Extreme Networks Annual Report 2000

================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- Form 10-K ---------------- (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended July 2, 2000 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number 333-71921 Extreme Networks, Inc. (Exact name of Registrant as specified in its charter) Delaware 77-0430270(State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3585 Monroe Street 95051 Santa Clara, California (Zip Code)(Address of principal executive offices) Registrant's telephone number, including area code: (408) 579-2800 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common stock, $.001 par value Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item405 of Regulation S-K is not contained herein, and will not be contained, to thebest of the Registrant's knowledge, in definitive proxy or informationstatements incorporated by reference to Part III of this Form 10-K or anyamendment to this Form 10-K. [_] The aggregate market value of voting stock held by non-affiliates of theRegistrant was approximately $9,892,125,000 as of September 15, 2000, based uponthe closing price on the Nasdaq National Market reported for such date. Thiscalculation does not reflect a determination that certain persons are affiliatesof the Registrant for any other purpose. 109,912,500 shares of the Registrant's Common stock, $.001 par value, wereoutstanding September 15, 2000. DOCUMENTS INCORPORATED BY REFERENCE Items 10 (as to directors), 11,12 and 13 of Part III incorporate byreference information from the Registrant's Proxy Statement to be filed with theSecurities and Exchange Commission in connection with the solicitation ofproxies for the Registrant's 2000 Annual Meeting of Stockholders.================================================================================ EXTREME NETWORKS, INC. FORM 10-K INDEX Page ---- PART IItem 1. Business 3Item 2. Properties 14Item 3. Legal Proceedings 14Item 4. Submission of Matters to a Vote of Security holders 14 PART IIItem 5. Market For Registrant's Common Equity and Related Stockholder Matters 16Item 6. Selected Consolidated Financial Data 16Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 17Item7A. Quantitative and Qualitative Disclosures About Market Risk 30Item 8. Financial Statements and Supplementary Data 32Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 49 PART IIIItem 10. Directors and Executive Officers of the Registrant 49Item 11. Executive Compensation 49Item 12. Security Ownership of Certain Beneficial Owners and Management 50Item 13. Certain Relationships and Related Transactions 50 PART IVItem 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 50SIGNATURES 53 PART IItem 1. Business. When used in this Report, the words "may," "should," "believes," "expects,""anticipates," "estimates" and similar expressions are intended to identifyforward-looking statements. Such statements, which include statements concerningthe availability and functionality of products under development, product mix,pricing trends, the mix of export sales, sales to significant customers and theavailability and cost of products from the Company's suppliers, are subject torisks and uncertainties, including those set forth under "Management'sDiscussion and Analysis of Financial Condition and Results of Operations --Factors That May Affect Our Results." Our actual results could differ materiallyfrom those projected in these forward-looking statements which could have amaterial adverse effect on our business, operating results and financialcondition. These forward-looking statements speak only as of the date hereof andthere may be events in the future that we are not able to predict accurately orover which we have no control.Overview Extreme Networks, Inc. ("Extreme" or "the Company") is a leading providerof broadband ethernet networking solutions for the Internet economy. The keyadvantages of our ethernet switching solutions are increased performance, theability to easily grow, or "scale," in size as customer needs change, flexibleallocation of network resources, ease of use and lower cost of ownership. Theseadvantages are obtained through the use of custom semiconductors, known asASICs, in our products and through designs that are common and uniform acrossour product line. The routing of network traffic, a function referred to asLayer 3 switching, is done primarily with ASICs in our products, andconsequently, is faster than the software implementations used in many competingproducts. Traditional Layer 3 products rely primarily on software which can slowtraffic speeds below those which could otherwise be achieved and result inmessage packets being lost when network traffic is high. Our productsincorporate an ASIC-based, wire-speed architecture and are designed to avoid theloss of message packets in the switch, or "non-blocking." As a result, ourproducts are less expensive than software-based routers, yet offer improvedperformance throughout the network.Industry Background Businesses and other organizations have become increasingly dependent onthe internet as their central communications infrastructure to provideconnectivity for internal and external communications. New mission-criticalcomputing applications, such as enterprise resource planning, large enterprisedatabases and sophisticated on-line connections with vendors, as well as theincreased use of traditional applications, such as e-mail, require significantinformation technology resources. The emergence of the desktop browser as a userinterface has enabled bandwidth-intensive applications that contain voice, videoand graphics to be used extensively through intranets and externally throughextranets. These new applications, combined with the growth in business-to-business e-commerce and other on-line transactions, mobile communications andapplication service providers for example, are further burdening the networkinfrastructure.Today's Networking Environments LANs. LANs have traditionally been designed for client/server applications,where traffic patterns were predictable and traffic loads are relatively stable.In this environment, the majority of traffic remained within a given workgroup,with only a small percentage traveling across the high traffic portion of a LANwhich interconnects all or a large part of the LAN. The increased use ofdata-intensive, mission-critical applications, the widespread implementations ofintranets and extranets, and the ubiquity of Internet technologies have createdunpredictable traffic patterns, and unpredictable traffic loads within the LAN.In addition, as users utilize the desktop browser and Internet technologies toaccess significant amounts of information from servers located inside andoutside of the organization, a much higher percentage of traffic crosses theenterprise LAN backbone. For example, an employee can make a simple request thatmay require data to be downloaded and analyzed from multiple data warehousesoutside his or her local workgroup, resulting in increased traffic across theLAN. Similarly, multiple users could request a multimedia presentation from acompany intranet or from the Internet consuming tremendous amounts of networkcapacity. Either of these situations could result in users overwhelming acompany's enterprise LAN unknowingly. As a result, the increased traffic,bandwidth-intensive applications and unpredictable traffic patterns arestraining traditional LAN environments and reducing the performance ofmission-critical applications. Early LANs supported limited numbers of users and used a variety ofprotocols to organize the transmission of data, including Ethernet, Token Ringor AppleTalk technologies. As the number of users and the amount of traffic on anetwork grew, network performance began to decline. In this shared environment,each desktop received and was burdened by the communication of every otherdesktop. The need to improve network performance was initially addressed byadding network devices known as bridges or hubs 3 that separated the entire LAN into smaller workgroups. This arrangement waseffective in supporting the traditional client/server environment where themajority of traffic remained within the workgroup. As applications became morebandwidth-intensive and users increasingly communicated outside of theirworkgroup, bridges and hubs were unable to process this traffic effectively. Tomitigate this problem, Layer 2 switches were developed to provide a dedicatedlink for each desktop and eliminate the unnecessary flow of information to everydesktop. In addition to the evolution of new devices, the need for increasedbackbone speeds led to the development of new and faster technologies such asFDDI, Fast Ethernet and ATM. However, each of these technologies employsdifferent protocols, further complicating the LAN by requiring software-basedrouters that use expensive CPUs and software tables to route this multi-protocoltraffic. Today, it is not uncommon to find multiple protocols and devices acrossthe enterprise network. A network must be scalable in the following four dimensions: Speed. Speed refers to the number of bits per second that can betransmitted across the network. Today's network applications increasinglyrequire speeds of up to 100 Mbps to the desktop. Hence, the backbone and serverconnections that aggregate traffic from desktops require speeds well in excessof 100 Mbps. Wire speed refers to the ability of a network device to process anincoming data stream at the highest possible rate without loss of packets. Wirespeed routing refers to the ability to perform Layer 3 switching at the maximumpossible rate. Bandwidth. Bandwidth refers to the volume of traffic that a network or anetwork device can handle before traffic is "blocked," or unable to get throughwithout interruption. When traffic was more predictable, the amount of trafficacross a network link or through a network device grew basically in line withthe number of users on the network. With today's data-intensive applicationsaccessed in random patterns from within and outside of the network, users canspike traffic unpredictably, consuming significant bandwidth to the detriment ofother users. Network size. Network size refers to the number of users and servers thatare connected to a network. Today's networks must be capable of connecting andsupporting up to thousands, and even tens of thousands, of users and serverswhile providing performance and reliable connectivity. Quality of service. Quality of service refers to the ability to control thedelivery of traffic based upon its level of importance. Mission-criticalenterprise and delay-sensitive multimedia applications require specificperformance minimums, while traffic such as general e-mail and Internet surfingmay not be as critical. In addition to basic standards-based prioritization oftraffic according to importance, true end-to-end quality of service wouldallocate bandwidth to specified applications.Opportunity for Next Generation Switching Solutions The emergence of several technology trends is enabling a new generation ofnetworking equipment that can meet the four scalability dimensions of today'senterprise ISPs and metropolitan area networks by accommodating newunpredictable traffic patterns and bandwidth-intensive, mission-criticalapplications. First, while many new and different technologies have beendeployed in existing LANs, Ethernet has become the predominant LAN technology,with over 97% of the market in 1999 and total shipments of over 490 millionports from 1991 to 1999, according to the Dell'Oro Group. Ethernet has evolvedfrom the original 10 Mbps Ethernet to 100 Mbps Fast Ethernet and, in 1998, to1,000 Mbps Gigabit Ethernet. Today, Gigabit ethernet and 10 gigabit ethernetrepresent a viable network backbone protocol, enabling broadband connections tobe aggregated for network backbone transport across the metropolitan core.Second, growth of the Internet and the subsequent development of applicationbased on Internet technologies have increased the use of the Internet Protocol. With the wide acceptance of Ethernet and Internet Protocol-basedtechnologies, the need to support a multi-protocol environment is diminished. Asa result, the simplified routing functionality can be embedded in applicationspecific integrated circuits, or ASICs, instead of in the software and CPUs usedin multi-protocol software-based routers. The resulting device, called a Layer 3switch, 4 functions as a less expensive and significantly faster hardware-based router.Layer 3 switches can operate at multi-gigabit speeds and, as hardware routers,can support large networks. However, most Layer 3 switches still block trafficin high utilization scenarios and can only support standards-based trafficprioritization quality of service. While Layer 3 switching dramaticallyincreases network performance, many of today's offerings fail to realize thepotential of this technology because of the use of inconsistent hardware,software and management architectures. To effectively address the needs of today's enterprise ISPs and metro areanetworks, customers need a solution that is easy to use and implement an canscale in terms of speed, bandwidth, network size and quality of service. Layer 3switching represents the next critical step in addressing these requirements.However, customers need a Layer 3 solution that provides sufficient bandwidth tosupport unpredictable traffic spikes without impacting all other users connectedto the network. In addition, customers require a quality of service solutionthat supports industry-standard prioritization and enables networkadministrators to offer quality of service that maps business processes andnetwork policies. Finally, to simplify their networks, customers need a familyof interoperable devices that utilize a consistent hardware, software andmanagement architecture. Through an integrated family of products, networkmanagers can effectively deploy the solution at any point in the network andfollow a migration path to a network implemented with a consistent architecturefrom end-to-end.The Extreme Networks Solution Extreme provides broadband ethernet networking solutions that meet therequirements of enterprise,ISPs and Metropolitan Area Networks by providingincreased performance, scalability, policy-based quality of service, ease of useand lower cost of ownership. Our products share a common ASIC, software andnetwork management architecture that enables Layer 3 switching at wire speed ineach major area of the network. In addition, these products can be utilized byISPs and content providers for their web-hosting and server co-locationoperations. Because our products are based on industry standard routing andnetwork management protocols, they are interoperable with existing networkinfrastructures. We offer policy-based quality of service that controls thedelivery of network traffic according to pre-set policies that specify priorityand bandwidth limits. All of our switches allow the switch to be managed fromany browser-equipped desktop. The key benefits of Extreme's solutions are: High performance. Our products provide Broadband and IP services Ethernettogether with the non-blocking, wire-speed routing of our ASIC-based Layer 3switching. Using our products, customers can achieve forwarding rates that areup to 100 times faster than with software-based routers. Ease of use and implementation. Our products share a common ASIC, softwareand network management architecture and offer consistent features for each ofthe key areas of the network. Our standard-based products can be integrated intoand installed within existing networks. Customers can upgrade with Extremeproducts without needing additional training. ExtremeWare software simplifiesnetwork management by enabling customers to manage any of our products remotelythrough a browser interface. Scalability. Our solutions offer customers the speed and bandwidth theyneed today with the capability to scale their networks to support demandingapplications in the future without the burden of additional training or softwareor system complexity. Customers who purchase our products can upgrade them toadvanced Layer 3 and Layer 4-7 capability because this functionality is builtinto our ASICs. Quality of service. Extreme's policy-based quality of service enablescustomers to prioritize mission-critical applications by providingindustry-leading tools for allocating network resources to specificapplications. With our policy-based quality of service, customers can use aweb-based interface to identify and control the delivery of traffic fromspecific applications in accordance with specific policies that are set by thecustomer. The quality of service functionality of our ASICs allows ourpolicy-based quality of service to be performed at wire speed. In addition toproviding priority, customers can allocate specified amounts of bandwidth tospecific applications or users. Lower cost of ownership. Our products are less expensive thansoftware-based routers, yet offer higher routing performance. Because they sharea common hardware, software and management architecture, we believe our productscan substantially reduce the cost and complexity of network management andadministration. This uniform architecture creates a simpler networkinfrastructure which leverages the knowledge and resources businesses haveinvested in Ethernet and the Internet Protocol, thereby requiring fewerresources and less time to maintain. 5 The Extreme Networks Strategy Extreme's objective is to be the leading supplier of end-to-end networksolutions. The key elements of our strategy include: Provide easy to use, high-performance, cost-effective switching solutions.We offer customers easy to use, powerful, cost-effective switching solutionsthat meet the specific demands of switching environments in enterprise LANs,ISPs and content providers. Our products provide customers with 1,000 MbpsGigabit Ethernet and the wire speed, non-blocking routing capabilities ofASIC-based Layer 3 switching. We intend to capitalize on our expertise inEthernet, Internet protocol ("IP") and switching technologies to develop newproducts based on our common architecture that meet the future requirements ofenterprise LANs, ISPs and content providers. These products will offer higherperformance with more advanced functionality and features while continuing toreduce total cost of ownership for our customers. Expand market penetration. We are focused on product sales to new customersacross market segments, including ISPs, content providers and metropolitan areanetworks, or MANs, and on extending our product penetration within existingcustomers' networks. Once a customer buys our products for one area of theirnetwork, our strategy is to then offer that customer products for other areas.As additional products are purchased, a customer obtains the increased benefitsof our end-to-end solution by simplifying their networks, extending policy-basedquality of service and reducing costs of ownership while increasing performance. Extend switching technology leadership. Our technological leadership isbased on our custom ASICs and software and includes our wire-speed, Layer 3switching, policy-based quality of service, routing protocols and ExtremeWaresoftware. We intend to invest our engineering resources in ASIC and otherdevelopment areas and provide leading edge technologies to increase theperformance and functionality of our products. We also intend to maintain ouractive role in industry standards committees such as IEEE and IETF. Leverage and expand multiple distribution channels. We distribute ourproducts primarily through resellers and selected OEMs and through our fieldsales team. To quickly reach a broad, worldwide audience, we have more than 250resellers in 50 countries, including regional networking system resellers,network integrators and wholesale distributors, and have establishedrelationships with select OEMs. We maintain a field sales force primarily tosupport our resellers and to focus on select strategic and large accounts. Weintend to increase the size of our reseller programs and are developing two tierdistribution channels in some regions. To complement and support our domesticand international reseller and OEM channels, we expect to increase our worldwidefield sales force. Provide high-quality customer service and support. We seek to enhancecustomer satisfaction and build customer loyalty through the quality of ourservice and support. We offer a wide range of standard support programs thatinclude emergency telephone support 24 hours a day, seven days a week andadvanced replacement of products. In addition, we have designed our products toallow easy service and administration. For example, we can access all of ourswitches remotely through a standard web browser to configure, troubleshoot andhelp maintain our products. We intend to continue to enhance the ease of use ofour products and invest in additional support services by increasing staffingand adding new programs for our OEMs and resellers. In addition, we also arecommitted to providing customer-driven product functionality through feedbackfrom key prospects, consultants, channel and OEM partners and customer surveys.Products Extreme provides broadband networking solutions that meet the requirementsof enterprise, ISPs and IP carrier and Metropolitan Area Networks by providingincreased performance, scalability, policy-based quality of service, ease of useand lower cost of ownership. Our Summit, BlackDiamond and Alpine switches sharea common ASIC, software and management architecture that facilitates arelatively short product design and development cycle, thereby reducing thetime-to-market for new products and features. This common architecture enablescustomers to build a broadband networking solution that has consistentfunctionality, performance and management. The common architecture andend-to-end functionality of our products also reduces the cost and complexity ofnetwork administration and management. The following table identifies our principal hardware and softwareproducts: 6 Product name Product name and date of and date of first shipment Configuration / Description first shipment Configuration / DescriptionThe Summit Stackable product family The BlackDiamond Modular Chassis----------------------------------- -------------------------------- Summit-based products: BlackDiamond 6808 Up to 576 10/100 Mbps Summit4 16 10/100 Mbps September 1998 Ethernet ports or 96 March 1998 Ethernet ports and Gigabit Ethernet ports in 6 Gigabit Ethernet ports one chassis Summit24 24 10/100 Mbps 10 slots to accommodate November 1998 Ethernet ports a variety of up to 8 connectivity and modules and 1 or 2 management 1 Gigabit Ethernet ports modules Summit48 48 10/100 Mbps The Alpine Chassis April 1998 Ethernet ports and ------------------ 2 Gigabit Ethernet ports Alpine 3808 Up to 256 10/100 Mbps April 2000 Ethernet ports or 32 Gigabit Ethernet ports in one chassis Inferno-based products: Summit1i 8 Gigabit Ethernet ports 9 slots to accommodate September 2000 a variety of up to 8 connectivity modules and 1 management module Summit5i 16 Gigabit Ethernet ports September 2000 Summit7i 32 Gigabit Ethernet ports Software December 1999 -------- ExtremeWare Software suite that has standard September 1997 protocols, web-based configuration and Policy-Based Quality of Service ExtremeWare Enterprise An integrated management Manager application suite that protects August 1998 the delivery of provisioned services and applications Summit Stackable Products Products in the Summit family of switches are designed to meet thedemanding requirements emerging in intranet and Internet applications. AllSummit switches share a common non-blocking switch architecture that providesscalability in four areas: speed, bandwidth, network size and quality of service(QoS). The Summit product family supports a range of gigabit and 10/100 Mbpsaggregation for enterprise desktops and servers, large Internet data centers,and broadband points of presence ("POP") in metropolitan area networks andmulti-tenant buildings. The enterprise desktop is the portion of the network where individualend-user workstations are connected to a hub or switch. In this sharedenvironment, each desktop in the workgroup receives and is burdened by thecommunication of every other desktop in the workgroup. As applications havebecome more bandwidth intensive and as user traffic has migrated outside theworkgroup via the Internet or an intranet or extranet, the hubs are unable toeffectively process this traffic, resulting in diminished desktop performance.Replacing the hub with a Layer 3 switch alleviates this problem by providing adedicated link for each desktop and eliminating unnecessary broadcasts ofinformation to every desktop in the workgroup. Enterprise desktop switchingprovides the desktop with features typically found only at the network core,such as redundancy, greater speed and the ability to aggregate multiple switchports into a single high-bandwidth connection. Extreme became an industry leaderin Layer 3 switching for the desktop with the introduction of our Summit48 andSummit24 desktop switching products. The Summit48 addresses high-densityenterprise desktop connections. This switch features a non-blocking architectureto avoid the loss of data packets. The Summit24, with half the number of portsof the Summit48, is targeted at local wiring closets with moderately densedesktop connections. Servers run the applications and store the data needed by all networkend-users. The traditional network architecture has been shifting toward morecentralized server clusters, or server farms, which require the physicaldeployment of multiple servers in a single central data center. This newarchitecture is easier to manage and can be configured in a redundant fashion,thereby reducing the risk of 7 system failure. Additionally, remote offices and telecommuters can access thesame server-based data as desktop users, increasing the flexibility of thenetwork to support users wherever they may be located. As more people access thenetwork and as server requests increasingly involve more bandwidth-intensiveapplications, network traffic to and from servers has increased dramatically,causing bandwidth to be consumed by traffic. Servers also communicate with eachother, creating a high volume of server-to-server traffic within the serverfarm. Recent technology developments allow enterprises to install networkinterface cards that enable connections using Gigabit Ethernet or theaggregation of multiple 100 Mbps ports on a single card. This developmentincreases the communication speed of the servers. In turn, these servers havecreated the need for switches that can support their higher server-to-server andserver-to-end-user communications speeds. Our Summit4 product addresses serverswitching constraints by providing switched Gigabit Ethernet and multiple 100Mbps links to the servers, thereby delivering sufficient bandwidth betweenservers and to clients on attached segments. In server farms and data centers,the Summit7i maximizes server availability and performance by combining serverload-balancing with wire-speed switching. As metropolitan area networks evolve to handle more data rather than voice,the POP must also progress from serving as a simple transport device to anapplication services tool. Today's broadband POPs are moving closer to thecustomer and need to offer services density and scalability withoutre-engineering discreet narrowband technologies. There is a growing need forconsistent scalable services in the multi-tenant market, which according toCahner's InStat Group will reach $2 billion by 2004. The new Summit1i andSummit5i Gigabit Ethernet switching systems eliminate the limitations associatedwith multiple narrowband aggregation technologies traditionally used inmetropolitan POPs. BlackDiamond Modular Chassis The BlackDiamond modular chassis delivers scalability, redundancy and highreliability for core switching in high-density Ethernet/IP enterprise andservice provider networks. The BlackDiamond switch includes the fault-tolerantfeatures associated with mission-critical enterprise-class Layer 3 switching,including redundant system management and switch fabric modules, hot-swappablemodules and chassis components, load-sharing power supplies and managementmodules, up to eight 10 Mbps, 100 Mbps, or 1,000 Mbps aggregated links, dualsoftware images and system configurations, spanning tree and multipath routing,and redundant router protocols for enhanced system reliability. The network core is the most critical point in the network, as it is wherethe majority of network traffic, including desktop, segment and server traffic,converges. Network core switching involves switching traffic from the desktops,segments and servers within the network. Because of the high-traffic nature ofthe network core, wire-speed Layer 3 switching, scalability, a non-blockinghardware architecture, fault-tolerant mission-critical features, redundancy,link aggregation, the ability to support a variety of high-density "speeds andfeeds" and the ability to accommodate an increasing number of high-capacitybackbone connections are critical in core switching. Alpine Chassis The Alpine 3808 chassis switch provides a simpler, more resilient broadbandinfrastructure for metropolitan area networks ("MANs"), service provider datacenters, multi-tenant buildings and enterprise wiring closets. The Alpine 3808is the industry's first broadband provisioning switch based on Ethernet and IPthat enables MANs and carriers to deliver more infrastructure bandwidth, sliceand dice that bandwidth for optimal usage, and guarantee fixed latency fordelay-sensitive services such as video and voice. ExtremeWare The ExtremeWare software suite combines industry-standard protocols toprovide interoperability with legacy switches and routers, plus Policy-BasedQuality of Service (QoS) for bandwidth management and traffic prioritization intoday's networks. With ExtremeWare, QoS policies are easy to define and assignto traffic groups. The range of QoS profiles includes minimum bandwidth, maximumbandwidth and relative priority. These QoS profiles are key to optimizingbandwidth management effectiveness. Our policy-based quality of service alsoenables network managers to define numerous levels of control, or policies, thatdetermine the amount of bandwidth available to a group of users or networkdevices at a given time. ExtremeWare Enterprise Manager ExtremeWare Enterprise Manager is a value-added application suite thatmakes it easier to perform configuration, troubleshooting and status monitoring,and deploy multi-vendor policy-based management. ExtremeWare Enterprise Manageroffers a comprehensive 8 set of network management tools that are easy to use from a workstation with aJava-enabled web browser. ExtremeWare Enterprise Manager simplifies the task ofmanaging and configuring groups of our switches. With ExtremeWare EnterpriseManager, an entire network of our switches can be managed from a singlemanagement console using a standard web browser. ExtremeWare ServiceWatch In August 2000 Extreme announced ExtremeWare ServiceWatch. This software isdesigned to help businesses avoid costly downtime and help to ensure thatnetwork services remain up and performing at peak levels. Just like thetelephone dial tone that indicates the availability and quality of voiceservices, ServiceWatch delivers application dial tone to facilitate "always-on"Layer 7 network services. It monitors and manages the response time ofmission-critical services such as e-mail, e-commerce and filer transferactivities. If response time starts to degrade, ServiceWatch can be configuredto notify the network manager to take corrective action before a problem occurs.ServiceWatch is also used as a bandwidth-capacity planning tool and can helptrack ISP service level agreements (SLAs) using historical reporting andgraphing of service availability and response time.Sales, Marketing and Distribution Extreme's sales and marketing strategy is focused on domestic andinternational resellers, distributors, OEMs and field sales. Resellers. We have entered into agreements to sell our products throughmore than 250 resellers in 50 countries. Our resellers include regionalnetworking system resellers, resellers who focus on specific vertical markets,network integrators and wholesale distributors. We provide training and supportto our resellers and our resellers generally provide the first level of supportto end users of our products. We intend to increase the number of our resellerrelationships, to target vertical markets and support a two-tier distributionchannel. OEMs. We have established several key OEM relationships with leaders in thetelecommunications, personal computer and computer networking industries. Weintend to maintain a limited number of relationships with key strategic OEMs whomay offer products or distribution channels that compliment ours. Each of ourOEMs resells our products under its own name. We believe that our OEMrelationships enhance our ability to sell and provide support to largeorganizations because certain end-user organizations may prefer to do businesswith very large suppliers. We anticipate that OEM sales will decline as apercentage of net revenue as we expand our reseller and fields sales efforts. Field sales. We have designed and established our field sales organizationto support and develop leads for our resellers and to establish and maintain alimited number of key accounts and strategic customers. To support theseobjectives, our field sales force: . assists end-user customers in finding solutions to complex network system and architecture problems;. differentiates the features and capabilities of our products from competitive offerings;. continually monitors and understands the evolving networking needs of enterprise customers;. promotes our products and ensures direct contact with current and potential customers; and. monitors the changing requirements of our customers. As of June 30, 2000, Extreme's worldwide sales and marketing organizationincluded 376 individuals, including managers, sales representatives, andtechnical and administrative support personnel. We have domestic sales officeslocated in major metropolitan areas in Arizona, California, Colorado,Connecticut, District of Columbia, Florida, Georgia, Illinois, Kansas,Massachusetts, Maryland, Michigan, North Carolina, New Jersey, New York, Ohio,Oregon, Pennsylvania, Texas, Washington and Wisconsin. In addition, we haveinternational sales offices located in Argentina, Australia, Brazil, Chile,Columbia, France, Germany, Hong Kong, Italy, Japan, Korea, The Netherlands,Sweden and United Kingdom.International sales We believe that there is a strong international market for our switchingproducts. Our international sales are conducted primarily through our overseasoffices and foreign resellers. Sales to customers outside of North Americaaccounted for approximately 45% of our net revenue in fiscal 2000. 9 Marketing We have a number of marketing programs to support the sale and distributionof our products and to inform existing and potential customers and ourresellers, distributors and OEMs about the capabilities and benefits of ourproducts. Our marketing efforts include participation in industry tradeshows,technical conferences and technology seminars, preparation of competitiveanalyses, sales training, publication of technical and educational articles inindustry journals, maintenance of our web site, advertising and publicrelations. In addition, we have begun to develop an e-commerce business directedat resellers. We also participate in third-party, independent product tests.Customer Support and Service Our customer service and support organization maintains and supportsproducts sold by our field sales force to end users, and provides technicalsupport to our resellers and OEMs. Generally, our resellers and OEMs provideinstallation, maintenance and support services to their customers and we assistour resellers and OEMs in providing such support. In addition to designing custom maintenance programs to satisfy specificcustomer requirements, we also offer several standard maintenance programs toour resellers and customers, including ExtremeAssist Basic, ExtremeAssist1,ExtremeAssist2, ExtremeAssist Premium and ExtremeAssist Elite. ExtremeAssist Basic. This program is designed for customers who areinterested in keeping service and support costs to a minimum but want access tobasic support services. Basic service includes access to Extreme'sweb-accessible knowledge database and software upgrades and bug fixes. TheExtremeAssist program includes eight-hour, five-day technical assistance centertelephone support, e-mail inquiries and responses within 24 hours andrapid-response emergency/network down telephone support 24 hours a day, 7 days aweek. ExtremeAssist1. This program is designed for customers who have strongtechnical networking skills and are interested in keeping service and supportcosts to a minimum. With ExtremeAssist1, the customers' information technologyorganizations provide first-level support for configuration, hardware andtrouble shooting, while Extreme's technical assistance center provides advancedsecond-level support on an essential need basis. The ExtremeAssist1 programincludes all the features in ExtremeAssist Basic plus 48-hour advancedreplacement of hardware. ExtremeAssist2. This program is designed for network environments thatrequire a high degree of network availability, data integrity and end-userproductivity. The ExtremeAssist2 program includes all the features inExtremeAssist1 plus twelve-hour, five-day technical assistance center telephonesupport and next business day replacement of hardware. As switched broadband infrastructures become more vital to a company'sability to compete, networks are doing much more than just sharing anddistributing information. Networks have become the brains of day-to-day businessoperations and are the key to reducing time to market and sharpening a company'scompetitive edge. Extreme recognizes the critical nature of the switchedbroadband infrastructure in today's business environment and the ever-expandingdemands that will be put on networks in the future. To meet these needs, Extremehas developed a series of comprehensive on-site support plans to fit the needsof the most demanding network environments. ExtremeAssist Premium. ExtremeAssist Premium is designed to meet and exceedall the essential requirements of supporting and maintaining enterprise LANs.Ideal for mission-critical network environments that require a high degree ofnetwork availability, data integrity and end-user productivity. TheExtremeAssist Premium plan includes faster on-site service and spares. TheExtremeAssist Premium program includes all the features in ExtremeAssist2 plus24 hours a day, 7 days a week on-site emergency network down assistance within 4hours. ExtremeAssist Elite. ExtremeAssist Elite is Extreme's most comprehensivesupport plan for mission-critical switched broadband networks. Elite is limitedto the top 20% of Extreme's customer base to ensure a very individualized,flexible and focused approach to providing Elite support services. ExtremeWorksElite adds dedicated level 3 technical support engineers and our fastest on-siteservice and spares response time. We typically provide end users with a one-year hardware and 90-day softwarewarranty. We also offer various training courses for their third-party resellersor end-user customers. 