluted
|
144,054,432
|
|
|
166,845,544
|
|
|
119,851,586
|
|
|
161,709,365
|
|
|
Three Months Ended
April 30, |
|
Nine Months Ended
April 30, |
||||||||||||
|
2017
*As Adjusted
|
|
2018
|
|
2017
*As Adjusted
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Net loss
|
$
|
(96,835
|
)
|
|
$
|
(85,674
|
)
|
|
$
|
(313,506
|
)
|
|
$
|
(209,792
|
)
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
||||||||
Change in unrealized gain (loss) on available-for-sale securities, net of tax
|
74
|
|
|
(517
|
)
|
|
(84
|
)
|
|
(1,131
|
)
|
||||
Comprehensive loss
|
$
|
(96,761
|
)
|
|
$
|
(86,191
|
)
|
|
$
|
(313,590
|
)
|
|
$
|
(210,923
|
)
|
|
Nine Months Ended April 30,
|
||||||
|
2017
*As Adjusted
|
|
2018
|
||||
|
(in thousands)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(313,506
|
)
|
|
$
|
(209,792
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
27,934
|
|
|
36,013
|
|
||
Stock-based compensation
|
193,686
|
|
|
122,472
|
|
||
Loss on debt extinguishment
|
3,320
|
|
|
—
|
|
||
Change in fair value of convertible preferred stock warrant liability
|
21,133
|
|
|
—
|
|
||
Change in fair value of contingent consideration
|
176
|
|
|
(3,371
|
)
|
||
Amortization of debt discount and issuance cost
|
—
|
|
|
7,654
|
|
||
Other
|
601
|
|
|
(186
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(58,841
|
)
|
|
(15,307
|
)
|
||
Deferred commissions
|
(14,688
|
)
|
|
(29,201
|
)
|
||
Prepaid expenses and other assets
|
(29,628
|
)
|
|
(5,327
|
)
|
||
Accounts payable
|
32,468
|
|
|
(6,407
|
)
|
||
Accrued compensation and benefits
|
32,000
|
|
|
3,700
|
|
||
Accrued expenses and other liabilities
|
5,399
|
|
|
(1,147
|
)
|
||
Deferred revenue
|
107,849
|
|
|
170,709
|
|
||
Net cash provided by operating activities
|
7,903
|
|
|
69,810
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(37,797
|
)
|
|
(46,089
|
)
|
||
Purchases of investments
|
(156,420
|
)
|
|
(485,777
|
)
|
||
Maturities of investments
|
59,542
|
|
|
147,868
|
|
||
Sales of investments
|
32,640
|
|
|
—
|
|
||
Payments for business combinations, net of cash acquired
|
(184
|
)
|
|
(22,792
|
)
|
||
Net cash used in investing activities
|
(102,219
|
)
|
|
(406,790
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from issuance of convertible senior notes, net
|
—
|
|
|
563,937
|
|
||
Proceeds from issuance of warrants
|
—
|
|
|
87,975
|
|
||
Payments for convertible note hedges
|
—
|
|
|
(143,175
|
)
|
||
Proceeds from sales of shares through employee equity incentive plans, net of repurchases
|
26,662
|
|
|
68,186
|
|
||
Proceeds from initial public offering, net of underwriting discounts and commissions
|
254,455
|
|
|
—
|
|
||
Payments of offering costs
|
(1,609
|
)
|
|
(85
|
)
|
||
Repayment of senior notes
|
(75,000
|
)
|
|
—
|
|
||
Debt extinguishment costs
|
(1,580
|
)
|
|
—
|
|
||
Payment of debt in conjunction with business combinations
|
(7,124
|
)
|
|
(1,428
|
)
|
||
Other
|
77
|
|
|
—
|
|
||
Net cash provided by financing activities
|
195,881
|
|
|
575,410
|
|
||
Net increase in cash and cash equivalents
|
101,565
|
|
|
238,430
|
|
||
Cash and cash equivalents—beginning of period
|
99,209
|
|
|
138,359
|
|
||
Cash and cash equivalents—end of period
|
$
|
200,774
|
|
|
$
|
376,789
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Cash paid for income taxes
|
$
|
3,559
|
|
|
$
|
8,038
|
|
Cash paid for interest
|
$
|
1,271
|
|
|
$
|
—
|
|
Supplemental disclosures of non-cash investing and financing information:
|
|
|
|
||||
Issuance of common stock for business combinations
|
$
|
27,063
|
|
|
$
|
63,780
|
|
Purchases of property and equipment included in accounts payable and accrued liabilities
|
$
|
4,496
|
|
|
$
|
9,285
|
|
Vesting of early exercised stock options
|
$
|
1,293
|
|
|
$
|
570
|
|
Convertible senior notes offering costs included in accounts payable and accrued liabilities
|
$
|
—
|
|
|
$
|
425
|
|
Conversion of convertible preferred stock to common stock, net of issuance costs
|
$
|
310,379
|
|
|
$
|
—
|
|
Reclassification of convertible preferred stock warrant liability to additional paid-in capital
|
$
|
30,812
|
|
|
$
|
—
|
|
Offering costs included in accounts payable
|
$
|
51
|
|
|
$
|
—
|
|
|
|
Revenue
|
|
Accounts Receivable
as of
|
||||||||||||||
|
|
Three Months Ended
April 30, |
|
Nine Months Ended
April 30, |
|
|||||||||||||
Partners
|
|
2017
As Adjusted (2)
|
|
2018
|
|
2017
As Adjusted (2)
|
|
2018
|
|
July 31, 2017
|
|
April 30, 2018
|
||||||
Partner A
|
|
(1)
|
|
|
(1)
|
|
|
10
|
%
|
|
10
|
%
|
|
(1)
|
|
|
(1)
|
|
Partner B
|
|
18
|
%
|
|
15
|
%
|
|
18
|
%
|
|
20
|
%
|
|
12
|
%
|
|
(1)
|
|
Partner C
|
|
18
|
%
|
|
18
|
%
|
|
16
|
%
|
|
17
|
%
|
|
14
|
%
|
|
18
|
%
|
Partner D
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
10
|
%
|
|
20
|
%
|
|
15
|
%
|
Partner E
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
Partner F
|
|
17
|
%
|
|
13
|
%
|
|
14
|
%
|
|
13
|
%
|
|
18
|
%
|
|
15
|
%
|
|
(1)
|
Less than 10%
|
(2)
|
Adjusted to include the impact of ASC 606. Refer to Note 3 for more details on the impact of the adoption of this standard.
|
|
Estimated Fair Value
|
||
|
(in thousands)
|
||
Goodwill
|
$
|
71,652
|
|
Amortizable intangible assets
|
25,920
|
|
|
Tangible assets acquired
|
842
|
|
|
Liabilities assumed
|
(11,041
|
)
|
|
Total consideration
|
$
|
87,373
|
|
|
As of July 31, 2017
|
||||||||||
|
As Previously Reported
|
|
Impact of Adoption
|
|
As Adjusted
|
||||||
|
(in thousands)
|
||||||||||
Assets
|
|
|
|
|
|
||||||
Deferred commissions—current
|
$
|
27,679
|
|
|
$
|
(3,836
|
)
|
(1)
|
$
|
23,843
|
|
Deferred commissions—non-current
|
33,709
|
|
|
15,975
|
|
(1)
|
49,684
|
|
|||
Total deferred commissions
|
$
|
61,388
|
|
|
$
|
12,139
|
|
|
$
|
73,527
|
|
Liabilities
|
|
|
|
|
|
||||||
Deferred revenue—current
|
$
|
233,498
|
|
|
$
|
(63,375
|
)
|
(2)
|
$
|
170,123
|
|
Deferred revenue—non-current
|
292,573
|
|
|
(93,640
|
)
|
(2)
|
198,933
|
|
|||
Total deferred revenue
|
$
|
526,071
|
|
|
$
|
(157,015
|
)
|
|
$
|
369,056
|
|
|
|
|
|
|
|
||||||
Accrued expenses and other current liabilities
|
$
|
9,414
|
|
|
$
|
293
|
|
(3)
|
$
|
9,707
|
|
|
|
|
|
|
|
||||||
Stockholders' Equity
|
$
|
48,202
|
|
|
$
|
168,861
|
|
|
$
|
217,063
|
|
|
(1)
|
Impact of cumulative change in commissions expense
|
(2)
|
Impact of cumulative change in revenue
|
(3)
|
Impact of cumulative change in provision for income taxes
|
|
Three Months Ended April 30, 2017
|
||||||||||
|
As Previously Reported
|
|
Impact of Adoption
|
|
As Adjusted
|
||||||
|
(in thousands, except per share data)
|
||||||||||
Revenue
|
|
|
|
|
|
||||||
Product
|
$
|
143,142
|
|
|
$
|
16,934
|
|
|
$
|
160,076
|
|
Support, entitlements and other services
|
48,621
|
|
|
(3,027
|
)
|
|
45,594
|
|
|||
Total revenue
|
$
|
191,763
|
|
|
$
|
13,907
|
|
|
$
|
205,670
|
|
Gross profit
|
$
|
108,557
|
|
|
$
|
13,907
|
|
|
$
|
122,464
|
|
Operating expenses
|
|
|
|
|
|
||||||
Sales and marketing expenses
|
$
|
128,007
|
|
|
$
|
(1,261
|
)
|
|
$
|
126,746
|
|
Loss from operations
|
$
|
(109,667
|
)
|
|
$
|
15,168
|
|
|
$
|
(94,499
|
)
|
Net loss
|
$
|
(111,977
|
)
|
|
$
|
15,142
|
|
|
$
|
(96,835
|
)
|
Basic and diluted net loss per share
|
$
|
(0.78
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.67
|
)
|
|
Nine Months Ended April 30, 2017
|
||||||||||
|
As Previously Reported
|
|
Impact of Adoption
|
|
As Adjusted
|
||||||
|
(in thousands, except per share data)
|
||||||||||
Revenue
|
|
|
|
|
|
||||||
Product
|
$
|
411,307
|
|
|
$
|
60,518
|
|
|
$
|
471,825
|
|
Support, entitlements and other services
|
129,460
|
|
|
(7,840
|
)
|
|
121,620
|
|
|||
Total revenue
|
$
|
540,767
|
|
|
$
|
52,678
|
|
|
$
|
593,445
|
|
Gross profit
|
$
|
310,953
|
|
|
$
|
52,678
|
|
|
$
|
363,631
|
|
Operating expenses
|
|
|
|
|
|
||||||
Sales and marketing expenses
|
$
|
368,026
|
|
|
$
|
(1,281
|
)
|
|
$
|
366,745
|
|
Loss from operations
|
$
|
(338,338
|
)
|
|
$
|
53,959
|
|
|
$
|
(284,379
|
)
|
Net loss
|
$
|
(367,358
|
)
|
|
$
|
53,852
|
|
|
$
|
(313,506
|
)
|
Basic and diluted net loss per share
|
$
|
(3.07
|
)
|
|
$
|
0.45
|
|
|
$
|
(2.62
|
)
|
|
Three Months Ended April 30, 2017
|
||||||||||
|
As Previously Reported
|
|
Impact of Adoption
|
|
As Adjusted
|
||||||
|
(in thousands)
|
||||||||||
U.S.
|
$
|
112,218
|
|
|
$
|
2,105
|
|
|
$
|
114,323
|
|
Europe, the Middle East and Africa
|
38,023
|
|
|
1,248
|
|
|
39,271
|
|
|||
Asia-Pacific
|
35,508
|
|
|
9,935
|
|
|
45,443
|
|
|||
Other Americas
|
6,014
|
|
|
619
|
|
|
6,633
|
|
|||
Total revenue
|
$
|
191,763
|
|
|
$
|
13,907
|
|
|
$
|
205,670
|
|
|
Nine Months Ended April 30, 2017
|
||||||||||
|
As Previously Reported
|
|
Impact of Adoption
|
|
As Adjusted
|
||||||
|
(in thousands)
|
||||||||||
U.S.
|
$
|
317,262
|
|
|
$
|
8,271
|
|
|
$
|
325,533
|
|
Europe, the Middle East and Africa
|
95,543
|
|
|
3,746
|
|
|
99,289
|
|
|||
Asia-Pacific
|
101,798
|
|
|
39,435
|
|
|
141,233
|
|
|||
Other Americas
|
26,164
|
|
|
1,226
|
|
|
27,390
|
|
|||
Total revenue
|
$
|
540,767
|
|
|
$
|
52,678
|
|
|
$
|
593,445
|
|
|
Nine Months Ended April 30, 2017
|
||||||||||
|
As Previously Reported
|
|
Impact of Adoption
|
|
As Adjusted
|
||||||
|
(in thousands)
|
||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net loss
|
$
|
(367,358
|
)
|
|
$
|
53,852
|
|
|
$
|
(313,506
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Deferred commissions
|
$
|
(13,406
|
)
|
|
$
|
(1,282
|
)
|
|
$
|
(14,688
|
)
|
Accrued expenses and other liabilities
|
$
|
5,291
|
|
|
$
|
108
|
|
|
$
|
5,399
|
|
Deferred revenue
|
$
|
160,527
|
|
|
$
|
(52,678
|
)
|
|
$
|
107,849
|
|
•
|
Identification of the contract, or contracts, with a customer — A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
|
•
|
Identification of the performance obligations in the contract — Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or services either on their own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.
|
•
|
Determination of the transaction price — The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer.
|
•
|
Allocation of the transaction price to the performance obligations in the contract — If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price ("SSP"). We determine SSP based on the price at which the performance obligation is sold separately. If the SSP is not observable through past transactions, we estimate the SSP, taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
|
•
|
Recognition of revenue when, or as, we satisfy a performance obligation — We satisfy performance obligations either over time or at a point in time, as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied with the transfer of a promised good or service to a customer.
|
|
Three Months Ended
April 30, |
|
Nine Months Ended
April 30, |
||||||||||||
|
2017
|
|
2018
|
|
2017
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Software revenue
|
$
|
100,810
|
|
|
$
|
158,500
|
|
|
$
|
308,400
|
|
|
$
|
441,885
|
|
Hardware revenue
|
59,266
|
|
|
62,617
|
|
|
163,425
|
|
|
221,454
|
|
||||
Support, entitlements and other services revenue
|
45,594
|
|
|
68,296
|
|
|
121,620
|
|
|
188,370
|
|
||||
Total revenue
|
$
|
205,670
|
|
|
$
|
289,413
|
|
|
$
|
593,445
|
|
|
$
|
851,709
|
|
|
Three Months Ended
April 30, 2018 |
||||||
|
Deferred Revenue
|
|
Deferred Commissions
|
||||
|
(in thousands)
|
||||||
Balance as of January 31, 2018
|
$
|
478,000
|
|
|
$
|
99,628
|
|
Additions
|
130,061
|
|
|
30,755
|
|
||
Revenue/commissions recognized
|
(68,296
|
)
|
|
(27,655
|
)
|
||
Assumed in a business combination
|
124
|
|
|
—
|
|
||
Balance as of April 30, 2018
|
$
|
539,889
|
|
|
$
|
102,728
|
|
|
Nine Months Ended
April 30, 2018 |
||||||
|
Deferred Revenue
|
|
Deferred Commissions
|
||||
|
(in thousands)
|
||||||
Balance as of July 31, 2017(1)
|
$
|
369,056
|
|
|
$
|
73,527
|
|
Additions
|
359,079
|
|
|
110,344
|
|
||
Revenue/commissions recognized
|
(188,370
|
)
|
|
(81,143
|
)
|
||
Assumed in a business combination
|
124
|
|
|
—
|
|
||
Balance as of April 30, 2018
|
$
|
539,889
|
|
|
$
|
102,728
|
|
|
(1)
|
See details above for the summary of adjustments to deferred commissions and deferred revenue as a result of the adoption of ASC 606.
|
|
As of July 31, 2017
|
||||||||||||||
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
34,784
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
34,784
|
|
Commercial paper
|
—
|
|
|
23,041
|
|
|
—
|
|
|
23,041
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|||||||
Corporate bonds
|
—
|
|
|
160,634
|
|
|
—
|
|
|
160,634
|
|
||||
Commercial paper
|
—
|
|
|
36,084
|
|
|
—
|
|
|
36,084
|
|
||||
U.S. government securities
|
—
|
|
|
13,976
|
|
|
—
|
|
|
13,976
|
|
||||
Total measured at fair value
|
$
|
34,784
|
|
|
$
|
233,735
|
|
|
$
|
—
|
|
|
$
|
268,519
|
|
Cash
|
|
|
|
|
|
|
80,534
|
|
|||||||
Total cash, cash equivalents and short-term investments
|
|
|
|
|
|
|
$
|
349,053
|
|
||||||
Financial Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,295
|
|
|
$
|
4,295
|
|
|
As of April 30, 2018
|
||||||||||||||
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
95,258
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
95,258
|
|
Commercial paper
|
—
|
|
|
108,253
|
|
|
—
|
|
|
108,253
|
|
||||
Corporate bonds
|
—
|
|
|
4,000
|
|
|
—
|
|
|
4,000
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|||||||
Corporate bonds
|
—
|
|
|
395,107
|
|
|
—
|
|
|
395,107
|
|
||||
Commercial paper
|
—
|
|
|
118,939
|
|
|
—
|
|
|
118,939
|
|
||||
U.S. government securities
|
—
|
|
|
32,629
|
|
|
—
|
|
|
32,629
|
|
||||
Total measured at fair value
|
$
|
95,258
|
|
|
$
|
658,928
|
|
|
$
|
—
|
|
|
$
|
754,186
|
|
Cash
|
|
|
|
|
|
|
169,278
|
|
|||||||
Total cash, cash equivalents and short-term investments
|
|
|
|
|
|
|
$
|
923,464
|
|
||||||
Financial Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
924
|
|
|
$
|
924
|
|
|
As of July 31, 2017
|
|
As of April 30, 2018
|
||||||||||||
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
Convertible senior notes, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
422,567
|
|
|
$
|
714,535
|
|
|
Nine Months Ended
April 30, |
||||||
|
2017
|
|
2018
|
||||
|
(in thousands)
|
||||||
Contingent consideration—beginning balance
|
$
|
—
|
|
|
$
|
4,295
|
|
Assumed in a business combination
|
2,371
|
|
|
—
|
|
||
Change in fair value(1)
|
176
|
|
|
(3,371
|
)
|
||
Contingent consideration—ending balance
|
$
|
2,547
|
|
|
$
|
924
|
|
|
(1)
|
Recorded in the condensed consolidated statements of operations within general and administrative expenses.
