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Lease Improvements Phase C

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LEASE


(IMPROVEMENTS PHASE "C")


By and Between


SUMITOMO BANK OF NEW YORK TRUST COMPANY ("SBNYTC"),
AS TRUSTEE
UNDER THAT CERTAIN TRUST AGREEMENT
DATED MAY 22, 1995
BETWEEN
SUMITOMO BANK LEASING AND FINANCE, INC. AND SBNYTC


as Landlord


and


CISCO SYSTEMS, INC.,
A CALIFORNIA CORPORATION


as Tenant


for
Premises located in
San Jose, California


THIS LEASE IS NOT INTENDED TO CONSTITUTE A TRUE LEASE
FOR INCOME TAX PURPOSES. SEE SECTION 21.2


2


TABLE OF CONTENTS


Page ARTICLE 1 BASIC LEASE PROVISIONS................................... 1
1.1 Date of Lease............................................ 1
1.2 Landlord................................................. 1
1.3 Tenant................................................... 1
1.4 Land..................................................... 1
1.5 Premises................................................. 1
1.6 Term..................................................... 2
1.7 Rent Commencement Date................................... 2
1.8 Base Rent................................................ 3
1.9 Addresses for Notices.................................... 3
1.10 Address for Rent Payments................................ 3


ARTICLE 2 DEFINITIONS.............................................. 4
2.1 Additional Rent.......................................... 4
2.2 Advance.................................................. 5
2.3 Approval Plans........................................... 5
2.4 Authorized Loan.......................................... 5
2.5 Authorized Plans......................................... 5
2.6 Base Rent................................................ 5
2.7 Building................................................. 5
2.8 Building Leases.......................................... 5
2.9 Capitalized Interest..................................... 5
2.10 Collateral............................................... 5
2.11 Construction Period...................................... 5
2.12 Contractor............................................... 5
2.13 Coverage Test............................................ 6
2.14 Default.................................................. 6
2.15 Default Rate............................................. 6
2.16 Entity................................................... 6
2.17 Equity Contribution...................................... 6
2.18 Equity Funded Amount..................................... 6
2.19 Equity Rent Component.................................... 6
2.20 Event of Major Default................................... 7
2.21 Extension Fee............................................ 7
2.22 Extension Term........................................... 7
2.23 Fee Mortgage............................................. 7
2.24 Funded Amount............................................ 7
2.25 Guaranteed Residual Value................................ 7
2.26 HSBC..................................................... 8
2.27 Improvements............................................. 8
2.28 Improvements Loan........................................ 8
2.29 Initial Term............................................. 8
2.30 ILC...................................................... 8
2.31 Land..................................................... 8
2.32 Land Lease............................................... 8
2.33 Land Lease Deed of Trust................................. 8
2.34 Land Loan................................................ 9
2.35 Landlord Affiliate....................................... 9
2.36 Landlord Deed of Trust................................... 9
2.37 Lease Inception Date..................................... 9


i.