10 Manufacturing We outsource the majority of our manufacturing and supply chain managementoperations, and we conduct quality assurance, manufacturing engineering,documentation control and repairs at our facility in Santa Clara, California.This approach enables us to reduce fixed costs and to provide flexibility inmeeting market demand. Where cost-effective, we may begin to perform certain ofour non-manufacturing outsourced operations in-house. Currently, we use three contract manufacturers--Flextronics, located in SanJose, California, to manufacture our Summit1, Summit4, Summit RPS andBlackDiamond products, MCMS, located in Boise, Idaho, to manufacture ourSummit24, Summit48, Summit1i, Summit5i and Summit7i products and Solectron,located in Milpitas, California, to manufacture our Alpine products. Each ofthese manufacturing processes and procedures is ISO 9002 certified. We designand develop the key components of our products, including ASICs and printedcircuit boards. In addition, we determine the components that are incorporatedin our products and select the appropriate suppliers of such components. Producttesting and burn-in is performed by our contract manufacturers using tests wespecify and automated testing equipment. We also use comprehensive inspectiontesting and statistical process controls to assure the quality and reliabilityof our products. We intend to regularly introduce new products and productenhancements, which will require that we rapidly achieve volume production bycoordinating our efforts with those of our suppliers and contract manufacturers.See "Factors That May Affect Our Results--Extreme Needs to Expand ItsManufacturing Operations and Depends on Contract Manufacturers for SubstantiallyAll of Its Manufacturing Requirements." Although we use standard parts and components for our products wherepossible, we currently purchase several key components used in the manufactureof our products from single or limited sources. Our principal single-sourcedcomponents include: . ASICs; . microprocessors; . programmable integrated circuits; . selected other integrated circuits; . cables; and . custom-tooled sheet metal.Our principal limited-source components include: . flash memories; . DRAMs; . SRAMs; and . printed circuit boards. Generally, purchase commitments with our single or limited source suppliersare on a purchase order basis. LSI Logic manufacturers all of our ASICs whichare used in all of our switches. Any interruption or delay in the supply of anyof these components, or the inability to procure these components from alternatesources at acceptable prices and within a reasonable time, would materiallyadversely affect our business, operating results and financial condition. Inaddition, qualifying additional suppliers can be time-consuming and expensiveand may increase the likelihood of errors. We use a rolling nine-month forecast based on anticipated product orders todetermine our material requirements. Lead times for materials and components weorder vary significantly, and depend on factors such as the specific supplier,contract terms and demand for a component at a given time. See "Factors That MayAffect Our Results--Extreme Purchases Several Key Components for Products FromSingle or Limited Sources and Could Lose Sales if These Sources Fail to Fill ItsNeeds" and "--Extreme Needs To Expand Its Manufacturing Operations and Dependson Contract Manufacturers for Substantially All of Its ManufacturingRequirements."Research and Development We believe that our future success depends on our ability to continue toenhance our existing products and to develop new products that maintaintechnological competitiveness. We focus our product development activities onsolving the needs of enterprise, service providers and IP carrier andMetropolitan Area Network markets. We monitor changing customer needs and workclosely with 11 users, value-added resellers and distributors, and market research organizationsto monitor changes in the marketplace. We design our products around currentindustry standards and will continue to support emerging standards that areconsistent with our product strategy. Our products have been designed to incorporate the same core ASICs andsoftware and system architecture, facilitating a relatively short product designand development cycle and reducing the time to market for new products andfeatures. We have utilized this architectural design to develop and introduceother product models and enhancements since the introduction of our firstproducts in 1997. We intend to continue to utilize this architectural design todevelop and introduce additional products and enhancements in the future. We are undertaking development efforts for our family of products withemphasis on increasing reliability, performance and scalability and reducing theoverall network operating costs to end users. This fiscal year we introduced anew generation chipset which was incorporated in a new product family whichbegan shipping in the quarter ended December 31. We are also focusing on costreduction engineering to reduce the cost of our products. There can be noassurance that our product development efforts will result in commerciallysuccessful products, or that our products will not be rendered obsolete bychanging technology or new product announcements by other companies. See"Factors That May Affect Our Results--Extreme's Market is Subject to RapidTechnological Change and to Compete, Extreme Must Continually Introduce NewProducts that Achieve Broad Market Acceptance."Competition The market for internet switches is part of the broader market fornetworking equipment, which is dominated by a few large companies, particularlyCabletron Systems, Cisco Systems, Lucent Technologies and Nortel Networks. Eachof these companies has introduced, or has announced its intention to develop,switches that are or may be competitive with our products. For example, inJanuary 1999, Cisco announced its Catalyst 6000 family of chassis-basedswitches. In addition, there are a number of large telecommunications equipmentproviders, including Alcatel, Ericsson, Nokia, and Siemens, which have enteredthe market for network equipment, particularly through acquisitions of publicand privately held companies. We expect to face increased competition,particularly price competition, from these and other telecommunicationsequipment providers. We also expect to compete with other public and privatecompanies that offer switching solutions, such as Alteon Web Systems and FoundryNetworks. These vendors may develop products with functionality similar to ourproducts or provide alternative network solutions. Our OEMs may compete with uswith their current products or products they may develop, and with the productsthey purchase from us. Current and potential competitors have established or mayestablish cooperative relationships among themselves or with third parties todevelop and offer competitive products. Furthermore, we compete with numerouscompanies that offer routers and other technologies and devices thattraditionally have managed the flow of traffic on the enterprise or metropolitanarea networks. Many of our current and potential competitors have longer operatinghistories and substantially greater financial, technical, sales, marketing andother resources, as well as greater name recognition and a larger installedcustomer base, than we do. As a result, these competitors are able to devotegreater resources to the development, promotion, sale and support of theirproducts. In addition, competitors with a large installed customer base may havea significant competitive advantage over us. We have encountered, and expect tocontinue to encounter, many potential customers who are extremely confident inand committed to the product offerings of our principal competitors, includingCisco Systems and Nortel Networks. Accordingly, such potential customers may notconsider or evaluate our products. When such potential customers have consideredor evaluated our products, we have in the past lost, and expect in the future tolose, sales to some of these customers as large competitors have offeredsignificant price discounts to secure such sales. We believe the principal competitive factors in the network switchingmarket are: . expertise and familiarity with network protocols, network switching and network management; . product performance, features, functionality and reliability; . price/performance characteristics; . timeliness of new product introductions; . adoption of emerging industry standards; . customer service and support; . size and scope of distribution network; 12 . brand name; . access to customers; and . size of installed customer base. We believe we compete favorably with our competitors with respect to eachof the foregoing factors. However, because many of our existing and potentialcompetitors have longer operating histories, greater name recognition, largercustomer bases and substantially greater financial, technical, sales, marketingand other resources, they may have larger distribution channels, stronger brandnames, access to more customers and a larger installed customer base than we do.Such competitors may, among other things, be able to undertake more extensivemarketing campaigns, adopt more aggressive pricing policies and make moreattractive offers to distribution partners than we can. To remain competitive,we believe we must, among other things, invest significant resources indeveloping new products and enhancing our current products and maintain customersatisfaction worldwide. If we fail to do so, our products will not competefavorably with those of our competitors which will materially adversely affectour business. See "Factors That May Affect Our Results--Intense Competition inthe Market for Networking Equipment Could Prevent Extreme From IncreasingRevenue and Prevent Extreme From Achieving or Sustaining Profitability."Intellectual Property We rely on a combination of patent, copyright, trademark and trade secretlaws and restrictions on disclosure to protect our intellectual property rights.We have been issued six patents in the U.S. We have filed eight patentapplications in the U.S. and selected countries abroad relating to thearchitecture of our network switches and quality of service features. There canbe no assurance that these applications will be approved, that any issuedpatents will protect our intellectual property or that they will not bechallenged by third parties. Furthermore, there can be no assurance that otherswill not independently develop similar or competing technology or design aroundany patents that may be issued. We also have five registered trademarks and fourpending trademark applications in the U.S. We also enter into confidentiality or license agreements with ouremployees, consultants and corporate partners, and control access to anddistribution of our software, documentation and other proprietary information.In addition, we provide our software products to end-users primarily under"shrink-wrap" license agreements included within the packaged software. Theseagreements are not negotiated with or signed by the licensee, and thus theseagreements may not be enforceable in some jurisdictions. Despite our efforts toprotect our proprietary rights, unauthorized parties may attempt to copy orotherwise obtain and use our products or technology. There can be no assurancethat these precautions will prevent misappropriation or infringement of ourintellectual property. Monitoring unauthorized use of our products is difficult,and we cannot be certain that the steps we have taken will preventmisappropriation of our technology, particularly in foreign countries where thelaws may not protect our proprietary rights as fully as in the United States. The networking industry is characterized by the existence of a large numberof patents and frequent claims and related litigation regarding patent and otherintellectual property rights. In particular, leading companies in the datacommunications and networking markets have extensive patent portfolios withrespect to networking technology. From time to time, third parties, includingthese leading companies, have asserted and may assert exclusive patent,copyright, trademark and other intellectual property rights against us. Indeed,a number of third parties, including leading companies, have asserted patentrights to technologies and related standards that are important to us. We expectto increasingly be subject to infringement claims asserted by third parties asthe numbers of products and competitors in the market for network switches growand the functionality of products overlaps. In this regard, since April, 2000,we have been in communication with one of these leading companies that believescertain of our products require a license under a number of their patents. Thethird party is willing to grant us a non-exclusive license under the identifiedpatents as well as other patents or technology that we may require. We currentlyare reviewing the identified patents to examine whether we consider a licensenecessary. However, there can be no assurance that this license would beobtainable on commercially acceptable terms. Although we have not been a party to any litigation asserting claims thatallege infringement of intellectual property rights, we cannot assure you thatwe will not be a party to litigation in the future. In addition, we cannotassure you that third parties will not assert additional claims or initiatelitigation against us or our manufacturers, suppliers or customers alleginginfringement of their proprietary rights with respect to existing or futureproducts. We may in the future initiate claims or litigation against third partiesfor infringement of our proprietary rights to determine the 13 scope and validity of our proprietary rights. Any such claims, with or withoutmerit, could be time-consuming, result in costly litigation and diversion oftechnical and management personnel or require us to develop non-infringingtechnology or enter into royalty or licensing agreements. Such royalty orlicensing agreements, if required, may not be available on acceptable terms, ifat all. In the event of a successful claim of infringement and our failure orinability to develop non-infringing technology or license the proprietary rightson a timely basis, our business, operating results and financial condition couldbe materially adversely affected.Employees As of June 30, 2000, we employed 680 persons, including 376 in sales andmarketing, 110 in research and development, 67 in operations, 65 in technicalsupport and 62 in finance and administration. We have never had a work stoppageand no personnel are represented under collective bargaining agreements. Weconsider our employee relations to be good. We believe that our future success will depend on our continued ability toattract, integrate, retain, train and motivate highly qualified personnel, andupon the continued service of our senior management and key personnel. None ofour personnel is bound by an employment agreement. Competition for qualifiedpersonnel is intense, particularly in the San Francisco Bay Area, where ourheadquarters is located. At times we have experienced difficulties in attractingnew personnel. There can be no assurance that we will successfully attract,integrate, retain and motivate a sufficient number of qualified personnel toconduct our business in the future. See "Factors That May Affect Our Results--IfExtreme Loses Key Personnel or is Unable to Hire Additional Qualified Personnelas Necessary, It May Not Be Able to Successfully Manage Its Business or AchieveIts Objectives."Item 2. Properties. Our principal administrative, sales, marketing and research developmentfacilities are located in an approximately 77,000 square feet facility locatedin Santa Clara, California. In June 2000, we entered into a five-year operatinglease agreement to lease 275,000 square feet in Santa Clara, California to housefurther physical expansion of our principal operations. We also lease officespace in various other geographic locations domestically and internationally forsales and service personnel.Item 3. Legal Proceedings. We are not aware of any pending legal proceedings against us that,individually or in the aggregate, would have a material adverse effect on ourbusiness, operating results or financial condition. We may in the future beparty to litigation arising in the course of our business, including claims thatwe allegedly infringe third-party trademarks and other intellectual propertyrights. Such claims, even if not meritorious, could result in the expenditure ofsignificant financial and managerial resources.Item 4. Submission of Matters to a Vote of Security Holders. Not applicable.Executive Officers of the Registrant The following table sets forth information regarding the executive officersof Extreme as of August 31, 2000: Name Age Position ---- --- -------- Gordon L. Stitt.......................................... 44 President, Chief Executive Officer and ChairmanStephen Haddock.......................................... 42 Vice President and Chief Technical OfficerHerb Schneider........................................... 41 Vice President of EngineeringSam Halabi............................................... 35 Vice President of IP Carrier Business DevelopmentJune Hull................................................ 45 Vice President of Human ResourcesAllan G. Miller.......................................... 48 Vice President of Manufacturing OperationsVito E. Palermo.......................................... 36 Vice President, Chief Financial Officer and SecretaryGeorge Prodan............................................ 47 Vice President of MarketingHarry Silverglide........................................ 54 Vice President of Sales Gordon L. Stitt. Mr. Stitt co-founded Extreme in May 1996 and has served asPresident, Chief Executive Officer and a director of Extreme since itsinception. From 1989 to 1996, Mr. Stitt worked at another company he co-founded,Network Peripherals, a designer and manufacturer of high-speed networkingtechnology. He served first as its Vice President of Marketing, then as VicePresident and General Manager of the OEM Business Unit. Mr. Stitt holds an MBAfrom the Haas School of Business of the University of 14 California, Berkeley and a BSEE/CS from Santa Clara University. Stephen Haddock. Mr. Haddock co-founded Extreme in May 1996 and has servedas Vice President and Chief Technical Officer of Extreme since its inception.From 1989 to 1996, Mr. Haddock worked as Chief Engineer at Network Peripherals.Mr. Haddock is a member of IEEE, an editor of the Gigabit Ethernet Standard andChairman of the IEEE 802.3ad link aggregation committee. Mr. Haddock holds anMSEE and a BSME from Stanford University. Herb Schneider. Mr. Schneider co-founded Extreme in May 1996 and has servedas Vice President of Engineering of Extreme since its inception. From 1990 to1996, Mr. Schneider worked as Engineering Manager at Network Peripherals and wasresponsible for the development of LAN switches. From 1981 to 1990, Mr.Schneider held various positions at National Semiconductor, a developer andmanufacturer of semiconductor products, where he was involved in the developmentof early Ethernet chipsets and FDDI chipsets. Mr. Schneider holds a BSEE fromthe University of California, Davis. Sam Halabi. Mr. Halabi has served as Vice President of IP Carrier businessdevelopment of Extreme since July 2000. Prior to joining Extreme Networks, Mr.Halabi held various marketing positions with leading data communicationscompanies, including Cisco Systems. Mr. Halabi holds a MS in Computer Sciencefrom San Jose State University and a BS in Computer Engineering from AmericanUniversity-Beirut. June Hull. Ms. Hull has served as Vice President of Human Resources sinceSeptember 1999. From October 1996 to August 1999, she served as RegionalDirector of Human Resources and Corporate Director of Human Resources atNetscape Communications, an e-commerce company. From April 1989 to September1996, she served in a variety of senior Human Resource management positions forApple Computer, Inc. Allan G. Miller. Mr. Miller has served as Vice President of ManufacturingOperations of Extreme since July 2000. Prior to joining Extreme Networks, Mr.Miller spent 22 years at Amdahl Corporation. He held several senior managementpositions in manufacturing operations and quality assurance, the most recent wasVice President of Operations. He holds a MS in Mechanical Engineering and a MBAfrom the University of California at Berkeley and a BS in Mechanical Engineeringfrom California State University, Northridge. Vito E. Palermo. Mr. Palermo has served as Vice President, Chief FinancialOfficer and Secretary of Extreme since January 1999. From January 1997 toJanuary 1999, he served as Senior Vice President, Chief Financial Officer andSecretary of Metawave Communications, a wireless communications company. From1992 to 1996, Mr. Palermo served in various financial management positions atBay Networks, a networking communications company, most recently serving as VicePresident and Corporate Controller and previously serving as Director ofTechnology Finance, Corporate Financial and Planning Manager, and Manufacturingand Customer Service Controller. Mr. Palermo holds an MBA from St. Mary'sCollege and a BS in Business Administration from California State University. George Prodan. Mr. Prodan has served as Vice President of Marketing ofExtreme since February 1997. From January 1994 to January 1997, he served asDirector of Marketing and Senior Director of Worldwide Channels at FORE Systems,a networking equipment company. From April 1991 to December 1993, he served as aproduct line manager for a division of 3Com, a networking company. He holds anMS in Instructional Communications from Shippensburg State University and a BSin Industrial Arts Education from California State University. Harry Silverglide. Mr. Silverglide has served as Vice President of Sales ofExtreme since January 1997. From May 1995 to January 1997, he served as VicePresident of Western Region Sales for Bay Networks. From July 1994 to May 1995,he served as Vice President of Sales for Centillion Networks, a provider of LANswitching products which was acquired by Bay Networks in 1995. From April 1984to July 1994, he worked in sales and senior sales management positions atUngermann Bass, a network communications company. 15 PART IIItem 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Company's common stock commenced trading on the Nasdaq National Marketon April 9, 1999 under the symbol "EXTR." The following table sets forth thehigh and low closing prices as reported by Nasdaq. Such prices represent pricesbetween dealers, do not include retail mark-ups, mark-downs or commissions andmay not represent actual transactions. All prices have been adjusted to reflecta 2-for-1 stock split effected in August 2000. Stock Prices High Low ---- --- 1999 Fourth quarter (1)............................................$ 29.03 $ 19.16 2000 First quarter.................................................$ 42.25 $ 22.81 Second quarter................................................$ 49.03 $ 30.66 Third quarter.................................................$ 59.50 $ 38.00 Fourth quarter................................................$ 52.75 $ 21.44 -------------- (1) Commencing April 9, 1999 At September 14, 2000, there were approximately 284 stockholders of recordof the Company's common stock and approximately 36,000 beneficial stockholders.The Company has never declared or paid cash dividends on its capital stock anddoes not anticipate paying any cash dividends in the foreseeable future. TheCompany currently intends to retain future earnings for the development of itsbusiness.Item 6. Selected Consolidated Financial Data. For the Period from May 8, 1996 (Date of Years Ended June 30, Inception) -------------------- 2000 1999 1998 June 30, 1997 ---- ---- ---- ------------- (In thousands, except per share amounts) ---------------------------------------- Consolidated Statements of Operations Data:Net revenue................................................... $ 261,956 $ 98,026 $ 23,579 $ 256Gross profit (loss)........................................... 135,040 49,506 8,682 (132)Total operating expenses...................................... 118,786 50,951 22,709 7,928Operating income (loss)....................................... 16,254 (1,445) (14,027) (8,060)Net income (loss)............................................. 20,048 (1,617) (13,936) (7,923)Basic net income (loss) per share (1)......................... $ 0.20 $ (0.09) $ (1.59) $ (2.26)Diluted net income (loss) per share (1)....................... $ 0.18 $ (0.09) $ (1.59) $ (2.26)Weighted average shares outstanding used in computing basic net income (loss) per share (1)........... 100,516 18,924 8,758 3,516Weighted average shares outstanding used in computing diluted net income (loss) per share (1)......... 111,168 18,924 8,758 3,516 16 As of June 30, ----------------------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Consolidated Balance Sheets DataCash and cash equivalents..................................... $116,721 $107,143 $ 9,510Short-term investments........................................ 66,640 16,422 10,995Working capital............................................... 205,881 119,039 13,796Total assets.................................................. 515,930 171,803 33,731Long-term debt, deposit and capital lease obligations, net of current portion.......................... 306 -- 2,634Total stockholders' equity.................................... $419,021 $141,876 $ 15,869 ------------------ (1) Share and per share data have been restated to give retroactive effectto a two-for-one stock split in the form of a stock dividend effected in August2000.Item 7. Management's Discussion and Analysis of Financial Condition and Resultsof Operations. When used in this discussion and elsewhere in this Form 10-K, the words"may," "should," "believes," "expects," "anticipates," "estimates" and similarexpressions identify forward-looking statements. Such statements, which includestatements concerning the availability and functionality of products underdevelopment, product mix, pricing trends, the mix of export sales, sales tosignificant customers and the availability and cost of products from theCompany's suppliers, are subject to risks and uncertainties, including those setforth below under "Factors That May Affect Our Results." Our actual resultscould differ materially from those anticipated in these forward-lookingstatements which could have a material adverse effect on our business, operatingresults and financial condition. These forward-looking statements speak only asof the date hereof and there may be events in the future that we are not able topredict accurately or over which we have no control which would affect or alterour expectations.Overview From our inception in May 1996 through September 1997, our operatingactivities related primarily to developing a research and developmentorganization, testing prototype designs, building an ASIC design infrastructure,commencing the staffing of our marketing, sales and field service and technicalsupport organizations, and establishing relationships with resellers and OEMs.We commenced volume shipments of our Summit1 and Summit2, the initial productsin our Summit stackable product family, in October 1997, and we began shippingour BlackDiamond modular product family in September 1998. We introduced our newAlpine product family in fiscal 2000 which is based on a new generation chipset. In addition, we also introduced new products within our existing productlines that incorporate this new chip set. Our revenue is derived primarily from sales of our Summit and BlackDiamondproduct families and fees for services relating to our products, includingmaintenance and training. The level of sales to any customer may vary fromperiod to period; however, we expect that significant customer concentrationwill continue for the foreseeable future. See "Factors That May Affect OurResults--If a Key Reseller, OEM or Other Significant Customer Cancels or Delaysa Large Purchase, Extreme's Revenues May Decline and the Price of Its Stock MayFall." For fiscal 2000, there were no customers with sales greater than 10%. Forfiscal 1999, Compaq and Hitachi Cable accounted for 21% and 13% of our netrevenue, respectively. We market and sell our products primarily through resellers, distributorsand, to a lesser extent, OEMs and our field sales organization. We sell ourproducts through more than 250 resellers in 50 countries. In fiscal 2000, salesto customers outside of North America accounted for approximately 45% of our netrevenue. Currently, all of our international sales are denominated in U.S.dollars. We generally recognize product revenue at the time of shipment, unlesswe have future obligations for installation or have to obtain customeracceptance, in which case revenue is deferred until such obligations have beensatisfied. We have established a program which, under specified conditions,enables third party resellers to return products to us. The amount of potentialproduct returns is estimated and provided for in the period of the sale. Servicerevenue is recognized ratably over the term of the contract period, which istypically 12 months. We expect to experience rapid erosion of average selling prices of ourproducts due to a number of factors, including competitive 17 pricing pressures, promotional pricing and rapid technological change. Our grossmargins will be affected by such declines and by fluctuations in manufacturingvolumes, component costs and the mix of product configurations sold. Inaddition, our gross margins may fluctuate due to the mix of distributionchannels through which our products are sold, including the potential effects ofour development of a two-tier distribution channel. We generally realize highergross margins on sales to resellers and distributors than on sales through ourOEMs. Any significant decline in sales to our OEMs or resellers or distributors,or the loss of any of our OEMs or resellers or distributors could materiallyadversely affect our business, operating results and financial condition. Inaddition, new product introductions may result in excess or obsoleteinventories. Any excess or obsolete inventories may also reduce our grossmargins. We outsource the majority of our manufacturing and supply chain managementoperations, and we conduct quality assurance, manufacturing engineering,documentation control and repairs at our facility in Santa Clara, California.Accordingly, a significant portion of our cost of revenue consists of paymentsto our contract manufacturers, Flextronics, MCMS and Solectron. We expect torealize lower per unit product costs as a result of volume efficiencies.However, we cannot assure you when or if such price reductions will occur. Thefailure to obtain such price reductions could materially adversely affect ourgross margins and operating results. Research and development expenses consist principally of salaries andrelated personnel expenses, consultant fees and prototype expenses related tothe design, development, testing and enhancement of our products. We expense allresearch and development expenses as incurred. We believe that continuedinvestment in research and development is critical to attaining our strategicobjectives and, as a result, we expect these expenses to increase in absolutedollars in the future. Sales and marketing expenses consist of salaries, commissions and relatedexpenses for personnel engaged in marketing, sales and field service supportfunctions, as well as trade shows and promotional expenses. We intend to pursuesales and marketing campaigns aggressively and therefore expect these expensesto increase significantly in absolute dollars in the future. In addition, werecently hired approximately 200 sales and marketing personnel. We expect tocontinue to expand our field sales operations to support and develop leads forour resellers and distributors, which will also result in an increase in salesand marketing expenses. General and administrative expenses consist primarily of salaries andrelated expenses for executive, finance and administrative personnel,professional fees and other general corporate expenses. We expect general andadministrative expenses to increase in absolute dollars as we add personnel,increase spending on our information systems and incur additional costs relatedto the anticipated growth of our business and operation as a public company. During fiscal 1998, in connection with the grant of certain stock optionsto employees, we recorded deferred stock compensation of $437,000 representingthe difference between the exercise price and the deemed fair value of ourcommon stock on the date such stock options were granted. Such amount isincluded as a reduction of stockholders' equity and is being amortized bycharges to operations on a graded vesting method. We recorded amortization ofdeferred stock compensation expense of approximately $119,000, $172,000 and$68,000 for the years ended June 30, 2000, 1999 and 1998, respectively. At June30, 2000, we had a total of approximately $78,000 remaining to be amortized overthe corresponding vesting period of each respective option, generally fouryears. The amortization expense relates to options awarded to employees in alloperating expense categories. Despite growing revenues in all fiscal years since our inception, fiscal2000 was the first year we have achieved profitability in each of the fourquarters. Our net income has not increased proportionately with the increase inour revenue primarily because of increased expenses relating to our growth inoperations and in particular the recent accelerated hiring of sales andmarketing personnel. Because of the lengthy sales cycle of our products, thereis often a significant delay between the time we incur expenses and the time werealize any related revenue. See "Factors That May Affect Our Results--The SalesCycle for Extreme's Products is Long and Extreme May Incur SubstantialNon-Recoverable Expenses or Devote Significant Resources to Sales that Do NotOccur When Anticipated." To the extent that future revenues do not increasesignificantly in the same periods in which operating expenses increase, ouroperating results would be adversely affected. See "Factors That May Affect OurResults--A Number of Factors Could Cause Extreme's Quarterly Financial Resultsto Be Worse Than Expected, Resulting in a Decline in Its Stock Price." Due to the Company's issuance of warrants to a networking company asdiscussed in Note 3, future operating income will be reduced by $7.1 million perquarter for each quarter in fiscal 2001 and for three of the four fiscalquarters in fiscal 2002. Notwithstanding this charge the Company stillanticipates being profitable in the first quarter of fiscal 2001.Results of Operations 18 The following table sets forth for the years indicated certain financialdata as a percentage of net revenue: Years ended June 30, --------------------------------- 2000 1999 1998 ---- ---- ---- Net revenue............................ 100.0% 100.0% 100.0%Cost of revenue........................ 48.5 49.5 63.2 ----- ----- -----Gross profit .......................... 51.5 50.5 36.8Operating expenses: Research and development............. 12.6 17.4 45.2 Sales and marketing.................. 25.6 27.6 40.7 General and administrative........... 4.5 7.0 10.4 Amortization of goodwill and purchased intangibles 2.6 -- -- ----- ----- ------ Total operating expenses..... 45.3 52.0 96.3 ----- ----- ------Operating income (loss)................ 6.2 (1.5) (59.5)Interest income........................ 5.6 1.9 2.6Interest expense....................... (.2) (.4) (1.4)Other income (loss), net............... -- -- (.8) ----- ----- ------Income (loss) before income taxes...... 11.6 .0 (59.1)Provision for income taxes............. 3.9 1.7 -- ----- ----- ------Net income (loss)...................... 