|
|
As of
April 30, 2018
|
||
|
(in thousands)
|
||
Due within one year
|
$
|
405,385
|
|
Due in one year through three years
|
141,290
|
|
|
Total
|
$
|
546,675
|
|
|
Estimated
Useful Life |
|
As of
|
||||||
|
|
July 31, 2017
|
|
April 30, 2018
|
|||||
|
(in months)
|
|
(in thousands)
|
||||||
Computer, production, engineering, and other equipment
|
36
|
|
$
|
85,280
|
|
|
$
|
117,403
|
|
Demonstration units
|
12
|
|
46,387
|
|
|
52,508
|
|
||
Leasehold improvements(1)
|
N/A
|
|
10,562
|
|
|
17,549
|
|
||
Furniture and fixtures
|
60
|
|
4,744
|
|
|
6,535
|
|
||
Total property and equipment, gross
|
|
|
146,973
|
|
|
193,995
|
|
||
Less: Accumulated depreciation and amortization
|
|
|
(88,901
|
)
|
|
(117,673
|
)
|
||
Total property and equipment, net
|
|
|
$
|
58,072
|
|
|
$
|
76,322
|
|
|
(1)
|
Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the remaining lease term.
|
|
|
Carrying Amount
|
||
|
|
(in thousands)
|
||
Balance as of July 31, 2017
|
|
$
|
16,672
|
|
Acquired in Netsil acquisition
|
|
53,085
|
|
|
Acquired in Minjar acquisition
|
|
18,567
|
|
|
Balance as of April 30, 2018
|
|
$
|
88,324
|
|
|
As of
|
||||||
|
July 31, 2017
|
|
April 30, 2018
|
||||
|
(in thousands)
|
||||||
Indefinite-lived intangible asset:
|
|
|
|
||||
In-process R&D(1)
|
$
|
16,100
|
|
|
$
|
—
|
|
Finite-lived intangible assets:
|
|
|
|
||||
Developed technology(1)
|
7,300
|
|
|
47,500
|
|
||
Customer relationships
|
4,830
|
|
|
6,650
|
|
||
Total finite-lived intangible assets, gross
|
12,130
|
|
|
54,150
|
|
||
Total intangible assets, gross
|
28,230
|
|
|
54,150
|
|
||
Less:
|
|
|
|
||||
Accumulated amortization of developed technology
|
(1,314
|
)
|
|
(4,821
|
)
|
||
Accumulated amortization of customer relationships
|
(915
|
)
|
|
(1,539
|
)
|
||
Total accumulated amortization
|
(2,229
|
)
|
|
(6,360
|
)
|
||
Intangible assets, net
|
$
|
26,001
|
|
|
$
|
47,790
|
|
|
(1)
|
We started amortizing in-process R&D during the first quarter of fiscal 2018, as the related technology was completed and released in the first quarter of fiscal 2018. We are amortizing developed technology using the straight-line method over a useful life of 5 years. Based on the foregoing, the balance of in-process R&D is now presented as part of developed technology as of April 30, 2018.
|
Year Ending July 31:
|
Amount
|
||
|
(in thousands)
|
||
2018 (remaining three months)
|
$
|
2,237
|
|
2019
|
8,989
|
|
|
2020
|
8,949
|
|
|
2021
|
8,949
|
|
|
2022
|
7,751
|
|
|
Thereafter
|
10,915
|
|
|
Total
|
$
|
47,790
|
|
|
As of
|
||||||
|
July 31, 2017
|
|
April 30, 2018
|
||||
|
(in thousands)
|
||||||
Accrued commissions
|
$
|
20,388
|
|
|
$
|
16,767
|
|
Accrued vacation
|
6,286
|
|
|
10,100
|
|
||
Contributions to ESPP withheld
|
14,371
|
|
|
7,581
|
|
||
Accrued bonus
|
7,342
|
|
|
9,187
|
|
||
Payroll taxes payable
|
3,434
|
|
|
8,627
|
|
||
Other
|
5,700
|
|
|
8,959
|
|
||
Total accrued compensation and benefits
|
$
|
57,521
|
|
|
$
|
61,221
|
|
|
As of
|
||||||
|
July 31, 2017
|
|
April 30, 2018
|
||||
|
(in thousands)
|
||||||
Accrued professional services
|
$
|
4,167
|
|
|
$
|
4,614
|
|
Income taxes payable(1)
|
3,873
|
|
|
2,903
|
|
||
Other
|
1,667
|
|
|
4,128
|
|
||
Total accrued expenses and other current liabilities
|
$
|
9,707
|
|
|
$
|
11,645
|
|
|
(1)
|
Balance as of July 31, 2017 was adjusted to reflect the impact of the adoption of ASC 606 on income taxes. See Note 3 for a summary of adjustments.
|
|
Amount
|
||
|
(in thousands)
|
||
Principal amount
|
$
|
575,000
|
|
Less: initial purchasers' discount
|
(10,781
|
)
|
|
Less: cost of the bond hedges
|
(143,175
|
)
|
|
Add: proceeds from the sale of warrants
|
87,975
|
|
|
Less: other issuance costs
|
(707
|
)
|
|
Net proceeds
|
$
|
508,312
|
|
1)
|
during any fiscal quarter commencing after the fiscal quarter ending on April 30, 2018 (and only during such fiscal quarter), if the last reported sale price of our Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter, is greater than or equal to 130% of the conversion price on each applicable trading day;
|
2)
|
during the five business day period after any five consecutive trading day period (the "measurement period") in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the conversion rate for the Notes on each such trading day; or
|
3)
|
upon the occurrence of certain specified corporate events.
|
|
As of
April 30, 2018
|
||
|
(in thousands)
|
||
Principal amounts:
|
|
||
Principal
|
$
|
575,000
|
|
Unamortized debt discount(1)
|
(144,378
|
)
|
|
Unamortized debt issuance costs(1)
|
(8,055
|
)
|
|
Net carrying amount
|
$
|
422,567
|
|
Carrying amount of the equity component(2)
|
$
|
148,598
|
|
|
(1)
|
Included in the condensed consolidated balance sheets within "Convertible senior notes, net" and amortized over the remaining life of the Notes using the effective interest rate method. The effective interest rate is 6.62%.
|
(2)
|
Included in the condensed consolidated balance sheets within additional paid-in capital, net of $3.0 million in equity issuance costs.
|
|
Three Months Ended
April 30, 2018 |
|
Nine Months Ended
April 30, 2018 |
||||
|
(in thousands)
|
||||||
Interest expense related to amortization of debt discount
|
$
|
6,550
|
|
|
$
|
7,250
|
|
Interest expense related to amortization of debt issuance costs
|
366
|
|
|
404
|
|
||
Total interest expense
|
$
|
6,916
|
|
|
$
|
7,654
|
|
Fiscal Year Ending July 31:
|
Amount
|
||
|
(in thousands)
|
||
2018 (remaining three months)
|
$
|
5,784
|
|
2019
|
22,259
|
|
|
2020
|
19,007
|
|
|
2021
|
17,571
|
|
|
2022
|
15,856
|
|
|
Thereafter
|
25,111
|
|
|
Total
|
$
|
105,588
|
|
|
Number of
Shares |
|
Grant Date Fair Value per Share
|
|||
Outstanding at July 31, 2017
|
17,376,090
|
|
|
$
|
18.85
|
|
Granted
|
11,374,865
|
|
|
$
|
34.35
|
|
Vested
|
(4,288,257
|
)
|
|
$
|
19.13
|
|
Canceled/forfeited
|
(1,748,803
|
)
|
|
$
|
22.54
|
|
Outstanding at April 30, 2018
|
22,713,895
|
|
|
$
|
26.27
|
|
|
Nine Months Ended April 30,
|
||||
|
2017
|
|
2018
|
||
Expected term (in years)
|
0.75
|
|
|
0.75
|
|
Risk-free interest rate
|
0.6
|
%
|
|
1.4
|
%
|
Volatility
|
51.0
|
%
|
|
49.8
|
%
|
Dividend yield
|
—
|
%
|
|
—
|
%
|
|
Three Months Ended
April 30, |
|
Nine Months Ended
April 30, |
||||||||||||
|
2017
|
|
2018
|
|
2017
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
610
|
|
|
$
|
634
|
|
|
$
|
2,424
|
|
|
$
|
1,888
|
|
Support, entitlements and other services
|
2,471
|
|
|
1,951
|
|
|
8,210
|
|
|
6,156
|
|
||||
Sales and marketing
|
15,726
|
|
|
18,051
|
|
|
65,145
|
|
|
47,759
|
|
||||
Research and development
|
27,041
|
|
|
16,474
|
|
|
89,826
|
|
|
49,039
|
|
||||
General and administrative
|
4,503
|
|
|
7,836
|
|
|
28,081
|
|
|
17,630
|
|
||||
Total stock-based compensation expense
|
$
|
50,351
|
|
|
$
|
44,946
|
|
|
$
|
193,686
|
|
|
$
|
122,472
|
|
|
Three Months Ended
April 30, |
|
Nine Months Ended
April 30, |
||||||||||||
|
2017
As Adjusted (1)
|
|
2018
|
|
2017
As Adjusted (1)
|
|
2018
|
||||||||
|
(in thousands, except share and per share data)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(96,835
|
)
|
|
$
|
(85,674
|
)
|
|
$
|
(313,506
|
)
|
|
$
|
(209,792
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average shares—basic and diluted
|
144,054,432
|
|
|
166,845,544
|
|
|
119,851,586
|
|
|
161,709,365
|
|
||||
Net loss per share attributable to common stockholders—basic and diluted
|
$
|
(0.67
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(2.62
|
)
|
|
$
|
(1.30
|
)
|
|
(1)
|
Adjusted to include the impact of ASC 606. Refer to Note 3 for more details on the impact of the adoption of this standard.
|
|
Three and Nine Months Ended
April 30, |
||||
|
2017
|
|
2018
|
||
Outstanding stock options and RSUs
|
41,204,043
|
|
|
35,206,318
|
|
Employee stock purchase plan
|
1,474,965
|
|
|
1,341,470
|
|
Contingently issuable shares pursuant to a business combination
|
—
|
|
|
276,625
|
|
Common stock subject to repurchase
|
383,736
|
|
|
73,360
|
|
Common stock warrants
|
34,180
|
|
|
34,180
|
|
Total
|
43,096,924
|
|
|
36,931,953
|
|
|
Three Months Ended
April 30, |
|
Nine Months Ended
April 30, |
||||||||||||
|
2017
As Adjusted(1)
|
|
2018
|
|
2017
As Adjusted(1)
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
U.S.
|
$
|
114,323
|
|
|
$
|
135,276
|
|
|
$
|
325,533
|
|
|
$
|
488,416
|
|
Europe, the Middle East and Africa
|
39,271
|
|
|
74,916
|
|
|
99,289
|
|
|
164,089
|
|
||||
Asia-Pacific
|
45,443
|
|
|
68,622
|
|
|
141,233
|
|
|
172,774
|
|
||||
Other Americas
|
6,633
|
|
|
10,599
|
|
|
27,390
|
|
|
26,430
|
|
||||
Total revenue
|
$
|
205,670
|
|
|
$
|
289,413
|
|
|
$
|
593,445
|
|
|
$
|
851,709
|
|
|
(1)
|
Adjusted to include the impact of ASC 606. Refer to Note 3 for more details on the impact of the adoption of this standard.
|
|
As of and for the
|
||||||||||||||
|
Three Months Ended April 30,
|
|
Nine Months Ended April 30,
|
||||||||||||
|
2017
|
|
2018
|
|
2017
|
|
2018
|
||||||||
|
(in thousands, except percentages)
|
||||||||||||||
Total revenue
|
$
|
205,670
|
|
|
$
|
289,413
|
|
|
$
|
593,445
|
|
|
$
|
851,709
|
|
Billings
|
$
|
234,147
|
|
|
$
|
351,178
|
|
|
$
|
701,294
|
|
|
$
|
1,022,418
|
|
Gross profit
|
$
|
122,464
|
|
|
$
|
193,798
|
|
|
$
|
363,631
|
|
|
$
|
538,944
|
|
Adjusted gross profit
|
$
|
125,903
|
|
|
$
|
197,830
|
|
|
$
|
375,221
|
|
|
$
|
550,494
|
|
Gross margin
|
59.5
|
%
|
|
67.0
|
%
|
|
61.3
|
%
|
|
63.3
|
%
|
||||
Adjusted gross margin
|
61.2
|
%
|
|
68.4
|
%
|
|
63.2
|
%
|
|
64.6
|
%
|
||||
Total deferred revenue
|
$
|
332,339
|
|
|
$
|
539,889
|
|
|
$
|
332,339
|
|
|
$
|
539,889
|
|
Net cash (used in) provided by operating activities
|
$
|
(16,009
|
)
|
|
$
|
13,308
|
|
|
$
|
7,903
|
|
|
$
|
69,810
|
|
Free cash flow
|
$
|
(29,190
|
)
|
|
$
|
(788
|
)
|
|
$
|
(29,894
|
)
|
|
$
|
23,721
|
|
Non-GAAP operating expenses
|
$
|
169,739
|
|
|
$
|
232,398
|
|
|
$
|
463,445
|
|
|
$
|
627,397
|
|
Total end customers
|
6,172
|
|
|
9,689
|
|
|
6,172
|
|
|
9,689
|
|
|
Three Months Ended April 30,
|
|
Nine Months Ended April 30,
|
||||||||||||
|
2017
|
|
2018
|
|
2017
|
|
2018
|
||||||||
|
(in thousands, except percentages)
|
||||||||||||||
Total revenue
|
$
|
205,670
|
|
|
$
|
289,413
|
|
|
$
|
593,445
|
|
|
$
|
851,709
|
|
Change in deferred revenue, net of acquisitions
|
28,477
|
|
|
61,765
|
|
|
107,849
|
|
|
170,709
|
|
||||
Billings (non-GAAP)
|
$
|
234,147
|
|
|
$
|
351,178
|
|
|
$
|
701,294
|
|
|
$
|
1,022,418
|
|
|
|
|
|
|
|
|
|
||||||||
Gross profit
|
$
|
122,464
|
|
|
$
|
193,798
|
|
|
$
|
363,631
|
|
|
$
|
538,944
|
|
Stock-based compensation
|
3,081
|
|
|
2,585
|
|
|
10,634
|
|
|
8,044
|
|
||||
Amortization of intangible assets
|
358
|
|
|
1,447
|
|
|
956
|
|
|
3,506
|
|
||||
Adjusted gross profit (non-GAAP)
|
$
|
125,903
|
|
|
$
|
197,830
|
|
|
$
|
375,221
|
|
|
$
|
550,494
|
|
|
|
|
|
|
|
|
|
||||||||
Gross margin
|
59.5
|
%
|
|
67.0
|
%
|
|
61.3
|
%
|
|
63.3
|
%
|
||||
Stock-based compensation
|
1.5
|
%
|
|
0.9
|
%
|
|
1.8
|
%
|
|
0.9
|
%
|
||||
Amortization of intangible assets
|
0.2
|
%
|
|
0.5
|
%
|
|
0.1
|
%
|
|
0.4
|
%
|
||||
Adjusted gross margin (non-GAAP)
|
61.2
|
%
|
|
68.4
|
%
|
|
63.2
|
%
|
|
64.6
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Net cash (used in) provided by operating activities
|
$
|
(16,009
|
)
|
|
$
|
13,308
|
|
|
$
|
7,903
|
|
|
$
|
69,810
|
|
Purchases of property and equipment
|
(13,181
|
)
|
|
(14,096
|
)
|
|
(37,797
|
)
|
|
(46,089
|
)
|
||||
Free cash flow (non-GAAP)
|
$
|
(29,190
|
)
|
|
$
|
(788
|
)
|
|
$
|
(29,894
|
)
|
|
$
|
23,721
|
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses
|
$
|
216,963
|
|
|
$
|
276,080
|
|
|
$
|
648,010
|
|
|
$
|
740,122
|
|
Stock-based compensation
|
(47,270
|
)
|
|
(42,361
|
)
|
|
(183,052
|
)
|
|
(114,428
|
)
|
||||
Change in fair value of contingent consideration
|
296
|
|
|
(584
|
)
|
|
(176
|
)
|
|
3,371
|
|
||||
Amortization of intangible assets
|
(250
|
)
|
|
(222
|
)
|
|
(665
|
)
|
|
(625
|
)
|
||||
Business combination-related costs
|
—
|
|
|
(515
|
)
|
|
(672
|
)
|
|
(1,043
|
)
|
||||
Operating expenses (non-GAAP)
|
$
|
169,739
|
|
|
$
|
232,398
|
|
|
$
|
463,445
|
|
|
$
|
627,397
|
|
|
Three Months Ended
April 30, |
|
Nine Months Ended
April 30, |
||||||||||||
|
2017
|
|
2018
|
|
2017
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
160,076
|
|
|
$
|
221,117
|
|
|
$
|
471,825
|
|
|
$
|
663,339
|
|
Support, entitlements and other services
|
45,594
|
|
|
68,296
|
|
|
121,620
|
|
|
188,370
|
|
||||
Total revenue
|
205,670
|
|
|
289,413
|
|
|
593,445
|
|
|
851,709
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Product(1)(2)
|
62,593
|
|
|
66,680
|
|
|
173,206
|
|
|
235,059
|
|
||||
Support, entitlements and other services(1)
|
20,613
|
|
|
28,935
|
|
|
56,608
|
|
|
77,706
|
|
||||
Total cost of revenue
|
83,206
|
|
|
95,615
|
|
|
229,814
|
|
|
312,765
|
|
||||
Gross profit
|
122,464
|
|
|
193,798
|
|
|
363,631
|
|
|
538,944
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Sales and marketing(1)(2)
|
126,746
|
|
|
169,860
|
|
|
366,745
|
|
|
466,466
|
|
||||
Research and development(1)
|
74,607
|
|
|
81,291
|
|
|
220,802
|
|
|
216,727
|
|
||||
General and administrative(1)
|
15,610
|
|
|
24,929
|
|
|
60,463
|
|
|
56,929
|
|
||||
Total operating expenses
|
216,963
|
|
|
276,080
|
|
|
648,010
|
|
|
740,122
|
|
||||
Loss from operations
|
(94,499
|
)
|
|
(82,282
|
)
|
|
(284,379
|
)
|
|
(201,178
|
)
|
||||
Other income (expense), net
|
303
|
|
|
(4,235
|
)
|
|
(25,830
|
)
|
|
(5,285
|
)
|
||||
Loss before provision for income taxes
|
(94,196
|
)
|
|
(86,517
|
)
|
|
(310,209
|
)
|
|
(206,463
|
)
|
||||
Provision for (benefit from) income taxes
|
2,639
|
|
|
(843
|
)
|
|
3,297
|
|
|
3,329
|
|
||||
Net loss
|
$
|
(96,835
|
)
|
|
$
|
(85,674
|
)
|
|
$
|
(313,506
|
)
|
|
$
|
(209,792
|
)
|
|
|
|
|
|
|
|
|
||||||||
(1) Includes stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
||||||||
Product cost of sales
|
$
|
610
|
|
|
$
|
634
|
|
|
$
|
2,424
|
|
|
$
|
1,888
|
|
Support cost of sales
|
2,471
|
|
|
1,951
|
|
|
8,210
|
|
|
6,156
|
|
||||
Sales and marketing
|
15,726
|
|
|
18,051
|
|
|
65,145
|
|
|
47,759
|
|
||||
Research and development
|
27,041
|
|
|
16,474
|
|
|
89,826
|
|
|
49,039
|
|
||||
General and administrative
|
4,503
|
|
|
7,836
|
|
|
28,081
|
|
|
17,630
|
|
||||
Total stock-based compensation expense
|
$
|
50,351
|
|
|
$
|
44,946
|
|
|
$
|
193,686
|
|
|
$
|
122,472
|
|
|
|
|
|
|
|
|
|
||||||||
(2) Includes amortization of intangible assets as follows:
|
|
|
|
|
|
|
|
||||||||
Product cost of sales
|
$
|
358
|
|
|
$
|
1,447
|
|
|
$
|
956
|
|
|
$
|
3,506
|
|
Sales and marketing
|
250
|
|
|
222
|
|
|
665
|
|
|
625
|
|
||||
Total amortization of intangible assets
|
$
|
608
|
|
|
$
|
1,669
|
|
|
$
|
1,621
|
|
|
$
|
4,131
|
|
|
Three Months Ended
April 30, |
|
Nine Months Ended
April 30, |
||||||||
|
2017
|
|
2018
|
|
2017
|
|
2018
|
||||
|
(as a percentage of total revenue)
|
||||||||||
Revenue:
|
|
|
|
|
|
|
|
||||
Product
|
77.8
|
%
|
|
76.4
|
%
|
|
79.5
|
%
|
|
77.9
|
%
|
Support, entitlements and other services
|
22.2
|
%
|
|
23.6
|
%
|
|
20.5
|
%
|
|
22.1
|
%
|
Total revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of revenue:
|
|
|
|
|
|
|
|
||||
Product
|
30.4
|
%
|
|
23.0
|
%
|
|
29.2
|
%
|
|
27.6
|
%
|
Support, entitlements and other services
|
10.1
|
%
|
|
10.0
|
%
|
|
9.5
|
%
|
|
9.1
|
%
|
Total cost of revenue
|
40.5
|
%
|
|
33.0
|
%
|
|
38.7
|
%
|
|
36.7
|
%
|
Gross profit
|
59.5
|
%
|
|
67.0
|
%
|
|
61.3
|
%
|
|
63.3
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
||||
Sales and marketing
|
61.6
|
%
|
|
58.7
|
%
|
|
61.8
|
%
|
|
54.8
|
%
|
Research and development
|
36.2
|
%
|
|
28.1
|
%
|
|
37.2
|
%
|
|
25.4
|
%
|
General and administrative
|
7.6
|
%
|
|
8.6
|
%
|
|
10.2
|
%
|
|
6.7
|
%
|
Total operating expenses
|
105.4
|
%
|
|
95.4
|
%
|
|
109.2
|
%
|
|
86.9
|
%
|
Loss from operations
|
(45.9
|
)%
|
|
(28.4
|
)%
|
|
(47.9
|
)%
|
|
(23.6
|
)%
|
Other income (expense), net
|
0.1
|
%
|
|
(1.5
|
)%
|
|
(4.4
|
)%
|
|
(0.6
|
)%
|
Loss before provision for income taxes
|
(45.8
|
)%
|
|
(29.9
|
)%
|
|
(52.3
|
)%
|
|
(24.2
|
)%
|
Provision for (benefit from) income taxes
|
1.3
|
%
|
|
(0.3
|
)%
|
|
0.6
|
%
|
|
0.4
|
%
|
Net loss
|
(47.1
|
)%
|
|
(29.6
|
)%
|
|
(52.9
|
)%
|
|
(24.6
|
)%
|
|
Three Months Ended
April 30, |
|
Change
|
|
Nine Months Ended
April 30, |
|
Change
|
||||||||||||||||||||||
|
2017
|
|
2018
|
|
$
|
|
%
|
|
2017
|
|
2018
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||||||
Product
|
$
|
160,076
|
|
|
$
|
221,117
|
|
|
$
|
61,041
|
|
|
38
|
%
|
|
$
|
471,825
|
|
|
$
|
663,339
|
|
|
$
|
191,514
|
|
|
41
|
%
|
Support, entitlements and other services
|
45,594
|
|
|
68,296
|
|
|
22,702
|
|
|
50
|
%
|
|
121,620
|
|
|
188,370
|
|
|
66,750
|
|
|
55
|
%
|
||||||
Total revenue
|
$
|
205,670
|
|
|
$
|
289,413
|
|
|
$
|
83,743
|
|
|
41
|
%
|
|
$
|
593,445
|
|
|
$
|
851,709
|
|
|
$
|
258,264
|
|
|
44
|
%
|
|
Three Months Ended
April 30, |
|
Change
|
|
Nine Months Ended
April 30, |
|
Change
|
||||||||||||||||||||||
|
2017
|
|
2018
|
|
$
|
|
%
|
|
2017
|
|
2018
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||||||
U.S.