3


2.38 Legal Requirements...................................... 9
2.39 Lenders................................................. 9
2.40 Lenders Deed of Trust................................... 9
2.41 LIBOR Business Day...................................... 9
2.42 LIBOR Rate. ........................................... 10
2.43 Monthly Calculation..................................... 10
2.44 Mortgage................................................ 10
2.45 Mortgagee............................................... 10
2.46 New Loan................................................ 10
2.47 Nominal Rate............................................ 10
2.48 Notes................................................... 10
2.49 Notice.................................................. 10
2.50 Official Records........................................ 10
2.51 Permitted Exceptions.................................... 10
2.52 Premises................................................ 11
2.53 Real Estate Taxes....................................... 11
2.54 Rent.................................................... 11
2.55 Rent Commencement Date.................................. 11
2.56 Rent Payment Date....................................... 11
2.57 Rent Period............................................. 11
2.58 Required Permits........................................ 11
2.59 SBNYTC.................................................. 11
2.60 Security Deposit........................................ 11
2.61 Senior Funded Amount.................................... 11
2.62 Senior Rent Component................................... 11
2.63 Site Plan............................................... 12
2.64 Sumitomo................................................ 12
2.65 Taking.................................................. 12
2.66 Tenant Deed of Trust.................................... 12
2.67 Term.................................................... 12
ARTICLE 3 DEMISE.................................................. 12
3.1 Premises................................................ 12
ARTICLE 4 TERM.................................................... 12
4.1 Initial Term............................................ 12
4.2 Extension Term.......................................... 12
4.3 Holding Over............................................ 13
ARTICLE 5 RENT.................................................... 13
5.1 Base Rent............................................... 13
5.2 Proration............................................... 16
5.3 No Abatement of Rent.................................... 16
5.4 Delinquent Rent......................................... 16
5.5 Equity Funding.......................................... 16
5.6 Exhibits Reflecting Initial Advance and Rent
Commencement Date...................................... 17
5.7 Security Deposit........................................ 18
5.8 Additional Rent......................................... 19
ARTICLE 6 TAXES................................................... 19
6.1 Real Estate Taxes....................................... 19
6.2 Personal Property Taxes................................. 20
6.3 Right to Contest........................................ 20
6.4 Withholding Taxes....................................... 21


ii.


4


6.5 Additional Provisions Relating to Taxes...................... 22
ARTICLE 7 INSURANCE.................................................... 22
7.1 Liability Insurance.......................................... 22
7.2 Builders' Risk Insurance..................................... 23
7.3 All-Risk Insurance........................................... 23
7.4 General Requirements......................................... 23
7.5 Waiver of Subrogation........................................ 24
7.6 Indemnity.................................................... 24
ARTICLE 8 USE.......................................................... 25
8.1 Use.......................................................... 25
8.2 Contest of Legal Requirements................................ 28
8.3 Indemnification.............................................. 28
ARTICLE 9 UTILITIES AND SERVICES....................................... 29
9.1 Services to the Premises..................................... 29
ARTICLE 10 MAINTENANCE AND REPAIRS; SURRENDER OF THE PREMISES........... 29
10.1 Tenant Obligations........................................... 29
10.2 Surrender of the Premises.................................... 29
ARTICLE 11 CONSTRUCTION OF IMPROVEMENTS................................. 30
11.1 Tenant's Rights to Construct Improvements.................... 30
11.2 Request for Construction Funding; Landlord
Obligation to Fund.......................................... 30
11.3 Conditions Precedent to Landlord's Obligation to
Fund Initial Advances....................................... 30
11.4 Conditions Precedent to Landlord's Obligation to
Fund Subsequent Advances.................................... 33
11.5 Conditions Precedent to Landlord's Obligation to
Fund Final Advance.......................................... 34
11.6 Additional Provisions Regarding Advances..................... 34
11.7 Required Permits, Easements, etc............................. 35
11.8 Alterations.................................................. 35
11.9 Title to and Nature of Improvements.......................... 35
11.10 Tenant as Landlord's Construction Agent...................... 36
11.11 Tenant's Release of Funding Commitment....................... 36
ARTICLE 12 LIENS........................................................ 36
ARTICLE 13 ASSIGNMENT BY LANDLORD....................................... 36
13.1 Further Mortgages or Encumbrances by Landlord;
Authorized Loans............................................ 36
13.2 Landlord's Right to Sell..................................... 39
13.3 Transfer of Funds and Property............................... 39
ARTICLE 14 ASSIGNMENT AND SUBLEASING.................................... 40
14.1 Right to Assign.............................................. 40
14.2 Right to Sublet.............................................. 40
14.3 Tenant's Right to Mortgage................................... 41