7.7% (1.7)% (59.1)% ===== ===== ====== Net Revenue Net revenue increased from $98.0 million in fiscal 1999 to $262.0 millionin fiscal 2000, an increase of $164.0 million. The increase in net revenue forfiscal 2000 resulted primarily from increased sales of our Summit stackableproducts and our BlackDiamond modular product family, the market's growingacceptance of Extreme's existing and new product offerings, and a significantincrease in our sales and marketing organizations. Net revenue increased from $23.6 million in fiscal 1998 to $98.0 million infiscal 1999, an increase of $74.4 million. The increase in net revenue forfiscal 1999 resulted primarily from increased sales of our Summit stackableproducts and the introduction of our BlackDiamond modular product family inSeptember 1998. Export sales accounted for 45% and 53% of net revenue in fiscal 2000 andfiscal 1999, respectively. We expect that export sales will continue torepresent a significant portion of net revenue, although we cannot assure youthat export sales as a percentage of net revenue will remain at current levels.All sales transactions are denominated in U.S. dollars.Gross Profit Gross profit increased from $49.5 million in fiscal 1999 to $135.0 millionin fiscal 2000, an increase of $85.5 million, primarily due to the relatedincrease in revenue. Gross margins increased from 50.5% in fiscal 1999 to 51.5%in fiscal 2000. The increase in gross margin resulted primarily from a shift inproduct mix, a shift in our channel mix from OEMs to resellers and distributorsand improved manufacturing efficiencies, offset in part by lower average sellingprices due primarily to increased competition. Gross profit increased from $8.7 million in fiscal 1998 to $49.5 million infiscal 1999, an increase of $40.8 million. Gross margins increased from 36.8% infiscal 1998 to 50.5% in fiscal 1999. The increase in gross margin resultedprimarily from reductions in component costs, improved manufacturingefficiencies and a shift in our channel mix from OEMs to resellers, which wereoffset in part by lower average selling prices due to increased competition.Research and Development Expenses Research and development expenses increased from $17.0 million in fiscal1999 to $33.0 million in fiscal 2000, an increase of $16.0 million. The increasewas primarily due to nonrecurring engineering and initial product verificationexpenses and increased salaries and related personnel expenses due to the hiringof additional engineers. For fiscal 1999 and fiscal 2000, research anddevelopment expenses decreased as a percentage of net revenue from 17.4% to12.6%. This percentage decrease was primarily the result of an increase in ournet revenue. 19 Research and development expenses increased from $10.7 million in fiscal1998 to $17.0 million in fiscal 1999, an increase of $6.3 million. The increasewas primarily due to nonrecurring engineering and initial product verificationexpenses, the hiring of additional engineers and an increase in depreciationcharges due to increases in capital spending on design and simulation softwareand test equipment. For fiscal 1998 and fiscal 1999, research and developmentexpenses decreased as a percentage of net revenue from 45.2% to 17.4%. Thispercentage decrease was primarily the result of an increase in our net revenue.Sales and Marketing Expenses Sales and marketing expenses increased from $27.1 million in fiscal 1999 to$67.1 million in fiscal 2000, an increase of $40.0 million. This increase wasprimarily due to the hiring of additional sales, marketing and customer supportpersonnel, increased sales commission expenses resulting from increasedrevenues, increased tradeshow and promotional expenses and the establishment ofnew sales offices. For fiscal 1999 and fiscal 2000, sales and marketing expensesdecreased as a percentage of net revenue from 27.6% to 25.6%. This percentagedecrease was primarily the result of an increase in our net revenue. We intend to pursue sales and marketing campaigns aggressively andtherefore expect these expenses to increase significantly in absolute dollars inthe future. In addition, we recently hired approximately 200 sales and marketingpersonnel. We expect to continue to expand our field sales operations to supportand develop leads for our resellers and distributors, which will also result inan increase in sales and marketing expenses. Sales and marketing expenses increased from $9.6 million in fiscal 1998 to$27.1 million in fiscal 1999, an increase of $17.5 million. This increase wasprimarily due to the hiring of additional sales and customer support personnel,tradeshow and promotional expenses, increased commission expenses resulting fromhigher sales, and the establishment of new sales offices. For fiscal 1998 andfiscal 1999, sales and marketing expenses decreased as a percentage of netrevenue from 40.7% to 27.6%. This percentage decrease was primarily the resultof an increase in our net revenue.General and Administrative Expenses General and administrative expenses increased from $6.9 million in fiscal1999 to $11.9 million in fiscal 2000, an increase of $5.0 million. This increasewas due primarily to the hiring of additional finance, information technology,legal and administrative personnel and increased professional fees and occupancycosts. For fiscal 1999 and fiscal 2000, general and administrative expensesdecreased as a percentage of net revenue from 7.0% to 4.5%. This percentagedecrease was primarily the result of an increase in our net revenue. General and administrative expenses increased from $2.4 million in fiscal1998 to $6.9 million in fiscal 1999, an increase of $4.5 million. This increasewas due primarily to the hiring of additional finance, information technologyand legal and administrative personnel, recruiting expenses, professional feesand increased spending on information systems. For fiscal 1998 and fiscal 1999,general and administrative expenses decreased as a percentage of net revenuefrom 10.4% to 7.0%. This percentage decrease was primarily the result of anincrease in our net revenue.Amortization of Goodwill and Purchased Intangibles Amortization of goodwill and purchased intangibles was $7.1 million infiscal 2000. This amount was due to the Company's issuance of fully earned,non-forfeitable, fully exercisable warrants with a two year life to purchase 3million shares of the Company's common stock with an exercise price of $39.50per share as discussed in Note 3 of notes to consolidated financial statements.Future operating income will be reduced by approximately $7.1 million perquarter for each quarter in fiscal 2001 and for three fiscal quarters in fiscal2002.Interest Income Interest income increased from $1.9 million in fiscal 1999 to $14.6million in fiscal 2000, an increase of $12.7 million. The increase is due to theincreased amount of cash and cash equivalents, short-term investments,restricted investments and long-term investments from the proceeds we receivedfrom our initial public offering in April 1999 and our secondary public offeringin October 1999. Interest income increased from $.6 million in fiscal 1998 to $1.9 millionin fiscal 1999, an increase of $1.3 million. The increase 20 is due to the increased amount of cash and cash equivalents, short-terminvestments and long-term investments from the proceeds we received from ourinitial public offering in April 1999.Income Taxes We recorded a tax provision of $10.3 million for the year ended June 30,2000. The provision for fiscal 2000 results in an effective tax rate of 34%which consists primarily of federal taxes, state income taxes and foreign taxes,offset by the recognition of deferred tax assets. FASB Statement No. 109provides for the recognition of deferred tax assets if realization of suchassets is more likely than not. We intend to evaluate the realizability of thedeferred tax assets on a quarterly basis. We incurred significant operatinglosses for all fiscal years from inception through June 30, 1999. We recorded atax provision of $1.7 million for the year ended June 30, 1999, which consistedprimarily of foreign taxes, federal taxes and state income taxes.Liquidity and Capital Resources Cash and cash equivalents and short-term investments increased from $123.6million at June 30, 1999 to $183.4 million at June 30, 2000, an increase of$59.8 million. The increase is primarily a result of our secondary publicoffering of common stock in October 1999, which generated net proceeds of $174.0million, primarily offset by an increase in long-term investments and restrictedinvestments of $108.0 million. Cash provided by operating activities was $24.8million in fiscal 2000, as compared to cash provided by operating activities of$2.8 million in fiscal 1999. The increase was primarily due to net income,depreciation, amortization and increases in accounts payable, deferred revenueand accrued liabilities, offset by increases in accounts receivable, inventoriesand other current and noncurrent assets. We expect that accounts receivable willcontinue to increase to the extent our revenues continue to rise. We expect ourinventory levels to increase in connection with our development of a two-tierdistribution system, new product introductions and the need to maintain shorterlead times on certain products. Any such increase can be expected to reducecash, cash equivalents, short-term investments and long-term investments. Investing activities used cash of $195.0 million in fiscal 2000 due tocapital expenditures of $27.2 million, net purchases of investments of $158.8million and minority investments of $9.0 million. Our investing activities usedcash of $29.1 million in fiscal 1999 for net purchases of investments of $21.6million and capital expenditures of $7.5 million. Our investing activities usedcash of $13.5 million in fiscal 1998 for capital expenditures of $2.5 millionand net purchases of investments of $11.0 million. We expect capitalexpenditures of approximately $30.0 million in fiscal 2001. Under the terms of acertain equity investment, upon the attainment of certain technologicalmilestones, we will be obligated to purchase all of the outstanding capitalstock in fiscal 2001, payable in any combination of cash or shares of Extremecommon stock. Financing activities provided cash of $179.7 million in fiscal 2000,arising primarily from proceeds from the issuance of common stock in conjunctionwith our secondary public offering, partially offset by payments of capitallease obligations. Financing activities provided cash of $124.0 million infiscal 1999, arising primarily from proceeds from the issuance of common stockin conjunction with our initial public offering, partially offset by principalpayments on notes payable and capital lease obligations. Financing activitiesprovided cash of $21.2 million in fiscal 1998, primarily from the issuance ofconvertible preferred stock and proceeds from notes payable, partially offset byprincipal payments on notes payable and capital lease obligations. In June 2000, we entered into an operating lease agreement to lease 275,000square feet to house our primary facility in Santa Clara, California. Our leasepayments will vary based on the LIBOR plus a spread which was 7.14% at June 30,2000. Our lease payments are estimated to be approximately $5.7 million on anannual basis over the lease term. The lease is for five years and can be renewedfor two five-year periods, subject to the approval of the lessor. At theexpiration or termination of the lease, we have the option to either purchasethe property for $80.0 million, or arrange for the sale of the property to athird party for at least $80.0 million with a contingent liability for anydeficiency. If the property is not purchased or sold as described above, we willbe obligated for an additional lease payment of approximately $68.0 million. As part of the above lease transaction, the Company restricted $80.0million of its investment securities as collateral for specified obligations ofthe lessee under the lease. These investment securities are restricted as towithdrawal and are managed by a third party subject to certain limitations underthe Company's investment policy. The lease also requires us to maintainspecified financial covenants with which we were in compliance as of June 30,2000. We require substantial capital to fund our business, particularly tofinance inventories and accounts receivable and for capital expenditures. As aresult, we could be required to raise substantial additional capital. To theextent that we raise additional capital 21 through the sale of equity or convertible debt securities, the issuance of suchsecurities could result in dilution to existing stockholders. If additionalfunds are raised through the issuance of debt securities, these securities mayhave rights, preferences and privileges senior to holders of common stock andthe terms of such debt could impose restrictions on our operations. We cannotassure you that such additional capital, if required, will be available onacceptable terms, or at all. If we are unable to obtain such additional capital,we may be required to reduce the scope of our planned product development andmarketing efforts, which would materially adversely affect our business,financial condition and operating results. We believe that our current cash and cash equivalents, short-terminvestments, long-term investments and cash available from credit facilities andfuture operations will enable us to meet our working capital requirements for atleast the next 12 months.New Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for DerivativeInstruments and Hedging Activities" ("FAS 133"). FAS 133 establishes methods ofaccounting for derivative financial instruments and hedging activities relatedto those instruments as well as other hedging activities. In June 1999, the FASBissued SFAS No. 137, "Accounting for Derivative Instruments and HedgingActivities - Deferral of the Effective Date of FASB Statement No. 133", whichextended the deferral of the application of FAS 133 to all fiscal quarters offiscal years beginning after June 15, 2000. In June 15, 2000 the FASB alsoissued FAS 138, "Accounting for Certain Derivative Instruments and CertainHedging Activities) an Amendment to FASB Statement No. 133". FAS 138 amends theaccounting and reporting standards of Statement 133 for certain derivativeinstruments and certain hedging activities. The Company will be required toadopt these pronouncements for the year ending June 30, 2001. Because theCompany currently holds no derivative financial instruments and does notcurrently engage in hedging activities, adoption of FAS 133 and 138 are expectedto have no material impact on the Company's financial condition or results ofoperations. In December 1999, the Staff of the Securities and Exchange Commission("SEC") issued Staff Accounting Bulletin ("SAB") No. 101. "Revenue Recognitionin Financial Statements", which provides guidance on the recognition,presentation and disclosure of revenue in financial statements. Theimplementation of SAB 101 has recently been deferred to no later than the fourthfiscal quarter of fiscal years beginning after December 15, 1999. The Company ispresently evaluating the potential impact of the adoption of SAB 101. In March 2000, the FASB issued Financial Accounting Standards BoardInterpretation No. 44, "Accounting for Certain Transactions involving StockCompensation - an interpretation of APB Opinion No. 25" (Interpretation No. 44).Interpretation No. 44 is effective July 1, 2000. The interpretation clarifiesthe application of APB Opinion No. 25 for certain issues, specifically, (a) thedefinition of an employee, (b) the criteria for determining whether a planqualifies as a noncompensatory plan, (c) the accounting consequence of variousmodifications to the terms of a previously fixed stock option or award, and (d)the accounting for an exchange or stock compensation awards in a businesscombination. We do not anticipate that the adoption of Interpretation No. 44will have a material impact on our financial position or the results of ouroperations.Factors That May Affect Our ResultsExtreme Has a Limited History of Profitability and Cannot Assure You that itWill Continue to Achieve Profitability Although our revenue has grown in recent quarters, we cannot be certainthat we will realize sufficient revenue to achieve continued profitability on afiscal year basis. Fiscal 2000 was the first year in which Extreme achievedprofitability in each of the four quarters. We anticipate continuing to incursignificant sales and marketing, product development and general andadministrative expenses and, as a result, we will need to generate significantlyhigher revenue to sustain profitability. In particular, our recent hiring ofapproximately 200 sales and marketing personnel has substantially increasedexpenses. We expect that the hiring of such personnel will allow us to increasesales, however, we can not assure you that this will occur and we cannot assureyou that operating margins will not be adversely affected by this or otherhiring. In addition, the amortization of purchased intangibles and goodwill isestimated to be approximately $27.7 million and $21.0 million in fiscal 2001 and2002, respectively.A Number of Factors Could Cause Extreme's Quarterly Financial Results to BeWorse Than Expected, Resulting in a Decline in Its Stock Price We plan to significantly increase our operating expenses to expand oursales and marketing activities, broaden our customer 22 support capabilities, develop new distribution channels, fund increased levelsof research and development and build our operational infrastructure. We baseour operating expenses on anticipated revenue trends and a high percentage ofour expenses are fixed in the short term. As a result, any delay in generatingor recognizing revenue could cause our quarterly operating results to be belowthe expectations of public market analysts or investors, which could cause theprice of our common stock to fall. We may experience a delay in generating or recognizing revenue because of anumber of reasons. Orders at the beginning of each quarter typically do notequal expected revenue for that quarter and are generally cancelable at anytime. Accordingly, we are dependent upon obtaining orders in a quarter forshipment in that quarter to achieve our revenue objectives. In addition, thetiming of product releases, purchase orders and product availability couldresult in significant product shipments at the end of a quarter. Failure to shipthese products by the end of a quarter may adversely affect our operatingresults. Furthermore, our customer agreements typically provide that thecustomer may delay scheduled delivery dates and cancel orders within specifiedtime frames without significant penalty. Our quarterly revenue and operating results have varied significantly inthe past and may vary significantly in the future due to a number of factors,including:. fluctuations in demand for our products and services, including seasonality, particularly in Asia and Europe;. unexpected product returns or the cancellation or rescheduling of significant orders;. our ability to develop, introduce, ship and support new products and product enhancements and manage product transitions;. announcements and new product introductions by our competitors; . our ability to develop and support customer relationships with service providers and other potential large customers;. our ability to achieve required cost reductions;. our ability to obtain sufficient supplies of sole or limited sourced components for our products;. unfavorable changes in the prices of the components we purchase;. our ability to attain and maintain production volumes and quality levels for our products;. the mix of products sold and the mix of distribution channels through which they are sold; and. costs relating to possible acquisitions and integration of technologies or businesses.. the affect of amortization of goodwill and purchased intangibles resulting from existing or new transactions. Due to the foregoing factors, we believe that period-to-period comparisonsof our operating results should not be relied upon as an indicator of our futureperformance.Intense Competition in the Market for Networking Equipment Could Prevent ExtremeFrom Increasing Revenue and Prevent Extreme From Sustaining Profitability The market for Internet switches is intensely competitive. Our principalcompetitors include Cabletron Systems, Cisco Systems, Foundry Networks, LucentTechnologies and Nortel Networks. Many of our current and potential competitorshave longer operating histories and substantially greater financial, technical,sales, marketing and other resources, as well as greater name recognition andlarger installed customer bases, than we do. These competitors may havedeveloped, or could in the future, develop new technologies that compete withour products or even render our products obsolete. To remain competitive, we believe we must, among other things, investsignificant resources in developing new products and enhancing our currentproducts and maintaining customer satisfaction. If we fail to do so, ourproducts may not compete favorably with those of our competitors and our revenueand future profitability could be materially adversely affected.Extreme Expects the Average Selling Prices of Its Products to Decrease RapidlyWhich May Reduce Gross Margins or Revenue The network equipment industry has experienced rapid erosion of averageselling prices due to a number of factors, including competitive pricingpressures and rapid technological change. We may experience substantialperiod-to-period fluctuations in future 23 operating results due to the erosion of our average selling prices. Weanticipate that the average selling prices of our products will decrease in thefuture in response to competitive pricing pressures, increased sales discounts,new product introductions by us or our competitors, including, for example,competitive products manufactured with low cost merchant silicon, or otherfactors. Therefore, to maintain our gross margins, we must develop and introduceon a timely basis new products and product enhancements and continually reduceour product costs. Our failure to do so would cause our revenue and grossmargins to decline, which could materially adversely affect our operatingresults and cause the price of our common stock to decline.Extreme's Market is Subject to Rapid Technological Change and to Compete,Extreme Must Continually Introduce New Products that Achieve Broad MarketAcceptance The network equipment market is characterized by rapid technologicalchange, frequent new product introductions, changes in customer requirements andevolving industry standards. If we do not address these changes by regularlyintroducing new products, our product line will become obsolete. Developments inrouters and routing software could also significantly reduce demand for ourproduct. Alternative technologies could achieve widespread market acceptance anddisplace Ethernet technology on which our product lines and architecture arebased. We cannot assure you that our technological approach will achieve broadmarket acceptance or that other technologies or devices will not supplant ourapproach. When we announce new products or product enhancements that have thepotential to replace or shorten the life cycle of our existing products,customers may defer purchasing our existing products. These actions couldmaterially adversely affect our operating results by unexpectedly decreasingsales, increasing our inventory levels of older products and exposing us togreater risk of product obsolescence. The market for switching products isevolving and we believe our ability to compete successfully in this market isdependent upon the continued compatibility and interoperability of our productswith products and architectures offered by other vendors. In particular, thenetworking industry has been characterized by the successive introduction of newtechnologies or standards that have dramatically reduced the price and increasedthe performance of switching equipment. To remain competitive we need tointroduce products in a timely manner that incorporate or are compatible withthese new technologies as they emerge. For example, this fiscal year weintroduced a new generation chipset which was incorporated in a new productfamily which began shipping in the quarter ended March 31, 2000. We cannotassure you that these new products will be commercially successful. We haveexperienced delays in releasing new products and product enhancements in thepast which delayed sales and resulted in lower quarterly revenue thananticipated. We may experience similar delays in product development and releasein the future and any delay in product introduction could adversely affect ourability to compete and cause our operating results to be below our expectationsor the expectations of public market analysts or investors.Continued Rapid Growth Will Strain Extreme's Operations and Will Require Extremeto Incur Costs to Upgrade Its Infrastructure We have experienced a period of rapid growth and expansion which hasplaced, and continues to place, a significant strain on our resources. Even ifwe manage this growth effectively, we may make mistakes in operating ourbusiness such as inaccurate sales forecasting, incorrect material planning orinaccurate financial reporting, which may result in unanticipated fluctuationsin our operating results. Our net revenue increased significantly during thelast fiscal year, and from June 30, 1999 to June 30, 2000, the number of ouremployees increased from 249 to 680. We expect our anticipated growth andexpansion to strain our management, operational and financial resources. Ourmanagement team has had limited experience managing such rapidly growingcompanies on a public or private basis. To accommodate this anticipated growth,we will be required to:. improve existing and implement new operational, information and financial systems, procedures and controls; . hire, train and manage additional qualified personnel, including sales, marketing personnel and research and development personnel; and. effectively manage multiple relationships with our customers, suppliers and other third parties. We may not be able to install adequate control systems in an efficient andtimely manner, and our current or planned personnel systems, procedures andcontrols may not be adequate to support our future operations. In August 1998,we installed a new management information system, which we may continue tomodify and improve to meet the increasing needs associated with our growth. Thedifficulties associated with installing and implementing these new systems,procedures and controls may place a significant burden on our management and ourinternal resources. In addition, as we grow internationally, we will have toexpand our 24 worldwide operations and enhance our communications infrastructure. Any delay inthe implementation of such new or enhanced systems, procedures or controls, orany disruption in the transition to such new or enhanced systems, procedures orcontrols, could adversely affect our ability to accurately forecast salesdemand, manage our supply chain and record and report financial and managementinformation on a timely and accurate basis.Extreme Must Develop and Expand Its Indirect Distribution Channels to IncreaseRevenues and Improve Its Operating Results Our distribution strategy focuses primarily on developing and expandingindirect distribution channels through resellers, distributors and, to a lesserextent, original equipment manufacturers, or OEMs, as well as expanding ourfield sales organization. If we fail to develop and cultivate relationships withsignificant resellers, or if these resellers are not successful in their salesefforts, sales of our products may decrease and our operating results wouldsuffer. Many of our resellers also sell products that compete with our products.We are developing a two-tier distribution structure in Europe and the UnitedStates which has and will require us to enter into agreements with a smallnumber of stocking distributors. We have entered into two-tier distributionagreements; however, we cannot assure you that we will continue to be able toenter into additional distribution agreements or that we will be able tosuccessfully manage the transition of resellers to a two-tier distributionchannel. Our failure to do so could limit our ability to grow or sustainrevenue. In addition, our operating results will likely fluctuate significantlydepending on the timing and amount of orders from our resellers. We cannotassure you that our resellers will market our products effectively or continueto devote the resources necessary to provide us with effective sales, marketingand technical support. To support and develop leads for our indirect distribution channels and toexpand our direct sales effort, to service providers and content providers, weplan to continue to expand our field sales and support staff significantly. Wecannot assure you that this internal expansion will be successfully completed,that the cost of this expansion will not exceed the revenues generated or thatour expanded sales and support staff will be able to compete successfullyagainst the significantly more extensive and well-funded sales and marketingoperations of many of our current or potential competitors. Our inability toeffectively establish our distribution channels or manage the expansion of oursales and support staff would materially adversely affect our ability to growand increase revenue.Because Substantially All of Extreme's Revenue is Derived From Sales of TwoProduct Families, Extreme is Dependent on Widespread Market Acceptance of TheseProducts; Future Performance will Depend on the Introduction and Acceptance ofNew Products In fiscal 2000, we derived substantially all of our revenue from sales ofour Summit and BlackDiamond product families. We expect that revenue from theseproduct families will account for a substantial portion of our revenue for theforeseeable future. Accordingly, widespread market acceptance of our productfamilies is critical to our future success. Factors that may affect the marketacceptance of our products include market acceptance of switching products, andGigabit Ethernet and Layer 3 switching technologies in particular in theenterprise, service provider and metropolitan area network markets, theperformance, price and total cost of ownership of our products, the availabilityand price of competing products and technologies, and the success anddevelopment of our resellers, distributors, OEMs and field sales channels. Manyof these factors are beyond our control. Our future performance will also dependon the successful development, introduction and market acceptance of new andenhanced products that address customer requirements in a cost-effective manner.We have in the past experienced delays in product development and such delaysmay occur in the future. We introduced a new product family in fiscal 2000 whichis based on a new generation chip set. In addition, we also introduced newproducts within our existing product lines that incorporate this new chip set.The introduction of new and enhanced products may cause our customers to deferor cancel orders for existing products. Therefore, to the extent customers deferor cancel orders in the expectation of any new product release, any delay indevelopment or introduction could cause our operating results to suffer. Failureof our existing or future products to maintain and achieve widespread levels ofmarket acceptance may significantly impair our revenue growth.If a Key Reseller, Distributor, OEM or Other Significant Customer Cancels orDelays a Large Purchase, Extreme's Revenues May Decline and the Price of ItsStock May Fall To date, a limited number of resellers, distributors, OEMs and othercustomers have accounted for a significant portion of our revenue. If any of ourlarge customers stop or delay purchases, our revenue and profitability would beadversely affected. For example, in fiscal 1999, Compaq and Hitachi Cableaccounted for 21% and 13% of our net revenue, respectively. Because our expenselevels are based on our expectations as to future revenue and to a large extentare fixed in the short term, a substantial reduction or delay in sales of ourproducts to, or the loss of any significant reseller, distributor, OEM or othercustomer, or unexpected returns from 25 resellers could harm our business, operating results and financial condition.Although our largest customers may vary from period-to-period, we anticipatethat our operating results for any given period will continue to depend to asignificant extent on large orders from a small number of customers,particularly in light of the high sales price per unit of our products and thelength of our sales cycles. While our financial performance depends on large orders from a few keyresellers, distributors, OEMs and other significant customers, we do not havebinding commitments from any of them. For example:. our service provider and enterprise network customers can stop purchasing and our resellers, distributors and OEMs can stop marketing our products at any time;. our reseller agreements generally are not exclusive and are for one year terms, with no obligation of the resellers to renew the agreements;. our reseller agreements provide for discounts based on expected or actual volumes of products purchased or resold by the reseller in a given period; and. our reseller, distributor and OEM agreements generally do not require minimum purchases. We have established a program which, under specified conditions, enablessome third party resellers to return products to us. The amount of potentialproduct returns is estimated and provided for in the period of the sale. Some ofour OEM agreements also provide manufacturing rights and access to our sourcecode upon the occurrence of specified conditions of default. If we were todefault on these agreements, our OEMs could use our source code to develop andmanufacture competing products, which would negatively affect our performanceand ability to compete.The Sales Cycle for Extreme's Products is Long and Extreme May Incur SubstantialNon-Recoverable Expenses or Devote Significant Resources to Sales that Do NotOccur When Anticipated The timing of our sales revenue is difficult to predict because of ourreliance on indirect sales channels and the length and variability of our salescycle. Our products have a relatively high sales price per unit, and oftenrepresent a significant and strategic decision by an enterprise regarding itscommunications infrastructure. Accordingly, the purchase of our productstypically involves significant internal procedures associated with theevaluation, testing, implementation and acceptance of new technologies. Thisevaluation process frequently results in a lengthy sales process, typicallyranging from three months to longer than a year, and subjects the sales cycleassociated with the purchase of our products to a number of significant risks,including budgetary constraints and internal acceptance reviews. The length ofour sales cycle also may vary substantially from customer to customer. While ourcustomers are evaluating our products and before they may place an order withus, we may incur substantial sales and marketing expenses and expend significantmanagement effort. Consequently, if sales forecasted from a specific customerfor a particular quarter are not realized in that quarter, we may be unable tocompensate for the shortfall, which could harm our operating results.Extreme Purchases Several Key Components for Products From Single or LimitedSources and Could Lose Sales if These Sources Fail to Fill Its Needs We currently purchase several key components used in the manufacture of ourproducts from single or limited sources and are dependent upon supply from thesesources to meet our needs. Certain components such as tantalum capacitors, SRAMand printed circuit boards have been and may in the future be in short supply.While we have been able to meet our needs to date, we have in the past and arelikely in the future to encounter shortages and delays in obtaining these orother components and this could materially adversely affect our ability to meetcustomer orders. Our principal sole sourced components include:. ASICs;. microprocessors;. programmable integrated circuits;. selected other integrated circuits;. cables; and. custom-tooled sheet metal. 