|
$
|
114,323
|
|
|
$
|
135,276
|
|
|
$
|
20,953
|
|
|
18
|
%
|
|
$
|
325,533
|
|
|
$
|
488,416
|
|
|
$
|
162,883
|
|
|
50
|
%
|
Europe, the Middle East and Africa
|
39,271
|
|
|
74,916
|
|
|
35,645
|
|
|
91
|
%
|
|
99,289
|
|
|
164,089
|
|
|
64,800
|
|
|
65
|
%
|
||||||
Asia-Pacific
|
45,443
|
|
|
68,622
|
|
|
23,179
|
|
|
51
|
%
|
|
141,233
|
|
|
172,774
|
|
|
31,541
|
|
|
22
|
%
|
||||||
Other Americas
|
6,633
|
|
|
10,599
|
|
|
3,966
|
|
|
60
|
%
|
|
27,390
|
|
|
26,430
|
|
|
(960
|
)
|
|
(4
|
)%
|
||||||
Total revenue
|
$
|
205,670
|
|
|
$
|
289,413
|
|
|
$
|
83,743
|
|
|
41
|
%
|
|
$
|
593,445
|
|
|
$
|
851,709
|
|
|
$
|
258,264
|
|
|
44
|
%
|
|
Three Months Ended
April 30, |
|
Change
|
|
Nine Months Ended
April 30, |
|
Change
|
||||||||||||||||||||||
|
2017
|
|
2018
|
|
$
|
|
%
|
|
2017
|
|
2018
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||||||
Cost of product revenue
|
$
|
62,593
|
|
|
$
|
66,680
|
|
|
$
|
4,087
|
|
|
7
|
%
|
|
$
|
173,206
|
|
|
$
|
235,059
|
|
|
$
|
61,853
|
|
|
36
|
%
|
Product gross margin
|
60.9
|
%
|
|
69.8
|
%
|
|
|
|
8.9
|
%
|
|
63.3
|
%
|
|
64.6
|
%
|
|
|
|
1.3
|
%
|
||||||||
Cost of support, entitlements and other services revenue
|
$
|
20,613
|
|
|
$
|
28,935
|
|
|
$
|
8,322
|
|
|
40
|
%
|
|
$
|
56,608
|
|
|
$
|
77,706
|
|
|
$
|
21,098
|
|
|
37
|
%
|
Support, entitlements and other services gross margin
|
54.8
|
%
|
|
57.6
|
%
|
|
|
|
2.8
|
%
|
|
53.5
|
%
|
|
58.7
|
%
|
|
|
|
5.2
|
%
|
||||||||
Total gross margin
|
59.5
|
%
|
|
67.0
|
%
|
|
|
|
7.5
|
%
|
|
61.3
|
%
|
|
63.3
|
%
|
|
|
|
2.0
|
%
|
|
Three Months Ended
April 30, |
|
Change
|
|
Nine Months Ended
April 30, |
|
Change
|
||||||||||||||||||||||
|
2017
|
|
2018
|
|
$
|
|
%
|
|
2017
|
|
2018
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||||||
Sales and marketing
|
$
|
126,746
|
|
|
$
|
169,860
|
|
|
$
|
43,114
|
|
|
34
|
%
|
|
$
|
366,745
|
|
|
$
|
466,466
|
|
|
$
|
99,721
|
|
|
27
|
%
|
Percent of total revenue
|
62
|
%
|
|
59
|
%
|
|
|
|
|
|
62
|
%
|
|
55
|
%
|
|
|
|
|
|
Three Months Ended
April 30, |
|
Change
|
|
Nine Months Ended
April 30, |
|
Change
|
||||||||||||||||||||||
|
2017
|
|
2018
|
|
$
|
|
%
|
|
2017
|
|
2018
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||||||
Research and development
|
$
|
74,607
|
|
|
$
|
81,291
|
|
|
$
|
6,684
|
|
|
9
|
%
|
|
$
|
220,802
|
|
|
$
|
216,727
|
|
|
$
|
(4,075
|
)
|
|
(2
|
)%
|
Percent of total revenue
|
36
|
%
|
|
28
|
%
|
|
|
|
|
|
37
|
%
|
|
25
|
%
|
|
|
|
|
|
Three Months Ended
April 30, |
|
Change
|
|
Nine Months Ended
April 30, |
|
Change
|
||||||||||||||||||||||
|
2017
|
|
2018
|
|
$
|
|
%
|
|
2017
|
|
2018
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||||||
General and administrative
|
$
|
15,610
|
|
|
$
|
24,929
|
|
|
$
|
9,319
|
|
|
60
|
%
|
|
$
|
60,463
|
|
|
$
|
56,929
|
|
|
$
|
(3,534
|
)
|
|
(6
|
)%
|
Percent of total revenue
|
8
|
%
|
|
9
|
%
|
|
|
|
|
|
10
|
%
|
|
7
|
%
|
|
|
|
|
|
Three Months Ended
April 30, |
|
Change
|
|
Nine Months Ended
April 30, |
|
Change
|
||||||||||||||||||||||
|
2017
|
|
2018
|
|
$
|
|
%
|
|
2017
|
|
2018
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||||||
Other income (expense), net
|
$
|
303
|
|
|
$
|
(4,235
|
)
|
|
$
|
(4,538
|
)
|
|
(1,498
|
)%
|
|
$
|
(25,830
|
)
|
|
$
|
(5,285
|
)
|
|
$
|
20,545
|
|
|
(80
|
)%
|
|
Three Months Ended
April 30, |
|
Change
|
|
Nine Months Ended
April 30, |
|
Change
|
||||||||||||||||||||||
|
2017
|
|
2018
|
|
$
|
|
%
|
|
2017
|
|
2018
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||||||
Provision for (benefit from) income taxes
|
$
|
2,639
|
|
|
$
|
(843
|
)
|
|
$
|
(3,482
|
)
|
|
(132
|
)%
|
|
$
|
3,297
|
|
|
$
|
3,329
|
|
|
$
|
32
|
|
|
1
|
%
|
|
Nine Months Ended April 30,
|
||||||
|
2017
|
|
2018
|
||||
|
(in thousands)
|
||||||
Net cash provided by operating activities
|
$
|
7,903
|
|
|
$
|
69,810
|
|
Net cash used in investing activities
|
(102,219
|
)
|
|
(406,790
|
)
|
||
Net cash provided by financing activities
|
195,881
|
|
|
575,410
|
|
||
|
$
|
101,565
|
|
|
$
|
238,430
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
Total
|
|
Less than
1 Year
|
|
1 Year to
3 Years
|
|
3 to 5 Years
|
|
More than 5 Years
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Principal amount payable on convertible senior notes(1)
|
$
|
575,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
575,000
|
|
|
$
|
—
|
|
Operating lease obligations
|
105,588
|
|
|
22,929
|
|
|
37,515
|
|
|
30,248
|
|
|
14,896
|
|
|||||
Other purchase commitments(2)
|
25,423
|
|
|
25,423
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Purchase commitments with contract manufacturers(3)
|
54,721
|
|
|
54,721
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
760,732
|
|
|
$
|
103,073
|
|
|
$
|
37,515
|
|
|
$
|
605,248
|
|
|
$
|
14,896
|
|
|
(1)
|
For additional information regarding our convertible senior notes, refer to Note 6 of Part I, Item 1 of this Quarterly Report on Form 10-Q.
|
(2)
|
Purchase obligations pertaining to our normal operations.
|
(3)
|
Commitments in the form of guarantees to our contract manufacturers related to certain components.
|
•
|
software providers such as VMware and Red Hat, Inc., that offer a broad range of virtualization, infrastructure and management products to build and operate enterprise clouds;
|
•
|
traditional IT systems vendors such as Hewlett Packard Enterprise Company ("HPE"), Cisco Systems, Inc. ("Cisco"), Lenovo Group Ltd., Dell, Hitachi Data Systems Corporation ("Hitachi"), and International Business Machines Corporation ("IBM"), that offer integrated systems that include bundles of servers, storage and networking solutions, as well as a broad range of standalone server and storage products;
|
•
|
traditional storage array vendors such as Dell, NetApp, Inc. ("NetApp"), and Hitachi, which typically sell centralized storage products; and
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providers of public cloud infrastructure such as Amazon.com, Inc., Google Inc., and Microsoft Corporation.
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competition from companies that traditionally target larger enterprises, service providers and government entities and that may have pre-existing relationships or purchase commitments from such end customers;
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increased purchasing power and leverage held by large end customers in negotiating contractual arrangements with us;
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more stringent requirements in our support service contracts, including demand for quicker support response times and penalties for any failure to meet support requirements; and
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longer sales cycles and the associated risk that substantial time and resources may be spent on a potential end customer that elects not to purchase our solutions.
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the timing and magnitude of orders, shipments and acceptance of our solutions in any quarter;
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our ability to attract new and retain existing end customers;
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disruptions in our sales channels or termination of our relationship with important channel partners and OEMs;
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the timing of revenue recognition for our sales, which has materially changed for the majority of sales of software-only licenses on or after August 1, 2017 as a result of our adoption of ASC 606, which requires us to recognize the revenue from sales of software licenses upon transfer of control to our end customers, instead of deferring the revenue over the post contract support period; this change will heighten the impact of any fluctuations in the timing and magnitude of software-only sales on our quarterly operating results;
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reductions in end customers’ budgets for information technology purchases;
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delays in end customers’ purchasing cycles or deferments of end customers’ purchases in anticipation of new products or updates from us or our competitors;
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fluctuations in demand and competitive pricing pressures for our solutions;
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the mix of solutions sold, including the mix between appliance and software-only sales and the mix of the types of appliances that we sell, and the mix of revenue between products and support, entitlements and other services, which will depend in part on whether we are successful in executing our strategy to transition our business to focus on more software-only transactions;
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our ability to develop, introduce and ship in a timely manner new solutions and product enhancements that meet customer requirements;
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the timing of product releases or upgrades or announcements by us or our competitors;
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any change in the competitive dynamics of our markets, including consolidation among our competitors or resellers, new entrants or discounting of prices;
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the amount and timing of expenses to grow our business and the extent to which we are able to take advantage of economies of scale or to leverage our relationships with OEM or channel partners;
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the costs associated with acquiring new businesses and technologies and the follow-on costs of integrating and consolidating the results of acquired businesses;
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the amount and timing of stock-based compensation expenses;
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our ability to control the costs of our solutions and their key components, or to pass along any cost increases to our end customers;
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general economic, industry and market conditions; and
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future accounting pronouncements and changes in accounting policies, including our ability to implement the new procedures and processes necessary to accurately recognize our revenue under the new ASC 606 revenue recognition standard.
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lost revenue or lost OEM or other channel partners or end customers;
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increased costs, including warranty expense and costs associated with end customer support as well as development costs to remedy the errors or defects;
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delays, cancellations, reductions or rescheduling of orders or shipments;
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product returns or discounts; and
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damage to our reputation and brand.
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public sector budgetary cycles and funding authorizations;
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changes in fiscal or contracting policies;
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decreases in available government funding;
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changes in government programs or applicable requirements;
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the adoption of new laws or regulations or changes to existing laws or regulations;
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potential delays or changes in the government appropriations or other funding authorization processes; and
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higher expenses associated with, or delays caused by, diligence and qualifying or maintaining qualification as a government vendor.
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business practices may differ from those in the United States and may require us in the future to include terms other than our standard terms in customer, channel partner, employee, consultant and other contracts;
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political, economic and social instability or uncertainty around the world;
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potential changes in trade relations arising from policy initiatives implemented by, or statements made by, the U.S. government, which has been critical of existing and proposed trade agreements;
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greater difficulty in enforcing contracts, judgments and arbitration awards in international courts, and in collecting accounts receivable and longer payment and collection periods;
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greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties;
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risks associated with trade restrictions and foreign legal requirements, including the importation, certification and localization of our solutions required in foreign countries;
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greater risk of a failure of foreign employees, partners, distributors and resellers to comply with both U.S. and foreign laws, including antitrust regulations, the FCPA, the U.K. Bribery Act, U.S. or foreign sanctions regimes and export or import control laws, and any trade regulations ensuring fair trade practices;
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heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;
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requirements to comply with foreign privacy, data protection and information security laws and regulations and the risks and costs of non-compliance;
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reduced or uncertain protection for intellectual property rights in some countries;
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impediments to the flow of foreign exchange capital payments and receipts due to exchange controls instituted by certain foreign governments;
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increased expenses incurred in establishing and maintaining corporate entities, office space, and equipment for our international operations;
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difficulties in managing and staffing international offices and increased travel, infrastructure and legal compliance costs associated with multiple international locations;
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greater difficulty in identifying, attracting and retaining local experienced personnel, and the costs and expenses associated with such activities;
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the challenge of managing a development team in geographically disparate locations;
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management communication and integration problems resulting from cultural and geographic dispersion;
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differing employment practices and labor relations issues;
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fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business; and
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treatment of revenue from international sources for tax purposes and changes in tax laws, regulations or official interpretations, including being subject to foreign tax laws and being liable for paying withholding, income or other taxes in foreign jurisdictions.
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If open source software programmers, most of whom we do not employ, do not continue to develop and enhance open source technologies, our development expenses could be increased and our product release and upgrade schedules could be delayed.
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Open source software is open to further development or modification by anyone. As a result, others may develop such software to be competitive with our operating system, and may make such competitive software available as open source. It is also possible for competitors to develop their own solutions using open source software, potentially reducing the demand for, and putting price pressure on, our solutions.