iii. 5


ARTICLE 15 EMINENT DOMAIN.......................................... 41
15.1 Total or Substantial Taking............................. 41
15.2 Partial Taking.......................................... 41
15.3 Temporary Taking........................................ 41
15.4 Damages................................................. 42
15.5 Notice and Execution.................................... 42
ARTICLE 16 DAMAGE OR DESTRUCTION................................... 42
16.1 Casualty................................................ 42
16.2 Termination of Lease.................................... 42
16.3 Insurance Proceeds...................................... 43
ARTICLE 17 DEFAULT................................................. 45
17.1 Default................................................. 45
17.2 Event of Major Default.................................. 45
17.3 Contest by Tenant....................................... 47
17.4 Remedies................................................ 47
17.5 No Waiver............................................... 48
17.6 Effect of Assignment.................................... 48
17.7 Landlord Cure Right..................................... 49
17.8 Landlord's Default...................................... 49
ARTICLE 18 QUIET ENJOYMENT......................................... 50
ARTICLE 19 TENANT'S OPTION TO PURCHASE............................. 51
19.1 Option To Purchase Premises............................. 51
19.2 Mandatory Purchase/Sale of Premises..................... 53
19.3 Survival................................................ 55
ARTICLE 20 ADDITIONAL COVENANTS OF LANDLORD........................ 55
20.1 Title and Subdivision................................... 55
20.2 Land Use................................................ 55
20.3 Transfer of Property Interests.......................... 56
20.4 Trust Equity; No Other Asset............................ 56
20.5 Default Under Authorized Loan........................... 56
ARTICLE 21 MISCELLANEOUS........................................... 57
21.1 Relationship............................................ 57
21.2 Form of Transaction; Certain Tax Matters................ 57
21.3 Notices................................................. 58
21.4 Severability of Provisions.............................. 58
21.5 Entire Agreement; Amendment............................. 58
21.6 Approvals and Consents.................................. 58
21.7 Terminology............................................. 59
21.8 Memorandum of Lease..................................... 59
21.9 Successors and Assigns.................................. 59
21.10 Commissions............................................. 59
21.11 Attorneys' Fees......................................... 60
21.12 Governing Law........................................... 60
21.13 Counterparts............................................ 60
21.14 Time Is of the Essence.................................. 60
21.15 No Third Party Beneficiaries............................ 60
21.16 Limitations on Recourse................................. 60
21.17 Estoppel Certificates................................... 60


iv.


6


21.18 Collateral............................................. 61
21.19 Landlord's Continuing Obligation to Sell............... 61
21.20 As-Is Lease............................................ 61
21.21 Net Lease.............................................. 62
21.22 Representations and Warranties......................... 62
21.23 Appraisal Procedure.................................... 62
21.24 Financial Reporting.................................... 64
21.25 Appraisal.............................................. 64


List of Exhibits


Exhibit A Description of Land Exhibit B Permitted Exceptions Exhibit C Site Plan Exhibit D Pre-Approved Approval Plans Exhibit E Memorandum of Lease Exhibit F Form of Contractor's Certificate Exhibit G Initial Advance Memorandum Exhibit H Rent Commencement Date Memorandum Exhibit I Draw Request Form Exhibit J Closing Costs and Fees to be Included in Funded Amount Exhibit K Notice of Interest Rate Period Selection Exhibit L Description of Additional Property Owned by Landlord


v. 7
LEASE


THIS LEASE ("Lease") by and between SUMITOMO BANK OF NEW YORK TRUST COMPANY ("SBNYTC"), AS TRUSTEE UNDER THAT CERTAIN TRUST AGREEMENT DATED MAY 22, 1995 BETWEEN SUMITOMO BANK LEASING AND FINANCE, INC., AND SBNYTC ("Landlord"), and CISCO SYSTEMS, INC., a California corporation ("Tenant"), is entered into as of the date set forth in Article 1 and shall be effective and binding upon the parties hereto as of such date. Capitalized terms used in this Lease shall have the definitions set forth in Article 2 or in the text of this Lease.