26 Our principal limited sourced components include:. flash memories;. dynamic and static random access memories, commonly known as DRAMs and SRAMs, respectively; and. printed circuit boards. We use a rolling six-month forecast based on anticipated product orders todetermine our material requirements. Lead times for materials and components weorder vary significantly, and depend on factors such as the specific supplier,contract terms and demand for a component at a given time. If orders do notmatch forecasts, we may have excess or inadequate inventory of certain materialsand components, which could materially adversely affect our operating resultsand financial condition. From time to time we have experienced shortages andallocations of certain components, resulting in delays in filling orders. Inaddition, during the development of our products we have experienced delays inthe prototyping of our ASICs, which in turn has led to delays in productintroductions.Extreme Needs to Expand Its Manufacturing Operations and Depends on ContractManufacturers for Substantially All of Its Manufacturing Requirements If the demand for our products continues to grow, we will need to increaseour material purchases, contract manufacturing capacity and internal test andquality functions. Any disruptions in product flow could limit our revenue,adversely affect our competitive position and reputation and result inadditional costs or cancellation of orders under agreements with our customers. We rely on third party manufacturing vendors to manufacture our products.We currently subcontract substantially all of our manufacturing to threecompanies--Flextronics International, Ltd., located in San Jose, California,MCMS, Inc., located in Boise, Idaho and Solectron, located in Milpitas,California. We have experienced a delay in product shipments from contractmanufacturers in the past, which in turn delayed product shipments to ourcustomers. We may in the future experience similar or other problems, such asinferior quality and insufficient quantity of product, any of which couldmaterially adversely affect our business and operating results. There can be noassurance that we will effectively manage our contract manufacturers or thatthese manufacturers will meet our future requirements for timely delivery ofproducts of sufficient quality and quantity. We intend to regularly introducenew products and product enhancements, which will require that we rapidlyachieve volume production by coordinating our efforts with those of oursuppliers and contract manufacturers. The inability of our contractmanufacturers to provide us with adequate supplies of high-quality products orthe loss of either of our contract manufacturers would cause a delay in ourability to fulfill orders while we obtain a replacement manufacturer and wouldhave a material adverse effect on our business, operating results and financialcondition. As part of our cost-reduction efforts, we will need to realize lower perunit product costs from our contract manufacturers as a result of volumeefficiencies. However, we cannot be certain when or if such price reductionswill occur. The failure to obtain such price reductions would adversely affectour gross margins and operating results.If Extreme Loses Key Personnel or is Unable to Hire Additional QualifiedPersonnel as Necessary, It May Not Be Able to Successfully Manage Its Businessor Achieve Its Objectives Our success depends to a significant degree upon the continuedcontributions of our key management, engineering, sales and marketing andmanufacturing personnel, many of whom would be difficult to replace. Inparticular, we believe that our future success is highly dependent on GordonStitt, Chairman, President and Chief Executive Officer, Stephen Haddock, VicePresident and Chief Technical Officer, and Herb Schneider, Vice President ofEngineering. We neither have employment contracts with nor key person lifeinsurance on any of our key personnel. We believe our future success will also depend in large part upon ourability to attract and retain highly skilled managerial, engineering, sales andmarketing, finance and manufacturing personnel. Competition for these personnelis intense, especially in the San Francisco Bay Area, and we have had difficultyhiring employees in the timeframe we desire, particularly software engineers.There can be no assurance that we will be successful in attracting and retainingsuch personnel. The loss of the services of any of our key personnel, theinability to attract or retain qualified personnel in the future or delays inhiring required personnel, particularly engineers and sales personnel, couldmake it difficult for us to manage our business and meet key objectives, such asproduct introductions, on time. In addition, companies in the networkingindustry whose employees accept positions with competitors frequently claim thatcompetitors have engaged in unfair hiring practices. We have from time to timereceived claims like this from 27 other companies and, although to date they have not resulted in materiallitigation, we cannot assure you that we will not receive additional claims inthe future as we seek to hire qualified personnel or that such claims will notresult in material litigation. We could incur substantial costs in defendingourselves against any such claims, regardless of the merits of such claims.Extreme's Products Must Comply With Evolving Industry Standards and ComplexGovernment Regulations or Its Products May Not Be Widely Accepted, Which MayPrevent Extreme From Sustaining Its Revenues or Achieving Profitability The market for network equipment products is characterized by the need tosupport industry standards as different standards emerge, evolve and achieveacceptance. We will not be competitive unless we continually introduce newproducts and product enhancements that meet these emerging standards. In thepast, we have introduced new products that were not compatible with certaintechnological changes, and in the future we may not be able to effectivelyaddress the compatibility and interoperability issues that arise as a result oftechnological changes and evolving industry standards. In addition, in theUnited States, our products must comply with various regulations and standardsdefined by the Federal Communications Commission and Underwriters Laboratories.Internationally, products that we develop may be required to comply withstandards established by telecommunications authorities in various countries aswell as with recommendations of the International Telecommunication Union. If wedo not comply with existing or evolving industry standards or if we fail toobtain timely domestic or foreign regulatory approvals or certificates we wouldnot be able to sell our products where these standards or regulations apply,which may prevent us from sustaining our revenues or achieving profitability.Failure to Successfully Integrate Extreme's Expanded Sales and SupportOrganizations into Its Operation or Educate Them About Its Product Families WillHurt Its Operating Results. Our products and services require a sophisticated sales effort targeted atseveral levels within a prospective customer's organization. Unless we expandour sales force we will not be able to increase revenues. In April 2000, asignificant number of former sales and system engineer employees of anothernetworking company joined our operation. We cannot assure you that we will beable to educate these new employees about our product families or integratethese new employees into our company. A failure to do so will hurt our revenuegrowth and may hurt our operating results.Extreme Depends Upon International Sales for Much of Its Revenue and Extreme'sAbility to Sustain and Increase Its International Sales Depends on SuccessfullyExpanding Its International Operations Our ability to grow will depend in part on the expansion of internationalsales and operations which have and are expected to constitute a significantportion of our sales. Sales to customers outside of North America accounted forapproximately 53% and 45% of our net revenue in fiscal 1999 and fiscal 2000,respectively. Our international sales primarily depend on our resellers,distributors and OEMs. The failure of our resellers, distributors and OEMs tosell our products internationally would limit our ability to sustain and growour revenue. In addition, there are a number of risks arising from ourinternational business, including:. longer accounts receivable collection cycles;. difficulties in managing operations across disparate geographic areas; . difficulties associated with enforcing agreements through foreign legal systems;. payment of operating expenses in local currencies, which subjects us to risks of currency fluctuations; . import or export licensing requirements;. potential adverse tax consequences; and . unexpected changes in regulatory requirements. Our international sales currently are U.S. dollar-denominated. As a result,an increase in the value of the U.S. dollar relative to foreign currencies couldmake our products less competitive in international markets. In the future, wemay elect to invoice some of our international customers in local currency whichwill subject us to fluctuations in exchange rates between the U.S. dollar andthe particular local currency. If we do so, we may determine to engage inhedging transactions to minimize the risk of such fluctuations. However, if weare not successful in managing such hedging transactions, we could incur lossesfrom hedging activities. Because we currently denominate sales in U.S. dollars,we do not anticipate that the adoption of the Euro as a functional legalcurrency of certain European countries will materially affect our business. 28 Extreme May Engage in Future Acquisitions that Dilute the Ownership Interests ofOur Stockholders, Cause Us to Incur Debt and Assume Contingent Liabilities As part of our business strategy, we review acquisition and strategicinvestment prospects that would complement our current product offerings,augment our market coverage or enhance our technical capabilities, or that mayotherwise offer growth opportunities. We are reviewing investments in newbusinesses and we expect to make investments in and acquire businesses, productsor technologies in the future. In the event of any future acquisitions, wecould: . issue equity securities which would dilute current stockholders' percentage ownership;. incur substantial debt . assume contingent liabilities; or . expend significant cash. These actions by us could materially adversely affect our operating resultsand/or the price of our common stock. Acquisitions and investment activitiesalso entail numerous risks, including:. difficulties in the assimilation of acquired operations, technologies or products;. unanticipated costs associated with the acquisition or investment transaction;. diversion of management's attention from other business concerns;. adverse effects on existing business relationships with suppliers and customers;. risks associated with entering markets in which we have no or limited prior experience. potential loss of key employees of acquired organizations; and. substantial charges for amortization of goodwill or purchased intangibles or similar items. We cannot assure you that we will be able to successfully integrate anybusinesses, products, technologies or personnel that we might acquire in thefuture, and our failure to do so could materially adversely affect our business,operating results and financial condition.Extreme May Need Additional Capital to Fund Its Future Operations And, If It IsNot Available When Needed, Extreme May Need to Reduce Its Planned Developmentand Marketing Efforts, Which May Reduce Its Revenues and Prevent Extreme FromAchieving Profitability We believe that our existing working capital, proceeds from the initialpublic offering in April 1999, proceeds from the secondary offering in October1999 and cash available from credit facilities and future operations will enableus to meet our working capital requirements for at least the next 12 months.However, if cash from future operations is insufficient, or if cash is used foracquisitions or other currently unanticipated uses, we may need additionalcapital. The development and marketing of new products and the expansion ofreseller and distribution channels and associated support personnel is expectedto require a significant commitment of resources. In addition, if the market forour products were to develop more slowly than anticipated or if we fail toestablish significant market share and achieve a meaningful level of revenues,we may continue to utilize significant amounts of capital. As a result, we couldbe required to raise substantial additional capital. To the extent that we raiseadditional capital through the sale of equity or convertible debt securities,the issuance of such securities could result in dilution to existingstockholders. If additional funds are raised through the issuance of debtsecurities, such securities may have rights, preferences and privileges seniorto holders of common stock and the term of such debt could impose restrictionson our operations. We cannot assure you that such additional capital, ifrequired, will be available on acceptable terms, or at all. If we are unable toobtain such additional capital, we may be required to reduce the scope of ourplanned product development and marketing efforts, which would harm ourbusiness, financial condition and operating results. 29 If Extreme's Products Contain Undetected Software or Hardware Errors, ExtremeCould Incur Significant Unexpected Expenses and Lost Sales Network products frequently contain undetected software or hardware errorswhen first introduced or as new versions are released. We have experienced sucherrors in the past in connection with new products and product upgrades. Weexpect that such errors will be found from time to time in new or enhancedproducts after commencement of commercial shipments. These problems maymaterially adversely affect our business by causing us to incur significantwarranty and repair costs, diverting the attention of our engineering personnelfrom our product development efforts and causing significant customer relationsproblems. Our products must successfully interoperate with products from othervendors. As a result, when problems occur in a network, it may be difficult toidentify the source of the problem. The occurrence of hardware and softwareerrors, whether caused by our products or another vendor's products, couldresult in the delay or loss of market acceptance of our products and anynecessary revisions may result in the incurrence of significant expenses. Theoccurrence of any such problems would likely have a material adverse effect onour business, operating results and financial condition.Extreme's Limited Ability to Protect Its Intellectual Property May AdverselyAffect Its Ability to Compete We rely on a combination of patent, copyright, trademark and trade secretlaws and restrictions on disclosure to protect our intellectual property rights.However, we cannot assure you that the actions we have taken will adequatelyprotect our intellectual property rights. We also enter into confidentiality or license agreements with ouremployees, consultants and corporate partners, and control access to anddistribution of our software, documentation and other proprietary information.Despite our efforts to protect our proprietary rights, unauthorized parties mayattempt to copy or otherwise obtain and use our products or technology.Provisions in Extreme's Charter or Agreements May Delay or Prevent a Change ofControl Provisions in our certificate of incorporation and bylaws may delay orprevent a change of control or changes in our management. These provisionsinclude:. the division of the board of directors into three separate classes;. the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors; and. the ability of the board of directors to alter our bylaws without getting stockholder approval Furthermore, we are subject to the provisions of section 203 of theDelaware General Corporation Law. These provisions prohibit large stockholders,in particular those owning 15% or more of the outstanding voting stock, fromconsummating a merger or combination with a corporation unless this stockholderreceives board approval for the transaction or 66 2/3% of the shares of votingstock not owned by the stockholder approve the merger or combination.Item 7A. Quantitative and Qualitative Disclosures About Market RiskInterest Rate Sensitivity The primary objective of our investment activities is to preserve principalwhile at the same time maximizing the income we receive from our investmentswithout significantly increasing risk. Some of the securities that we haveinvested in may be subject to market risk. This means that a change inprevailing interest rates may cause the principal amount of the investment tofluctuate. For example, if we hold a security that was issued with a fixedinterest rate at the then-prevailing rate and the prevailing interest rate laterrises, the principal amount of our investment will probably decline. To minimizethis risk, we maintain our portfolio of cash equivalents and short-terminvestments in a variety of securities, including commercial paper, othernon-government debt securities and money market funds. In general, money marketfunds are not subject to market risk because the interest paid on such fundsfluctuates with the prevailing interest rate. The following table presents theamounts of our cash equivalents and short-term investments that are subject tomarket risk by range of expected maturity and weighted-average interest rates asof June 30, 2000 and June 30, 1999. This table does not include money marketfunds because those funds are not subject to market risk. 30 June 30, 2000: Maturing in ---------------------------------------------------------------- Three months Three months Greater than Fair or less to one year one year Total Value ------- ----------- -------- ----- ----- (In thousands) Included in cash and cash equivalents................. $ 100,696 $ 100,696 $ 100,696 Weighted average interest rate...................... 6.37% Included in short-term investments.................... $ 66,640 $ 66,640 $ 66,640 Weighted average interest rate...................... 6.50% Included in investments............................... $ 44,144 $ 44,144 $ 44,144 Weighted average interest rate...................... 7.29% Maturing in --------------------------------------------------------------- June 30, 1999: Three months Three months Greater than Fair or less to one year one year Total Value ------- ----------- -------- ----- ----- (In thousands) Included in cash and cash equivalents................ $ 93,819 $ 93,819 $ 93,819 Weighted average interest rate..................... 5.12% Included in short-term investments................... $ 16,422 $ 16,422 $ 16,422 Weighted average interest rate..................... 5.04% Included in investments.............................. 300 $ 15,797 $ 16,097 $ 16,097 Weighted average interest rate..................... 6.02% 6.36% Exchange Rate Sensitivity Currently, all of our sales and the majority of our expenses are denominatedin U.S. dollars and as a result, we have experienced no significant foreignexchange gains and losses to date. While we have conducted some transactions inforeign currencies during the year ended June 30, 2000 and expect to continue todo so, we do not anticipate that foreign exchange gains or losses will besignificant. We have not engaged in foreign currency hedging activities to date,however, we may do so in the future. 31 Item 8. Financial Statements and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF EXTREME NETWORKS, INC. Page(s) -------- Report of Ernst & Young LLP, Independent Auditors........................................................................ 33Consolidated Balance Sheets.............................................................................................. 34Consolidated Statements of Operations.................................................................................... 35Consolidated Statement of Stockholders' Equity........................................................................... 36Consolidated Statements of Cash Flows.................................................................................... 37Notes to Consolidated Financial Statements............................................................................... 38 32 Report of Ernst & Young LLP, Independent AuditorsThe Board of Directors and StockholdersExtreme Networks, Inc.We have audited the accompanying consolidated balance sheets of ExtremeNetworks, Inc. as of June 30, 2000 and 1999, and the related consolidatedstatements of operations, stockholders' equity and cash flows for each of thethree years in the period ended June 30, 2000. Our audits also included thefinancial statement schedule listed in the Index at Item 14(a). These financialstatements and schedule are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statements andschedule based on our audits.We conducted our audits in accordance with auditing standards generally acceptedin the United States. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the consolidated financialstatements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the consolidated financial position of ExtremeNetworks, Inc. at June 30, 2000 and 1999, and the consolidated results of itsoperations and its cash flows for each of the three years in the period endedJune 30, 2000, in conformity with accounting principles generally accepted inthe United States. Also, in our opinion, the related financial statementschedule, when considered in relation to the basic consolidated financialstatements taken as a whole, presents fairly in all material respects theinformation set forth therein. Ernst & Young LLPPalo Alto, CaliforniaJuly 18, 2000, except for Note 9, as to which the date is August 24, 2000 33 EXTREME NETWORKS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) ASSETS June 30, --------------------- 2000 1999 --------- --------- Current assets: Cash and cash equivalents................................. $ 116,721 $ 107,143 Short-term investments.................................... 66,640 16,422 Accounts receivable, net of allowance for doubtful accounts of $1,237 in 2000 and $1,374 in 1999........... 60,996 20,797 Inventories............................................... 23,801 2,626 Other current assets...................................... 34,326 1,978 --------- --------- Total current assets.............................. 302,484 148,966Property and equipment, net................................. 26,750 6,506Restricted investments...................................... 80,000 --Investments................................................. 44,144 16,097Goodwill and purchased intangibles.......................... 49,782 --Other assets................................................ 12,770 234 --------- --------- $ 515,930 $ 171,803 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable.......................................... $ 39,023 $ 13,418 Accrued compensation...................................... 6,759 2,500 Accrued commissions....................................... 4,282 1,600 Leasehold improvements allowance.......................... 8,424 -- Deferred revenue.......................................... 22,042 1,717 Other accrued liabilities................................. 12,935 7,394 Income tax liability...................................... 3,138 1,650 Capital lease obligations, current portion................ -- 1,648 ---------- ---------- Total current liabilities......................... 96,603 29,927Long term deposit........................................... 306 --Commitments (Note 4) Stockholders' equity: Convertible preferred stock, $.001 par value, issuable in series: 2,000,000 shares authorized; no shares issued and outstanding.................................. -- -- Common stock, $.001 par value; 150,000,000 shares authorized; 106,670,964 and 98,690,460 shares issued and June 30, 2000 and 1999, respectively........ 106 98 Additional paid-in capital................................ 423,044 165,569 Deferred stock compensation............................... (78) (197) Accumulated other comprehensive loss...................... (623) (118) Accumulated deficit....................................... (3,428) (23,476) --------- --------- Total stockholders' equity........................ 419,021 141,876 --------- --------- $ 515,930 $ 171,803 ========= ========= See accompanying notes to consolidated financial statements. 34 EXTREME NETWORKS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Years Ended June 30, ----------------------------------- 2000 1999 1998 ----------- --------- -------- Net revenue....................................... $261,956 $ 98,026 $ 23,579Cost of revenue................................... 126,916 48,520 14,897 -------- --------- --------Gross profit...................................... 135,040 49,506 8,682Operating expenses: Research and development........................ 32,737 17,036 10,668 Sales and marketing............................. 67,146 27,056 9,601 General and administrative...................... 11,852 6,859 2,440 Amortization of goodwill and purchased intangibles.................................... 7,051 -- -- -------- -------- -------- Total operating expenses................... 118,786 50,951 22,709 -------- -------- --------Operating income (loss)........................... 16,254 (1,445) (14,027)Interest income................................... 14,638 1,855Interest expense.................................. (490) (398) (326)Other income (loss), net.......................... (33) 21 (196) -------- -------- --------Income (loss) before income taxes................. 30,369 33 (13,936)Provision for income taxes........................ 10,321 1,650 -- -------- -------- --------Net income (loss)................................. $ 20,048 $ (1,617) $(13,936) ======== ======== ========Basic net income (loss) per share................. $ 0.20 $ (0.09) $ (1.59) Diluted net income (loss) per share............... $ 0.18 $ (0.09) $ (1.59) Weighted average shares outstanding used in computing basic net income (loss) per share................................. 100,516 18,924 8,758 Weighted average shares outstanding used in computing diluted net income (loss) per share.......................... 111,168 18,924 8,758 See accompanying notes to consolidated financial statements. 35 EXTREME NETWORKS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands, except share amounts) Convertible Accumulated Preferred Stock Common Stock Additional Deferred Other --------------- ------------ Paid-In Stock Comprehensive Shares Amount Shares Amount Capital Compensation Loss ------ ------ ------ ------ ------- ------------ ---- Balances at June 30, 1997 ................. 46,932 $ 46 21,620 $ 22 $ 17,160 $ -- $ -- Issuance of warrant for 96,694 shares of Series B convertible preferred stock ..... -- -- -- -- 28 -- -- Issuance of Series C convertible preferred stock to investors for cash (less issuance costs of $416)................... 11,190 12 -- -- 20,105 -- -- Issuance of warrant for 140,352 shares of Series C convertible preferred stock ..... -- -- -- -- 140 -- -- Exercise of options to purchase common stock ............................. -- -- 1,450 2 145 -- -- Deferred stock compensation ............... -- -- -- -- 437 (437) -- Amortization of deferred stock compensation ............................. -- -- -- -- -- 68 -- Net loss .................................. -- -- -- -- -- -- -- ------ ---- ------- ---- ------ ----- ---- Balances at June 30, 1998 ................. 58,122 58 23,070 24 38,015 (369) -- Comprehensive loss: Net loss ................................. -- -- -- -- -- -- -- Other comprehensive loss, net of tax: Change in unrealized loss on investments............................. -- -- -- -- -- -- (112) Foreign currency translation adjustment.. -- -- -- -- -- -- (6) Other comprehensive loss ................. -- -- -- -- -- -- -- Comprehensive loss ........................ -- -- -- -- -- -- -- Issuance of warrants to purchase 80,000 shares of common stock ................... -- -- -- -- 948 -- -- Issuance of common stock in conjunction with initial public offering (less issuance costs of $1,948)................. -- -- 16,100 16 125,306 -- -- Conversion of preferred stock to common stock in conjunction with initial public offering .......................... (58,122) (58) 58,122 58 -- -- -- Exercise of warrants to purchase common stock ............................. -- -- 264 -- -- -- -- Exercise of options to purchase common stock ............................. -- -- 1,134 -- 1,300 -- -- Amortization of deferred stock compensation ............................. -- -- -- -- -- 172 -- ------ ---- ------- ---- ------ ------ ---- Balances at June 30, 1999 ................. -- -- 98,690 98 165,569 (197) (118) Comprehensive income: Net income ............................... -- -- -- -- -- -- -- Other comprehensive loss, net of tax: Change in unrealized loss on investments............................. -- -- -- -- -- -- (503) Foreign currency translation adjustment.. -- -- -- -- -- -- (2) Other comprehensive loss ................. -- -- -- -- -- -- -- Comprehensive income ...................... -- -- -- -- -- -- -- Issuance of common stock in conjunction with secondary public offering(less issuance costs of $910) .................. -- -- 4,748 6 174,022 -- -- Exercise of warrants to purchase common stock ............................. -- -- 370 -- -- -- -- Exercise of options to purchase common stock ............................. -- -- 2,392 2 3,387 -- -- Issuance of common stock under employee stock purchase plan ...................... -- -- 470 -- 3,966 -- -- Issuance of warrants for goodwill and purchased intangibles .................... -- -- -- -- 54,324 -- --Tax benefit from employee stock transactions ............................. -- -- -- -- 21,600 -- -- Stock compensation for options granted to consultants .............................. -- -- -- -- 176 -- -- Amortization of deferred stock compensation ............................. -- -- -- -- -- 119 -- ------ ---- -------- ---- -------- ----- ----- Balances at June 30, 2000 ................. -- $ -- $106,670 $106 $423,044 $ (78) $(623) ====== ==== ======== ==== ======== ===== ===== Total Accumulated Stockholders' Deficit Equity ------- ------ Balances at June 30, 1997 ................. $ (7,923) $ 9,305 Issuance of warrant for 96,694 shares of Series B convertible preferred stock ..... -- 28 Issuance of Series C convertible preferred stock to investors for cash (less issuance costs of $416)................... -- 20,117 Issuance of warrant for 140,352 shares of Series C convertible preferred stock ..... -- 140 Exercise of options to purchase common stock ............................. -- 147 Deferred stock compensation ............... -- -- Amortization of deferred stock compensation ............................. -- 68 Net loss .................................. (13,936) (13,936) -------- -------- Balances at June 30, 1998 ................. (21,859) 15,869 Comprehensive loss: Net loss ................................. (1,617) (1,617) Other comprehensive loss, net of tax: Change in unrealized loss on investments............................. -- (112) Foreign currency translation adjustment.. -- (6) -------- Other comprehensive loss ................. -- (118) -------- Comprehensive loss ........................ -- (1,735) Issuance of warrants to purchase 80,000 shares of common stock ................... -- 948 Issuance of common stock in conjunction with initial public offering (less ....... issuance costs of $1,948)................. -- 125,322 Conversion of preferred stock to common stock in conjunction with initial public offering .......................... -- -- Exercise of warrants to purchase common stock ............................. -- -- Exercise of options to purchase common stock ............................. -- 1,300 Amortization of deferred stock compensation ............................. -- 172 -------- -------Balances at June 30, 1999 ................. (23,476) 141,876 Comprehensive income: Net income ............................... 20,048 20,048 Other comprehensive loss, net of tax: Change in unrealized loss on investments............................. -- (503) Foreign currency translation adjustment.. -- (2) -------- Other comprehensive loss ................. -- (505) -------- Comprehensive income ...................... -- 19,543 Issuance of common stock in conjunction with secondary public offering(less issuance costs of $910) .................. -- 174,028 Exercise of warrants to purchase common stock ............................. -- -- Exercise of options to purchase common stock ............................. -- 3,389 Issuance of common stock under employee stock purchase plan....................... -- 3,966 Issuance of warrants for goodwill and purchased intangibles..................... -- 54,324 Tax benefit from employee stock transactions.............................. -- 21,600Stock compensation for options granted to consultants............................... -- 176Amortization of deferred stock compensation ............................. -- 119 -------- -------- Balances at June 30, 2000 ................. $ (3,428) $419,021 ======== ======== See accompanying notes to consolidated financial statements. 36 EXTREME NETWORKS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended June 30, -------------------- 2000 1999 1998 -------- -------- -------- Operating activities Net income (loss)............................................... $ 20,048 $ (1,617) $ (13,936) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation................................................... 6,992 5,733 1,453 Amortization................................................... 7,052 -- -- Warrants issued to a business partner.......................... -- 948 -- Amortization of deferred stock compensation.................... 119 172 68 Loss on equity investments..................................... 248 -- -- Compensation expense for options granted to consultants........ 176 -- -- Changes in operating assets and liabilities: Accounts receivable........................................ (40,199) (12,989) (7,545) Inventories................................................ (21,175) (2,503) (86) Other current and noncurrent assets........................ (18,832) (1,392) (585) Accounts payable........................................... 25,605 3,425 9,244 Accrued compensation....................................... 4,259 2,038 272 Accrued commissions........................................ 2,682 1,127 473 Leasehold improvements allowance........................... 8,424 -- -- Deferred revenue........................................... 20,325 1,434 283 Other accrued liabilities.................................. 4,101 4,727 2,203 Income tax liability....................................... 4,688 1,650 -- Long term deposit.......................................... 306 -- -- Due to shareholder......................................... -- -- (109) ---------- ---------- ----------- Net cash provided by (used in) operating activities............. 24,819 2,753 (8,265) ---------- ---------- -----------Investing activities Capital expenditures............................................ (27,236) (7,492) (2,511) Purchases and maturities of investments......................... (158,770) (21,636) (10,996) Minority investments............................................ (8,970) -- -- ---------- ---------- ----------- Net cash used in investing activities........................... (194,976) (29,128) (13,507) ---------- ---------- -----------Financing activities Proceeds from issuance of convertible preferred stock........... -- -- 20,285 Proceeds from issuance of common stock.......................... 181,383 126,622 147 Proceeds from notes payable..................................... -- 783 1,606 Principal payments on notes payable............................. -- (2,784) (241) Principal payments of capital lease obligations................. (1,648) (613) (562) ---------- ---------- ----------- Net cash provided by financing activities....................... 179,735 124,008 21,235 ---------- ---------- ----------- Net increase (decrease) in cash and cash equivalents............ 9,578 97,633 (537)Cash and cash equivalents at beginning of period.................. 107,143 9,510 10,047 ---------- ---------- -----------Cash and cash equivalents at end of period........................ $ 116,721 $ 107,143 $ 9,510 ========== ========== ===========Supplemental disclosure of cash flow information: Interest paid................................................... $ 744 $ 185 $ 326 Cash paid for taxes............................................. $ 5,828 $ -- $ --Supplemental schedule of noncash investing and financing activities: Property and equipment acquired under capital lease obligations................................................... $ -- $ 278 $ 1,588 Warrants issued in connection with capital lease................ $ -- $ -- $ 168 Warrants issued for goodwill and purchased intangibles.......... $ 54,324 $ -- $ -- Warrants issued to a business partner........................... $ -- $ 948 $ -- Deferred stock compensation..................................... $ -- $ -- $ 437 Conversion of preferred stock to common stock................... $ -- $ 58 $ -- Tax benefit from disqualifying dispositions..................... $ 21,600 $ -- $ -- See accompanying notes to consolidated financial statements. 37 EXTREME NETWORKS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1) Summary of Significant Accounting PoliciesNature of Operations Extreme Networks, Inc. ("Extreme" or the "Company") was incorporated inCalifornia on May 8, 1996 and was reincorporated in Delaware on March 31, 1999.Extreme is a leading provider of broadband networking solutions for the Interneteconomy.Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of Extreme andits wholly-owned subsidiaries. All significant inter-company balances andtransactions have been eliminated. Investments in which management intends tomaintain more than a temporary 20% to 50% interest, or otherwise has the abilityto exercise significant influence, are accounted for under the equity method.Investments in which we have less than a 20% interest and/or do not have theability to exercise significant influence are carried at the lower of cost orestimated realizable value. Assets and liabilities of foreign operations are translated to U.S. dollarsat current rates of exchange, and revenues and expenses are translated usingweighted average rates. Foreign currency transaction gains and losses have notbeen material. Gains and losses from foreign currency translation are includedas a separate component of other comprehensive income (loss). Certain items previously reported in specific financial statement captionshave been reclassified to conform to the 2000 presentation. Suchreclassifications have not impacted previously reported operating income (loss).Fiscal Year Effective July 1, 1999, Extreme changed its fiscal year from June 30/th/ toa 52/53-week fiscal accounting year. The June 30, 2000 year closed on July 2,2000 and comprised 52 weeks of revenue and expense activity. All referencesherein to "fiscal 2000" or "2000" represent the fiscal year ended July 2, 2000.Quarterly results are based upon a 13-week reporting period.Accounting Estimates The preparation of financial statements in conformity with generallyaccepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities at thedate of the financial statements and the reported amounts of revenue andexpenses during the reporting period. Estimates are used for, but not limitedto, the accounting for doubtful accounts, inventory reserves, depreciation andamortization, sales returns, warranty costs and income taxes. Actual resultscould differ from these estimates.Cash Equivalents and Short-Term Investments Extreme considers cash and all highly liquid investment securitiespurchased with an original or remaining maturity of less than three months atthe date of purchase to be cash equivalents. Extreme's investments compriseU.S., state and municipal government obligations and corporate securities.Investments with maturities of less than one year are considered short term andinvestments with maturities greater than one year are considered long term. To date, all marketable securities have been classified asavailable-for-sale and are carried at fair value, with unrealized gains andlosses, when material, reported net-of-tax as a separate component of othercomprehensive income. Realized gains and losses on available-for-sale securitiesare included in interest income. The cost of securities sold is based onspecific identification. Premiums and discounts are amortized over the periodfrom acquisition to maturity and are included in investment income, along withinterest and dividends.Fair Value of Financial Instruments 38 The carrying amounts of certain of Extreme's financial instruments,including cash and equivalents, approximate fair value because of their shortmaturities. The fair values of investments are determined using quoted marketprices for those securities or similar financial instruments (see Note 2).Transfer of Financial Assets The Company from time to time transfers specifically identified accountsreceivable balances from customers to financing institutions, on a non-recoursebasis. The Company records such transfers as sales of the related accountsreceivable when it is considered to have surrendered control of such receivablesunder the provisions of Statement of Financial Accounting Standards No. 125,"Accounting for Transfers and Servicing of Financial Assets and Extinguishmentsof Liabilities." The impact of the above transaction reduced receivables andincreased cash flows from operating activities in the consolidated statements ofcash flows.Inventories Inventories consist of raw materials and finished goods and are stated atthe lower of cost or market (on a first-in, first-out basis). Inventories consist of: June 30, 2000 June 30, 1999 ------------- ------------- Raw materials $ 9,501 $ 700 Finished goods 14,300 1,926 ---------------- ---------------- Total $23,801 $2,626 ================ ================Restricted Investments Extreme restricted $80.0 million of its investment securities as collateralfor specified obligations of the lessee under the operating lease. Theseinvestment securities are restricted as to withdrawal and are managed by a thirdparty subject to certain limitations under the Company's investment policy. (SeeNote 4)Concentration of Credit Risk, Product and Significant Customers and SupplierInformation Financial instruments that potentially subject Extreme to concentration ofcredit risk consist principally of marketable investments and accountsreceivable. Extreme places its investments only with high-credit qualityissuers. Extreme will not invest an amount exceeding 10% of the corporation'scombined cash, cash equivalent, short-term and long-term investments, in thesecurities of any one obligor or maker, except for obligations of the UnitedStates, obligations of United States agencies and money market accounts. Extremeperforms ongoing credit evaluations of its customers and generally does notrequire collateral. To date, credit losses have been insignificant and withinmanagement's expectations. Extreme operates solely within one business segment,the development and marketing of switching solutions for the Internet economy.For fiscal 2000, there were no customers with sales greater than 10%. For fiscal1999, Compaq and Hitachi Cable accounted for 21% and 13% of our net revenue,respectively. One supplier currently manufacturers all of Extreme's ASICs which are usedin all of Extreme's networking products. Any interruption or delay in the supplyof any of these components, or the inability to procure these components fromalternate sources at acceptable prices and within a reasonable time, wouldmaterially adversely affect Extreme's business, operating results and financialcondition. In addition, qualifying additional suppliers can be time-consumingand expensive and may increase the likelihood of errors. Extreme attempts tomitigate these risks by working closely with its ASIC supplier regardingproduction planning and product introduction timing. Extreme currently derives substantially all of its revenue from sales oftwo product families. Extreme expects that revenue from these two productfamilies will account for a substantial portion of its revenue for theforeseeable future. Accordingly, widespread market acceptance of Extreme'sproduct families is critical to their future success.Property and Equipment 39 Property and Equipment Property and equipment are stated at cost and depreciated on astraight-line basis over the estimated useful lives of the assets ofapproximately three years. Property and equipment consist of the following (inthousands): June 30, ----------------------------- 2000 1999 ---- ---- Computer and other related equipment.................... $ 27,257 $ 8,661 Office equipment, furniture and fixtures................ 1,905 1,090 Software................................................ 4,956 3,146 Leasehold improvements.................................. 1,802 1,111 --------- -------- 35,920 14,008 Less accumulated depreciation and amortization.......... (9,170) (7,502) --------- -------- Property and equipment, net............................. $ 26,750 $ 6,506 ========= ======== Goodwill and Purchased Intangible Assets We record goodwill when the cost of net assets we acquire exceeds theirfair value. Goodwill is amortized on a straight-line basis over lives rangingfrom 2 to 4 years. The cost of identified intangibles is generally amortized ona straight-line basis over periods ranging from 2 to 4 years. We regularlyperform reviews to determine if the carrying value of assets is impaired. Thereviews look for the existence of facts or circumstances, either internal orexternal, which indicate that the carrying value of the asset cannot berecovered. No such impairment has been indicated to date. If, in the future,management determines the existence of impairment indicators, we would useundiscounted cash flows to initially determine whether impairment should berecognized. If necessary, we would perform a subsequent calculation to measurethe amount of the impairment loss based on the excess of the carrying value overthe fair value of the impaired assets. If quoted market prices for the assetsare not available, the fair value would be calculated using the present value ofestimated expected future cash flows. The cash flow calculations would be basedon management's best estimates, using appropriate assumptions and projections atthe time. The total purchase price of the goodwill and purchased intangible assetswas allocated based on an independent appraisal obtained by the Company, to thetangible and intangible assets acquired based on their respective fair values onthe date of acquisition as follows (in thousands): Customer list.............................. $ 4,169 Acquired workforce......................... 4,615 Goodwill................................... 48,050 ----------- $56,834 ===========Revenue Recognition Extreme generally recognizes product revenue at the time of shipment,unless Extreme has future obligations such as installation or has to obtaincustomer acceptance. When significant obligations remain after products aredelivered, revenue is only recognized after such obligations are fulfilled. Amounts billed in excess of revenue recognized are included as deferredrevenue in the accompanying consolidated balance sheets. Extreme has establisheda program which, under specified conditions, enables third party resellers toreturn products to us. The amount of potential product returns is estimated andprovided for in the period of the sale. Revenue from service obligations isrecognized ratably over the term of the contract period, which is typically 12months. Extreme makes certain sales to partners in two-tier distributionchannels. These customers are generally given privileges to return a portion ofinventory and participate in various cooperative marketing programs. Extremedefers recognition of revenue on such sales until the product is sold by thedistributors and also maintains appropriate accruals and allowances for allother programs. Upon shipment of products to its customers, Extreme provides for theestimated cost to repair or replace products that may be returned underwarranty. Extreme's warranty period is typically 12 months from the date ofshipment to the end user.Advertising 40 Advertising We expense advertising costs as incurred. Advertising expenses for theyears ended June 30, 2000, 1999 and 1998 were approximately $2.2 million, $1.1million and $0.4 million, respectively.Foreign Operations Extreme's foreign offices consist of sales, marketing and supportactivities through its foreign subsidiaries and overseas resellers anddistributors. Operating income (loss) generated by Extreme's operating foreignsubsidiaries and their corresponding identifiable assets were not material inany period presented. Extreme's export sales represented 45% and 53% of net revenue in 2000 and1999, respectively. All of the export sales to date have been denominated inU.S. dollars and were derived from sales to Europe and Asia. Extreme recordedexport sales over 10% (as a percentage of total net revenue) to the followingcountries: Years Ended June 30, -------------------- 2000 1999 ---- ---- Japan..................................................................... 19% 29% All other export sales to countries totaling less than 10% each........... 26% 24% Net Income (Loss) Per Share Basic earnings (loss) per share is calculated by dividing net income (loss)by the weighted average number of common shares outstanding during the period,less shares subject to repurchase, and excludes any dilutive effects of options,warrants, and convertible securities. Dilutive earnings per common share iscalculated by dividing net income by the weighted average number of commonshares used in the basic earnings per common share calculation plus the dilutiveeffect of options and warrants. The following table presents the calculation of basic and diluted netincome (loss) per share (in thousands, except per share data): Years Ended June 30, -------------------- 2000 1999 1998 ---- ---- ---- Net income (loss).................................................. $ 20,048 $ (1,617) $ (13,936) ======== ======== ========== Weighted-average shares of common stock outstanding........... 103,734 27,324 22,384 Less: Weighted-average shares subject to repurchase........... (3,218) (8,400) (13,626) ---------- ---------- ---------- Weighted-average shares used in computing basic net income (loss) per common share.............................. 100,516 18,924 8,758 ========== ========== ========== Incremental shares using the treasury stock method 10,652 -- -- Weighted-average shares used in computing diluted net income (loss) per common share.............................. 111,168 18,924 8,758 ---------- ====== ===== Basic net income (loss) per common share........................... $ 0.20 $ (0.09) $ (1.59) ========== ========== ========== Diluted net income (loss) per common share......................... $ 0.18 $ (0.09) $ (1.59) ========== ========== ========== Share and per-share data presented reflect the two-for-one stock spliteffective to stockholders of record on August 10, 2000.Accounting for Stock-Based Compensation Extreme's grants of stock options are for a fixed number of shares toemployees with an exercise price equal to the fair value of the shares at thedate of grant. As permitted under SFAS Statement No. 123, "Accounting forStock-Based Compensation" ("FAS 123"), Extreme accounts for stock option grantsto employees and directors in accordance with APB Opinion No. 25, "Accountingfor Stock Issued to Employees" ("APB 25") and, accordingly, recognizes nocompensation expense for stock option grants with an exercise price equal to thefair value of the shares at the date of grant.Recently Issued Accounting Standards In June 1997, the Financial Accounting Standards Board ("FASB") issued SFASNo. 131, "Disclosures about Segments of an Enterprise and Related Information"("FAS 131") effective for financial statements for periods beginning afterDecember 15, 1997. 41 FAS 131 establishes standards for the way that public business enterprisesreport financial and descriptive information about reportable operating segmentsin annual financial statements and interim financial reports issued toshareholders. FAS 131 supersedes SFAS No. 14, "Financial Reporting for Segmentsof a Business Enterprise," but retains the requirement to report informationabout major customers. Extreme has determined that it has a single reportablesegment. Management uses one measurement of profitability and does notdisaggregate its business for internal reporting. In June 1998, the FASB issued SFAS No. 133, "Accounting for DerivativeInstruments and Hedging Activities" ("FAS 133"). FAS 133 establishes methods ofaccounting for derivative financial instruments and hedging activities relatedto those instruments as well as other hedging activities. In June 1999, the FASBissued SFAS No. 137, "Accounting for Derivative Instruments and HedgingActivities - Deferral of the Effective Date of FASB Statement No. 133", whichextended the deferral of the application of FAS 133 to all fiscal quarters offiscal years beginning after June 15, 2000. In June 15, 2000 the FASB alsoissued FAS 138, "Accounting for Certain Derivative Instruments and CertainHedging Activities) an Amendment to FASB Statement No. 133". FAS 138 amends theaccounting and reporting standards of Statement 133 for certain derivativeinstruments and certain hedging activities. The Company will be required toadopt these pronouncements for the year ending June 30, 2001. Because theCompany currently holds no derivative financial instruments and does notcurrently engage in hedging activities, adoption of FAS 133 and 138 are expectedto have no material impact on the Company's financial condition or results ofoperations. In December 1999, the Staff of the Securities and Exchange Commission("SEC") issued Staff Accounting Bulletin ("SAB") No.101, "Revenue Recognition inFinancial Statements", which provides guidance on the recognition, presentationand disclosure of revenue in financial statements. The implementation of SAB 101has recently been deferred to no later than the fourth fiscal quarter of fiscalyears beginning after December 15, 1999. Extreme is presently evaluating thepotential impact of the adoption of SAB 101. In March 2000, the FASB issued Financial Accounting Standards BoardInterpretation No. 44, "Accounting for Certain Transactions involving StockCompensation - an interpretation of APB Opinion No. 25" (Interpretation No. 44).Interpretation No. 44 is effective July 1, 2000. The interpretation clarifiesthe application of APB Opinion No. 25 for certain issues, specifically, (a) thedefinition of an employee, (b) the criteria for determining whether a planqualifies as a noncompensatory plan, (c) the accounting consequence of variousmodifications to the terms of a previously fixed stock option or award, and (d)the accounting for an exchange or stock compensation awards in a businesscombination. We do not anticipate that the adoption of Interpretation No. 44will have a material impact on our financial position or the results of ouroperations.2) Financial Instruments The following is a summary of available-for-sale securities (in thousands): Unrealized Unrealized Amortized Fair Holding Holding Cost Value Gains Losses ---- ----- ----- ------ June 30, 2000: Money market fund........................................ $ 12,372 $ 12,372 $ -- $ -- Commercial paper......................................... 71,929 71,889 -- (40) U.S. corporate debt securities........................... 107,994 107,410 29 (613) U.S. government agencies................................. 9,800 9,809 11 (2) U.S. tax exempt securities............................... 10,000 10,000 -- -- --------- -------- ------- -------- $ 212,095 $211,480 $ 40 $ (655) ========= ======== ======= ======== Classified as: Cash equivalents.................................... $ 100,736 $100,696 $ -- $ (40) Short-term investments.............................. 66,976 66,640 26 (362) Investments......................................... 44,383 44,144 14 (253) --------- -------- ------- -------- $ 212,095 $211,480 $ 40 $ (655) ========= ======== ======= ======== Unrealized Unrealized Amortized Fair Holding Holding Cost Value Gains Losses ---- ----- ----- ------ June 30, 1999: Money market fund...................................... $ 2 $ 2 $ - $ -- 42 Commercial paper.......................... 110,265 110,241 -- (24) U.S. corporate debt securities............ 15,885 15,797 -- (88) U.S. government agencies.................. 300 300 -- -- -------- --------- ----- ------ $126,452 $126,340 $ -- $ (112) ======== ========= ===== ====== Classified as: Cash equivalents..................... $ 93,840 $ 93,821 $ -- $ (19) Short-term investments............... 16,427 16,422 -- (5) Investments.......................... 16,185 16,097 -- (88) -------- -------- ----- ------ $126,452 $126,340 $ -- $ (112) ======== ======== ===== ====== 3) Business Combinations and Investments During the fiscal year ended June 30, 2000, Extreme acquired certainassets of a Company for a total cost of approximately $2.5 million of which $1.1million has been paid. Extreme accounted for the acquisition using the purchasemethod of accounting, and incurs charges of approximately $157,000 per quarterrelated to the amortization of goodwill over the estimated useful life of fouryears. The entire purchase price was allocated to goodwill and purchasedintangibles. Extreme recorded approximately $261,000 for amortization related tothis acquisition in the year ended June 30, 2000. In April 2000, Extreme issued fully earned, non-forfeitable, fullyexercisable warrants with a two year life to purchase 3 million shares ofExtreme's common stock with an exercise price of $39.50 per share to anetworking company in consideration of the networking company's selection ofExtreme as the preferred vendor of next generation core backbone switchingproducts to a certain group of the networking company's customers. The fairvalue of the warrants was approximately $54.3 million. The warrants were valuedunder a Black-Scholes model, using a volatility assumption of 1.04% and atwo-year term. The value of the warrants is being amortized over approximatelytwo years, which is the estimated economic life of the acquired intangibles,comprising of customer list, workforce and goodwill. Extreme made several additional investments during the year ended June 30,2000 totaling $7.7 million, which are reflected in "Other assets" in theaccompanying consolidated balance sheets. Two investments were made in entitiesin which a related party of Extreme is also a significant investor. Theseinvestments totaled $3.4 million, net of Extreme's share of these affiliates'losses of $0.3 million. As these investments are being accounted for under theequity-method, the revenue and operating costs of these entities have not beenincluded in Extreme's results from operations, however Extreme's share of theseaffiliates' losses have been included in other expense from the closing date ofthe related transactions forward. Pursuant to the terms of these two agreements,Extreme has certain rights to acquire the remaining shares of these entitiesunder certain conditions for additional consideration. Under the terms of one ofthese equity investments, Extreme has been granted the right at any time priorto December 31, 2000 to purchase all of the outstanding capital stock andoptions for shares of Extreme common stock. Upon the attainment of certaintechnological milestones, the terms of one investment will obligate Extreme topurchase all the outstanding capital stock in fiscal 2001, payable in anycombination of cash or shares of Extreme common stock. At June 30, 2000 thepossibility of attainment of any of the technical milestones was remote. Theremaining $4.3 million of investments at June 30, 2000 are being accounted forunder the cost method. We expect to continue to make additional investments inthe future.4) Commitments Extreme currently has outstanding fiscal year 2001 non-cancelable purchaseorder commitments for materials of approximately $73.3 million. The fiscal year2000 purchase orders have been fulfilled and the related invoices have beenaccrued as of June 30, 2000. This expense is included within cost of revenue inthe year ended June 30, 2000. In June 2000, we entered into an operating lease agreement to lease275,000 square feet to house our primary facility in Santa Clara, California.Our lease payments will vary based on the LIBOR plus a spread which was 7.14% atJune 30, 2000. Our lease payments are estimated to be approximately $5.7 millionon an annual basis over the lease term. The lease is for five years and can berenewed for two five-year periods, subject to the approval of the lessor. At theexpiration or termination of the lease, we have the option to either purchasethe property for $80.0 million, or arrange for the sale of the property to athird party for at least $80.0 million with a contingent liability for anydeficiency. If the property is not purchased or sold as described above, we willbe obligated for an additional lease payment of approximately $68.0 million. 43 As part of the above lease transaction, Extreme restricted $80.0 million ofits investment securities as collateral for specified obligations of the lessorunder the lease. These investment securities are restricted as to withdrawal andare managed by a third party subject to certain limitations under Extreme'sinvestment policy. The lease also requires us to maintain specified financialcovenants with which we were in compliance as of June 30, 2000. Future payments under all noncancelable leases (net of future committedsublease proceeds of $9,161) at June 30, 2000 are as follows (in thousands): Years ending June 30: 2001...................................... $ 2,691 2002...................................... 2,758 2003...................................... 5,200 2004...................................... 6,504 2005...................................... 6,242 ------- Total minimum payments......................... $23,395 ======= Rent expense was approximately $2.9 million, $0.7 million and $0.8 millionfor 2000, 1999 and 1998, respectively. Sublease income for the years ended 2001,2002 and 2003 was $3.9 million, $3.9 million and $1.4 million, respectively.These amounts were netted from the amounts in the above schedule.5) Stockholders' EquityCommon Stock Offering In April 1999, Extreme completed an initial public offering of 16,100,000shares of common stock (including the underwriters' over-allotment provision) ata price of $8.50 per share. Concurrent with the initial public offering, alloutstanding shares of preferred stock were converted to a total of 58,122,630shares of common stock. Net proceeds from the offering were approximately $125.3million net of offering costs. On October 20, 1999, Extreme announced the completion of a secondary publicoffering of approximately 15 million shares (including the underwriters'over-allotment provision) of its common stock at a price of $38.50 per share. Ofthese shares, Extreme sold 4,745,416 shares and existing stockholders sold10,204,584 shares. Extreme raised approximately $174.0 million net of offeringcosts.Preferred Stock The number of shares of preferred stock authorized to be issued at June 30,2000 is 2,000,000 with a par value of $0.001 per share. The preferred stock maybe issued from time to time in one or more series. The board of directors isauthorized to provide for the rights, preferences and privileges of the sharesof each series and any qualifications, limitations or restrictions on theseshares. As of June 30, 2000, no shares of preferred stock had been issued.Common Stock In May 1996, Extreme issued 9,450,000 shares of common stock to foundersfor cash. The common stock is subject to repurchase until vested; vesting withrespect to 25% occurs on the first anniversary of the issuance date, with thebalance vesting ratably over a period of three years as specified in thepurchase agreements. At June 30, 1999, approximately 1,182,000 shares weresubject to repurchase at their original issuance price (none at June 30, 2000).Warrants In November 1996, Extreme issued warrants to a lease financing company topurchase 420,000 shares of Series A convertible preferred stock with an exerciseprice of $.17 per share, in consideration for equipment leases and a loan. InJuly 1997, Extreme issued warrants to the same lease financing company topurchase 96,694 shares of Series B convertible preferred stock with an exerciseprice of $.69 per share, in consideration for equipment leases. Concurrent withthe initial public offering, these warrants converted into the 44 right to purchase equivalent number of shares of common stock at the sameexercise price per share. The warrants may be exercised at any time within aperiod of (i) 10 years or (ii) 5 years from the effective date of the initialpublic offering, whichever is longer. In May 1999, 294,000 of these warrantswere exercised. In August 1999, 222,694 of these warrants were exercised. In November 1997, Extreme issued warrants to a lease financing company topurchase 158,102 shares of Series C convertible preferred stock with an exerciseprice of $1.27, in consideration for a loan. Concurrent with the initial publicoffering, these warrants converted into the right to purchase equivalent numberof shares of common stock at the same exercise price per share. The warrants maybe exercised at any time within a period which expires the sooner of (i) 10years or (ii) 3 years from the effective date of the initial public offering. InAugust 1999, all of the 158,102 warrants were exercised. In June 1999, Extreme issued fully vested, non-forfeitable and exercisablewarrants to a business partner to purchase 80,000 shares of Extreme's commonstock with an exercise price of $29.03 per share. The fair value of thesewarrants was approximately $948,000. This value was expensed in fiscal 1999 asthe warrants were issued in exchange for services rendered. As discussed in Note 3, in April 2000, Extreme issued fully earned,non-forfeitable, fully exercisable warrants with a two year life to purchase 3million shares of Extreme's common stock with an exercise price of $39.50 pershare. In June 2000, Extreme issued fully vested, non-forfeitable and exercisableoptions to consultants to purchase 120,000 shares of Extreme's common stock withan exercise price of $14.02 per share. The fair value of these options wasapproximately $1.7 million. The options were valued under a Black-Scholes model,using a volatility assumption of 1.04%. This amount will be amortized over twoyears as the services are rendered. The compensation expense for the year endedJune 30, 2000 was $176,000.Deferred Stock Compensation During the year ended June 30, 1998, in connection with the grant ofcertain stock options to employees, Extreme recorded deferred stock compensationof $437,000 representing the difference between the exercise price and thedeemed fair value of Extreme's common stock on the date such stock options weregranted. Such amount is included as a reduction of stockholders' equity and isbeing amortized by charges to operations on a graded vesting method. Extremerecorded amortization of deferred stock compensation expense of approximately$119,000, $172,000 and $68,000 for the years ended June 30, 2000, 1999 and 1998,respectively. At June 30, 2000, Extreme had a total of approximately $78,000remaining to be amortized over the corresponding vesting period of eachrespective option, generally four years. The amortization expense relates tooptions awarded to employees in all operating expense categories.Amended 1996 Stock Option Plan In January 1999, the board of directors approved an amendment to the 1996Stock Option Plan (the "Plan") to (i) increase the share reserve by 10,000,000shares, (ii) to remove certain provisions which are required to be in optionplans maintained by California privately-held companies and (iii) to rename thePlan as the "Amended 1996 Stock Option Plan." Under the Plan, which was originally adopted in September 1996, options maybe granted for common stock, pursuant to actions by the board of directors, toeligible participants. A total of 34,028,618 shares have been reserved under thePlan. Options granted are exercisable as determined by the board of directors.Options vest over a period of time as determined by the board of directors,generally four years. The term of the Plan is ten years. Options to purchaseapproximately 1,470,286 and 4,655,558 shares of common stock have been exercisedas of June 30, 2000 and 1999, respectively, but are subject to repurchase untilvested. As of June 30, 2000, 3,834,388 shares were available for future grantunder the Plan.2000 Stock Option Plan In March 2000, the board of directors adopted the 2000 Nonstatutory StockOption Plan (the "Plan"). Options may be granted for common stock, pursuant toactions by the board of directors, to eligible participants. A total of4,000,000 shares have been reserved under the Plan. Options vest over a periodof time as determined by the board of directors, generally four years. The termof the Plan is ten years. The following table summarizes stock option activity under all plans: 45 Weighted- Average Number of Exercise Price Shares Per Share ------ --------- Options outstanding at June 30, 1997........................... 3,151,500 $ .03 Granted..................................................... 3,542,920 $ .65 Exercised................................................... (1,449,550) $ .11 Canceled.................................................... (37,000) $ .18 ------------ Options outstanding at June 30, 1998........................... 5,207,870 $ .42 Granted..................................................... 5,875,516 $ 5.05 Exercised................................................... (1,135,600) $ .93 Canceled.................................................... (190,252) $ 3.34 ------------ Options outstanding at June 30, 1999........................... 9,757,534 $ 3.04 Granted..................................................... 12,404,750 $ 33.99 Exercised................................................... (2,392,472) $ 1.23 Canceled.................................................... (1,374,704) $ 26.91 ------------ Options outstanding at June 30, 2000........................... 18,395,108 $ 22.74 ============ Options to purchase 6,721,582 and 9,368,034 shares were exercisable at June30, 2000 and 1999, respectively, with a weighted-average exercise price of $3.75and $2.22, respectively. The following table summarizes significant ranges of outstanding andexercisable options at June 30, 2000: Options Outstanding Options Exercisable ----------------------------------------------------------- ---------------------------------------- Weighted- Weighted- Weighted- Range of Average Average Average Exercise Number Remaining Exercise Number Exercise Prices Outstanding Contractual Life Price Exercisable Price ------ ----------- ---------------- ----- ----------- ----- (In years) $ 0.01 - 2.88 3,854,758 7.32 $ 1.43 3,854,758 $ 1.43 $ 3.25 - 28.00 3,869,580 8.63 $ 11.15 2,769,948 $ 5.96 $ 28.03 - 32.57 1,896,868 9.25 $ 29.97 8,126 $ 29.03 $ 32.72 - 33.32 4,051,500 9.39 $ 33.30 88,750 $ 33.32 $ 33.57 - 57.50 4,722,402 8.87 $ 37.66 -- $ -- ----------- ----------- $ 0.01 - 57.50 18,395,108 8.65 $ 22.74 6,721,582 $ 3.75 =========== =========== 1999 Employee Stock Purchase Plan In January 1999, the board of directors approved the adoption of Extreme's1999 Employee Stock Purchase Plan (the "1999 Purchase Plan"). A total of2,000,000 shares of common stock have been reserved for issuance under the 1999Purchase Plan. The 1999 Purchase Plan permits eligible employees to acquireshares of Extreme's common stock through periodic payroll deductions of up to15% of total compensation. No more than 1,250 shares may be purchased on anypurchase date per employee. Each offering period will have a maximum duration of12 months. The price at which the common stock may be purchased is 85% of thelesser of the fair market value of Extreme's common stock on the first day ofthe applicable offering period or on the last day of the respective purchaseperiod. The initial offering period commenced on the effectiveness of theinitial public offering and ended on April 30, 2000. Through June 30, 2000,470,978 shares were purchased under the 1999 Purchase Plan.Stock-Based Compensation Extreme has elected to continue to follow APB 25 and relatedinterpretations in accounting for its employee and director stock-basedcompensation plans. Because the exercise price of Extreme's employee stockoptions equals the market price of the underlying stock on the date of grant, nocompensation expense has been recognized. Pro forma information regarding net income (loss) has been determined as ifExtreme had accounted for its stock-based awards to employees under the fairvalue method prescribed by FAS 123. The resulting effect on pro forma net income(loss) disclosed is not 46 likely to be representative of the effects on net income (loss) on a pro formabasis in future years, due to subsequent years including additional grants andyears of vesting. Prior to Extreme's initial public offering, the fair value of each optiongrant was determined on the date of grant using the minimum value method.Subsequent to the offering, the fair value of Extreme's stock-based awards toemployees has been estimated using the Black-Scholes option pricing model. TheBlack-Scholes option valuation model was developed for use in estimating thefair value of traded options that have no vesting restrictions and are fullytransferable. The Black-Scholes model requires the input of highly subjectiveassumptions including the expected stock price volatility. Because Extreme'sstock-based awards have characteristics significantly different from those intraded options and because changes in the subjective input assumptions canmaterially affect the fair value estimate, in management's opinion, the existingmodels do not necessarily provide a reliable single measure of the fair value ofExtreme's stock-based awards. The following weighted-average assumptions wereused to estimate fair value: Stock Option Plan Employee Stock Purchase Plan --------------------------------------- -------------------------------------- Years Ended June 30, Years Ended June 30, --------------------------------------- -------------------------------------- 2000 1999 1998 2000 1999 1998 --------- ---------- ----------- ---------- ----------- --------- Expected life 3.4 yrs 3.5 yrs 6.0 yrs 0.6yrs 0.7 yrs. --Volatility 1.12% 55% -- 1.12% 55% --Risk-free interest rate 6.3% 5.1% 6.0% 5.4% 5.0% -- The weighted-average estimated fair value of options granted in the yearsended June 30, 2000, 1999 and 1998 was $24.23 $2.21 and $0.19, respectively. Theweighted-average estimated fair value of shares granted under the 1999 PurchasePlan in the years ended June 30, 2000 and 1999 was $7.51 and $2.81,respectively. For purposes of pro forma disclosures, the estimated fair value of optionsis amortized to pro forma expense over the options' vesting period. Pro formainformation follows (in thousands, except per share amounts): Years Ended June 30, -------------------- 2000 1999 1998 ---- ---- ---- Pro forma net loss under FAS 123................................... $ (31,088) $ (4,066) $ (14,053) Net loss per common share - pro forma under FAS 123: Basic and diluted............................................... $ (0.32) $ (0.22) $ (1.61) 6) Income Taxes Due to operating losses and the inability to recognize the benefitstherefrom, there was no tax provision for the year ended June 30, 1998. The provision for income taxes for the years ended June 30, 2000 and 1999consists of the following (in thousands): Years Ended June 30, -------------------- 2000 1999 ---- ---- Current: Federal........................................ $ 24,811 $ 350 State.......................................... 2,026 200 Foreign........................................ 306 1,100 --------- -------- Total current ...................................... $ 27,143 $ 1,650 ========= ======== Deferred: Federal $(15,497) $ - State (1,325) - -------- -------- Total deferred $(16,822) $ - ======== ======== Provision for income taxes $ 10,321 $ 1,650 ======== ======== 47 The tax benefit resulting from the exercise of nonqualified stock optionsand the disqualifying dispositions of shares acquired under Extreme's incentivestock option plans was $21,600,000 for the year ended June 30, 2000. Suchbenefit was credited to additional paid-in capital. Pretax loss from foreign operations was $10,663,288 and $7,021,204 in theyears ended June 30, 2000 and 1999, respectively. The difference between the provision for income taxes and the amountcomputed by applying the Federal statutory income tax rate (35 percent) toincome before taxes is explained below (in thousands): Years Ended June 30, -------------------- 2000 1999 1998 ---- ----- ---- Tax at federal statutory rate (benefit)........................ $ 10,666 $ 11 $(4,878) State income tax............................................... 1,018 200 -- Federal alternative minimum taxes.............................. -- 350 -- Foreign taxes.................................................. 69 1,100 -- Unbenefited (utilized) net operating losses.................... (773) (11) 4,878 Tax credits.................................................... (1,576) -- -- Valuation allowance decrease................................... (5,148) -- -- Unbenefited foreign loss....................................... 3,974 -- -- Other.......................................................... 2,091 -- -- ---------- -------- ------- Total..................................................... $ 10,321 $ 1,650 $ -- ========== ======== ======= Significant components of Extreme's deferred tax assets are as follows (inthousands): Years Ended June 30, -------------------- 2000 1999 ---- ---- Deferred tax assets: Net operating loss carryforwards......................................... $ 431 $ 1,647 Tax credit carryforwards................................................. 2,358 2,238 Depreciation............................................................. 1,951 407 Deferred revenue......................................................... 3,545 373 Warrant amortization..................................................... 2,673 -- Other reserves and accruals ............................................. 7,500 3,887 -------- -------- Total deferred tax assets..................................................... 18,458 8,552 Valuation allowance........................................................... -- (8,552) -------- -------- Net deferred tax assets....................................................... $ 18,458 $ -- ======== ======== The net valuation allowance decreased by $8,522,000 and $1,019,000 duringthe years ended June 30, 2000 and 1999, respectively. As of June 30, 2000, Extreme had net operating loss carryforwards for statetax purposes of approximately $7,500,000. Extreme also had federal and stateresearch and development tax credit carryforwards of approximately $1,000,000and $1,800,000, respectively. The state net operating loss carryforwards willexpire in 2004, if not utilized. Utilization of the net operating losses and tax credits may be subject to asubstantial annual limitation due to the ownership change limitations providedby the Internal Revenue Code of 1986, as amended, and similar state provisions.The annual limitation may result in the expiration of net operating losses andtax credits before utilization.7) Comprehensive Income (Loss) The following are the components of accumulated other comprehensive loss,net of tax (in thousands): Years Ended June 30, -------------------- 2000 1999 1998 ---- ----- ---- 48 Unrealized gain (loss) on investments...................................... $ (615) $ (112) $ -- Foreign currency translation adjustments................................... (8) (6) -- ------- ------- ------ Accumulated other comprehensive loss.................................... $ (623) $ (118) $ -- ======= ======= ====== The following schedule of other comprehensive income (loss) shows the grosscurrent-period gain (loss) and the reclassification adjustment (in thousands): Years Ended June 30, -------------------- 2000 1999 1998 ---- ----- ---- Unrealized gain (loss) on investments: Unrealized gain (loss) on available-for-sale securities................. $ (508) $ (112) $ -- Less: reclassification adjustment for gain (loss) realized in net income (loss)................................................ 5 -- -- ------ ------ ------ Net unrealized gain (loss) on investments.................................. (503) (112) -- Foreign currency translation adjustments................................... (2) (6) -- ------ ------ ------ Other comprehensive income (loss).......................................... $ (505) $ (118) $ -- ====== ====== ====== 8) 401(k) Plan Extreme provides a tax-qualified employee savings and retirement plan,commonly known as a 401(k) plan, which covers our eligible employees. Pursuantto the 401(k) plan, employees may elect to reduce their current annualcompensation up to the lesser of 20% or the statutorily prescribed limit, whichis $10,000 in calendar year 2000, and have the amount of the reductioncontributed to the 401(k) plan.9) Subsequent Event On July 19, 2000 Extreme announced a two-for-one stock split in the form ofa stock dividend to be paid on August 24, 2000 to stockholders of record onAugust 10, 2000. All share and per share data have been restated to giveretroactive effect to this stock split.Item 9. Changes in and Disagreements with Accountants on Accounting andFinancial Disclosure. Not applicable. PART III Certain information required by Part III is incorporated by reference fromthe Company's definitive Proxy Statement to be filed with the Securities andExchange Commission in connection with the solicitation of proxies for theCompany's 2000 Annual Meeting of Stockholders (the "Proxy Statement").Item 10. Directors and Executive Officers of the Registrant. The information required by this section is incorporated by reference fromthe information in the section entitled "Proposal 1-Election of Directors" inthe Proxy Statement. The required information concerning executive officers ofthe Company is contained in the section entitled "Executive Officers of theRegistrant" in Part I of this Form 10-K. Item 405 of Regulation S-K calls for disclosure of any known late filing orfailure by an insider to file a report required by Section 16 of the ExchangeAct. This disclosure is contained in the section entitled "Section 16(a)Beneficial Ownership Reporting Compliance" in the Proxy Statement and isincorporated herein by reference.Item 11. Executive Compensation. The information required by this section is incorporated by reference fromthe information in the sections entitled "Proposal 1-Election of Directors --Directors' Compensation", "Executive Compensation" and "Stock Price PerformanceGraph" in the Proxy Statement. 49 Item 12. Security Ownership of Certain Beneficial Owners and Management. The information required by this section is incorporated by reference fromthe information in the section entitled "Proposal 1- Election of Directors-Security Ownership of Certain Beneficial Owners and Management" in the ProxyStatement.Item 13. Certain Relationships and Related Transactions. The information required by this section is incorporated by reference fromthe information in the section titled "Certain relationships and relatedtransactions" in the Proxy statement. PART IVItem 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.(a) The following documents are filed as a part of this Form 10-K: (1) Financial Statements: Reference is made to the Index to Consolidated Financial Statements of Extreme Networks, Inc. under Item 8 in Part II of this Form 10-K. (2) Financial Statement Schedules: The following financial statement schedule of Extreme Networks, Inc. for the years ended June 30, 2000, 1999 and 1998 is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of Extreme Networks, Inc. Reference PageSchedule II-- Valuation and Qualifying Accounts....................... 52 All other schedules are omitted because they are not applicable or therequired information is shown in the financial statements or notes thereto. (3) Exhibits: The exhibits listed below are required by Item 601 of Regulation S-K. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K has been identified. Exhibit Number Notes Description of Document --------- ----- ----------------------- 2.1 (1) Form of Agreement and Plan of Merger between Extreme Networks, a California corporation, and Extreme Networks, Inc., a Delaware corporation. 3.1 (1) Certificate of Incorporation of Extreme Networks, Inc., a Delaware Corporation. 3.2 (1) Form of Certificate of Amendment of Certificate of Incorporation of Extreme Networks, Inc., a Delaware Corporation. 3.3 (1) Form of Amended and Restated Bylaws of Extreme Networks, Inc., a Delaware Corporation. 4.1 (1) Second Amended and Restated Rights Agreement dated January 12, 1998 between Extreme Network and certain stockholders. 10.1 (1) Form of Indemnification Agreement for directors and officers. 10.2 (1) Amended 1996 Stock Option Plan and forms of agreements thereunder.* 10.3 (1) 1999 Employee Stock Purchase Plan.* 10.4 (1) Sublease, dated June 5, 1997 between NetManage, Inc. and Extreme Networks, Inc., a California corporation, to Master Lease, dated September 30, 1994, between Cupertino Industrial Associates and NetManage, Inc. 10.5 (1) Sublease, dated January 1, 1999 between Apple Computer, Inc., a California corporation, and Extreme Networks, Inc., a California corporation, to Lease Agreement, as amended. 50 10.6 Form of Warrant to Purchase Common Stock between 3Com Corporation and Extreme Networks, Inc. 10.7 Form of 2000 Nonstatutory Stock Option Plan.* 10.8 Form of Lease Agreement (Land) dated June 1, 2000 by and between BNP Leasing Corporation, a Delaware corporation ("BNPLC") and Extreme Networks, Inc. a Delaware corporation ("Extreme"). 10.9 Form of Lease Agreement (Improvements) dated June 1, 2000, executed by and between BNPLC and Extreme. 10.10 Form of Purchase Agreement (Land) dated to be effective as of June 1, 2000, executed by and between BNPLC and Extreme. 10.11 Form of Purchase Agreement (Improvements) dated to be effective as of June 1, 2000, executed by and between BNPLC and Extreme. 10.12 Form of Pledge Agreement (Land) dated to be effective as of June 1, 2000, among BNPLC, BNP Paribas (as Agent), and Extreme. 10.13 Form of Pledge Agreement (Improvements) dated to be effective as of June 1, 2000, among BNPLC, BNP Paribas (as Agent), and Extreme. 21.1 Subsidiaries of Registrant. 23.1 Consent of Ernst and Young LLP, Independent Auditors. 24.1 Power of Attorney (see page 53 of this Form 10-K). 27.1 Financial Data Schedule (available in EDGAR format only)._____________* Indicates management contract or compensatory plan or arrangement.(1) Incorporated by reference from the Registrant's Registration Statement onForm S-1 (File No. 333-71921).(b) Reports on Form 8-K: No reports on form 8-K were filed by the Company during the three monthsended June 30, 2000. 51 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED JUNE 30, 2000, 1999 AND 1998 (In thousands) Reversals Balance at Charged to to costs Balance at beginning costs and and end of Description of period expenses expenses (Deductions) period ----------- ------------ ------------ ---------- -------------- ----------- Allowance for doubtful accounts 2000......................... $1,374 $ -- $ -- $ (137) $ 1,237 1999......................... 433 1,364 -- (423) 1,374 1998......................... -- 470 -- (37) 433 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized, on September 28, 2000. EXTREME NETWORKS, INC. (Registrant) By: /s/ GORDON L. STITT ------------------------------------- Gordon L. Stitt President Chief Executive Officer Chairman of the Board September 28, 2000 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signatureappears below constitutes and appoints Gordon L. Stitt and Vito E. Palermo, andeach of them, his or her true and lawful attorneys-in-fact, each with full powerof substitution, for him or her in any and all capacities, to sign anyamendments to this report on Form 10-K and to file the same, with exhibitsthereto and other documents in connection therewith, with the Securities andExchange Commission, hereby ratifying and confirming all that each of saidattorneys-in-fact or their substitute or substitutes may do or cause to be doneby virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, thisreport has been signed below by the following persons on behalf of theRegistrant and in the capacities and on the date indicated: /s/ GORDON L. STITT /s/ PROMOD HAQUE----------------------------------------------- ----------------------------------------------- Gordon L. Stitt Promod Haque President, Chief Executive Officer Director Chairman of the Board September 28, 2000 September 28, 2000 /s/ VITO E. PALERMO /s/ LAWRENCE K. ORR----------------------------------------------- ----------------------------------------------- Vito E. Palermo Lawrence K. Orr Vice President & Chief Financial Officer Director (Principal Financial and Accounting Officer) September 28, 2000 September 28, 2000 /s/ CHARLES CARINALLI /s/ PETER WOLKEN----------------------------------------------- ----------------------------------------------- Charles Carinalli Peter Wolken Director Director September 28, 2000 September 28, 2000 53 EXHIBIT INDEX Exhibit Number Notes Description of Document --------- ----- ----------------------- 2.1 (1) Form of Agreement and Plan of Merger between Extreme Networks, a California corporation, and Extreme Networks, Inc., a Delaware corporation. 3.1 (1) Certificate of Incorporation of Extreme Networks, Inc., a Delaware Corporation. 3.2 Form of Certificate of Amendment of Certificate of Incorporation of Extreme Networks, Inc., a Delaware (1) Corporation. 3.3 (1) Form of Amended and Restated Bylaws of Extreme Networks, Inc., a Delaware Corporation. 4.1 (1) Second Amended and Restated Rights Agreement dated January 12, 1998 between Extreme Network and certain stockholders. 10.1 (1) Form of Indemnification Agreement for directors and officers. 10.2 (1) Amended 1996 Stock Option Plan and forms of agreements thereunder.* 10.3 (1) 1999 Employee Stock Purchase Plan.* 10.4 (1) Sublease, dated June 5, 1997 between NetManage, Inc. and Extreme Networks, Inc., a California corporation, to Master Lease, dated September 30, 1994, between Cupertino Industrial Associates and NetManage, Inc. 10.5 (1) Sublease, dated January 1, 1999 between Apple Computer, Inc., a California corporation, and Extreme Networks, Inc., a California corporation, to Lease Agreement, as amended. 10.6 Form of Warrant to Purchase Common Stock between 3Com Corporation and Extreme Networks, Inc. 10.7 Form of 2000 Nonstatutory Stock Option Plan.* 10.8 Form of Lease Agreement (Land) dated June 1, 2000 by and between BNP Leasing Corporation, a Delaware corporation ("BNPLC") and Extreme Networks, Inc. a Delaware corporation ("Extreme"). 10.9 Form of Lease Agreement (Improvements) dated June 1, 2000, executed by and between BNPLC and Extreme. 10.10 Form of Purchase Agreement (Land) dated to be effective as of June 1, 2000, executed by and between BNPLC and Extreme. 10.11 Form of Purchase Agreement (Improvements) dated to be effective as of June 1, 2000, executed by and between BNPLC and Extreme. 10.12 Form of Pledge Agreement (Land) dated to be effective as of June 1, 2000, among BNPLC, BNP Paribas (as Agent), and Extreme. 10.13 Form of Pledge Agreement (Improvements) dated to be effective as of June 1, 2000, among BNPLC, BNP Paribas (as Agent), and Extreme. 21.1 Subsidiaries of Registrant. 23.1 Consent of Ernst and Young LLP, Independent Auditors. 24.1 Power of Attorney (see page 53 of this Form 10-K). 27.1 Financial Data Schedule (available in EDGAR format only).____________* Indicates management contract or compensatory plan or arrangement.(1) Incorporated by reference from the Registrant's Registration Statement onForm S-1 (File No. 333-71921). EXHIBIT 10.6 WARRANT WARRANT NO. 2 ----- THIS WARRANT OR THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT, OR THE SHARES ISSUABLE HEREUNDER, MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION THEREUNDER. EXTREME NETWORKS, INC. WARRANT TO PURCHASE COMMON STOCK Void after April 3, 2002 This certifies that, for value received, 3Com Corporation orregistered assigns ("Holder") is entitled, subject to the terms set forth below,to purchase from Extreme Networks, Inc. (the "Company"), a Delaware corporation,1,500,000 shares (such number of shares being referred to herein as the"Original Amount") of the Common Stock of the Company (the "Common Stock"), asconstituted on the date hereof (the "Warrant Issue Date"), upon surrenderhereof, at the principal office of the Company referred to below, with thenotice of exercise form attached hereto duly executed, and simultaneous paymenttherefor in lawful money of the United States or otherwise as hereinafterprovided, at the Exercise Price as set forth in Section 2 below. The OriginalAmount, character and Exercise Price of such shares of Common Stock are subjectto adjustment as provided below. The term "Warrant" as used herein shall includethis Warrant, and any warrants delivered in substitution or exchange therefor asprovided herein. 1. Term of Warrant. --------------- (a) Subject to the terms and conditions set forth herein andcompliance with any applicable regulatory requirements, this Warrant shall beexercisable, in whole or in part, at any time during the term commencing onApril 3, 2000 and ending at 5:00 p.m., Pacific standard time, on April 3, 2002(the "Expiration Date"), and, except as otherwise provided herein, shall be voidthereafter. This Warrant shall expire earlier upon the closing of an event inwhich more than fifty percent (50%) of the Company's assets or capital stock isacquired by or merged into another corporation that is not under direct orindirect control of the persons who are the shareholders of the Companyimmediately prior to such acquisition or merger, provided that Holder is givenat least 20 days prior written notice of such acquisition or merger in which toexercise this Warrant in advance of its expiration. (b) In the event that the Expiration Date of this Warrantfalls on a day which is not a Business Day, the Expiration Date shall beadjusted to the Business Day immediately following such Expiration Date. As usedherein, the term "Business Day" means each day other than a Saturday, Sunday or other day on which banks in the location of theprincipal office of the Company are legally authorized to close. 2. Exercise Price. The Exercise Price at which this Warrant may be --------------exercised shall be $79.00 per share of Common Stock, as adjusted from time totime pursuant to Section 11 hereof (the "Exercise Price"). 3. Exercise of Warrant. ------------------- (a) The purchase rights represented by this Warrant are exercisableby the Holder in whole or in part subject to compliance with applicableregulatory requirements, at any time and from time to time, during the termhereof as described in Section 1 above, by the surrender of this Warrant and theNotice of Exercise annexed hereto duly completed and executed on behalf of theHolder, at the office of the Company (or such other office or agency of theCompany as it may designate by notice in writing to the Holder at the address ofthe Holder appearing on the books of the Company), upon payment (i) in cash orby check acceptable to the Company, (ii) by cancellation by the Holder ofindebtedness of the Company to the Holder, or (iii) by a combination of (i) and(ii), of an amount equal to the then applicable Exercise Price per sharemultiplied by the number of shares then being purchased. For so long as theCompany remains a publicly listed company, the Holder may pay the Exercise Priceof the Warrant (i) by surrendering to the Company shares of the Company's CommonStock having a value equal to the Exercise Price of the Warrant being exercisedor (ii) by directing the Company to apply toward payment of the Exercise Pricefrom the number of shares of the Common Stock for which the Warrant is beingexercised, shares of the Common Stock having a value equal to the Exercise Priceof the Warrant being exercised. For purposes of this Section 3, the value ofeach share of Common Stock shall be the average of the daily closing prices ofthe Common Stock for the five consecutive Trading Days ending on the Trading Daypreceding the date of such exercise. As used herein the term "Trading Days" withrespect to Common Stock means (i) if the Common Stock is quoted on the NASDAQStock Markets, Inc. any similar system of automated dissemination of quotationsof securities prices, days on which trades may be made on such system or (ii) ifthe Common Stock is listed or admitted for trading on any national securitiesexchange, days on which such national securities exchange is open for business. (b) This Warrant shall be deemed to have been exercised immediatelyprior to the close of business on the date of its surrender for exercise asprovided above, and the person entitled to receive the shares of Common Stockissuable upon such exercise shall be treated for all purposes as the holder ofrecord of such shares as of the close of business on such date. As promptly aspracticable on or after such date and in any event within ten (10) daysthereafter, the Company, at its expense, shall issue and deliver to the personor persons entitled to receive the same a certificate or certificates for thenumber of shares issuable upon such exercise. In the event that this Warrant isexercised in part, the Company, at its expense, will execute and deliver a newWarrant of like tenor exercisable for the number of shares for which thisWarrant may then be exercised. -2- 4. Fractional Shares. No fractional shares will be issued in connection -----------------with any exercise of this Warrant, and the number of shares to which the Holderis entitled upon exercise of this Warrant shall be rounded down to the nearestwhole number. 5. Replacement of Warrant. On receipt of evidence reasonably ----------------------satisfactory to the Company of the loss, theft, destruction or mutilation ofthis Warrant and, in the case of loss, theft or destruction, on delivery of anindemnity agreement reasonably satisfactory in form and substance to the Companyor, in the case of mutilation, on surrender and cancellation of this Warrant,the Company at its expense shall execute and deliver, in lieu of this Warrant, anew warrant of like tenor and amount. 6. No Rights as Stockholder. Subject to Sections 9 and 11 of this ------------------------Warrant, the Holder shall not be entitled to vote or receive dividends pursuantto this Warrant or be deemed the holder of Common Stock pursuant to thisWarrant, nor shall anything contained herein be construed to confer upon theHolder, as such, any of the rights of a stockholder of the Company or any rightto vote for the election of directors or upon any matter submitted tostockholders at any meeting thereof, or to give or withhold consent to anycorporate action (whether upon any recapitalization, issuance of stock,reclassification of stock, change of par value, or change of stock to no parvalue, consolidation, merger, conveyance, or otherwise) or to receive notice ofmeetings, or to receive dividends or subscription rights or otherwise until theWarrant shall have been exercised as provided herein. 7. Transfer of Warrant. As this warrant is issued in furtherance of the -------------------relationship between the Company and the initial Holder, this warrant may not betransferred without the written approval of the Company, which consent may bewithheld for any reason. (a) The Company will maintain a register (the "Warrant Register")containing the names and addresses of the Holder or Holders. Any Holder of thisWarrant or any portion thereof may change his address as shown on the WarrantRegister by written notice to the Company requesting such change. Any notice orwritten communication required or permitted to be given to the Holder may bedelivered or given by mail to such Holder as shown on the Warrant Register andat the address shown on the Warrant Register. Until this Warrant is transferredon the Warrant Register of the Company, the Company may treat the Holder asshown on the Warrant Register as the absolute owner of this Warrant for allpurposes, notwithstanding any notice to the contrary. (b) The Company may, by written notice to the Holder, appoint anagent for the purpose of maintaining the Warrant Register referred to in Section7(a) above, issuing the Common Stock or other securities then issuable upon theexercise of this Warrant, exchanging this Warrant, replacing this Warrant, orany or all of the foregoing. Thereafter, any such registration, issuance,exchange, or replacement, as the case may be, shall be made at the office ofsuch agent. (c) This Warrant may not be transferred or assigned in whole or inpart without compliance with applicable federal and state securities laws by thetransferor and the transferee. Subject to the provisions of this Warrant withrespect to compliance with the Securities Act of 1933, as amended (the "Act"),title to this Warrant may be transferred by -3- endorsement (by the Holder executing the Assignment Form annexed hereto) anddelivery in the same manner as a negotiable instrument transferable byendorsement and delivery. (d) On surrender of this Warrant for exchange, properly endorsed onthe Assignment Form and subject to the provisions of this Warrant with respectto compliance with the Act and with the limitations on assignments and transferscontained in this Section 7, the Company at its expense shall issue to or on theorder of the Holder a new warrant or warrants of like tenor, in the name of theHolder or as the Holder (on payment by the Holder of any applicable transfertaxes) may direct, for the number of shares issuable upon exercise hereof. (e) The Holder of this Warrant, by acceptance hereof, acknowledgesthat the Holder will not offer, sell or otherwise dispose of this Warrant or anyshares of Common Stock to be issued upon exercise hereof except in compliancewith the registration requirements of the Act, subject, nevertheless, to thedisposition of the Holder's property being at all times within its control. (f) This Warrant and all shares of Common Stock issued upon exercisehereof (unless registered under the Act) shall be stamped or imprinted with alegend in substantially the following form: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION THEREUNDER. 8. Reservation of Stock; Stock Fully Paid. The Company covenants that --------------------------------------during the term this Warrant is exercisable, the Company will reserve from itsauthorized and unissued Common Stock a sufficient number of shares to providefor the issuance of Common Stock upon the exercise of this Warrant and, fromtime to time, will take all steps necessary to amend its Certificates ofIncorporation (the "Certificates") to provide sufficient reserves of shares ofCommon Stock issuable upon exercise of the Warrant and will refrain fromeffecting any amendment to the Certificates which in any manner would affect therights or privileges of the holders of its Common Stock. The Company furthercovenants that all shares that may be issued upon the exercise of rightsrepresented by this Warrant, upon exercise of the rights represented by thisWarrant and payment of the Exercise Price, all as set forth herein, will be dulyauthorized, validly issued, fully paid and nonassessable, and free from alltaxes, liens and charges in respect of the issue thereof (other than taxes inrespect of any transfer occurring contemporaneously). The Company agrees thatits issuance of this Warrant shall constitute full authority to its officers whoare charged with the duty of executing stock certificates to execute and issuethe necessary certificates for shares of Common Stock upon the exercise of thisWarrant. 9. Notices. ------- -4- (a) Whenever the Exercise Price or number of shares purchasablehereunder shall be adjusted pursuant to Section 11 hereof, the Company shallissue a certificate signed by its chief financial officer setting forth, inreasonable detail, the event requiring the adjustment, the amount of theadjustment, the method by which such adjustment was calculated, and the ExercisePrice and number of shares purchasable hereunder after giving effect to suchadjustment, and shall cause a copy of such certificate to be mailed (by first-class mail, postage prepaid) to the Holder of this Warrant. (b) In case: (i) the Company shall take a record of the holders ofits Common Stock (or other stock or securities at the time receivable upon theexercise of this Warrant) for the purpose of entitling them to receive anydividend or other distribution, or any right to subscribe for or purchase anyshares of stock of any class or any other securities, or to receive any otherright, or (ii) of any capital reorganization of the Company, any stocksplit or subdivision, or reverse stock split or combination, or any similarevent involving the Common Stock, any reclassification of the capital stock ofthe Company, any consolidation or merger of the Company with or into anothercorporation, or any sale, transfer or other conveyance of all or substantiallyall of the assets of the Company to another corporation, or (iii) of any voluntary dissolution, liquidation or winding-up ofthe Company, then, and in each such case, the Company will mail or cause to bemailed to the Holder or Holders a notice specifying, as the case may be, (A) thedate on which a record is to be taken for the purpose of such dividend,distribution or right, and stating the amount and character of such dividend,distribution or right, or (B) the date on which a record is to be taken fordetermining stockholders entitled to vote upon such reorganization,reclassification, consolidation, merger, conveyance, dissolution, liquidation orwinding-up is to take place, and the time, if any is to be fixed, as of whichthe holders of record of Common Stock (or such stock or securities at the timereceivable upon the exercise of this Warrant) shall be entitled to exchangetheir shares of Common Stock (or such other stock or securities) for securitiesor other property deliverable upon such reorganization, reclassification,consolidation, merger, conveyance, dissolution, liquidation or winding-up. Suchnotice shall be mailed at least 10 days prior to the date therein specified. (c) All such notices, advices and communications shall be deemed tohave been received (i) in the case of personal delivery, on the date of suchdelivery and (ii) in the case of mailing, on the third business day followingthe date of such mailing. 10. Amendments. ---------- (a) This Warrant and any term hereof may be changed, waived,discharged or terminated only by an instrument in writing signed by the partyagainst which enforcement of such change, waiver, discharge or termination issought. -5- (b) No waivers of, or exceptions to, any term, condition or provisionof this Warrant, in any one or more instances, shall be deemed to be, orconstrued as, a further or continuing waiver of any such term, condition orprovision. 11. Adjustments. ----------- (a) The Exercise Price and the number of shares purchasable hereundershall be subject to adjustment from time to time as follows: (i) The Exercise Price shall be adjusted from time to time inthe case of any stock split, subdivision of the number of shares of the CommonStock or similar event involving Common Stock (a "Split") or any reverse stocksplit, combination or similar event involving the Common Stock (a "Combination")and, accordingly, the Exercise Price shall be proportionately decreased in thecase of a Split or increased in the case of a Combination, as of the close ofbusiness on the date the Split or Combination becomes effective, computed to thenearest cent. (ii) In case of any reclassification or change of outstandingshares of Common Stock (except a split or combination, or a change in par value,or a change from par value to no par value, or a change from no par value to parvalue), or in case of any consolidation or merger to which the Company is aparty (other than a consolidation or merger that results in the termination ofthis Warrant under Section 1 or in which the Company is the survivingcorporation and which does not result in any reclassification of or change inthe outstanding Common Stock of the Company) or any sale, transfer or otherconveyance of all or substantially all of the Company's assets, the Company, orits successor, as the case may be, shall assume, by written instrument executedand delivered to the registered holder of this Warrant at such Holder's addressshown on the registration books of the Company the obligation to deliver to theHolder of this Warrant, upon due exercise thereof, the kind and amount of stockand other securities and property receivable upon such reclassification, change,consolidation, merger, sale, transfer or conveyance by a Holder of the number ofshares which would have been issued to such Holder had this Warrant beenexercised immediately prior thereto. As evidence of the kind and amount of stock or other securitiesor property which shall be issuable upon the exercise of this Warrant after anysuch reclassification, change, consolidation, merger, sale, transfer orconveyance, the Company shall maintain in its records at its principal office acertificate of any firm of independent public accountants (who may be theregular auditors retained by the Company) with respect thereto. The provisions of this clause (ii) shall similarly apply tosuccessive reclassifications, changes, consolidations, mergers, sales, transfersor conveyances. Upon any adjustment of the Exercise Price herein above providedfor, the number of shares issuable upon exercise of this Warrant shall bechanged to the number of shares calculated to the next highest whole shareobtained by dividing (A) the aggregate Exercise Price payable for the purchaseof all shares issuable upon exercise prior to such adjustment by (B) theExercise Price in effect immediately after such adjustment. -6- (iii) Whenever the Exercise Price or the number of sharespurchasable upon the exercise of this Warrant is adjusted as herein provided,the Company shall: (A) forthwith place on file at its office a certificatesigned by the chief financial officer of the Company, showing in appropriatedetail the facts requiring such adjustment, the computation thereof, theExercise Price after such adjustment, and the number of shares purchasable uponthe exercise of this Warrant after such adjustment with respect to each shareoriginally purchasable upon exercise hereof, and shall exhibit the same fromtime to time to any holder of this Warrant desiring an inspection thereof, and (B) within ten (10) days thereafter cause a notice to bemailed to the Holder hereof at its address shown in the registration books ofthe Company stating that such adjustment has been effected and the adjustedExercise Price and the number of shares purchasable as aforesaid. (iv) Irrespective of any adjustments in the Exercise Price orthe number of shares or the number or kind of other securities purchasable uponexercise of this Warrant, this Warrant or any Warrant thereafter issued maycontinue to express the same price and number and kind of shares as are statedin the Warrants initially issued by the Company. (b) In the event that the Company (i) issues as a dividend or othersimilar distribution (an "Extraordinary Dividend") on all of its thenoutstanding Common Stock, (A) securities of the Company of a class other thanCommon Stock, (B) rights, warrants or options (individually, a "Right" andcollectively, the "Rights") to acquire any securities of the Company (includingCommon Stock) or (C) evidences of its indebtedness or assets (any securities(other than Rights) issued as an Extraordinary Dividend or issued upon exerciseof any Rights issued as an Extraordinary Dividend shall be referred to as"Dividend Securities"): (x) this Warrant shall thereafter be exercisable for (1) theOriginal Amount of shares of Common Stock (subject to adjustment as hereinprovided), (2) such Dividend Securities and Rights as would theretofore havebeen issued in respect of such shares (adjusted as herein provided) had suchshares been outstanding at the time of such Extraordinary Dividend; and (y) any Right issued as an Extraordinary Dividend shall (1)expire upon the later of (a) the original expiration date of such Right or (b)the 180th day following the exercise of this Warrant, and (2) be exercisable forthe Dividend Securities issuable upon exercise of such Right. (c) In the event that at any time while this Warrant is outstanding,the Company shall offer to sell to all of the holders of Common Stock as aclass, rights or options to purchase Common Stock or rights or options topurchase any stock or securities convertible into or exchangeable for CommonStock (such exchangeable or convertible stock or securities being herein called"Convertible Securities"), whether or not such rights or options are immediatelyexercisable, and the price per share for which Common Stock is issuable upon theexercise of such rights or options or upon conversion or exchange of suchConvertible Securities (determined by dividing (i) the total amount received orreceivable by the Company upon -7- issuance and sale of such rights or options, plus the aggregate amount ofadditional consideration payable to the Company upon the exercise of all suchrights or options, plus, in the case of rights or options which relate toConvertible Securities, the aggregate amount of additional consideration, ifany, payable upon the conversion or exchange of all such Convertible Securities,by (ii) the total maximum number of shares of Common Stock issuable upon theexercise of all such rights or options or upon the conversion or exchange of allsuch Convertible Securities issuable upon the exercise of all such rights oroptions) shall be less than the Exercise Price in effect immediately prior tothe initial sale of any such rights or options, the Company shall offer to sellto the Holder, at the price and upon the terms at which such rights or optionsare offered to holders of its Common Stock, such number of such rights oroptions as the Holder would have been entitled to purchase had the Holderexercised this Warrant immediately prior to the commencement of the offering ofsuch rights or options. (d) If any event occurs as to which in the opinion of the Board ofDirectors of the Company the other provisions of this Section 11 are notstrictly applicable or if strictly applicable would not adequately protect fromdilution the exercise rights of the Holder in accordance with the intent andprinciples of such provisions, then the Board of Directors of the Company shallmake an equitable adjustment in the application of such provisions, inaccordance with such intent and principles of such provisions, so as to protectsuch exercise rights as aforesaid, but in no event shall such adjustment havethe effect of increasing the Exercise Price. 