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The licenses under which we license certain types of open source software may require that, if we modify the open source software we receive, we are required to make such modified software and other related proprietary software of ours publicly available without cost and on the same terms. Accordingly, we monitor our use of open source software in an effort to avoid subjecting our proprietary software to such conditions and others we do not intend. Although we believe that we have complied with our obligations under the various applicable licenses for open source software that we use, our processes used to monitor how open source software is used could be subject to error. In addition, there is little or no legal precedent governing the interpretation of terms in most of these licenses. Therefore, any improper usage of open source could result in unanticipated obligations regarding our solutions and technologies, which could have an adverse impact on our intellectual property rights and our ability to derive revenue from solutions incorporating the open source software.
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If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur legal expenses defending against such allegations, or engineering expenses in developing a substitute solution.
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price and volume fluctuations in the overall stock market from time to time;
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volatility in the market prices and trading volumes of high technology stocks;
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changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;
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failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, including as a result of our recently announced plan to transition our business to focus on more software-only transactions, or our failure to meet these estimates or the expectations of investors;
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the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
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announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments;
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public analyst or investor reaction to our press releases, other public announcements and filings with the SEC;
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rumors and market speculation involving us or other companies in our industry;
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actual or anticipated changes or fluctuations in our operating results;
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actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;
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actual or threatened litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;
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developments or disputes concerning our intellectual property or our solutions, or third-party proprietary rights;
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rumored, announced or completed acquisitions of businesses or technologies by us or our competitors;
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new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
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changes in accounting standards, policies, guidelines, interpretations or principles;
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any major changes in our management or our board of directors;
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general economic conditions and slow or negative growth of our markets; and
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other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
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our amended and restated certificate of incorporation provides for a dual class common stock structure for 17 years following the completion of our IPO;
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a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;
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the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
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upon the conversion of our Class A common stock and Class B common stock into a single class of common stock, the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
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upon the conversion of our Class A common stock and Class B common stock into a single class of common stock, a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
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the requirement that a special meeting of stockholders may be called only by the chairman of our board of directors, our lead independent director, our president, our secretary or a majority vote of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;
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the requirement for the affirmative vote of holders of at least 66 2⁄3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation relating to the issuance of preferred stock and management of our business or our amended and restated bylaws, which may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;
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the ability of our board of directors, by majority vote, to amend our amended and restated bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our amended and restated bylaws to facilitate an unsolicited takeover attempt; and
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advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
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Date: June 12, 2018
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/s/ Duston M. Williams
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Duston M. Williams
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Chief Financial Officer
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(Principal Financial Officer)
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A.
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Landlord (as successor in interest to CA-1740 Technology Drive Limited Partnership, a Delaware limited partnership) and Tenant are parties to that certain lease dated August 5, 2013 (the "Original Lease"), as previously amended by that certain First Amendment dated October 9, 2013 ("First Amendment"), by that certain Second Amendment dated April 17, 2014 ("Second Amendment"), by that certain Third Amendment dated October 13, 2014 ("Third Amendment"), by that certain Fourth Amendment dated March 23, 2015 ("Fourth Amendment"), by that certain Fifth Amendment dated July 28, 2016 (the "Fifth Amendment"), and by that certain Confirmation Letter dated April 11, 2017 (as amended, the "Lease"). Pursuant to the Lease, Landlord has leased to Tenant space currently containing a total of approximately 148,325 rentable square feet (the "Premises") described as Suite Nos. 150, 200, 270, 280, 290, 310, 320, 400, 500, 510, 530 and 600 of the building commonly known as 1740 Technology Drive located at 1740 Technology Drive, San Jose, California 95110 (the "Building").
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B.
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The parties wish to expand the Premises (defined in the Lease) to include additional space containing approximately 8,475 rentable square feet described as Suite No. 210 on the second (2nd) floor of the Building and shown on Exhibit A attached hereto (the "Expansion Space"), on the following terms and conditions.
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1.
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Expansion.
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1.1
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Effect of Expansion. Effective as of the Expansion Effective Date (defined in Section 1.2 below), the Premises shall be increased from 148,325 rentable square feet to 156,800 rentable square feet on by the addition of the Expansion Space, and, from and after the Expansion Effective Date, the Existing Premises and the Expansion Space shall collectively be deemed the Premises. The term of the Lease for the Expansion Space (the "Expansion Term") shall commence on the Expansion Effective Date and, unless sooner terminated in accordance with the Lease, end on October 31, 2021. From and after the Expansion Effective Date, the Expansion Space shall be subject to all the terms and conditions of the Lease except as provided herein. Except as may be expressly provided herein, (a) Tenant shall not be entitled to receive, with respect to the Expansion Space, any allowance, free rent or other financial concession granted with respect to the Existing Premises, and (b) no representation or warranty made by Landlord with respect to the Existing Premises shall apply to the Expansion Space.
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1.2
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Expansion Effective Date. As used herein, "Expansion Effective Date" means February 16, 2018; provided, however, that if Landlord fails to deliver vacant possession of the Expansion Space to Tenant on or before the date described in the preceding clause as a result of any holdover or unlawful possession by another party or for any other reason, the Expansion Effective Date shall be the date on which Landlord delivers vacant possession of the Expansion Space to Tenant free from occupancy by any party; provided Tenant acknowledges that the existing tenant will
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1.3
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Confirmation Letter. At any time after the Expansion Effective Date, Landlord may deliver to Tenant a notice substantially in the form of Exhibit B attached hereto, as a confirmation of the information set forth therein. Tenant shall execute and return (or, by written notice to Landlord, reasonably object to) such notice within five (5) days after receiving it.
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2.
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Base Rent. With respect to the Expansion Space during the Expansion Term, the schedule of Base Rent shall be as follows:
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3.
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Additional Security Deposit. Upon Tenant's execution hereof, Tenant shall pay Landlord the sum of $31,439.51, which shall be added to and become part of the Security Deposit held by Landlord pursuant to Section 21 of the Original Lease. Accordingly, simultaneously with the execution hereof, the Security Deposit is hereby increased from $436,979.53 to $468,419.04.
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4.
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Tenant's Share. With respect to the Expansion Space during the Expansion Term, Tenant's Share shall be 4.0966%.
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5.
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Expenses and Taxes. With respect to the Expansion Space during the Expansion Term, Tenant shall pay for Tenant's Share of Expenses and Taxes in accordance with the terms of the Lease; provided, however, that, with respect to the Expansion Space during the Expansion Term, the Base Year for Expenses and Taxes shall be 2016.
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6.
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Condition of the Expansion Space.
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6.1
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Configuration and Condition of Expansion Space. Tenant acknowledges that it has inspected
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6.2
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Responsibility for Improvements to Premises. Any improvements to the Expansion Space performed by Tenant shall be paid for by Tenant and performed in accordance with the terms of the Lease.
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6.3
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Package HVAC Units. In the event Tenant desires to utilize any existing dedicated heating, ventilation and air conditioning units ("Package Units") within the Expansion Space, or installs, as an Alteration, new Package Units within the Expansion Space, the plans and specifications for any Package Units shall be subject to Landlord's reasonable approval. If Tenant elects to utilize or install Package Units within the Expansion Space, Tenant shall also install, at Tenant's sole cost and expense, separate meters or at Landlord's option, sub-meters, in order to measure the amount of electricity furnished to such Package Units and Tenant shall be responsible for Landlord's actual cost of supplying electricity to such units as reflected by such meters or sub-meters, which amounts shall be payable on a monthly basis as Additional Rent. Tenant shall be responsible for maintenance and repair of the Package Units pursuant to Section 25.5 of the Lease and such units may be subject to removal by Tenant upon the expiration or earlier termination of the Lease pursuant to Section 25.5 of the Lease.
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7.
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Extension Option. Landlord and Tenant hereby acknowledge and agree that under the Lease, Tenant's lease of the Premises expires on March 31, 2021, and that under the Lease, as amended by this Sixth Amendment, Tenant's lease of the Expansion Space expires on October 31, 2021. Accordingly, in the event Tenant exercises right to further extend the term of the Lease for one (1) additional period of three (3) years under the terms and conditions of Section 6 of the Fifth Amendment (referencing Section 7 of the Fourth Amendment), such three (3)-year extension period shall run from April 1, 2021 through March 31, 2024 for the Premises and from November 1, 2021 through March 31, 2024 for the Expansion Space.
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8.
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Right of First Offer. The Right of First Offer with respect to the Expansion Space contained in Section 7.l(A)(ii) of the Fifth Amendment shall no longer apply.
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9.
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Other Pertinent Provisions. Landlord and Tenant agree that, effective as of the date of this Sixth Amendment, the Lease shall be amended in the following additional respects.
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9.1
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Energy Usage. If Tenant (or any party claiming by, through or under Tenant) pays directly to the provider for any energy consumed at the Building, Tenant, promptly upon request, shall deliver to Landlord (or, at Landlord's option, execute and deliver to Landlord an instrument enabling Landlord to obtain from such provider) any data about such consumption that Landlord, in its reasonable judgment, is required for benchmarking purposes or to disclose to a prospective buyer, tenant or mortgage lender under any applicable law.
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9.2
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California Civil Code Section 1938. Pursuant to California Civil Code§ 1938, Landlord hereby states that the Expansion Space has not undergone inspection by a Certified Access Specialist (CASp) (defined in California Civil Code§ 55.52).
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9.3
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The Suite 300 Must Take Space. Prior to the Suite 300 Expansion Effective Date, Landlord shall deliver to Tenant an amendment (the "Suite 300 Amendment") adding the Suite 300 Must Take Space to the Lease upon the same non-economic terms and conditions as applicable to the Premises, and the economic terms and conditions as provided in Section 12 of the Fifth Amendment. Tenant shall execute and deliver the Suite 300 Amendment to Landlord within 15 days after receiving it, but Tenant's lease of the Suite 300 Must Take Space shall be fully effective whether or not the Suite 300 Amendment is executed.
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9.4
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The Suite 550 Must Take Space. Prior to the Suite 550 Expansion Effective Date, Landlord shall deliver to Tenant an amendment (the "Suite 550 Amendment") adding the Suite 550 Must Take Space to the Lease upon the same non-economic terms and conditions as applicable to the Premises, and the economic terms and conditions as provided in Section 13 of the Fifth Amendment. Tenant shall execute and deliver the Suite 550 Amendment to Landlord within 15 days after receiving it, but Tenant's lease of the Suite 550 Must Take Space shall be fully effective whether or not the Suite 550 Amendment is executed.
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10.
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Surrender. Upon the expiration or earlier termination of the Lease, Tenant shall surrender possession of the Expansion Space to Landlord in accordance with the terms and conditions of Section 15 of the Original Lease. For avoidance of doubt, no leasehold improvements existing in the Expansion Space on the date of this Amendment shall be deemed to be Tenant-Insured Improvements that Tenant shall be required to remove under Section 8 of the Lease; provided Tenant shall be obligated to remove its furniture, and IT/Communications cabling, including, without limitation any such furniture and IT/Communications cabling originally belonging to the existing tenant referenced in Section 6.1 above.
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11.
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Parking. During the Expansion Term with respect to the Expansion Space, Tenant shall be entitled to use an additional thirty-two (32) unreserved parking spaces in the Parking Facility in accordance with the terms of the Lease.
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12.
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Contingency. The parties acknowledge and agree that this Sixth Amendment is contingent upon Landlord's negotiation and execution of a termination agreement on terms and conditions acceptable to Landlord with the current tenant of the Expansion Space on or before February 1, 2018.
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13.
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Miscellaneous.
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13.1
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This Sixth Amendment and the attached exhibits, which are hereby incorporated into and made a part of this Sixth Amendment, set forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Tenant shall not be entitled, in connection with entering into this Sixth Amendment, to any free rent, allowance, alteration, improvement or similar economic incentive to which Tenant may have been entitled in connection with entering into the Lease, except as may be
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13.2
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Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect.
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13.3
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In the case of any inconsistency between the provisions of the Lease and this Sixth Amendment, the provisions of this Sixth Amendment shall govern and control.
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13.4
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Submission of this Sixth Amendment by Landlord is not an offer to enter into this Sixth Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Sixth Amendment until Landlord has executed and delivered it to Tenant.
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13.5
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Capitalized terms used but not defined in this Sixth Amendment shall have the meanings given in the Lease.
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13.6
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Tenant shall indemnify and hold Landlord, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents harmless from all claims of any brokers in connection with this Sixth Amendment. Tenant acknowledges that any assistance rendered by any agent or employee of any affiliate of Landlord in connection with this Sixth Amendment has been made as an accommodation to Tenant solely in furtherance of consummating the transaction on behalf of Landlord, and not as agent for Tenant.
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13.7
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Landlord acknowledges that no Security Agreement (as defined in Article 17 of the Original Lease) exists on the date hereof.
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13.8
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This Sixth Amendment may be executed in any number of duplicate originals, all of which shall be of equal legal force and effect. Additionally, this Sixth Amendment may be executed in counterparts, but shall become effective only after each party has executed a counterpart hereof; all said counterparts when taken together, shall constitute the entire single agreement between the parties. This Sixth Amendment may be executed by a party's signature transmitted by portable document format ("pdf') or email or by a party's electronic signature (collectively, "pdf Signatures"), and copies of this Sixth Amendment executed and delivered by electronic means or originals of this Sixth Amendment executed by pdf Signature shall have the same force and effect as copies hereof executed and delivered with original wet signatures. All parties hereto may rely upon emailed or pdf Signatures as if such signatures were original wet signatures. Any party executing and delivering this Sixth Amendment by pdf or email shall promptly thereafter deliver a counterpart signature page of this Sixth Amendment containing said party's original signature. All parties hereto agree that a pdf or emailed signature page or a pdf Signature may be introduced into evidence in any proceeding arising out of or related to this Sixth Amendment as if it were an original wet signature page.
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By:
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Hudson Pacific Properties, Inc., a Maryland corporation,
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1.
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The Commencement Date is and the Expiration Date is
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2.
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The exact number of rentable square feet within the Premises is square feet, subject to Section 2.1.1 of the Lease.
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3.
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Tenant's Share, based upon the exact number of rentable square feet within the Premises, is %, subject to Section 2.1.1 of the Lease.
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A.
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Landlord (as successor in interest to CA-1740 Technology Drive Limited Partnership, a Delaware limited partnership) and Tenant are parties to that certain Office Lease dated August 5, 2013 (the "Original Lease"), as previously amended by that certain First Amendment dated October 9, 2013 ("First Amendment"), by that certain Second Amendment dated April 17, 2014 ("Second Amendment"), by that certain Third Amendment dated October 13, 2014 ("Third Amendment"), by that certain Fourth Amendment dated March 23, 2015 ("Fourth Amendment"), by that certain Fifth Amendment dated July 28, 2016 (the "Fifth Amendment"), by that certain Confirmation Letter dated April 11, 2017, and by that certain Sixth Amendment dated January 29, 2018 (the "Sixth Amendment") (as amended, the "Lease"). Pursuant to the Lease, Landlord has leased to Tenant space currently containing a total of approximately 156,800 rentable square feet (collectively, the "Premises") in the building commonly known as 1740 Technology Drive located at 1740 Technology Drive, San Jose, California 95110 (the "Building"). The Premises is comprised of (a) 148,325 rentable square feet located in Suite Nos. 150, 200, 270, 280, 290, 310, 320, 400, 500, 510, 530 and 600 (collectively, the "Existing Premises"), and (b) 8,475 rentable square feet located in Suite No. 210 ("Suite 210").
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B.
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Landlord and Tenant hereby acknowledge and agree that under the Lease, Tenant's lease of the Existing Premises expires on March 31, 2021, and Tenant's lease of Suite 210 expires on October 31, 2021. The parties wish to extend the term of the Lease on the following terms and conditions.
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C.
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The parties also wish to expand the Premises to include approximately 4,605 rentable square feet of additional space comprised of (i) approximately 1,365 rentable square feet described as Suite No. 205 on the second (2nd) floor of the Building and shown on Exhibit A attached hereto, and (ii) approximately 3,240 rentable square feet described as Suite No. 260 on the second (2nd) floor of the Building and shown on Exhibit A attached hereto (collectively, the "First Expansion Space"), on the following terms and conditions.
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D.
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The parties also wish to expand the Premises to include additional space containing approximately 6,927 rentable square feet described as Suite No. 110 on the first (1st) floor and certain second (2nd) floor storage space containing approximately 236 rentable square feet as shown on Exhibit B attached hereto (collectively, the "Second Expansion Space"), on the following terms and conditions.
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E.
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Pursuant to the Fifth Amendment, the Premises may be expanded to include the Suite 300 Must Take Space and the Suite 550 Must Take Space.
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1.
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Extension. The term of the Lease is hereby extended through May 31, 2024 (the "Seventh Amendment Expiration Date"). The portion of the term of the Lease beginning on April 1, 2021 and ending on the Seventh Amendment Expiration Date shall be referred to herein as the "Seventh Amendment Extended Term."
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2.
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The Existing Premises and Suite 210.
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2.1
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Base Rent. During the Seventh Amendment Extended Term, the schedule of Base Rent for the Existing Premises and Suite 210 shall be as follows:
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2.2
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Expenses and Taxes.
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A.
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From and after April 1, 2021 and continuing during the Seventh Amendment Extended Term, Tenant shall pay Tenant's Share of Expenses and Taxes for the Existing Premises in accordance with the terms of the Lease; provided, however, that from and after April 1, 2021, the Base Year for the Existing Premises shall be 2021.
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B.
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From and after November 1, 2021 and continuing during the Seventh Amendment Extended Term, Tenant shall pay Tenant's Share of Expenses and Taxes for Suite 210 in accordance with the terms of the Lease; provided, however, that from and after November 1, 2021, the Base Year for Suite 210 shall be 2021.
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2.3
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Improvements to the Existing Premises.
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A.
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Configuration and Condition of the Existing Premises. Tenant acknowledges that it is currently, and as of the commencement of the Seventh Amendment Extended Term will be, in possession of the Existing Premises and agrees to accept them "as is" without any representation by Landlord regarding their configuration or condition and without any obligation on the part of Landlord to perform or pay for any alteration or improvement, except as may be otherwise expressly provided in this Seventh Amendment.
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B.
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Responsibility for Improvements to the Existing Premises. After April 1, 2021, Tenant shall be entitled to perform additional improvements to the Existing Premises, and to receive an allowance from Landlord for such improvements, in accordance with the Work Letter attached to the Fifth Amendment as Exhibit A; provided that (i) the Allowance referenced in Section 1.1 of the Work Letter for the Existing Premises shall be $13.89 per rentable square foot of the Existing Premises, (ii) the reference in the last sentence of Section 1.1 of the Work Letter to "December 31, 2019" shall be replaced with a reference to "June 30, 2022" (with
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C.
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Other Modifications with respect to the Existing Premises.