In consideration of the Base Rent reserved herein, and the terms, covenants and conditions set forth below, Landlord and Tenant hereby agree as follows:


ARTICLE 1
BASIC LEASE PROVISIONS


1.1 DATE OF LEASE: May 22, 1995.


1.2 LANDLORD: Sumitomo Bank of New York Trust
Company, ("SBNYTC"), as trustee under
that certain trust agreement dated May
22, 1995 between Sumitomo Bank Leasing
and Finance, Inc. and SBNYTC.


1.3 TENANT: Cisco Systems, Inc., a California
corporation.


1.4 LAND: That certain tract of land located in
the City of San Jose, Santa Clara
County, California, consisting of
three (3) parcels and more
particularly described on Exhibit A
attached hereto, together with all
easements, rights of way,
appurtenances and other rights and
benefits belonging or pertaining to
such land. The Land does not include
the Improvements. Landlord makes no
representations as to the accuracy of
the description of the Land.


1.5 PREMISES: The Improvements which Tenant may
elect to construct, as agent for
Landlord, on the Land pursuant to the
terms of this Lease. The Premises
does not include any portion of the
Land itself.


1. 8


1.6 TERM: The initial term ("Initial Term") of
this Lease shall commence on the Date
of Lease set forth in Section 1.1
above and shall expire on May 21,
2000. Subject to the Extension
Conditions contained in Section 4.2,
upon at least ninety (90) days' prior
written notice to Landlord, Tenant may
extend the Initial Term for one (1)
additional period of five (5) years
("Extension Term"). The Initial Term
and (if exercised by Tenant) the
Extension Term shall be referred to
collectively herein as the "Term."
The Term shall cease upon, and shall
not refer to any period of time after,
termination of this Lease (whether
pursuant to the terms of the Lease, by
operation of law, or otherwise).


1.7 RENT COMMENCEMENT
DATE: Tenant's obligation to pay Base Rent
shall commence on a
Building-by-Building basis. With
respect to any particular Building, the
rent commencement date ("Rent
Commencement Date") shall be the first
LIBOR Business Day of the next calendar
month which commences immediately
following the earlier to occur of: (a)
the date Tenant receives from the
applicable governmental authority a
final Certificate of Occupancy for the
Building in question; or (b) eighteen
(18) months following the first Advance
by Landlord for the foundation for the
Building in question. If Tenant shall
elect to construct certain Improvements
in a phase of Buildings, then on or
before the Lease Inception Date for
such phase of Buildings, Landlord and
Tenant shall execute a memorandum of
understanding that construction is
taking place on a phased basis, and in
that event, the Rent Commencement Date
for such phase of Buildings shall be
the first LIBOR Business Day of the
next calendar month which commences
immediately following the earlier to
occur of: (i) the date Tenant receives
a final Certificate of Occupancy for
the phase in question from the
applicable governmental authority; or


2. 9


(ii) eighteen (18) months after the
first Advance by Landlord for the
foundation for the phase in question.


1.8 BASE RENT: As described in Section 2.6.


1.9 ADDRESSES FOR
NOTICES:


LANDLORD: TENANT:


Sumitomo Bank of New York Cisco Systems, Inc.
Trust Company Treasury Department
277 Park Avenue 3535 Garrett Drive
New York, NY 10172 Santa Clara, CA 95054
Attn: Corporate Trust Attention: Eugene Hill
Department


With a copy to: With a copy to:


Landels, Ripley & Diamond Cisco Systems, Inc.
Hills Plaza 3535 Garrett Drive
350 Steuart Street Santa Clara, CA 95054
San Francisco, CA 94105 Attention: Nancy Bareilles
Attn: Bruce W. Hyman, Esq.
and


Todd J. Anson, Esq.
Brobeck, Phleger & Harrison
550 West C Street
Suite 1300
San Diego, CA 92101


1.10 ADDRESS FOR RENT
PAYMENTS:


Equity Rent Component: Sumitomo Bank of New York Trust
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