12. Taxes. The issue of any stock or other certificate upon the exercise -----of this Warrant shall be made without charge to the Holder for any documentary,stamp or similar tax in respect of the issue of such stock or certificate. 13. Valid Issuance. Company represents to Holder that this Warrant and the --------------shares of Common Stock issuable upon the exercise of this Warrant have been dulyauthorized by all necessary corporate actions, this Warrant has been dulyexecuted and delivered and constitutes a legally binding agreement of theCompany enforceable in accordance with the terms hereof, the Company hasreserved out of its authorized and unissued shares of Common Stock a number ofshares sufficient to provide for the exercise of the rights represented by thisWarrant, and the shares of Common Stock issuable upon exercise of this Warrant,when issued in accordance with the terms hereof, will be validly issued, fullypaid and nonassessable. 14. Registration Rights. The Company hereby undertakes to use its best -------------------efforts to grant "piggy back" registration rights to the Holder, entitling theHolder to include in a registration statement filed by the Company with theSecurities Exchange Commission the shares issuable upon exercise of thisWarrant. Such rights shall be on the same terms as certain existing holders ofthe Company's common stock held pursuant to the Company's registration rightsagreement with its investors, and may require amendment of such agreement, whichamendment the Company will seek to obtain immediately following the issuance ofthis Warrant. 15. Governing Law. This Warrant shall be governed by, construed, and -------------enforced in accordance with the laws of the State of Delaware without referenceto its principles of conflicts of law. -8- IN WITNESS WHEREOF, Extreme Networks, Inc. has caused this Warrant to beexecuted by its officers thereunto duly authorized.Dated as of: April 3, 2000 EXTREME NETWORKS, INC. By:_____________________________ -9- NOTICE OF EXERCISETo: Extreme Networks, Inc. (1) The undersigned hereby elects to purchase ______ shares of CommonStock of Extreme Networks, Inc., pursuant to the terms of the attached Warrant,and tenders herewith payment of the purchase price for such shares in full. (2) Please issue a certificate or certificates representing saidshares of Common Stock in the name of the undersigned or in such other name asis specified below: ________________________________ (Name) ________________________________ (Address) (3) Please issue a new Warrant for the unexercised portion of theattached Warrant in the name of the undersigned or in such other name as isspecified below: ________________________________ (Name)____________________ ___________________________________(Date) (Signature) FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered owner of this Warranthereby sells, assigns and transfers unto the Assignee named below all of therights of the undersigned under the within Warrant, with respect to the numberof shares of Common Stock set forth below:Name of Assignee Address No. of Shares---------------- ------- -------------and does hereby irrevocably constitute and appoint Attorney _____________ tomake such transfer on the books of Extreme Networks, Inc., maintained for thepurpose, with full power of substitution in the premises.Dated:__________________ ________________________________ Signature of Holder EXHIBIT 10.7 EXTREME NETWORKS, INC. 2000 NONSTATUTORY STOCK OPTION PLAN Establishment, Purpose and Term of Plan. --------------------------------------- 1.1 Establishment. The Company's 2000 Nonstatutory Stock Option Plan(the "Plan") is established effective as of March ___, 2000. 1.2 Purpose. The purpose of the Plan is to advance the interests ofthe Participating Company Group and its stockholders by providing an incentiveto attract, retain and reward persons performing services for the ParticipatingCompany Group and by motivating such persons to contribute to the growth andprofitability of the Participating Company Group. 1.3 Term of Plan. The Plan shall continue in effect until the earlierof its termination by the Board or the date on which all of the shares of Stockavailable for issuance under the Plan have been issued and all restrictions onsuch shares under the terms of the Plan and the agreements evidencing Optionsgranted under the Plan have lapsed. Definitions and Construction. ----------------------------- 2.1 Definitions. Whenever used herein, the following terms shall havetheir respective meanings set forth below: "Board" means the Board of Directors of the Company. If oneor more Committees have been appointed by the Board to administer the Plan,"Board" also means such Committee(s). "Code" means the Internal Revenue Code of 1986, as amended,and any applicable regulations promulgated thereunder. "Committee" means the Compensation Committee or othercommittee of the Board duly appointed to administer the Plan and having suchpowers as shall be specified by the Board. Unless the powers of the Committeehave been specifically limited, the Committee shall have all of the powers ofthe Board granted herein, including, without limitation, the power to amend orterminate the Plan at any time, subject to the terms of the Plan and anyapplicable limitations imposed by law. "Company" means Extreme Networks, Inc., a Delawarecorporation, or any successor corporation thereto. "Consultant" means any person, including an advisor, engagedby a Participating Company to render services other than as an Employee or adirector. "Employee" means any person treated as an employee(including an officer or a director who is also treated as an employee) in therecords of a Participating Company. "Exchange Act" means the Securities Exchange Act of 1934, asamended. "Fair Market Value" means, as of any date, the value of ashare of Stock or other property as determined by the Board, in its discretion,or by the Company, in its discretion, if such determination is expresslyallocated to the Company herein, subject to the following: If, on such date, the Stock is listed on a national or regionalsecurities exchange or market system, the Fair Market Value of a share of Stockshall be the closing price of a share of Stock (or the mean of the closing bidand asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq National Market, The NasdaqSmallCap Market or such other national or regional securities exchange or marketsystem constituting the primary market for the Stock, as reported in The Wall --------Street Journal or such other source as the Company deems reliable. If the--------------relevant date does not fall on a day on which the Stock has traded on suchsecurities exchange or market system, the date on which the Fair Market Valueshall be established shall be the last day on which the Stock was so tradedprior to the relevant date, or such other appropriate day as shall be determinedby the Board, in its discretion. If, on such date, there is no public market for the Stock, the Fair Market Value of a share of Stock shall be as determined by the Board in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse. "Option" means a right to purchase Stock (subject toadjustment as provided in Section 4.2) pursuant to the terms and conditions ofthe Plan. Options are intended to be nonstatutory stock options and shall not betreated as incentive stock options within the meaning of Section 422(b) of theCode. "Option Agreement" means a written agreement between theCompany and an Optionee setting forth the terms, conditions and restrictions ofthe Option granted to the Optionee and any shares acquired upon the exercisethereof. "Optionee" means a person who has been granted one or moreOptions. "Parent Corporation" means any present or future "parentcorporation" of the Company, as defined in Section 424(e) of the Code. "Participating Company" means the Company or any ParentCorporation or Subsidiary Corporation. "Participating Company Group" means, at any point in time,all corporations collectively which are then Participating Companies. "Stock" means the common stock, without par value, of theCompany, as adjusted from time to time in accordance with Section 4.2. "Subsidiary Corporation" means any present or future"subsidiary corporation" of the Company, as defined in Section 424(f) of theCode. 2.2 Construction. Captions and titles contained herein are forconvenience only and shall not affect the meaning or interpretation of anyprovision of the Plan. Except when otherwise indicated by the context, thesingular shall include the plural and the plural shall include the singular. Useof the term "or" is not intended to be exclusive, unless the context clearlyrequires otherwise. Administration. -------------- 3.1 Administration by the Board. The Plan shall be administered bythe Board, including any duly appointed Committee of the Board. All questions ofinterpretation of the Plan or of any Option shall be determined by the Board,and such determinations shall be final and binding upon all persons having aninterest in the Plan or such Option. Any officer of a Participating Companyshall have the authority to act on behalf of the Company with respect to anymatter, right, obligation, determination or election which is the responsibilityof or which is allocated to the Company herein, provided the officer hasapparent authority with respect to such matter, right, obligation, determinationor election. 3.2 Powers of the Board. In addition to any other powers set forth inthe Plan and subject to the provisions of the Plan, the Board shall have thefull and final power and authority, in its sole discretion: to determine the persons to whom, and the time or times atwhich, Options shall be granted and the number of shares of Stock to be subjectto each Option; to determine the Fair Market Value of shares of Stock orother property; to determine the terms, conditions and restrictionsapplicable to each Option (which need not be identical) and any shares acquiredupon the exercise thereof, including, without limitation, (i) the exercise priceof the Option, (ii) the method of payment for shares purchased upon the exerciseof the Option, (iii) the method for satisfaction of any tax withholdingobligation arising in connection with the Option or such shares, including bythe withholding or delivery of shares of stock, (iv) the timing, terms andconditions of the exercisability of the Option or the vesting of any sharesacquired upon the exercise thereof, (v) the time of the expiration of theOption, (vi) the effect of the Optionee's termination of employment or servicewith the Participating Company Group on any of the foregoing, and (vii) allother terms, conditions and restrictions applicable to the Option or such sharesnot inconsistent with the terms of the Plan; to approve one or more forms of Option Agreement; to amend, modify, extend, or renew, or grant a new Option insubstitution for, any Option or to waive any restrictions or conditionsapplicable to any Option or any shares acquired upon the exercise thereof; to accelerate, continue, extend or defer the exercisabilityof any Option or the vesting of any shares acquired upon the exercise thereof,including with respect to the period following an Optionee's termination ofemployment or service with the Participating Company Group; to prescribe, amend or rescind rules, guidelines andpolicies relating to the Plan, or to adopt supplements to, or alternativeversions of, the Plan, including, without limitation, as the Board deemsnecessary or desirable to comply with the laws of, or to accommodate the taxpolicy or custom of, foreign jurisdictions whose citizens may be grantedOptions; and to correct any defect, supply any omission or reconcile anyinconsistency in the Plan or any Option Agreement and to make all otherdeterminations and take such other actions with respect to the Plan or anyOption as the Board may deem advisable to the extent consistent with the Planand applicable law. Shares Subject to Plan. ---------------------- 4.1 Maximum Number of Shares Issuable. Subject to adjustment asprovided in Section 4.2, the maximum aggregate number of shares of Stock thatmay be issued under the Plan shall be 2,000,000 and shall consist of authorizedbut unissued or reacquired shares of Stock or any combination thereof. If anoutstanding Option for any reason expires or is terminated or canceled or sharesof Stock acquired, subject to repurchase, upon the exercise of an Option arerepurchased by the Company, the shares of Stock allocable to the unexercisedportion of such Option, or such repurchased shares of Stock, shall again beavailable for issuance under the Plan. 4.2 Adjustments for Changes in Capital Structure. In the event of anystock dividend, stock split, reverse stock split, recapitalization, combination,reclassification or similar change in the capital structure of the Company,appropriate adjustments shall be made in the number and class of shares subjectto the Plan, and to any outstanding Options and in the exercise price per shareof any outstanding Options. If a majority of the shares which are of the sameclass as the shares that are subject to outstanding Options are exchanged for,converted into, or otherwise become (whether or not pursuant to an OwnershipChange Event, as defined in Section 8.1) shares of another corporation (the "NewShares"), the Board may unilaterally amend the outstanding Options to providethat such Options are exercisable for New Shares. In the event of any suchamendment, the number of shares subject to, and the exercise price per share of,the outstanding Options shall be adjusted in a fair and equitable manner asdetermined by the Board, in its sole discretion. Notwithstanding the foregoing,any fractional share resulting from an adjustment pursuant to this Section 4.2shall be rounded up or down to the nearest whole number, as determined by theBoard, and in no event may the exercise price of any Option be decreased to anamount less than the par value, if any, of the stock subject to the Option. Theadjustments determined by the Board pursuant to this Section 4.2 shall be final,binding and conclusive. Eligibility. Options may be granted only to Employees and Consultants; provided, however, that no Option shall be granted to any person(including any officer or director) whose eligibility to receive an Option under the Plan at the time of grant would require the approval of the Company's stockholders pursuant to any applicable law, regulation or rule, including, without limitation, any rule applicable to the listing of the Company's securities on the Nasdaq National Market. For purposes of the foregoingsentence, "Employees"and "Consultants" shall include prospective Employees andprospective Consultants to whom Options are granted in connection with written offers of an employment or other service relationship with the Participating Company Group. Eligible persons may be granted more than one (1) Option Terms and Conditions of Options. Options shall be evidenced by Option Agreements specifying the number of shares of Stock covered thereby, in such form as the Board shall from time to time establish. Option Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions: 6.1 Exercise Price. The exercise price for each Option shall beestablished in the sole discretion of the Board; provided, however, that theexercise price per share for an Option shall be not less than the Fair MarketValue of a share of Stock on the effective date of grant of the Option.Notwithstanding the foregoing, an Option may be granted with an exercise pricelower than the minimum exercise price set forth above if such Option is grantedpursuant to an assumption or substitution for another option in a mannerqualifying under the provisions of Section 424(a) of the Code. 6.2 Exercise Period. Options shall be exercisable at such time ortimes, or upon such event or events, and subject to such terms, conditions,performance criteria, and restrictions as shall be determined by the Board andset forth in the Option Agreement evidencing such Option; provided, however,that (a) no Option shall be exercisable after the expiration of ten (10) yearsafter the effective date of grant of such Option, and (b) no Option granted to aprospective Employee or prospective Consultant may become exercisable prior tothe date on which such person commences service with a Participating Company. 6.3 Payment of Exercise Price. Forms of Consideration Authorized. Except as otherwiseprovided below, payment of the exercise price for the number of shares of Stockbeing purchased pursuant to any Option shall be made (i) in cash, by check, orcash equivalent, (ii) by tender to the Company of shares of Stock owned by theOptionee having a Fair Market Value (as determined by the Company without regardto any restrictions on transferability applicable to such stock by reason offederal or state securities laws or agreements with an underwriter for theCompany) not less than the exercise price, (iii) by the assignment of theproceeds of a sale or loan with respect to some or all of the shares beingacquired upon the exercise of the Option (including, without limitation, throughan exercise complying with the provisions of Regulation T as promulgated fromtime to time by the Board of Governors of the Federal Reserve System) (a"Cashless Exercise"), (iv) by the Optionee's promissory note in a form approvedby the Company, (v) by such other consideration as may be approved by the Boardfrom time to time to the extent permitted by applicable law, or (vi) by anycombination thereof. The Board may at any time or from time to time, by adoptionof or by amendment to the standard form of Option Agreement described in Section7, or by other means, grant Options which do not permit all of the foregoingforms of consideration to be used in payment of the exercise price or whichotherwise restrict one or more forms of consideration. Tender of Stock. Notwithstanding the foregoing, an Optionmay not be exercised by tender to the Company of shares of Stock to the extentsuch tender of Stock would constitute a violation of the provisions of any law,regulation or agreement restricting the redemption of the Company's stock.Unless otherwise provided by the Board, an Option may not be exercised by tenderto the Company of shares of Stock unless such shares either have been owned bythe Optionee for more than six (6) months or were not acquired, directly orindirectly, from the Company. Cashless Exercise. The Company reserves, at any and alltimes, the right, in the Company's sole and absolute discretion, to establish,decline to approve or terminate any program or procedures for the exercise ofOptions by means of a Cashless Exercise. Payment by Promissory Note. No promissory note shall bepermitted if the exercise of an Option using a promissory note would be aviolation of any law. Any permitted promissory note shall be on such terms asthe Board shall determine at the time the Option is granted. The Board shallhave the authority to permit or require the Optionee to secure any promissorynote used to exercise an Option with the shares of Stock acquired upon theexercise of the Option or with other collateral acceptable to the Company.Unless otherwise provided by the Board, if the Company at any time is subject tothe regulations promulgated by the Board of Governors of the Federal ReserveSystem or any other governmental entity affecting the extension of credit inconnection with the Company's securities, any promissory note shall comply withsuch applicable regulations, and the Optionee shall pay the unpaid principal andaccrued interest, if any, to the extent necessary to comply with such applicableregulations. 6.4 Tax Withholding. The Company shall have the right, but not theobligation, to deduct from the shares of Stock issuable upon the exercise of anOption, or to accept from the Optionee the tender of, a number of whole sharesof Stock having a Fair Market Value, as determined by the Company, equal to allor any part of the federal, state, local and foreign taxes, if any, required bylaw to be withheld by the Participating Company Group with respect to suchOption or the shares acquired upon the exercise thereof. Alternatively or inaddition, in its sole discretion, the Company shall have the right to requirethe Optionee, through payroll withholding, cash payment or otherwise, includingby means of a Cashless Exercise, to make adequate provision for any such tax withholding obligations of the Participating Company Group arising inconnection with the Option or the shares acquired upon the exercise thereof. TheCompany shall have no obligation to deliver shares of Stock or to release sharesof Stock from an escrow established pursuant to the Option Agreement until theParticipating Company Group's tax withholding obligations have been satisfied bythe Optionee. Standard Forms of Option Agreement. ---------------------------------- 7.1 General. Unless otherwise provided by the Board at the time theOption is granted, an Option shall comply with and be subject to the terms andconditions set forth in the form of Option Agreement adopted by the Boardconcurrently with its adoption of the Plan and as amended from time to time. 7.2 Authority to Vary Terms. The Board shall have the authority fromtime to time to vary the terms of the standard form of Option Agreementdescribed in this Section 7 either in connection with the grant or amendment ofan individual Option or in connection with the authorization of a new standardform or forms; provided, however, that the terms and conditions of any such new,revised or amended standard form or forms of Option Agreement shall be inaccordance with the terms of the Plan. Transfer of Control. ------------------- 8.1 Definitions. An "Ownership Change Event" shall be deemed to have occurredif any of the following occurs with respect to the Company: (i) the direct orindirect sale or exchange in a single or series of related transactions by thestockholders of the Company of more than fifty percent (50%) of the voting stockof the Company; (ii) a merger or consolidation in which the Company is a party;(iii) the sale, exchange, or transfer of all or substantially all of the assetsof the Company; or (iv) a liquidation or dissolution of the Company. A "Transfer of Control" shall mean an Ownership Change Eventor a series of related Ownership Change Events (collectively, the "Transaction")wherein the stockholders of the Company immediately before the Transaction donot retain immediately after the Transaction, in substantially the sameproportions as their ownership of shares of the Company's voting stockimmediately before the Transaction, direct or indirect beneficial ownership ofmore than fifty percent (50%) of the total combined voting power of theoutstanding voting stock of the Company or the corporation or corporations towhich the assets of the Company were transferred (the "TransfereeCorporation(s)"), as the case may be. For purposes of the preceding sentence,indirect beneficial ownership shall include, without limitation, an interestresulting from ownership of the voting stock of one or more corporations which,as a result of the Transaction, own the Company or the TransfereeCorporation(s), as the case may be, either directly or through one or moresubsidiary corporations. The Board shall have the right to determine whethermultiple sales or exchanges of the voting stock of the Company or multipleOwnership Change Events are related, and its determination shall be final,binding and conclusive. 8.2 Effect of Transfer of Control on Options. In the event of aTransfer of Control, the surviving, continuing, successor, or purchasingcorporation or parent corporation thereof, as the case may be (the "AcquiringCorporation"), may either assume the Company's rights and obligations underoutstanding Options or substitute for outstanding Options substantiallyequivalent options for the Acquiring Corporation's stock. The Board may, in itssole discretion, provide in any Option Agreement that in the event the AcquiringCorporation elects not to assume or substitute for outstanding Options inconnection with a Transfer of Control (or regardless of whether the AcquiringCorporation so elects), any unexercisable or unvested portion of the outstandingOption shall be immediately exercisable and vested in full as of the date ten(10) days prior to the date of the Transfer of Control. The exercise or vestingof any Option that was permissible solely by reason of this Section 8.2 and theprovisions of such Option Agreement shall be conditioned upon the consummationof the Transfer of Control. Any Options which are neither assumed or substitutedfor by the Acquiring Corporation in connection with the Transfer of Control norexercised as of the date of the Transfer of Control shall terminate and cease tobe outstanding effective as of the date of the Transfer of Control.Notwithstanding the foregoing, shares acquired upon exercise of an Option priorto the Transfer of Control and any consideration received pursuant to theTransfer of Control with respect to such shares shall continue to be subject toall applicable provisions of the Option Agreement evidencing such Option exceptas otherwise provided in such Option Agreement. Furthermore, notwithstanding theforegoing, if the corporation the stock of which is subject to the outstandingOptions immediately prior to an Ownership Change Event described in Section8.1(a)(i) constituting a Transfer of Control is the surviving or continuingcorporation and immediately after such Ownership Change Event less than fiftypercent (50%) of the total combined voting power of its voting stock is held byanother corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) ofthe Code without regard to the provisions of Section 1504(b) of the Code, theoutstanding Options shall not terminate unless the Board otherwise provides inits sole discretion. Nontransferability of Options. During the lifetime of the Optionee,an Option shall be exercisable only by the Optionee or the Optionee's guardian or legal representative. No Option shall be assignable or transferable by theOptionee, except by will or by the laws of descent and distribution, except as provided in an Option Agreement. Compliance with Securities Laws. The grant of Options and the issuance of shares of Stock upon exercise of Options shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. Options may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Option may be exercised unless (a) a registration statement under the Securities Act shall at the time of exerciseof the Option be in effect with respect to the shares issuable upon exercise of the Option or (b) in the opinion of legal counsel to the Company, the sharesissuable upon exercise of the Option may be issued in accordance with the termsof an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body havingjurisdiction the authority, if any, deemed by the Company's legal counsel to benecessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell suchshares as to which such requisite authority shall not have been obtained. As a condition to the exercise of any Option, the Company may require the Optioneeto satisfy any qualifications that may be necessary or appropriate, to evidencecompliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority toact for the Board is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys' fees, actually and necessarilyincurred in connection with the defense of any action, suit or proceeding, or inconnection with any appeal therein, to which they or any of them may be a partyby reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legalcounsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as towhich it shall be adjudged in such action, suit or proceeding that such personis liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of suchaction, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. Termination or Amendment of Plan. The Board may terminate or amend the Plan at any time. However, no termination or amendment of the Plan mayadversely affect any then outstanding Option or any unexercised portion thereof, without the consent of the Optionee, unless such termination or amendment is necessary to comply with any applicable law, regulation or rule. PLAN HISTORY ------------_____________, 2000 Board adopts the Plan, with an initial reserve of2,000,000 shares. ================================================================================ EXHIBIT 10.8 $31,400,000 LEASE AGREEMENT (Land) BETWEEN BNP LEASING CORPORATION ("BNPLC") AND EXTREME NETWORKS, INC. ("Extreme") June 1, 2000 (Santa Clara, California)================================================================================[Land] TABLE OF CONTENTS Page ---- 1. Term............................................................................................................ 2 (a) Scheduled Term......................................................................................... 2 -------------- (b) Election by Extreme to Terminate After Accelerating the Designated Sale Date........................... 2 ---------------------------------------------------------------------------- (c) Extension of the Term.................................................................................. 3 ---------------------2. Use and Condition of the Property............................................................................... 3 (a) Use.................................................................................................... 3 --- (b) Condition of the Property.............................................................................. 4 ------------------------- (c) Consideration for and Scope of Waiver.................................................................. 4 -------------------------------------3. Rent............................................................................................................ 4 (a) Base Rent Generally.................................................................................... 4 ------------------- (b) Impact of Collateral Upon Formulas..................................................................... 4 ---------------------------------- (c) Calculation of and Due Dates for Base Rent............................................................. 5 ------------------------------------------ (i) Determination of Payment Due Dates, Generally................................................. 5 --------------------------------------------- (ii) Special Adjustments to Base Rent Payment Dates and Periods.................................... 5 ---------------------------------------------------------- (iii) Base Rent Formula for Periods During Which The Collateral Percentage is 100%.................. 6 ---------------------------------------------------------------------------- (iv) Base Rent Formula for Periods During Which The Collateral Percentage is Less Than 100%........ 6 -------------------------------------------------------------------------------------- (d) Additional Rent........................................................................................ 7 --------------- (e) No Demand or Setoff.................................................................................... 7 ------------------- (f) Default Interest and Order of Application.............................................................. 8 -----------------------------------------4. Nature of this Agreement......................................................................................... 8 (a) "Net" Lease Generally.................................................................................. 8 --------------------- (b) No Termination......................................................................................... 8 -------------- (c) Tax Reporting.......................................................................................... 9 ------------- (d) Characterization of this Land Lease.................................................................... 9 -----------------------------------5. Payment of Executory Costs and Losses Related to the Property................................................... 10 (a) Impositions............................................................................................ 10 ----------- (b) Increased Costs; Capital Adequacy Charges.............................................................. 10 ----------------------------------------- (c) Extreme's Payment of Other Losses; General Indemnification............................................. 11 ---------------------------------------------------------- (d) Exceptions and Qualifications to Indemnities........................................................... 13 --------------------------------------------6. Environmental................................................................................................... 14 (a) Environmental Covenants by Extreme..................................................................... 14 ---------------------------------- (b) Right of BNPLC to do Remedial Work Not Performed by Extreme............................................ 14 ----------------------------------------------------------- (c) Environmental Inspections and Reviews.................................................................. 15 ------------------------------------- (d) Communications Regarding Environmental Matters......................................................... 15 ----------------------------------------------7. Insurance Required and Condemnation............................................................................. 16 [Land] (a) Liability Insurance.................................................................................... 16 ------------------- (b) Failure to Obtain Insurance............................................................................ 16 --------------------------- (c) Condemnation........................................................................................... 16 ------------8. Application of Insurance and Condemnation Proceeds.............................................................. 16 (a) Collection and Application of Insurance and Condemnation Proceeds Generally............................ 17 --------------------------------------------------------------------------- (b) Advances of Escrowed Proceeds to Extreme............................................................... 17 ---------------------------------------- (c) Application of Escrowed Proceeds as a Qualified Prepayment............................................. 17 ---------------------------------------------------------- (d) Special Provisions Applicable After Completion by Extreme of the Initial Renovations................... 18 ------------------------------------------------------------------------------------ (e) Special Provisions Applicable After an Event of Default................................................ 18 ------------------------------------------------------- (f) Extreme's Obligation to Restore........................................................................ 18 ------------------------------- (g) Takings of All or Substantially All of the Property.................................................... 18 ---------------------------------------------------9. Additional Representations, Warranties and Covenants of Extreme Concerning the Property......................... 18 (a) Compliance with Covenants and Laws..................................................................... 18 ---------------------------------- (b) Operation of the Property.............................................................................. 19 ------------------------- (c) Debts for Construction, Maintenance, Operation or Development.......................................... 20 ------------------------------------------------------------- (d) Repair, Maintenance, Alterations and Additions......................................................... 20 ---------------------------------------------- (e) Permitted Encumbrances and Development Documents....................................................... 20 ------------------------------------------------ (f) Books and Records Concerning the Property.............................................................. 21 -----------------------------------------10. Financial Covenants, Reporting Covenants and Other Covenants Incorporated by Reference to Schedule 1............ 21 ----------11. Assignment and Subletting by Extreme............................................................................ 21 (a) BNPLC's Consent Required............................................................................... 21 ------------------------ (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters.................................. 21 --------------------------------------------------------------------- (c) Consent Not a Waiver................................................................................... 21 --------------------12. Assignment by BNPLC............................................................................................. 21 (a) Restrictions on Transfers.............................................................................. 21 ------------------------- (b) Effect of Permitted Transfer or other Assignment by BNPLC.............................................. 