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(1)
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The phrase "within twelve (12) months after the Suite 200 Expansion Effective Date" contained in Section 11.7(ii) of the Fifth Amendment is hereby deleted in its entirety and the phrase "on or before December 31, 2019" is substituted in lieu thereof.
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(2)
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The phrase "within twelve (12) months after the Suite 300 Expansion Effective Date" contained in Section 12.7(ii) of the Fifth Amendment is hereby deleted in its entirety and the phrase "on or before December 31, 2019" is substituted in lieu thereof.
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(3)
|
The phrase "within twelve (12) months after the Suite 550 Expansion Effective Date" contained in Section 13.7(ii) of the Fifth Amendment is hereby deleted in its entirety and the phrase "on or before December 31, 2019" is substituted in lieu thereof.
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(4)
|
The last sentence of Section 1.1 of Exhibit "B" to the Fourth Amendment is hereby deleted in its entirety and the following is inserted in lieu thereof: "Notwithstanding any contrary provision of this Amendment, if Tenant fails to use the entire Allowance on or before December 31, 2019, the unused amount shall revert to Landlord and Tenant shall have no further rights with respect thereto."
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2.4
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Improvements to Suite 210.
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A.
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Configuration and Condition of Suite 210. Tenant acknowledges that it is currently, and as of November 1, 2021 will be, in possession of Suite 210 and agrees to accept it "as is" without any representation by Landlord regarding its configuration or condition and without any obligation on the part of Landlord to perform or pay for any alteration or improvement, except as may be otherwise expressly provided in this Seventh Amendment.
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B.
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Responsibility for Improvements to Suite 210. After November 1, 2021, Tenant shall be entitled to perform additional improvements to Suite 210, and to receive an allowance from Landlord for such improvements, in accordance with the Work Letter attached to the Fifth Amendment as Exhibit A; provided that (i) the Allowance referenced in Section 1.1 of the Work Letter shall be $11.94 per rentable square foot of Suite 210, (ii) the reference to "March 31, 2019" contained in the last sentence of Section 1.1 of the Work Letter shall be revised to refer to "June 30, 2022" (with regard to Suite 210 only), (iii) and the Coordination Fee, referenced in Section 2.3 of the Work Letter shall be 1.5% of the cost of the Tenant Improvement Work.
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2.5
|
Suite 300 Must Take Space and Suite 550 Must Take Space. The terms and conditions of the Fifth Amendment shall govern in the event that the Suite 300 Must Take Space and the Suite 550 Must Take Space become part of the Premises prior to the start of the Seventh Amendment Extended Term. From and after the commencement of the Seventh Amendment Extended Term (if the Suite 300 Must Take Space and the Suite 550 Must Take Space are part of the Premises), (a) Tenant shall pay Base Rent with respect to the Suite 300 Must Take Space and the Suite 550 Must Take Space at the same then applicable annual rate per square foot as described in the rent table depicted in Section 2.1 of this Seventh Amendment (as thereafter increased annually pursuant to such rent table), and (b) the Base Year with regard to the Suite 300 Must Take Space and the Suite 550 Must Take Space shall be 2021 (effective from and after April 1, 2021).
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3.
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The First Expansion - Suite Nos. 205 & 260.
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3.1
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Effect of the First Expansion. Effective as of the First Expansion Effective Date (defined in Section 3.2 below), the Premises shall be increased by the addition of the First Expansion Space (4,605 rentable square feet), and, from and after the First Expansion Effective Date, the First Expansion Space shall be deemed part of the "Premises" under the Lease, as amended hereby. The term of the Lease for the First Expansion Space (the "First Expansion Space Term") shall commence on the First Expansion Effective Date and, unless extended or sooner terminated in accordance with the Lease, end on May 31, 2024. From and after the First Expansion Effective Date, the First Expansion Space shall be subject to all the terms and conditions of the Lease except as provided herein. Except as may be expressly provided herein, (a) Tenant shall not be entitled to receive, with respect to the First Expansion Space, any allowance, free rent or other financial concession granted with respect to the Existing Premises or Suite 210, and (b) no representation or warranty made by Landlord with respect to the Existing Premises or Suite 210 shall apply to the First Expansion Space.
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3.2
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First Expansion Effective Date. As used herein, "First Expansion Effective Date" means July 1, 2018; provided, however, that if Landlord fails to deliver vacant possession of Suite No. 205 to Tenant on or before the date described in the preceding clause as a result of holdover by the current tenant, unlawful possession by another party, or for any other reason, the First Expansion Effective Date for Suite No. 205 shall be the date on which Landlord delivers vacant possession of Suite No. 205 to Tenant free from occupancy by any party. Any such delay in the First Expansion Effective Date for Suite No. 205 shall not subject Landlord to any liability for any loss or damage resulting therefrom. During the period beginning on the date of full execution and delivery of this Seventh Amendment and ending on the date immediately preceding the First Expansion Effective Date, Tenant shall have the right to use and access Suite 260 of the First Expansion Space, and, during any such period of use or access, all provisions of the Lease relating to Suite 260 of the First Expansion Space shall apply as if the First Expansion Effective Date had occurred and Tenant shall be entitled to conduct business in the Suite 260; provided, however, that during such period Tenant shall not be required to pay Base Rent or Tenant's Share of Expenses and Taxes for Suite 260.
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3.3
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Base Rent. With respect to the First Expansion Space during the First Expansion Space Term, the schedule of Base Rent shall be as follows:
|
Period during
First Expansion Term
|
Annual Rate Per Square Foot (rounded to the nearest 100th of a dollar)
|
Monthly Base Rent
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7/1/2018 - 3/31/2019
|
$39.36
|
$15,104.40
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4/1/2019 - 3/31/2020
|
$40.54
|
$15,557.53
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4/1/2020 - 3/31/2021
|
$41.76
|
$16,024.26
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4/1/2021 - 3/31/2022
|
$43.01
|
$16,504.99
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4/1/2022 - 3/31/2023
|
$44.30
|
$17,000.14
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4/1/2023 - 3/31/2024
|
$45.63
|
$17,510.14
|
4/1/2024 - 5/31/2024
|
$47.00
|
$18,035.44
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3.4
|
Tenant's Share. With respect to the First Expansion Space during the First Expansion Space Term, Tenant's Share shall be 2.2259%.
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3.5
|
Expenses and Taxes. With respect to the First Expansion Space during the First Expansion Term, Space Tenant shall pay for Tenant's Share of Expenses and Taxes in accordance with the terms of the Lease; provided, however, that, with respect to the First Expansion Space during the First Expansion Space Term, the Base Year for Expenses and Taxes shall be 2018.
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3.6
|
Condition of the First Expansion Space.
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A.
|
Configuration and Condition of the First Expansion Space. Tenant acknowledges that it has inspected the First Expansion Space and agrees to accept it in its existing configuration and condition (or in such other configuration and condition as any existing tenant of Suite 205 may cause to exist in accordance with its lease), without any representation by Landlord regarding its configuration or condition and without any obligation on the part of Landlord to perform or pay for any alteration or improvement, except as may be otherwise expressly provided in this Seventh Amendment
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B.
|
Responsibility for Improvements to the First Expansion Space. Tenant shall be entitled to perform additional improvements in the First Expansion Space, and to receive an allowance from Landlord for such improvements, in accordance with the Work Letter attached to the Fifth Amendment as Exhibit A; provided that (i) the Allowance referenced in Section 1.1 of the Work Letter shall be $71.00 per rentable square foot of the First Expansion Space, (ii) the reference to "March 31, 2019" contained in the last sentence of Section 1.1 of the Work Letter shall be revised to refer to "December 31, 2018", and (iii) and the Coordination Fee, referenced in Section 2.3 of the Work Letter shall be 1.5% of the cost of the Tenant Improvement Work.
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C.
|
Suite 205 Contingency. The parties acknowledge and agree that Landlord has previously leased Suite 205 to a third party (such party, and any successor or assignee thereto, the "Suite 205 Existing Tenant") for a lease term extending through June 30, 2018 ("Suite 205 Existing Lease"). Nothing herein shall be deemed to require Landlord to negotiate for, enter into or otherwise cause an early termination of the Suite 205 Existing Lease with respect to Suite 205. Notwithstanding the foregoing, if the Suite 205 Existing Tenant fails to surrender possession of Suite 205 by the expiration of the Suite 205 Existing Lease, then Landlord shall use commercially reasonable efforts to recover possession of Suite 205 from the Suite 205 Existing Tenant as soon thereafter as reasonably possible (including, if necessary in Landlord's reasonable judgement, by commencing and pursuing an unlawful detainer).
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D.
|
Suite 205 Existing Improvements. Landlord shall use commercially reasonable efforts, subject to the rights of the Suite 205 Existing Tenant under the Suite 250 Existing Lease, to schedule and perform, at least 90 days before the First Expansion Effective Date with respect to Suite 205, a walk-through of Suite 205 during which representatives of Landlord and Tenant may identify any leasehold improvements in Suite 205 that (i) Landlord may have the right, under the Suite 205 Existing Lease, to require the Suite 205 Existing Tenant to remove, and (ii) Tenant wishes not to be removed or to be removed. If Tenant provides to Landlord, at least 75 days before the First Expansion Effective Date with respect to Suite 205, a Non-Removal Notice (as defined in Section 11.10 of the Fifth Amendment) identifying any leasehold improvements in the Suite 205 that Tenant, acting on a reasonable basis, does not wish to be removed before the First Expansion Effective Date with respect to Suite 205, then Landlord shall use commercially reasonable efforts to enforce any rights it may have under the Suite 205 Existing Lease to require the Suite 205 Existing Tenant to not perform such removal obligations, or, if applicable, to waive any such rights to cause the Suite 205 Existing Tenant to perform such removal obligations. If any such improvement is not so removed, then, for all purposes under the Lease, such Non-Removal Item shall be deemed a Tenant-Insured Improvement as to which Landlord has timely notified Tenant, pursuant to Section 8 of the Original Lease, that its removal shall be required pursuant to such Section 8; provided, however, that if, when it delivers any Non-Removal Notice, Tenant specifically requests that
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3.7
|
Parking. During the First Expansion Space Term with respect to the First Expansion Space, Tenant shall be entitled to use an additional fourteen (14) unreserved parking spaces in the Parking Facility in accordance with the terms of the Lease.
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4.
|
The Second Expansion - Suite 110 & 2nd Floor Storage Space.
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4.1
|
Effect of the Second Expansion. Effective as of the Second Expansion Effective Date (defined in Section 4.2 below), the Premises shall be increased by the addition of the Second Expansion Space (7,163 rentable square feet), and, from and after the Second Expansion Effective Date, the Second Expansion Space shall be deemed part of the "Premises" under the Lease, as amended hereby. The term of the Lease for the Second Expansion Space (the "Second Expansion Space Term") shall commence on the Second Expansion Effective Date (as defined in Section 4.2 below) and, unless extended or sooner terminated in accordance with the Lease, end on May 31, 2024. From and after the Second Expansion Effective Date, the Second Expansion Space shall be subject to all the terms and conditions of the Lease except as provided herein. Except as may be expressly provided herein, (a) Tenant shall not be entitled to receive, with respect to the Second Expansion Space, any allowance, free rent or other financial concession granted with respect to the Existing Premises, Suite 210, or the First Expansion Space, and (b) no representation or warranty made by Landlord with respect to the Existing Premises, Suite 210, or the First Expansion Space shall apply to the Second Expansion Space.
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4.2
|
Second Expansion Effective Date. As used herein, "Second Expansion Effective Date" means February 1, 2020.
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4.3
|
Base Rent. With respect to the Second Expansion Space during the Second Expansion Space Term, the schedule of Base Rent shall be as follows:
|
Period during
Second Expansion Term
|
Annual Rate Per Square Foot (rounded to the nearest 100th of a dollar)
|
Monthly Base Rent
|
2/1/2020 - 3/31/2020
|
$40.54
|
$24,199.00
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4/1/2020 - 3/31/2021
|
$41.76
|
$24,924.97
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4/1/2021 - 3/31/2022
|
$43.01
|
$25,672.72
|
4/1/2022 - 3/31/2023
|
$44.30
|
$26,442.90
|
4/1/2023 - 3/31/2024
|
$45.63
|
$27,236.19
|
4/1/2024 - 5/31/2024
|
$47.00
|
$28,053.27
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4.4
|
Tenant's Share. With respect to the Second Expansion Space during the Second Expansion Space Term, Tenant's Share shall be 3.4624%.
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4.5
|
Expenses and Taxes. With respect to the Second Expansion Space during the Second Expansion Term, Space Tenant shall pay for Tenant's Share of Expenses and Taxes in accordance with the terms of the Lease; provided, however, that, with respect to the Second Expansion Space during the Second Expansion Space Term, the Base Year for Expenses and Taxes shall be 2020.
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4.6
|
Condition of the Second Expansion Space.
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A.
|
Configuration and Condition of Second Expansion Space. Tenant acknowledges that it is currently, and as of the commencement of the Second Expansion Space Term will be, in possession of the Second Expansion Space (under the terms and conditions of a sublease) and agrees to accept them "as is" without any representation by Landlord regarding their configuration or condition and without any obligation on the part of Landlord to perform or pay for any alteration or improvement, except as may be otherwise expressly provided in this Seventh Amendment. Landlord agrees for the benefit of Tenant and the existing tenant of the Second Expansion Space (the "Suite 110 Existing Tenant") that Landlord will not require the Suite 110 Existing Tenant to remove or pay for the removal (or make payment in lieu of removal) of any existing alterations or improvements in the Second Expansion Space.
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B.
|
Responsibility for Improvements to Suite 110. Tenant shall be entitled to perform additional improvements in Suite 110, and to receive an allowance from Landlord for such improvements, in accordance with the Work Letter attached to the Fifth Amendment as Exhibit A; provided that (i) the Allowance referenced in Section 1.1 of the Work Letter shall be $17.78 per rentable square foot of Suite 110, (ii) the reference to "March 31, 2019" contained in Section 1.1 of the Work Letter shall be revised to refer to "December 31, 2020", and (iii) and the Coordination Fee, referenced in Section 2.3 of the Work Letter shall be 1.5% of the cost of the Tenant Improvement Work.
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4.7
|
Parking. During the Second Expansion Space Term with respect to the Second Expansion Space, Tenant shall be entitled to use an additional twenty-one (21) unreserved parking spaces in the Parking Facility in accordance with the terms of the Lease.
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5.
|
Extension Option. Section 7 of the Sixth Amendment and Section 6 of the Fifth Amendment are hereby deleted in their entirety. Tenant shall retain the right to further extend the term of the Lease for the entire Premises for one (1) additional period of three (3) years under the terms and conditions of Section 7 of the Fourth Amendment, provided (a) all references in such Section 7 to the "Second Extended Expiration Date" shall mean and refer to the Seventh Amendment Expiration Date referenced in Section 1 above, and (b) the reference to "2018" in the last clause of Section 7.2.(B) of the Fourth Amendment shall be modified to "2024."
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6.
|
Right of First Offer. The right of first offer with respect to Suite 110 contained in Section 7.1(A)(i) of the Fifth Amendment shall no longer apply.
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7.
|
Suite 250 Must Take Space.
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7.1
|
Effective Date of Suite 250 Must Take. Effective as of the Suite 250 Expansion Effective Date (defined in Section 7.2 below), the Premises shall be increased by the addition of approximately 3,198 rentable square feet described as Suite 250 on the second (2nd) floor of the Building (as more particularly shown on Exhibit C hereto, the "Suite 250 Must Take Space"). The term of the Lease for the Suite 250 Must Take Space (the "Suite 250 Expansion Term") shall commence on the Suite 250 Expansion Effective Date and, unless extended or sooner terminated in accordance with the Lease, end on the Seventh Amendment Expiration Date. From and after the Suite 250 Expansion Effective Date, the Suite 250 Must Take Space shall be subject to all the terms and conditions of the Lease except as provided herein. Except as may be expressly provided herein, (1) no representation or warranty made by Landlord with respect to the Premises shall apply to the Suite 250 Must Take Space, (2) Tenant shall not be entitled to receive, with respect to the Suite 250 Must Take Space, any allowance, free rent or other financial concession granted with respect to the Premises, and (3) the Suite 250 Must Take Space shall be accepted by Tenant in its configuration and condition existing on the date hereof (or, subject to Section 7.10 below, in such other configuration and condition as any existing tenant thereof may cause to exist in accordance with its lease), without any obligation of Landlord to perform or pay for any alterations to the Suite 250 Must Take Space, and without any representation or warranty regarding the configuration or condition of the Suite 250 Must Take Space.
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7.2
|
Suite 250 Expansion Effective Date. As used in this Section 7, "Suite 250 Expansion Effective Date" means the date upon which Landlord delivers possession (if ever and pursuant to the Lease, as amended hereby) of the Suite 250 Must Take Space to Tenant free from occupancy by any party (including, without limitation, free of any such parties' personal property), which delivery date is anticipated to be no later than October 1, 2020 (for purposes of this Section 7, the "Suite 250 Target Delivery Date"). The adjustment of the Suite 250 Expansion Effective Date and, accordingly, the postponement of Tenant's obligation to pay rent for the Suite 250 Must Take Space shall be Tenant's sole remedy if the Suite 250 Must Take Space is not delivered to Tenant in accordance with the terms hereof as of the Suite 250 Target Delivery Date. Notwithstanding any contrary provision of the Lease, any delay or failure to deliver the Suite 250 Must Take Space shall not be a Landlord default nor subject Landlord to any liability for any loss or damage resulting therefrom or entitle Tenant to any credit, abatement or adjustment of rent or other sums payable under the Lease; provided, however, that Landlord shall not lease the Suite 250 Must Take Space to anyone other than Tenant and Landlord shall not extend the Suite 250 Existing Lease (defined below).
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7.3
|
Confirmation Letter. At any time after the Suite 250 Expansion Effective Date, Landlord may deliver to Tenant a notice substantially in the form of Exhibit F attached hereto, as a confirmation of the information set forth therein. Tenant shall execute and return (or, by written notice to Landlord, reasonably object to) such notice within ten (10) business days after receiving it.
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7.4
|
Base Rent. With respect to the Suite 250 Must Take Space, commencing on the Suite 250 Expansion Effective Date and continuing during the Suite 250 Expansion Term, Tenant shall pay Base Rent at the same then applicable annual rate per square foot as described in the rent table depicted in Section 2.1 of this Seventh Amendment (as thereafter increased annually pursuant to such rent table). Notwithstanding the foregoing, Base Rent for the Suite 250 Must Take Space shall be abated for the first (2) full months of the Suite 250 Expansion Term; provided, however, that if a Default exists when any such abatement would otherwise apply, such abatement shall be deferred until the date, if any, on which such Default is cured. All such Base Rent shall be payable monthly by Tenant in accordance with the terms of the Lease.
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7.5
|
Tenant's Share. With respect to the Suite 250 Must Take Space during the Suite 250 Expansion Term, Tenant's Share shall be 1.5458%.
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7.6
|
Expenses and Taxes. With respect to the Suite 250 Must Take Space during the Suite 250 Expansion Term, Tenant shall pay for Tenant's Share of Expenses and Taxes in accordance with the terms of the Lease; provided, however, that, with respect to the Suite 250 Must Take Space during the Suite 250 Expansion Term, the Base Year for Expenses and Taxes shall be the calendar year in which the Suite 250 Expansion Effective Date falls.
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7.7
|
Improvements to the Suite 250 Must Take Space. Following the Suite 250 Expansion Effective Date, Tenant shall be entitled to perform improvements to the Suite 250 Must Take Space, in accordance with the Work Letter attached to the Fifth Amendment as Exhibit A, provided that (i) the Allowance for the Suite 250 Must Take Space shall be $79,950.00 (based upon $25.00 per rentable square foot of the Suite 250 Must Take Space) multiplied by a fraction, the numerator of which is the number of months remaining in the First Expansion Space Term (which First Expansion Space Term runs from 7/1/2018 - 5/31/2024) as of the Suite 250 Expansion Effective Date and the denominator of which is 71, (ii) if Tenant fails to use the entire Allowance (as calculated under this Section 7.7) within twelve (12) months after the Suite 250 Expansion Effective Date, the unused amount shall revert to Landlord and Tenant shall have no further rights with respect thereto, and (iii) the Coordination Fee, referenced in Section 2.3 of the Work Letter shall be 1.5% of the cost of the Tenant Improvement Work.
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7.8
|
Parking. During the Suite 250 Expansion Term with respect to the Suite 250 Must Take Space, Tenant shall be entitled to use an additional ten (10) unreserved parking spaces in the Parking Facility in accordance with the terms of the Lease.
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7.9
|
Contingency. The parties acknowledge and agree that Landlord has previously leased the Suite 250 Must Take Space to a third party (such party, and any successor or assignee thereto, the "Suite 250 Existing Tenant") for a lease term extending through September 30, 2020 ("Suite 250 Existing Lease"). Landlord shall attempt to engage the Suite 250 Existing Tenant in discussions in an effort to terminate the Suite 250 Existing Lease prior to its scheduled expiration date; however, Landlord shall not be obligated to expend any funds to effect such termination and Landlord does not guaranty it will be successful in terminating the Suite 250 Existing Lease prior to the scheduled expiration date. Tenant shall pay half of any reasonable costs incurred by Landlord to effect such early termination upon receipt of an invoice therefor. Notwithstanding the foregoing, if the Suite 250 Existing Tenant fails to surrender possession of the Suite 250 Must Take Space by the expiration of the Suite 250 Existing Lease, then Landlord shall use commercially reasonable efforts to recover possession of the Suite 250 Must Take Space from the Suite 250 Existing Tenant as soon thereafter as reasonably possible (including, if necessary in Landlord's reasonable judgement, by commencing and pursuing an unlawful detainer).
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7.10
|
Suite 250 Must Take Space. Landlord shall use commercially reasonable efforts, subject to the rights of the Suite 250 Existing Tenant under the Suite 250 Existing Lease, to schedule and perform, at least 90 days before the Suite 250 Target Delivery Date, a walk-through of the Suite 250 Must Take Space during which representatives of Landlord and Tenant may identify any leasehold improvements in the Suite 250 Must Take Space that (a) Landlord may have the right, under the Suite 250 Existing Lease, to require the Suite 250 Existing Tenant to remove, and (b) Tenant wishes not to be removed or to be removed. If Tenant provides to Landlord, at least 75 days before the Suite 250 Target Delivery Date, a Non-Removal Notice identifying any leasehold improvements in the Suite 250 Must Take Space that Tenant, acting on a reasonable basis, does not wish to be removed before the Suite 250 Expansion Effective Date, then Landlord shall use commercially reasonable efforts to enforce any rights it may have under the Suite 250 Existing Lease to require the Suite 250 Existing Tenant to not perform such removal obligations, or, if applicable, to waive any such rights to cause the Suite 250 Existing Tenant to perform such removal obligations. If any such improvement is not so removed, then, for all purposes under the Lease, such Non-Removal Item shall be deemed a Tenant-Insured Improvement as to which Landlord has timely notified Tenant, pursuant to Section 8 of the Lease, that its removal shall be required pursuant to such Section 8; provided, however, that if, when it delivers any Non-Removal Notice, Tenant specifically requests that Landlord identify any Non-Removal Item in the Suite 250 Must Take Space that Landlord will require to be removed pursuant to such Section 8, Landlord shall do so within 10 business days after receiving such request.
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8.
|
Suite 460 Must Take Space.
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8.1
|
Effective Date of Suite 460 Must Take. Effective as of the Suite 460 Expansion Effective Date (defined in Section 8.2 below), the Premises shall be increased by the addition of approximately 6,413 rentable square feet described as Suite 460 on the fourth (4th) floor of the Building (as more particularly shown on Exhibit D hereto, the "Suite 460 Must Take Space"). The term of the Lease for the Suite 460 Must Take Space (the "Suite 460 Expansion Term") shall commence on the Suite 460 Expansion Effective Date and, unless sooner terminated in accordance with the Lease, end on the Seventh Amendment Expiration Date. From and after the Suite 460 Expansion Effective Date, the Suite 460 Must Take Space shall be subject to all the terms and conditions of the Lease except as provided herein. Except as may be expressly provided herein, (1) no representation or warranty made by Landlord with respect to the Premises shall apply to the Suite 460 Must Take Space, (2) Tenant shall not be entitled to receive, with respect to the Suite 460 Must Take Space, any allowance, free rent or other financial concession granted with respect to the Premises, and (3) the Suite 460 Must Take Space shall be accepted by Tenant in its configuration and condition existing on the date hereof (or, subject to Section 8.10 below, in such other configuration and condition as any existing tenant thereof may cause to exist in accordance with its lease), without any obligation of Landlord to perform or pay for any alterations to the Suite 460 Must Take Space, and without any representation or warranty regarding the configuration or condition of the Suite 460 Must Take Space.
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8.2
|
Suite 460 Expansion Effective Date. As used in this Section 8, "Suite 460 Expansion Effective Date" means the date upon which Landlord delivers possession (if ever and pursuant to the Lease, as amended hereby) of the Suite 460 Must Take Space to Tenant free from occupancy by any party (including, without limitation, free of any such parties' personal property), which delivery date is anticipated to be no later than May 1, 2022, unless the existing tenant thereof exercises its option to renew for an additional five (5) year period (for purposes of this Section 8, the "Suite 460 Target Delivery Date"). The adjustment of the Suite 460 Expansion Effective Date and, accordingly, the postponement of Tenant's obligation to pay rent for the Suite 460 Must Take Space shall be Tenant's sole remedy if the Suite 460 Must Take Space is not delivered to Tenant in accordance with the terms hereof as of the Suite 460 Target Delivery Date. Notwithstanding any contrary provision of the Lease, any delay or failure to deliver the Suite 460 Must Take Space shall not be a Landlord default nor subject Landlord to any liability for any loss or damage resulting therefrom or entitle Tenant to any credit, abatement or adjustment of rent or other sums payable under the Lease; provided, however, that Landlord shall not lease the Suite 460 Must Take Space to anyone other than Tenant and Landlord shall not extend the Suite 460 Existing Lease (defined below) except where the Suite 460 Existing Tenant exercises its renewal option strictly pursuant to the terms of the Suite 460 Existing Lease.
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8.3
|
Confirmation Letter. At any time after the Suite 460 Expansion Effective Date, Landlord may deliver to Tenant a notice substantially in the form of Exhibit F attached hereto, as a confirmation of the information set forth therein. Tenant shall execute and return (or, by written notice to Landlord, reasonably object to) such notice within 10 business days after receiving it.
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8.4
|
Base Rent. With respect to the Suite 460 Must Take Space, commencing on the Suite 460 Expansion Effective Date and continuing during the Suite 460 Expansion Term, Tenant shall pay Base Rent at the same then applicable annual rate per square foot as described in the rent table depicted in Section 2.1 of this Seventh Amendment (as thereafter increased annually pursuant to such rent table). Notwithstanding the foregoing, Base Rent for the Suite 460 Must Take Space shall be abated for the first (2) full months of the Suite 460 Expansion Term; provided, however, that if a Default exists when any such abatement would otherwise apply, such abatement shall be deferred until the date, if any, on which such Default is cured. All such Base Rent shall be payable monthly by Tenant in accordance with the terms of the Lease.
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8.5
|
Tenant's Share. With respect to the Suite 460 Must Take Space during the Suite 460 Expansion Term, Tenant's Share shall be 3.1000%.
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8.6
|
Expenses and Taxes. With respect to the Suite 460 Must Take Space during the Suite 460 Expansion Term, Tenant shall pay for Tenant's Share of Expenses and Taxes in accordance with the terms of the Lease; provided, however, that, with respect to the Suite 460 Must Take Space during the Suite 460 Expansion Term, the Base Year for Expenses and Taxes shall be the calendar year in which the Suite 460 Expansion Effective Date falls.
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8.7
|
Improvements to the Suite 460 Must Take Space. Following the Suite 460 Expansion Effective Date, Tenant shall be entitled to perform improvements to the Suite 460 Must Take Space, in accordance with the Work letter attached to the Fifth Amendment as Exhibit A, provided that (i) the Allowance for the Suite 460 Must Take Space shall be $160,325.00 (based upon $25.00 per rentable square foot of the Suite 460 Must Take Space) multiplied by a fraction, the numerator of which is the number of months remaining in the First Expansion Space Term (which First Expansion Space Term runs from 7/1/2018 - 5/31/2024) as of the Suite 460 Expansion Effective Date and the denominator of which is 71, (ii) if Tenant fails to use the entire Allowance (as calculated under this Section 8.7) within twelve (12) months after the Suite 460 Expansion Effective Date, the unused amount shall revert to Landlord and Tenant shall have no further rights with respect thereto, and (iii) the Coordination Fee, referenced in Section 2.3 of the Work Letter shall be 1.5% of the cost of the Tenant Improvement Work.
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8.8
|
Parking. During the Suite 460 Expansion Term with respect to the Suite 460 Must Take Space, Tenant shall be entitled to use an additional nineteen (19) unreserved parking spaces in the Parking Facility in accordance with the terms of the Lease.
|
8.9
|
Contingency. The parties acknowledge and agree that Landlord has previously leased the Suite 460 Must Take Space to a third party (such party, and any successor or assignee thereto, the "Suite 460 Existing Tenant") for a lease term extending through April 30, 2022 (with a five (5) year option to renew) ("Suite 460 Existing Lease"). Landlord shall attempt to engage the Suite 460 Existing Tenant in discussions in an effort to terminate the Suite 460 Existing Lease prior to its scheduled expiration date; however, Landlord shall not be obligated to expend any funds to effect such termination and Landlord does not guaranty it will be successful in terminating the Suite 460 Existing Lease prior to the scheduled expiration date. Tenant shall pay half of any reasonable costs incurred by Landlord to effect such early termination upon receipt of an invoice therefor. Notwithstanding the foregoing, if the Suite 460 Existing Tenant fails to surrender possession of the Suite 460 Must Take Space by the expiration of the Suite 460 Existing Lease, then Landlord shall use commercially reasonable efforts to recover possession of the Suite 460 Must Take Space from the Suite 460 Existing Tenant as soon thereafter as reasonably possible (including, if necessary in Landlord's reasonable judgement, by commencing and pursuing an unlawful detainer).
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8.10
|
Suite 460 Must Take Space. Landlord shall use commercially reasonable efforts, subject to the rights of the Suite 460 Existing Tenant under the Suite 460 Existing Lease, to schedule and perform, at least 90 days before the Suite 460 Target Delivery Date, a walk-through of the Suite 460 Must Take Space during which representatives of Landlord and Tenant may identify any leasehold improvements in the Suite 460 Must Take Space that (a) Landlord may have the right, under the Suite 460 Existing Lease, to require the Suite 460 Existing Tenant to remove, and (b) Tenant wishes not to be removed or to be removed. If Tenant provides to Landlord, at least 75 days before the Suite 460 Target Delivery Date, a Non-Removal Notice identifying any leasehold improvements in the Suite 460 Must Take Space that Tenant, acting on a reasonable basis, does not wish to be removed before the Suite 460 Expansion Effective Date, then Landlord shall use commercially reasonable efforts to enforce any rights it may have under the Suite 460 Existing Lease to require the Suite 460 Existing Tenant to not perform such removal obligations, or, if applicable, to waive any such rights to cause the Suite 460 Existing Tenant to perform such removal obligations. If any such improvement is not so removed, then, for all purposes under the Lease, such Non-Removal Item shall be deemed a Tenant-Insured Improvement as to which Landlord has timely notified Tenant, pursuant to Section 8 of the Lease, that its removal shall be required pursuant to such Section 8; provided, however, that if, when it delivers any Non-Removal Notice, Tenant specifically requests that Landlord identify any Non-Removal Item in the Suite 460 Must Take Space that Landlord will require to be removed pursuant to such Section 8, Landlord shall do so within 10 business days after receiving such request.
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9.
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Suite 100 Must Take Space.
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9.1
|
Effective Date of Suite 100 Must Take. Effective as of the Suite 100 Expansion Effective Date (defined in Section 9.2 below), the Premises shall be increased by the addition of approximately 2,770 rentable square feet described as Suite 100 on the first (1st) floor of the Building (as more particularly shown on Exhibit D hereto, the "Suite 100 Must Take Space"). The term of the Lease for the Suite 100 Must Take Space (the "Suite 100 Expansion Term") shall commence on the Suite 100 Expansion Effective Date and, unless sooner terminated in accordance with the Lease, end on the Seventh Amendment Expiration Date. From and after the Suite 100 Expansion Effective Date, the Suite 100 Must Take Space shall be subject to all the terms and conditions of the Lease except as provided herein. Except as may be expressly provided herein, (1) no representation or warranty made by Landlord with respect to the Premises shall apply to the Suite 100 Must Take Space, (2) Tenant shall not be entitled to receive, with respect to the Suite 100 Must Take Space, any allowance, free rent or other financial concession granted with respect to the Premises, and (3) the Suite 100 Must Take Space shall be accepted by Tenant in its configuration and condition existing on the date of delivery thereof, without
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9.2
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Suite 100 Expansion Effective Date. As used in this Section 9, "Suite 100 Expansion Effective Date" means the date upon which Landlord delivers possession (if ever and pursuant to the Lease, as amended hereby) of the Suite 100 Must Take Space to Tenant free from occupancy by any party (including, without limitation, free of any such parties' personal property), which delivery date will be (if ever) the later to occur of (i) the date Tenant leases from Landlord all of the remaining rentable space in the Building such that Tenant is effectively the only tenant in the Building, and (ii) the date Landlord has provided another fitness center option (other than the fitness center currently located in the Suite 100 Must Take Space) for the benefit of the other buildings owned by Landlord (or affiliates of Landlord) located in the vicinity of the Building.
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9.3
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Confirmation Letter. At any time after the Suite 100 Expansion Effective Date, Landlord may deliver to Tenant a notice substantially in the form of Exhibit F attached hereto, as a confirmation of the information set forth therein. Tenant shall execute and return (or, by written notice to Landlord, reasonably object to) such notice within 10 business days after receiving it.
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9.4
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Base Rent. With respect to the Suite 100 Must Take Space during the Suite 100 Expansion Term, Tenant shall pay Base Rent at the same then applicable annual rate per square foot as described in the rent table depicted in Section 2.1 of this Seventh Amendment (as thereafter increased annually pursuant to such rent table). All such Base Rent shall be payable monthly by Tenant in accordance with the terms of the Lease.
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9.5
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Tenant's Share. With respect to the Suite 100 Must Take Space during the Suite 100 Expansion Term, Tenant's Share shall be 1.3389%.
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9.6
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Expenses and Taxes. With respect to the Suite 100 Must Take Space during the Suite 100 Expansion Term, Tenant shall pay for Tenant's Share of Expenses and Taxes in accordance with the terms of the Lease; provided, however, that, with respect to the Suite 100 Must Take Space during the Suite 100 Expansion Term, the Base Year for Expenses and Taxes shall be the calendar year in which the Suite 100 Expansion Effective Date falls.
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9.7
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Parking. During the Suite 100 Expansion Term with respect to the Suite 100 Must Take Space, Tenant shall be entitled to use an additional nineteen (19) unreserved parking spaces in the Parking Facility in accordance with the terms of the Lease.
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10.
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California Civil Code Section 1938. Pursuant to California Civil Code § 1938, Landlord hereby states that the Existing Premises, Suite 210, the First Expansion Space, the Second Expansion Space, and the Suite 250, 460 and 100 Must Take Spaces referenced in Sections 7, 8, and 9 above, have not undergone inspection by a Certified Access Specialist (CASp) (defined in California Civil Code § 55.52). Accordingly, pursuant to California Civil Code § 1938(e), Landlord hereby further states as follows: "A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises". In accordance with the foregoing, Landlord and Tenant agree that if Tenant requests a CASp inspection of the Premises, then Tenant shall pay (i) the fee for such inspection, and (ii) the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the Premises; provided, that, if Tenant is required to obtain such CASp inspection by applicable Law or to avoid any penalty
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11.
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Package HVAC Units. In the event Tenant desires to utilize any existing dedicated heating, ventilation and air conditioning units ("Package Units") within the Premises, or installs, as an Alteration, new Package Units within the Premises, the plans and specifications for any Package Units shall be subject to Landlord's reasonable approval. If Tenant elects to utilize or install Package Units within the Premises, Tenant shall also install, at Tenant's sole cost and expense, separate meters or at Landlord's option, sub-meters, in order to measure the amount of electricity furnished to such Package Units and Tenant shall be responsible for Landlord's actual cost of supplying electricity to such units as reflected by such meters or sub-meters, which amounts shall be payable on a monthly basis as Additional Rent. Tenant shall be responsible for maintenance and repair of the Package Units pursuant to Section 25.5 of the Lease and such units may be subject to removal by Tenant upon the expiration or earlier termination of the Lease pursuant to Section 25.5 of the Lease.
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12.
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The Single Tenant Amendment. Tenant hereby acknowledges and agrees, that at such time that Tenant has added to the Premises all of the remaining must-take space as provided in the Fifth Amendment and this Seventh Amendment, such that Tenant is effectively the only tenant in the Building, Landlord may prepare and deliver to Tenant an amendment (the "Single Tenant Amendment") (a) shifting the obligation to provide and pay for janitorial services, utility service, and security service to the Premises from Landlord to Tenant, and (b) decreasing the amount included for Expenses in the Base Year(s) then-applicable to various portions of the Premises to exclude the amount that Landlord reasonably determines it incurred to provide janitorial services, utility service, and security service in the applicable Base Year(s). Tenant shall execute and return the Single Tenant Amendment to Landlord within fifteen (15) days after receiving it, but Landlord shall be relieved of the obligation to provide and pay for janitorial service, utility service and security service to the Premises and the Expenses included in the Base Year(s) shall be adjusted whether or not the Single Tenant Amendment is executed.
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13.
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Signage.
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13.1
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Building-Top Signage. Subject to this Section 13.1, Tenant may, at Tenant's sole cost and expense, cause its existing building-top signage currently located on the East elevation of the Building ("Tenant's Existing Signage") to be removed from the exterior of the Building and shall cause the exterior of the Building to be restored to the condition existing prior to the placement of Tenant's Existing Signage. Tenant may re-install, at its sole cost and expense, such building-top sign on the North West elevation of the Building ("Tenant's Building-Top Signage"). The graphics, materials, size, color, design, lettering, lighting (if any), specifications and exact location of Tenant's Building-Top Signage (collectively, the "Signage Specifications") shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld, conditioned, or delayed. In addition, the Tenant's Building-Top Signage and all Signage Specifications therefor shall be subject to Tenant's receipt of all required governmental permits and approvals, shall be subject to all applicable governmental laws and ordinances, and all covenants, conditions and restrictions affecting the Building. Tenant hereby acknowledges that, notwithstanding Landlord's approval of the Tenant's Building-Top Signage and/or the Signage Specifications therefor, Landlord has made no representations or warranty to Tenant with respect to the probability of obtaining such approvals and permits. In the event Tenant does not receive the necessary permits and approvals for Tenant's Building-Top Signage, Tenant's and Landlord's rights and obligations under the remaining provisions of the Lease, as amended hereby, shall not be affected. The cost of installation of Tenant's Building-Top Signage, as well as all costs of design and construction of Tenant's Building-Top Signage and all other costs associated with Tenant's Building-Top Signage, including, without limitation, permits, maintenance and repair, shall be the sole responsibility of Tenant. Notwithstanding anything to the contrary contained herein, in the event that at any time during the Seventh Amendment Extended Term (or any Extension Term, if applicable), Tenant fails to lease at least 100,000 rentable square feet in the Building, Tenant's right to Tenant's Building-Top Signage shall thereupon terminate and Tenant
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13.2
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Exclusive Monument Signage. From and after the date of this Seventh Amendment, Tenant shall have the right, at Tenant's sole cost and expense, to exclusive use of the "monument" sign located at the Building ("Tenant's Monument Signage"). Tenant's Monument Signage shall be subject to Landlord's approval (which approval shall not be unreasonably withheld, conditioned or delayed) as to size, design, location, graphics, materials, colors and similar specifications and shall be consistent with the exterior design, materials and appearance of the Building and the Building's signage program and shall be further subject to all applicable local governmental laws, rules, regulations, codes and Tenant's receipt of all permits and other governmental approvals and any applicable covenants, conditions and restrictions. Tenant's Signage shall be personal to the Original Tenant and may not be assigned to any assignee or sublessee, or any other person or entity; provided that the rights to Tenant's Monument Signage may be transferred to an assignee of the Original Tenant's interest in the Lease that acquires its interest solely by means of one or more Permitted Transfers originating with the Original Tenant so long as the name of such assignee is not an "Objectionable Name," as that term is defined in Section 13.1 above. In addition, should the name of the Original Tenant change, Tenant shall be entitled to modify, at Tenant's sole cost and expense, Tenant's Monument Signage to reflect Tenant's new name, but only if Tenant's new name is not an "Objectionable Name". Landlord has the right, but not the obligation, to oversee the installation of Tenant's Monument Signage. The cost to
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14.
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Surrender. Except as required under Section 23 of the Original Lease (regarding removal of Lines) and except as required under Section 25.5 of the Original Lease and Section 11 above (regarding Units and Package Units) and except for Tenant's obligation to remove all of Tenant's full floor signage (i.e., any signage in the elevator lobby, hallways, or other areas of any full floor leased by Tenant) and Tenant's Building-Top Signage and Tenant's Monument Signage under Section 13 above, upon the expiration or earlier termination of the Lease, as amended hereby, Tenant shall surrender possession of the Premises to Landlord in as good condition and repair as exists as of the date of this Seventh Amendment, except for reasonable wear and tear, casualty, condemnation and repairs that are Landlord's express responsibility hereunder. Notwithstanding the foregoing, (a) in the event any Alterations are installed by Tenant in the Premises after the date of this Seventh Amendment which are not approved by Landlord, Tenant shall remove such non-approved Alterations upon the expiration or earlier termination of the Lease and repair any damage associated with such removal, and (b) in the event any tenant improvements or Alterations are installed by Tenant in the Premises after the date of this Seventh Amendment (including, without limitation, any Tenant Improvement Work to be installed in the Premises by Tenant in accordance with the Work Letter attached to the Fifth Amendment as Exhibit A), which are approved by Landlord, Tenant shall not be required to remove such Tenant Improvement Work or Alterations upon the expiration or earlier termination of the Lease. For clarity, nothing contained in this Section 14 shall be construed to limit Tenant's obligation to remove the Lines, Units, Package Units, Full Floor Signage or Tenant's Building-Top Signage or Tenant's Monument Signage upon the expiration or earlier termination of the Lease.
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15.
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Miscellaneous.
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15.1
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This Seventh Amendment and the attached exhibits, which are hereby incorporated into and made a part of this Seventh Amendment, set forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Tenant shall not be entitled, in connection with entering into this Seventh Amendment, to any free rent, allowance, alteration, improvement or similar economic incentive to which Tenant may have been entitled in connection with entering into the Lease, except as may be otherwise expressly provided in this Seventh Amendment.
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15.2
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Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect.
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15.3
|
In the case of any inconsistency between the provisions of the Lease and this Seventh Amendment, the provisions of this Seventh Amendment shall govern and control.
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15.4
|
Submission of this Seventh Amendment by Landlord is not an offer to enter into this Seventh Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Seventh Amendment until Landlord has executed and delivered it to Tenant.
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15.5
|
Capitalized terms used but not defined in this Seventh Amendment shall have the meanings given in the Lease.
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15.6
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Tenant shall indemnify and hold Landlord, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents harmless from all claims of any brokers in connection with this Seventh Amendment other than Savills Studley, claiming to have represented Tenant in connection with this Seventh Amendment. Tenant acknowledges that any assistance rendered by any agent or employee of any affiliate of Landlord in connection with this Seventh Amendment has been made as an accommodation
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15.7
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Landlord acknowledges that no Security Agreement (as defined in Article 17 of the Original Lease) exists on the date hereof.
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15.8
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This Seventh Amendment may be executed in any number of duplicate originals, all of which shall be of equal legal force and effect. Additionally, this Seventh Amendment may be executed in counterparts, but shall become effective only after each party has executed a counterpart hereof; all said counterparts when taken together, shall constitute the entire single agreement between the parties. This Seventh Amendment may be executed by a party’s signature transmitted by portable document format ("pdf") or email or by a party's electronic signature (collectively, "pdf Signatures"), and copies of this Seventh Amendment executed and delivered by electronic means or originals of this Seventh Amendment executed by pdf Signature shall have the same force and effect as copies hereof executed and delivered with original wet signatures. All parties hereto may rely upon emailed or pdf Signatures as if such signatures were original wet signatures. Any party executing and delivering this Seventh Amendment by pdf or email shall promptly thereafter deliver a counterpart signature page of this Seventh Amendment containing said party’s original signature. All parties hereto agree that a pdf or emailed signature page or a pdf Signature may be introduced into evidence in any proceeding arising out of or related to this Seventh Amendment as if it were an original wet signature page.
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15.9
|
Tenant and Landlord's affiliate, Hudson Concourse, LLC, a Delaware limited liability company ("Hudson Concourse") have concurrently entered into that certain Lease, of even date herewith, whereby Hudson Concourse leases to Tenant Suite 500 and Suite 600 (collectively, the "Concourse Premises") of the building located at 1745 Technology Drive, San Jose, California (the "Concourse"), contingent upon Hudson Concourse successfully terminating the existing leases for the Concourse Premises (collectively, the "Existing Leases") prior to their scheduled expiration dates. In the event Hudson Concourse has not entered into an agreement, within forty-five (45) days after the date of full execution and delivery of this Seventh Amendment, to terminate the Existing Leases effective on or prior to June 1, 2018, Landlord shall so notify Tenant and Tenant may, within five (5) days after such notice, terminate this Seventh Amendment, unless Landlord and Tenant mutually agree in writing to extend the forty-five (45) day period referenced above. In the event Hudson Concourse enters into an agreement, within forty-five (45) days after the date of full execution and delivery of this Seventh Amendment, to terminate the Existing Leases effective as of a date on or prior to June 1, 2018, but fails to deliver the Concourse Premises by June 1, 2018, Tenant may, within five (5) days after such date (but prior to the date Landlord actually delivers the Concourse Premises to Tenant), terminate this Seventh Amendment.
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LANDLORD:
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HUDSON 1740 TECHNOLOGY, LLC,
a Delaware limited liability company
By:Hudson Pacific Properties, L.P.,
a Maryland limited partnership,
its sole member
By:Hudson Pacific Properties, Inc.,
a Maryland corporation,
its general partner
By: /s/ Mark T. Lammas
Name: Mark T. Lammas
Title: Chief Operating Officer, Chief Financial Officer & Treasurer
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TENANT:
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NUTANIX, INC., a Delaware corporation,
By: /s/ Duston Williams
Name: Duston Williams
Title: Chief Financial Officer
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To:
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_______________________
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1.
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The Commencement Date is _____________ and the Expiration Date is _______________.
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2.
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The exact number of rentable square feet within the Premises is _________ square feet, subject to Section 2.1.1 of the Lease.
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3.
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Tenant's Share, based upon the exact number of rentable square feet within the Premises, is ____________%, subject to Section 2.1.1 of the Lease.
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A.
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Landlord (as successor in interest to CA-Metro Plaza Limited Partnership, a Delaware limited partnership) and Tenant are parties to that certain lease dated April 23, 2014 (the "Original Lease"), as previously amended by that certain First Amendment dated March 23, 2015 ("First Amendment"), by that certain Second Amendment dated January 28, 2016 ("Second Amendment"), and by that certain Third Amendment dated July 28, 2016 ("Third Amendment") (as amended, the "Lease"). Pursuant to the Lease, Landlord has leased to Tenant space currently containing a total of approximately 28,121 rentable square feet (the "Premises") comprised of approximately 9,716 rentable square feet described as Suite No. 280 located on the second (2nd) floor and approximately 18,405 rentable square feet described as Suite No. 300 located on the third (3rd) floor of the building commonly known as 181 Metro Drive located at 181 Metro Drive, San Jose, California 95110 (the "Building").
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B.
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Pursuant to Section 1 of the Third Amendment, the Lease will expire by its terms on March 31, 2021 (the "Existing Expiration Date"), and the parties wish to extend the term of the Lease on the following terms and conditions.
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1.
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Extension. The term of the Lease is hereby extended through May 31, 2024 (the "Fourth Amendment Expiration Date"). The portion of the term of the Lease beginning on April 1, 2021 and ending on the Fourth Amendment Expiration Date shall be referred to herein as the "Fourth Amendment Extended Term."
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2.
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Base Rent. During the period from the date of this Fourth Amendment through March 31, 2021, Tenant shall pay Base Rent for the Premises in accordance with the terms and conditions of the Lease. During the Fourth Amendment Extended Term, the schedule of Base Rent for the Premises shall be as follows:
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Period of the
Fourth Amendment Extended Term
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Annual Rate Per Square Foot (rounded to the nearest 100th of a dollar)
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Monthly Base Rent
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4/1/2021 - 3/31/2022
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$43.01
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$100,789.72
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4/1/2022 - 3/31/2023
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$44.30
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$103,813.41
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4/1/2023 - 3/31/2024
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$45.63
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$106,927.81
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4/1/2024 - 5/31/2024
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$47.00
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$110,135.65
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3.
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Expenses and Taxes. During the Fourth Amendment Extended Term, Tenant shall pay Tenant's Share of Expenses and Taxes for the Premises in accordance with the terms of the Lease; provided, however, that from and after April 1, 2021, the Base Year for the Premises shall be 2021.
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4.
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Improvements to the Premises.
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4.1
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Configuration and Condition of the Premises. Tenant acknowledges that it currently is, and as of the commencement of the Fourth Amendment Extended Term will be, in possession of the Premises and agrees to accept them "as is" without any representation by Landlord regarding their configuration or condition and without any obligation on the part of Landlord to perform or pay for any alteration or improvement, except as may be otherwise expressly provided in Section 5.2 of the Third Amendment and this Fourth Amendment.
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4.2
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Responsibility for Improvements to the Premises. Tenant shall be entitled to perform additional improvements to the Premises, and to receive an allowance from Landlord for such improvements, in accordance with the terms and conditions of the Work Letter attached to the Third Amendment as Exhibit A; provided that (i) the Allowance referenced in Section 1.1 of the Work Letter shall be $13.89 per rentable square foot of the Premises (for a total Allowance of $390,600.69) and shall be available to Tenant from and after May 31, 2018, (ii) the reference to "March 31, 2019" contained in the last sentence of Section 1.1 of the Work Letter shall be revised to "December 31, 2021," and (iii) the Coordination Fee, referenced in Section 2.3 of the Work Letter shall be 1.5% of the cost of the Tenant Improvement Work.
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4.3
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Other Modifications with respect to the Premises. The reference to March 31, 2019 contained in the last sentence of Section 1.1 of the Work Letter attached to the Third Amendment as Exhibit A is hereby replaced with "December 31, 2019" as it applies to the $10.00 per rentable square foot originally provided in Exhibit A of the Third Amendment (as opposed to the additional $13.89 per rentable square foot of the Premises provided in Section 4.2 above, which must be used by December 31, 2021 per Section 4.2 above).
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5.
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Security Deposit. Tenant has previously deposited with Landlord $89,495.08 as a Security Deposit under the Lease. Landlord shall continue to hold the Security Deposit in accordance with the terms and conditions of Section 21 of the Original Lease.
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6.
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Extension Option. Section 6 of the Third Amendment is hereby deleted in its entirety. Tenant shall retain the right to further extend the term of the Lease for the entire Premises for one (1) additional period of three (3) years under the terms and conditions of Section 7 of the First Amendment, provided (a) all references in such Section 7 to the "Modified Expiration Date" shall mean and refer to the Fourth Amendment Expiration Date referenced in Section 1 above, and (b) the reference to "2018" in the last clause of Section 7.2.(B) of the First Amendment shall be modified to "2024".
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7.
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California Civil Code Section 1938. Pursuant to California Civil Code § 1938, Landlord hereby states that the Premises have not undergone inspection by a Certified Access Specialist (CASp) (defined in California Civil Code § 55.52) and provides the following notification to Tenant: "A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction related accessibility standards within the premises." In accordance with the foregoing, Landlord and Tenant agree that if Tenant requests a CASp inspection of the Premises, then Tenant shall pay (i) the fee for such inspection, and (ii) the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the Premises;
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8.
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Package HVAC Units. In the event Tenant desires to utilize any existing dedicated heating, ventilation and air conditioning units ("Package Units") within any portion of the Premises, or installs, as part of the Tenant Improvement Work or as an Alteration, new Package Units within any portion of the Premises, the plans and specifications for any Package Units shall be subject to Landlord's reasonable approval. If Tenant elects to utilize or install Package Units within the Premises, Tenant shall also install, at Tenant's sole cost and expense, separate meters or at Landlord's option, sub-meters, in order to measure the amount of electricity furnished to such Package Units and Tenant shall be responsible for Landlord's actual cost of supplying electricity to such units as reflected by such meters or sub-meters, which amounts shall be payable on a monthly basis as Additional Rent. Tenant shall be responsible for maintenance and repair of the Package Units pursuant to Section 25.5 of the Original Lease and such units may be subject to removal by Tenant upon the expiration or earlier termination of the Lease pursuant to Section 25.5 of the Original Lease.
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9.
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Surrender. Except as required under Section 23 of the Original Lease (regarding removal of Lines) and except as required under Section 25.5 of the Original Lease and Section 8 above (regarding Units and Package Units), and except for Tenant's obligation to remove all of Tenant's full floor signage (i.e., any signage in the elevator lobby, hallways, or other areas of any full floor leased by Tenant), upon the expiration or earlier termination of the Lease, as amended hereby, Tenant shall surrender possession of the Premises to Landlord in as good condition and repair as exists as of the date of this Fourth Amendment, except for reasonable wear and tear, casualty, condemnation and repairs that are Landlord's express responsibility hereunder. Notwithstanding the foregoing, (a) in the event any Alterations are installed by Tenant in the Premises after the date of this Fourth Amendment which are not approved by Landlord, Tenant shall remove such non-approved Alterations upon the expiration or earlier termination of the Lease and repair any damage associated with such removal, and (b) in the event Alterations are installed by Tenant in the Premises after the date of this Fourth Amendment (including, without limitation, any Tenant Improvement Work to be installed in the Premises by Tenant in accordance with the Work Letter attached to the Third Amendment as Exhibit A), which are approved by Landlord, Tenant shall not be required to remove such Tenant Improvement Work or Alterations upon the expiration or earlier termination of the Lease. For clarity, nothing contained in this Section 10 shall be construed to limit Tenant's obligation to remove the Lines, Units, Package Units upon the expiration or earlier termination of the Lease.
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10.
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Miscellaneous.
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10.1
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This Fourth Amendment and the attached exhibits, which are hereby incorporated into and made a part of this Fourth Amendment, set forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Tenant shall not be entitled, in connection with entering into this Fourth Amendment, to any free rent, allowance, alteration, improvement or similar economic incentive to which Tenant may have been entitled in connection with entering into the Lease, except as may be otherwise expressly provided in this Fourth Amendment.
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10.2
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Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect.
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10.3
|
In the case of any inconsistency between the provisions of the Lease and this Fourth Amendment, the provisions of this Fourth Amendment shall govern and control.
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10.4
|
Submission of this Fourth Amendment by Landlord is not an offer to enter into this Fourth Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Fourth Amendment until Landlord has executed and delivered it to Tenant.
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10.5
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Capitalized terms used but not defined in this Fourth Amendment shall have the meanings given in the Lease.
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10.6
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Tenant shall indemnify and hold Landlord, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents harmless from all claims of any brokers, other than Savills Studley, claiming to have represented Tenant in connection with this Fourth Amendment. Landlord shall indemnify and hold Tenant, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, and agents, and the respective principals and members of any such agents harmless from all claims of any brokers claiming to have represented Landlord in connection with this Fourth Amendment. Tenant acknowledges that any assistance rendered by any agent or employee of any affiliate of Landlord in connection with this Fourth Amendment has been made as an accommodation to Tenant solely in furtherance of consummating the transaction on behalf of Landlord, and not as agent for Tenant.
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10.7
|
Landlord represents and warrants to Tenant that to Landlord's actual knowledge, without any duty of inquiry, no Security Agreement which is secured by the Building exists on the date hereof. Tenant acknowledges and agrees that Landlord leases the land underlying the Project pursuant to a ground lease (the "Ground Lease") under which Landlord currently is the lessee and the lessor. Tenant agrees that in the event of any merger of the ground leasehold interest with fee ownership of the Premises or other termination of the Ground Lease relating to the Premises, the Lease (as amended) shall not be terminated or destroyed by the application of the doctrine of merger and the Lease (as amended) shall continue in full force and effect notwithstanding any such merger or other termination.
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10.8
|
This Fourth Amendment may be executed in any number of duplicate originals, all of which shall be of equal legal force and effect. Additionally, this Fourth Amendment may be executed in counterparts, but shall become effective only after each party has executed a counterpart hereof; all said counterparts when taken together, shall constitute the entire single agreement between the parties. This Fourth Amendment may be executed by a party's signature transmitted by portable document format ("pdf") or email or by a party's electronic signature (collectively, "pdf Signatures"), and copies of this Fourth Amendment executed and delivered by electronic means or originals of this Fourth Amendment executed by pdf Signature shall have the same force and effect as copies hereof executed and delivered with original wet signatures. All parties hereto may rely upon emailed or pdf Signatures as if such signatures were original wet signatures. Any party executing and delivering this Fourth Amendment by pdf or email shall promptly thereafter deliver a counterpart signature page of this Fourth Amendment containing said party's original signature. All parties hereto agree that a pdf or emailed signature page or a pdf Signature may be introduced into evidence in any proceeding arising out of or related to this Fourth Amendment as if it were an original wet signature page.
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10.9
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Tenant and Landlord's affiliate, Hudson Concourse, LLC, a Delaware limited liability company ("Hudson Concourse") have concurrently entered into that certain Lease, of even date herewith, whereby Hudson Concourse leases to Tenant Suite 500 and Suite 600 (collectively, the "Concourse Premises") of the building located at 1745 Technology Drive, San Jose, California (the "Concourse"), contingent upon Hudson Concourse successfully terminating the existing leases for the Concourse Premises (collectively, the "Existing Leases") prior to their scheduled expiration dates. In the event Hudson Concourse has not entered into an agreement, within forty-five (45) days after the date of full execution and delivery of this Fourth Amendment, to terminate the Existing Leases effective on or prior to June 1, 2018, Landlord shall so notify Tenant and Tenant may, within five (5) days after such notice, terminate this Fourth Amendment, unless Landlord and Tenant mutually agree in writing to extend the forty-five (45) day period referenced above. In the event Hudson Concourse enters into an agreement, within forty-five (45) days after the date of full execution and delivery of this Fourth Amendment, to terminate the Existing Leases effective as of a date on or prior to June 1, 2018, but fails to deliver the Concourse Premises by June 1, 2018, Tenant may, within five (5) days after such date (but prior to the date Landlord actually delivers the Concourse Premises to Tenant), terminate this Fourth Amendment.
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LANDLORD:
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HUDSON 1740 TECHNOLOGY, LLC,
a Delaware limited liability company
By:Hudson Pacific Properties, L.P.,
a Maryland limited partnership,
its sole member
By:Hudson Pacific Properties, Inc.,
a Maryland corporation,
its general partner
By: /s/ Mark T. Lammas
Name: Mark T. Lammas
Title: Chief Operating Officer, Chief Financial Officer & Treasurer
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TENANT:
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NUTANIX, INC., a Delaware corporation,
By: /s/ Duston Williams
Name: Duston Williams
Title: Chief Financial Officer
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1.
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BASIC LEASE INFORMATION
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2.
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PREMISES AND COMMON AREAS
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3.
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RENT
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4.
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EXPENSES AND TAXES
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5.
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USE
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6.
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SERVICES
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7.
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REPAIRS AND ALTERATIONS
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8.
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LANDLORD'S PROPERTY
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9.
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LIENS
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10.
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INDEMNIFICATION
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11.
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CASUALTY DAMAGE
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12.
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NONWAIVER
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13.
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CONDEMNATION
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14.
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ASSIGNMENT AND SUBLETTING
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15.
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SURRENDER
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16.
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HOLDOVER
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17.
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SUBORDINATION
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18.
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ENTRY BY LANDLORD
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19.
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DEFAULTS
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20.
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LANDLORD EXCULPATION
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21.
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SECURITY DEPOSIT
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22.
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RELOCATION
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23.
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COMMUNICATIONS AND COMPUTER LINES
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24.
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PARKING
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25.
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MISCELLANEOUS
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1.
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BASIC LEASE INFORMATION.
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1.1 Date:
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April 4, 2018
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1.2 Premises.
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1.2.1 "Building":
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1745 Technology Drive, San Jose, California, commonly known as The Concourse VI.
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1.2.2 "Premises":
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Subject to Section 2.1.1, a total of 58,714 rentable square feet of space comprised of (a) the entire fifth (5th) floor of the Building commonly known as "Suite 500," and containing approximately 29,357 rentable square feet the outline and location of which is set forth in Exhibit A-1 and (b) the entire sixth (6th) floor of the Building commonly known as "Suite 600" and containing approximately 29,357 rentable square feet the outline and location of which is set forth in Exhibit A-2. If the Premises include any floor in its entirety, all corridors and restroom facilities located on such floor shall be considered part of the Premises.
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1.2.3 "Property":
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The Building, the parcel(s) of land upon which it is located, and, at Landlord's discretion, any parking facilities and other improvements serving the Building and the parcel(s) of land upon which such parking facilities and other improvements are located.
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1.2.4 "Project":
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The Property or, at Landlord's discretion, any project containing the Property and any other land, buildings or other improvements.
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1.3 Term
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1.3.1 Term:
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The term of this Lease (the "Term") be seventy-two (72) months and shall begin on the Commencement Date and expire on the Expiration Date (or any earlier date on which this Lease is terminated as provided herein).
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1.3.2
"Commencement Date":
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As to each of Suite 500 and Suite 600, the later of (a) June 1, 2018, and (ii) the Delivery Date for each such full floor of the Premises.
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1.3.3"Expiration Date":
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May 31, 2024.
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1.4 "Base Rent"
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"Base Rent"
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Period During
Term
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Annual Base Rent Per Rentable Square Foot (rounded to the nearest 100th of a dollar)
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Monthly Base Rent Per Rentable Square Foot (rounded to the nearest 100th of a dollar)
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Monthly
Installment
of Base Rent
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Commencement Date* - 3/31/2019
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N/A
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$3.00
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$176,142.00
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4/1/2019 - 3/31/2020
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$2,177,115.12
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$3.09
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$181,426.26
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4/1/2020 - 3/31/2021
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$2,242,434.00
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$3.18
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$186,869.05
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4/1/4021 - 3/31/2022
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$2,309,701.44
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$3.28
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$192,475.12
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4/1/2022 - 3/31/2023
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$2,378,992.44
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$3.38
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$198,249.37
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4/1/2023 - 3/31/2024
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$2,450,362.20
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$3.48
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$204,196.85
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4/1/2024 - 5/31/2024
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N/A
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$3.58
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$210,322.76
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1.5 Intentionally Omitted
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1.6 "Tenant's Share":
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25.7168% (based upon a total of 228,310 rentable square feet in the Building), subject to Section 2.1.1; provided in the event the Commencement Date for Suite 500 occurs on a different date than the Commencement Date for Suite 600, Tenant's Share shall be 12.8784% until such time as the Commencement Date for the entire Premises has occurred.
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1.7 "Permitted Use":
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General office and administrative use consistent with a first-class office building.
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1.8 "Security Deposit":
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$210,322.76, as more particularly described in Section 21.
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Prepaid Base Rent:
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$176,142.00, as more particularly described in Section 3.
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Prepaid Additional Rent:
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$71,043.94, as more particularly described in Section 3.
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1.9 Parking:
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One Hundred Seventy-Six (176) unreserved parking spaces, at the rate of $0.00 per space per month.
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1.10 Address of Tenant:
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Nutanix, Inc.
1740 Technology Drive, Suite 150
San Jose, CA 95110
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2.
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PREMISES AND COMMON AREAS.
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LANDLORD:
HUDSON CONCOURSE, LLC,
a Delaware limited liability company
By: Hudson Pacific Properties, L.P.,
a Maryland limited partnership,
its sole member
By: Hudson Pacific Properties, Inc.,
a Maryland corporation,
its general partner
By: /s/ Mark T. Lammas
Name: Mark T. Lammas
Title: Chief Operating Officer, Chief Financial Officer & Treasurer
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TENANT:
NUTANIX, INC., a Delaware corporation
By: /s/ Duston Williams
Name: Duston Williams
Title: Chief Financial Officer
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(i)
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"Tenant Improvements" means all improvements to be constructed in the Premises (including all corridors and restroom facilities located on each floor of the Premises), pursuant to this Work Letter. Any proposed improvements to such corridors and restroom facilities shall be in conformance with the Building-standard specifications and finishes for the Common Areas and shall be subject to Landlord's review and approval under Section 2.2 of this Work Letter below;
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(ii)
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"Tenant Improvement Work" means the construction of the Tenant Improvements, together with any related work (including demolition) that is necessary to construct the Tenant Improvements;
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(iii)
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"law" means Law; and
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(iv)
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"Agreement" means the amendment of which this Work Letter is a part.
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1.
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ALLOWANCE.
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2.
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MISCELLANEOUS.
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To:
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_______________________
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1.
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The Commencement Date is _____________ and the Expiration Date is _______________.
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2.
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The exact number of rentable square feet within the Premises is _________ square feet, subject to Section 2.1.1 of the Lease.
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3.
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Tenant's Share, based upon the exact number of rentable square feet within the Premises, is ____________%, subject to Section 2.1.1 of the Lease.
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"Landlord":
_______________________________
By:
Name:
Title:
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Agreed and Accepted as of , 20 .
"Tenant":
_______________________________
By:
Name:
Title:
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1.
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California Civil Code Section 1938. Pursuant to California Civil Code § 1938, Landlord hereby states that the Premises has not undergone inspection by a Certified Access Specialist (CASp) (defined in California Civil Code § 55.52). Accordingly, pursuant to California Civil Code § 1938(e), Landlord hereby further states as follows: "A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises". In accordance with the foregoing, Landlord and Tenant agree that if Tenant requests a CASp inspection of the Premises, then Tenant shall pay (i) the fee for such inspection, and (ii) the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the Premises; provided, that, if Tenant is required to obtain such CASp inspection by applicable Law or to avoid any penalty imposed under applicable Law, then the cost of and obligation for making any repairs necessary to correct violations of construction-related accessibility standards within the Premises shall be governed by the provisions of this Lease.
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2.
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Extension Option.
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(a)
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not less than 12 and not more than 15 full calendar months before the expiration date of the Lease, Tenant delivers written notice to Landlord (the "Extension Notice") electing to exercise the Extension Option and stating Tenant's estimate of the Prevailing Market (defined in Section 2.5 below) rate for the Extension Term;
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(b)
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no Default exists when Tenant delivers the Extension Notice;
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(c)
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no part of the Premises is sublet (other than to an Affiliate of Tenant) when Tenant delivers the Extension Notice; and
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(d)
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the Lease has not been assigned (other than pursuant to a Permitted Transfer) before Tenant delivers the Extension Notice.
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(a)
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During the Extension Term, (a) the Base Rent rate per rentable square foot shall be equal to the Prevailing Market rate per rentable square foot; (b) Base Rent shall increase, if at all, in accordance with the increases assumed in the determination of Prevailing Market rate; and (c) Base Rent shall be payable in monthly installments in accordance with the terms and conditions of the Lease.
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(b)
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During the Extension Term, Tenant shall pay Tenant's Share of Expenses and Taxes for the Premises in accordance with the Lease.
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2.3
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Procedure for Determining Prevailing Market.
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(a)
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Initial Procedure. Within thirty (30) days after receiving the Extension Notice, Landlord shall give Tenant either (i) written notice ("Landlord's Binding Notice") accepting Tenant's estimate of the Prevailing Market rate for the Extension Term stated in the Extension Notice, or (ii) written notice ("Landlord's Rejection Notice") rejecting such estimate and stating Landlord's estimate of the Prevailing Market rate for the Extension Term. If Landlord gives Tenant a Landlord's Rejection Notice, Tenant, within fifteen (15) days thereafter, shall give Landlord either (A) written notice ("Tenant's Binding Notice") accepting Landlord's estimate of the Prevailing Market rate for the Extension Term stated in such Landlord's Rejection Notice, or (B) written notice ("Tenant's Rejection Notice") rejecting such estimate. If Tenant gives Landlord a Tenant's Rejection Notice, Landlord and Tenant shall work together in good faith to agree in writing upon the Prevailing Market rate for the Extension Term. If, within thirty (30) days after delivery of a Tenant's Rejection Notice, the parties fail to agree in writing upon the Prevailing Market rate, the provisions of Section 2.3(b) shall apply.
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(b)
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Dispute Resolution Procedure.
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1.
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If, within 30 days after delivery of a Tenant's Rejection Notice, the parties fail to agree in writing upon the Prevailing Market rate, Landlord and Tenant, within five (5) days thereafter, shall each simultaneously submit to the other, in a sealed envelope, its good faith estimate of the Prevailing Market rate for the Extension Term (collectively, the "Estimates"). Within seven (7) days after the exchange of Estimates, Landlord and Tenant shall each select a broker or agent (an "Agent") to determine which of the two Estimates most closely reflects the Prevailing Market rate for the Extension Term. Each Agent so selected shall be licensed as a real estate broker or agent and in good standing with the California Department of Real Estate, and shall have at least five (5) years' experience within the previous 10 years as a commercial real estate broker or agent working in San Jose, California, with working knowledge of current rental rates and leasing practices relating to buildings similar to the Building.
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2.
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If each party selects an Agent in accordance with Section 2.3(b)(1) above, the parties shall cause their respective Agents to work together in good faith to agree upon which of the two Estimates most closely reflects the Prevailing Market rate for the Extension Term. The Estimate, if any, so agreed upon by such Agents shall be final and binding on both parties as the Prevailing Market rate for the Extension Term and may be entered in a court of competent jurisdiction. If the Agents fail to reach such agreement within 20 days after their selection, then, within 10 days after the expiration of such 20-day period, the parties shall instruct the Agents to select a third Agent meeting the above criteria (and if the Agents fail to agree upon such third Agent within 10 days after being so instructed, either party may cause a court of competent jurisdiction to select such third Agent). Promptly upon selection of such third Agent, the parties shall instruct such Agent (or, if only one of the parties has selected an Agent within the 7-day period described above, then promptly after the expiration of such 7-day period the parties shall instruct such Agent) to determine, as soon as practicable but in any case within 14 days after his selection, which of the two Estimates most closely reflects the Prevailing Market rate. Such determination by such Agent (the "Final Agent") shall be final and binding on both parties as the Prevailing Market rate for the Extension Term and may be entered in a court of competent jurisdiction. If the Final Agent believes that expert advice would materially assist him, he may retain one or more qualified persons to provide such expert advice. The parties shall share equally in the costs of the Final Agent and of any experts retained by the Final Agent. Any fees of any other broker, agent, counsel or expert engaged by Landlord or Tenant shall be borne by the party retaining such broker, agent, counsel or expert.
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(c)
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Adjustment. If the Prevailing Market rate has not been determined by the commencement date of the Extension Term, Tenant shall pay Base Rent for the Extension Term upon the terms and conditions in effect during the last month ending on or before the expiration date of the Lease until such time as the Prevailing Market rate has been determined. Upon such determination, the Base Rent for the Extension Term shall be retroactively adjusted. If such adjustment results in an under- or overpayment of Base Rent by Tenant, Tenant shall pay Landlord the amount of such underpayment, or receive a credit in the amount of such overpayment, with or against the next Base Rent due under the Lease.
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2.4
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Extension Amendment. If Tenant is entitled to and properly exercises its Extension Option, and if the Prevailing Market rate for the Extension Term is determined in accordance with Section 2.3 above, Landlord, within a reasonable time thereafter, shall prepare and deliver to Tenant an amendment (the "Extension Amendment") reflecting changes in the Base Rent, the Term, the expiration date of the Lease, and other appropriate terms in accordance with this Section 2, and Tenant shall execute and return (or provide Landlord with reasonable objections to) the Extension Amendment within thirty (30) days after receiving it. Notwithstanding the foregoing, upon determination of the Prevailing Market rate for the Extension Term in accordance with Section 2.3 above, an otherwise valid exercise of the Extension Option shall be fully effective whether or not the Extension Amendment is executed.
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2.5
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Definition of Prevailing Market. For purposes of this Extension Option, "Prevailing Market" shall mean the arms-length, fair-market, annual rental rate per rentable square foot under extension and renewal leases and amendments entered into on or about the date on which the Prevailing Market is being determined hereunder for space comparable to the Premises in the Building and office buildings comparable to the Building in the immediate vicinity of the Building in San Jose, California. The determination of Prevailing Market shall take into account (i) any material economic differences between the terms of the Lease and any comparison lease or amendment, such as rent abatements, construction costs and other concessions, and the manner, if any, in which the landlord under any such lease is reimbursed for operating expenses and taxes; (ii) any material differences in configuration or condition between the Premises and any comparison space, including any cost that would have to be incurred in order to make the configuration or condition of the comparison space similar to that of the Premises; and (iii) any reasonably anticipated changes in the Prevailing Market rate from the time such Prevailing Market rate is being determined and the time such Prevailing Market rate will become effective under the Lease.
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Nutanix, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(c)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: June 12, 2018
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/s/ Dheeraj Pandey
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Dheeraj Pandey
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Chairman and Chief Executive Officer
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(Principal Executive Officer)
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Nutanix, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(c)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: June 12, 2018
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/s/ Duston M. Williams
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Duston M. Williams
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Chief Financial Officer
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(Principal Financial Officer)
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Date: June 12, 2018
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/s/ Dheeraj Pandey
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Dheeraj Pandey
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Chairman and Chief Executive Officer
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(Principal Executive Officer)
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Date: June 12, 2018
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/s/ Duston M. Williams
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Duston M. Williams
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Chief Financial Officer
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(Principal Financial Officer)
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