22 ---------------------------------------------------------13. BNPLC'S Right of Access......................................................................................... 2214. Events of Default............................................................................................... 2315. Remedies........................................................................................................ 24 (a) Basic Remedies......................................................................................... 24 -------------- (b) Notice Required So Long As the Purchase Option and Extreme's Initial Remarketing -------------------------------------------------------------------------------- Rights and Obligations Continue Under the Purchase Agreement........................................... 26 -------------------------------------------------- (c) Enforceability......................................................................................... 26 -------------- (d) Remedies Cumulative.................................................................................... 26 -------------------16. Default by BNPLC................................................................................................ 2717. Quiet Enjoyment................................................................................................. 2718. Surrender Upon Termination...................................................................................... 27 [Land] 19. Holding Over by Extreme......................................................................................... 2820. Independent Obligations Evidenced by the Other Operative Documents.............................................. 28 [Land] Exhibits and SchedulesExhibit A......................................................Legal Description---------Exhibit B.................................................Insurance Requirements---------Exhibit C.............................................LIBOR Period Election Form---------Schedule 1............................Financial Covenants and Other Requirements----------[Land] (iv) LEASE AGREEMENT (LAND) This LEASE AGREEMENT (LAND) (this "Land Lease"), is made and dated as ofJune 1, 2000 (the "Effective Date") by and between BNP LEASING CORPORATION, aDelaware corporation ("BNPLC"), and EXTREME NETWORKS, INC., a Delawarecorporation ("Extreme"). RECITALS Contemporaneously with the execution of this Land Lease, BNPLC and Extremeare executing a Common Definitions and Provisions Agreement (Land) dated as ofthe Effective Date (the "Common Definitions and Provisions Agreement (Land)"),which by this reference is incorporated into and made a part of this Land Leasefor all purposes. As used in this Land Lease, capitalized terms defined in theCommon Definitions and Provisions Agreement (Land) and not otherwise defined inthis Land Lease are intended to have the respective meanings assigned to them inthe Common Definitions and Provisions Agreement (Improvements). Pursuant to the Acquisition Contract, which covers the Land described inExhibit A, BNPLC is acquiring the Land and any appurtenances thereto and all---------existing Improvements thereon from Seller contemporaneously with the executionof this Land Lease. In anticipation of BNPLC's acquisition of the Land and the existingImprovements thereon under the Acquisition Contract, BNPLC and Extreme havereached agreement as to the terms and conditions upon which BNPLC is willing tolease the Land to Extreme, and by this Land Lease BNPLC and Extreme desire toevidence such agreement. GRANTING CLAUSES BNPLC does hereby LEASE, DEMISE and LET unto Extreme for the termhereinafter set forth all right, title and interest of BNPLC, now owned orhereafter acquired, in and to: (1) the Land; (2) all easements and other rights appurtenant to the Land, whether now owned or hereafter acquired by BNPLC; and (3) (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and any abutting land not owned or leased by BNPLC.BNPLC's interest in all property described in clauses (1) through (3) above arehereinafter referred to collectively as the "Real Property". The Real Propertydoes not include any Improvements (now existing or those to be constructed asprovided in the Other Lease Agreement) or BNPLC's rights appurtenant to theImprovements, it being understood that the Other Lease Agreement constitutes aseparate lease of the Improvements and the appurtenances thereto, and only theImprovements and the appurtenances thereto, from BNPLC to Extreme.[Land] To the extent, but only to the extent, that assignable rights or interestsin, to or under the following have been or will be acquired by BNPLC under theAcquisition Contract or acquired by BNPLC pursuant to Paragraph ? below, BNPLCalso hereby grants and assigns to Extreme for the term of this Land Lease theright to use and enjoy (and, in the case of contract rights, to enforce) suchrights or interests of BNPLC: (a) the benefits, if any, conferred upon the owner of the Real Property by the Permitted Encumbrances and Development Documents; and (b) any permits, licenses, franchises, certificates, and other rights and privileges against third parties related to the Real Property.Such rights and interests of BNPLC, whether now existing or hereafter arising,are hereinafter collectively called the "Personal Property". The Real Propertyand the Personal Property are hereinafter sometimes collectively called the"Property." However, the leasehold estate conveyed hereby and Extreme's rightshereunder are expressly made subject and subordinate to the terms and conditionsof this Land Lease, the Premises Leases and all other Permitted Encumbrances,and to any other claims or encumbrances not constituting Liens Removable byBNPLC. GENERAL TERMS AND CONDITIONS The Property is leased by BNPLC to Extreme and is accepted and is to beused and possessed by Extreme upon and subject to the following terms andconditions: 1 Term. (a) Scheduled Term. The term of this Land Lease (the "Term") shall --------------commence on and include the Effective Date, and end on the first Business Day ofJuly, 2005, unless sooner terminated as expressly herein provided. (b) Election by Extreme to Terminate After Accelerating the -------------------------------------------------------Designated Sale Date. Extreme shall be entitled to accelerate the Designated--------------------Sale Date (and thus accelerate the purchase of BNPLC's interest in the Propertyby Extreme or by an Applicable Purchaser pursuant to the Purchase Agreement) bysending a notice to BNPLC as provided in clause (2) of the definition of"Designated Sale Date" in the Common Definitions and Provisions Agreement(Land). In the event, because of Extreme's election to so accelerate theDesignated Sale Date or for any other reason, the Designated Sale Date occursbefore the end of the scheduled Term, Extreme may terminate this Land Lease onor after the Designated Sale Date; provided, however, as a condition to any suchtermination by Extreme, Extreme must have done the following prior to thetermination: (i) purchased or caused an Applicable Purchaser to purchase the Property pursuant to the Purchase Agreement and satisfied all of Extreme's other obligations under the Purchase Agreement; (ii) paid to BNPLC all Base Rent and all other Rent due on or before or accrued through the Designated Sale Date; and (iii) paid any Breakage Costs caused by BNPLC's sale of the Property pursuant to the Purchase Agreement.[Land] -2- (c) Extension of the Term. The Term may be extended at the option of ---------------------Extreme for two successive periods of five years each; provided, however, thatprior to any such extension the following conditions must have been satisfied:(A) at least one hundred eighty days prior to the commencement of any suchextension, BNPLC and Extreme must have agreed in writing upon, and received theconsent and approval of BNPLC's Parent and all other Participants to (1) acorresponding extension not only to the date for the expiration of the Termspecified above in this Section, but also to the date specified in clause (1) ofthe definition of Designated Sale Date in the Common Definitions and ProvisionsAgreement (Land), and (2) an adjustment to the Rent that Extreme will berequired to pay for the extension, it being expected that the Rent for theextension may be different than the Rent required for the original Term, and itbeing understood that the Rent for any extension must in all events besatisfactory to both BNPLC and Extreme, each in its sole and absolutediscretion; (B) no Event of Default shall have occurred and be continuing at thetime of Extreme's exercise of its option to extend; and (C) immediately prior toany such extension, this Land Lease must remain in effect. With respect to thecondition that BNPLC and Extreme must have agreed upon the Rent required for anyextension of the Term, neither Extreme nor BNPLC is willing to submit itself toa risk of liability or loss of rights hereunder for being judged unreasonable.Accordingly, both Extreme and BNPLC hereby disclaim any obligation express orimplied to be reasonable in negotiating the Rent for any such extension. Subjectto the changes to the Rent payable during any extension of the Term as providedin this Paragraph, if Extreme exercises its option to extend the Term asprovided in this Paragraph, this Land Lease shall continue in full force andeffect, and the leasehold estate hereby granted to Extreme shall continuewithout interruption and without any loss of priority over other interests in orclaims against the Property that may be created or arise after the date hereofand before the extension. 2 Use and Condition of the Property. (a) Use. Subject to the Permitted Encumbrances, the Development ---Documents and the terms hereof, Extreme may use and occupy the Property duringthe Term, but only for the following purposes and other lawful purposesincidental thereto; (i) constructing, maintaining and using Improvements on the Land for purposes expressly permitted by and described in Paragraph 2(a) of the -------------- Other Lease Agreement; and (ii) other lawful purposes approved in advance and in writing by BNPLC, which approval will not be unreasonably withheld (but Extreme acknowledges that BNPLC's withholding of such approval shall be reasonable if BNPLC determines in good faith that (1) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, or (2) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring Extreme's compliance with the requirements of this Land Lease or other Operative Documents).Nothing in this subparagraph will prevent a tenant under a Premises Lease,executed prior to the Effective Date, from using the space covered thereby forpurposes expressly authorized by the terms and conditions of such PremisesLease. (b) Condition of the Property. Extreme acknowledges that it has -------------------------carefully and fully inspected the Property and accepts the Property in itspresent state, AS IS, and without any representation or warranty, express or -----implied, as to the condition of such property or as to the use which may be madethereof. Extreme also accepts the Property without any covenant, representationor warranty, express or implied, by BNPLC or its Affiliates regarding the titlethereto or the rights of any parties in possession of any part thereof, exceptas expressly set forth in Paragraph 17. BNPLC shall not be responsible for anylatent or other defect or change of[Land] -3- condition in the Land or in Improvements, fixtures and personal property forminga part of the Property or for any violations with respect thereto of ApplicableLaws. Further, BNPLC shall not be required to furnish to Extreme any facilitiesor services of any kind, including water, steam, heat, gas, air conditioning,electricity, light or power. (c) Consideration for and Scope of Waiver. The provisions of -------------------------------------subparagraph 2.(b) above have been negotiated by BNPLC and Extreme after dueconsideration for the Rent payable hereunder and are intended to be a completeexclusion and negation of any representations or warranties of BNPLC or itsAffiliates, express or implied, with respect to the Property that may arisepursuant to any law now or hereafter in effect or otherwise, except as expresslyset forth herein. However, such exclusion of representations and warranties by BNPLC is notintended to impair any representations or warranties made by other parties, thebenefit of which may pass to Extreme during the Term because of the definitionof Personal Property and Property above. 3 Rent. (a) Base Rent Generally. On each Base Rent Date through the end of -------------------the Term, Extreme shall pay BNPLC rent ("Base Rent"), calculated as providedbelow. Each payment of Base Rent must be received by BNPLC no later than 10:00a.m. (Pacific time) on the date it becomes due; if received after 10:00 a.m.(Pacific time) it will be considered for purposes of this Land Lease as receivedon the next following Business Day. At least five days prior to each Base RentDate, BNPLC shall notify Extreme in writing of the amount of each installment,calculated as provided below. Any failure by BNPLC to so notify Extreme,however, shall not constitute a waiver of BNPLC's right to payment, but absentsuch notice Extreme shall not be in default hereunder for any underpaymentresulting therefrom if Extreme, in good faith, reasonably estimates the paymentrequired, makes a timely payment of the amount so estimated and corrects anyunderpayment within three Business Days after being notified by BNPLC of theunderpayment. (b) Impact of Collateral Upon Formulas. To ease the administrative ----------------------------------burden of this Land Lease and the Pledge Agreement, the formulas for calculatingBase Rent set out below in subparagraph 3.(c) reflect a reduction in the BaseRent equal to the interest that would accrue on any Collateral provided inaccordance with the requirements of the Pledge Agreement from time to time ifthe Accounts (as defined in the Pledge Agreement) bore interest at the DepositRate. BNPLC has agreed to such reduction to provide Extreme with the economicequivalent of interest on such Collateral, and in return Extreme has agreed tothe provisions of the Pledge Agreement that excuse the actual payment ofinterest on the Accounts. By incorporating such reduction of Base Rent into theformulas below, and by providing for noninterest bearing Accounts in the PledgeAgreement, an unnecessary and cumbersome periodic exchange of equal paymentswill be avoided. It is not, however, the intent of BNPLC or Extreme tounderstate Base Rent or interest for financial reporting purposes. Accordingly,for purposes of any financial reports that this Land Lease requires of Extremefrom time to time, Extreme may report Base Rent as if there had been no suchreduction and as if the Collateral from time to time provided in accordance withthe requirements of the Pledge Agreement had been maintained in Accounts bearinginterest at the Deposit Rate. (c) Calculation of and Due Dates for Base Rent. Payments of Base ------------------------------------------Rent shall be calculated and become due as follows: (i) Determination of Payment Due Dates, Generally. ---------------------------------------------[Land] -4- a0 For all Base Rent Periods subject to a LIBOR Period Election of one month or three months, Base Rent shall be due in one installment on the Base Rent Date upon which the Base Rent Period ends. b0 For Base Rent Periods subject to a LIBOR Period Election of six months, Base Rent shall be payable in two installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, and with the second installment becoming due on the Base Rent Date upon which the Base Rent Period ends. c0 For Base Rent Periods subject to a LIBOR Period Election of nine months, Base Rent shall be payable in three installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, with the second installment becoming due on the first Business Day of the sixth calendar month following the commencement of such Base Rent Period, and with the third installment becoming due on the Base Rent Date upon which the Base Rent Period ends. d0 For Base Rent Periods subject to a LIBOR Period Election of twelve months, Base Rent shall be payable in four installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, with the second installment becoming due on the first Business Day of the sixth calendar month following the commencement of such Base Rent Period, with the third installment becoming due on the first Business Day of the ninth calendar month following the commencement of such Base Rent Period, and with the fourth installment becoming due on the Base Rent Date upon which the Base Rent Period ends. (ii) Special Adjustments to Base Rent Payment Dates and Periods. ----------------------------------------------------------Notwithstanding the foregoing: a0 Any Base Rent Period that begins before, and does not otherwise end before, the first Business Day of the first calendar month following a Failed Collateral Test Date shall end upon but not include such first Business Day, and such first Business Day shall constitute a Base Rent Date, upon which Extreme must pay all accrued, unpaid Base Rent for the Base Rent Period just ended. b0 In addition to Base Rent due on a the first Business Day of the first calendar month following a Failed Collateral Test Date, Extreme must pay the Breakage Costs, if any, resulting from any early ending of a Base Rent Period pursuant to the preceding clause 3.(c)(ii)a). c0 If Extreme or any Applicable Purchaser purchases BNPLC's interest in the Property pursuant to the Purchase Agreement, any accrued unpaid Base Rent and all outstanding Additional Rent shall be due on the date of purchase in addition to the purchase price and other sums due BNPLC under the Purchase Agreement.[Land] -5- (iii) Base Rent Formula for Periods During Which The Collateral --------------------------------------------------------- Percentage is 100%. Each installment of Base Rent payable for any Base Rent ------------------ Period during which the Collateral Percentage is one hundred percent (100%) shall equal: . Stipulated Loss Value on the first day of such Base Rent Period, times . the sum of (a) the Secured Spread and (b) the Effective Rate/Deposit Rate Difference for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times . the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by . three hundred sixty. Assume, only for the purpose of illustration: that the Collateral Percentage for a hypothetical Base Rent Period is one hundred percent (100%); that prior to the first day of such Base Rent Period Qualified Prepayments have been received by BNPLC, leaving a Stipulated Loss Value of $5,000,000; that the sum of the Secured Spread and the Effective Rate/Deposit Rate Difference is forty-two and one-half basis points (42.5/100 of 1%); and that such Base Rent Period contains exactly thirty days. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal: $5,000,000 x .425% x 30/360 = $1,770.83 (iv) Base Rent Formula for Periods During Which The Collateral --------------------------------------------------------- Percentage is Less Than 100%. Each installment of Base Rent payable for any ---------------------------- Base Rent Period during which the Collateral Percentage is less than one hundred percent (100%) shall equal: . Stipulated Loss Value on the first day of such Base Rent Period, times . the sum of: (A) the product of: (1) the Collateral Percentage for such Base Rent Period, times (2) the sum of (a) the Secured Spread and (b) the Effective Rate/Deposit Rate Difference for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, plus (B) the product of: (1) one minus the Collateral Percentage for such Base Rent Period, times[Land] -6- (2) the sum of (a) the Effective Rate with respect to such Base Rent Period, plus (b) the Unsecured Spread for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times . the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by . three hundred sixty. Assume, only for the purpose of illustration: that the Collateral Percentage for a hypothetical Base Rent Period is fifty-five percent (55%); that prior to the first day of such Base Rent Period Qualified Prepayments have been received by BNPLC, leaving a Stipulated Loss Value of $5,000,000; that the Effective Rate for the Base Rent Period is 6%; that the sum of the Secured Spread and the Effective Rate/Deposit Rate Difference is forty-two and one-half basis points (42.5/100 of 1%); that upon the commencement of such Base Rent Period the Unsecured Spread is two hundred twenty-five basis points (225/100 of 1%); and that such Base Rent Period contains exactly thirty days. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal:$5,000,000 x {(55% x .425%) + ([1 - 55%] x [6% + 2.25%])} x 30/360 = $16,442.41 (d) Additional Rent. All amounts which Extreme is required to pay to ---------------or on behalf of BNPLC pursuant to this Land Lease, together with every charge,premium, interest and cost set forth herein which may be added for nonpayment orlate payment thereof, shall constitute rent (all such amounts, other than BaseRent, are herein called "Additional Rent", and together Base Rent and AdditionalRent are herein sometimes called "Rent"). (e) No Demand or Setoff. Except as expressly provided herein, Extreme -------------------shall pay all Rent without notice or demand and without counterclaim, deduction,setoff or defense. (f) Default Interest and Order of Application. All Rent shall bear -----------------------------------------interest, if not paid when first due, at the Default Rate in effect from time totime from the date due until paid; provided, that nothing herein contained willbe construed as permitting the charging or collection of interest at a rateexceeding the maximum rate permitted under Applicable Laws. BNPLC shall beentitled to apply any amounts paid by or on behalf of Extreme against any Rentthen past due in the order the same became due or in such other order as BNPLCmay elect. 4 Nature of this Agreement. (a) "Net" Lease Generally. Subject only to the exceptions listed in --------------------subparagraph 5.(d) below, it is the intention of BNPLC and Extreme that BaseRent and other payments herein specified shall be absolutely net to BNPLC andthat Extreme shall pay all costs, expenses and obligations of every kindrelating to the Property or this Land Lease which may arise or become due,including: (i) any taxes payable by virtue of BNPLC's receipt of amounts paid toor on behalf of BNPLC in accordance with Paragraph 5; (ii) any amount for whichBNPLC is or becomes liable with respect to the Permitted Encumbrances or theDevelopment Documents; and (iii) any costs[Land] -7- incurred by BNPLC (including Attorneys' Fees) because of BNPLC's acquisition orownership of any interest in the Property or because of this Land Lease or thetransactions contemplated herein. (b) No Termination. Except as expressly provided in this Land Lease --------------itself, this Land Lease shall not terminate, nor shall Extreme have any right toterminate this Land Lease, nor shall Extreme be entitled to any abatement of theRent, nor shall the obligations of Extreme under this Land Lease be excused, forany reason whatsoever, including any of the following: (i) any damage to or thedestruction of all or any part of the Property from whatever cause, (ii) thetaking of the Property or any portion thereof by eminent domain or otherwise forany reason, (iii) the prohibition, limitation or restriction of Extreme's use ordevelopment of all or any portion of the Property or any interference with suchuse by governmental action or otherwise, (iv) any eviction of Extreme or ofanyone claiming through or under Extreme, (v) any default on the part of BNPLCunder this Land Lease or under any other agreement to which BNPLC and Extremeare parties, (vi) the inadequacy in any way whatsoever of the Property (it beingunderstood that BNPLC has not made, does not make and will not make anyrepresentation express or implied as to the adequacy thereof), (vii) any latentor other defect in the Property or any change in the condition thereof or theexistence with respect to the Property of any violations of Applicable Laws,(viii) any breach by Seller of the Acquisition Contract or other agreements orpromises or representations made in connection with the Acquisition Contract(ix) any breach of a Premises Lease by any lessee thereunder, or (x) any othercause whether similar or dissimilar to the foregoing. It is the intention of theparties hereto that the obligations of Extreme hereunder shall be separate andindependent of the covenants and agreements of BNPLC, that Base Rent and allother sums payable by Extreme hereunder shall continue to be payable in allevents and that the obligations of Extreme hereunder shall continue unaffected,unless the requirement to pay or perform the same shall have been terminated orlimited pursuant to an express provision of this Land Lease. Without limitingthe foregoing, Extreme waives to the extent permitted by Applicable Laws, exceptas otherwise expressly provided herein, all rights to which Extreme may now orhereafter be entitled by law (including any such rights arising because of anyimplied "warranty of suitability" or other warranty under Applicable Laws) (i)to quit, terminate or surrender this Land Lease or the Property or any partthereof or (ii) to any abatement, suspension, deferment or reduction of theRent. However, nothing in this subparagraph 4.(b) shall be construed as a waiverby Extreme of any right Extreme may have at law or in equity to the followingremedies, whether because of BNPLC's failure to remove a Lien Removable by BNPLCor because of any other default by BNPLC under this Land Lease that continuesbeyond the period for cure provided in Paragraph 16: (i) the recovery ofmonetary damages, (ii) injunctive relief in case of the violation, or attemptedor threatened violation, by BNPLC of any of the express covenants, agreements,conditions or provisions of this Land Lease which are binding upon BNPLC(including the confidentiality provisions set forth in subparagraph 13.(c)below), or (iii) a decree compelling performance by BNPLC of any of the expresscovenants, agreements, conditions or provisions of this Land Lease which arebinding upon BNPLC. (c) Tax Reporting. BNPLC and Extreme shall report this Land Lease and -------------the Purchase Agreement for federal income tax purposes as a conditional saleunless prohibited from doing so by the Internal Revenue Service. If the InternalRevenue Service shall challenge BNPLC's characterization of this Land Lease andthe Purchase Agreement as a conditional sale for federal income tax reportingpurposes, BNPLC shall notify Extreme in writing of such challenge and considerin good faith any reasonable suggestions by Extreme about an appropriateresponse. In any event, Extreme shall (subject only to the limitations set forthin this subparagraph) indemnify and hold harmless BNPLC from and against allliabilities, costs, additional taxes (other than Excluded Taxes) and otherexpenses that may arise or become due because of such challenge or because ofany resulting recharacterization required by the Internal Revenue Service,including any additional taxes that may become due upon any sale under thePurchase Agreement to the extent (if any) that such additional taxes are notoffset by tax savings resulting from additional depreciation deductions or othertax benefits to BNPLC of the recharacterization. If BNPLC receives a writtennotice of any challenge by the Internal Revenue Service that BNPLC believes willbe[Land] -8- covered by this Paragraph, then BNPLC shall promptly furnish a copy of suchnotice to Extreme. The failure to so provide a copy of the notice to Extremeshall not excuse Extreme from its obligations under this Paragraph; provided,that if none of the officers of Extreme and none of the employees of Extremeresponsible for tax matters are aware of the challenge described in the noticeand such failure by BNPLC renders unavailable defenses that Extreme mightotherwise assert, or precludes actions that Extreme might otherwise take, tominimize its obligations hereunder, then Extreme shall be excused from itsobligation to indemnify BNPLC against liabilities, costs, additional taxes andother expenses, if any, which would not have been incurred but for such failure.For example, if BNPLC fails to provide Extreme with a copy of a notice of achallenge by the Internal Revenue Service covered by the indemnities set out inthis Land Lease and Extreme is not otherwise already aware of such challenge,and if as a result of such failure BNPLC becomes liable for penalties andinterest covered by the indemnities in excess of the penalties and interest thatwould have accrued if Extreme had been promptly provided with a copy of thenotice, then Extreme will be excused from any obligation to BNPLC to pay theexcess. (d) Characterization of this Land Lease. For purposes of determining -----------------------------------the appropriate financial accounting for this Land Lease and for purposes ofdetermining their respective rights and remedies under state law, BNPLC andExtreme believe and intend that (i) this Land Lease constitutes a true lease,not a mere financing arrangement, enforceable in accordance with its expressterms, and the preceding subparagraph is not intended to affect the enforcementof any other provisions of this Land Lease or the Purchase Agreement, and (ii)the Purchase Agreement shall constitute a separate and independent contract,enforceable in accordance with the express terms and conditions set forththerein. In this regard, Extreme acknowledges that Extreme asked BNPLC toparticipate in the transactions evidenced by this Land Lease and the PurchaseAgreement as a landlord and owner of the Property, not as a lender. Althoughother transactions might have been used to accomplish similar results, Extremeexpects to receive certain material accounting and other advantages through theuse of a lease transaction. Accordingly, and notwithstanding the reporting forincome tax purposes described in the preceding subparagraph, Extreme cannotequitably deny that this Land Lease and the Purchase Agreement should beconstrued and enforced in accordance with their respective terms, rather than asa mortgage or other security device, in any action brought by BNPLC to enforcethis Land Lease or the Purchase Agreement. 5 Payment of Executory Costs and Losses Related to the Property. (a) Impositions. Subject only to the exceptions listed in -----------subparagraph 5.(d) below, Extreme shall pay or cause to be paid prior todelinquency all ad valorem taxes assessed against the Property and otherImpositions. If requested by BNPLC from time to time, Extreme shall furnishBNPLC with receipts showing payment of all Impositions prior to the applicabledelinquency date therefor. Notwithstanding the foregoing, Extreme may in good faith, by appropriateproceedings, contest the validity, applicability or amount of any assertedImposition, and pending such contest Extreme shall not be deemed in defaultunder any of the provisions of this Land Lease because of the Imposition if (1)Extreme diligently prosecutes such contest to completion in a manner reasonablysatisfactory to BNPLC, and (2) Extreme promptly causes to be paid any amountadjudged by a court of competent jurisdiction to be due, with all costs,penalties and interest thereon, promptly after such judgment becomes final;provided, however, in any event each such contest shall be concluded and thecontested Impositions must be paid by Extreme prior to the earlier of (i) thedate that any criminal prosecution is instituted or overtly threatened againstBNPLC or its directors, officers or employees because of the nonpayment thereofor (ii) the date any writ or order is issued under which any property owned orleased by BNPLC (including the Property) may be seized or sold or any otheraction is taken against BNPLC or against any property owned or leased by BNPLCbecause of the nonpayment thereof, or (iii) any Designated Sale Date upon which,for any reason, Extreme or an Affiliate of Extreme or any Applicable Purchasershall not purchase BNPLC's interest in the Property pursuant to the PurchaseAgreement for a price to BNPLC (when taken[Land] -9- together with any additional payments made by Extreme pursuant to Paragraph --------- 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable-------Purchaser) equal to the Break Even Price. (b) Increased Costs; Capital Adequacy Charges. Subject only to the -----------------------------------------exceptions listed in subparagraph 5.(d) below: (i) If after the Effective Date there shall be any increase in the cost to BNPLC's Parent or any other Participant agreeing to make or making, funding or maintaining advances to BNPLC in connection with the Property because of any Banking Rules Change, then Extreme shall from time to time, pay to BNPLC for the account of BNPLC's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate BNPLC's Parent or the Participant for such increased cost. An increase in costs resulting from any imposition or increase of reserve requirements applicable to Collateral held from time to time by BNPLC's Parent or other Participants pursuant to the Pledge Agreement would be an increase covered by the preceding sentence. A certificate as to the amount of such increased cost, submitted to BNPLC and Extreme by BNPLC's Parent or the other Participant, shall be conclusive and binding upon Extreme, absent clear and demonstrable error. (ii) BNPLC's Parent or any other Participant may demand additional payments ("Capital Adequacy Charges") if BNPLC's Parent or the other Participant determines that any Banking Rules Change affects the amount of capital to be maintained by it and that the amount of such capital is increased by or based upon the existence of advances made or to be made to BNPLC to permit BNPLC to maintain BNPLC's investment in the Property. To the extent that BNPLC's Parent or another Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such investment or advances, Extreme shall pay to BNPLC for the account of BNPLC's Parent or the other Participant, as the case may be, the amount so demanded. Without limiting the foregoing, BNPLC and Extreme hereby acknowledge and agree that the provisions for calculating Base Rent set forth herein reflect the assumption that the Pledge Agreement will cause a zero percent (0%) risk weight to be assigned to a percentage (equal to the Collateral Percentage) of the collective investment of BNPLC and the Participants in the Property pursuant to 12 Code of Federal Regulations, part 225, as from time to time supplemented or amended, or pursuant to any other similar or successor statute or regulation applicable to BNPLC and the Participants. If and so long as such risk weight is increased the assumed amount of zero percent (0%) because of a Banking Rules Change, Capital Adequacy Charges may be collected to yield the same rate of return to BNPLC, BNPLC's Parent and any other Participants (net of their costs of maintaining required capital) that they would have enjoyed from this Land Lease absent such increase. (iii) Notwithstanding the foregoing provisions of this subparagraph 5.(b), Extreme shall not be obligated to pay any claim for compensation pursuant to this subparagraph 5.(b) arising or accruing more than six months prior to the date Extreme is notified that BNPLC or a Participant intends to make the claim; provided, however, that Extreme shall not be excused by this subparagraph from providing such compensation for any period during which notice on behalf of BNPLC or the Participant, as the case may be, could not be provided because of the retroactive application of the statute, regulation or other basis for the claim. (iv) Any amount required to be paid by Extreme under this subparagraph 5.(b) shall be due fifteen days after a notice requesting such payment is received by Extreme. (c) Extreme's Payment of Other Losses; General Indemnification. ----------------------------------------------------------Subject only to the exceptions listed in subparagraph 5.(d) below:[Land] -10- (i) All Losses (including Environmental Losses) asserted against or incurred or suffered by BNPLC or other Interested Parties at any time and from time to time by reason of, in connection with or arising out of (A) their ownership or alleged ownership of any interest in the Property or the Rents, (B) the use and operation of the Property, (C) the negotiation, administration or enforcement of the Operative Documents, (D) the making of the Funding Advances, (E) the breach by Extreme of this Land Lease or any other document executed by Extreme in connection herewith, (F) any failure of the Property or Extreme itself to comply with Applicable Laws, (G) Permitted Encumbrances, (H) Hazardous Substance Activities, including those occurring prior to Effective Date, (I) any obligations under the Acquisition Contract that survive the closing under the Acquisition Contract, or (K) any bodily or personal injury or death or property damage occurring in or upon or in the vicinity of the Property through any cause whatsoever, shall be paid by Extreme, and Extreme shall indemnify and defend BNPLC and other Interested Parties from and against all such Losses. (ii) THE INDEMNITIES AND RELEASES PROVIDED HEREIN FOR THE BENEFIT OF BNPLC AND OTHER INTERESTED PARTIES, INCLUDING THE INDEMNITY SET FORTH IN ----- - - THE PRECEDING SUBPARAGRAPH 5.(c)(i), SHALL APPLY EVEN IF AND WHEN THE SUBJECT MATTERS OF THE INDEMNITIES AND RELEASES ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OR STRICT LIABILITY OF BNPLC OR ANOTHER INTERESTED PARTY. ----- - - FURTHER, SUCH INDEMNITIES AND RELEASES WILL APPLY EVEN IF INSURANCE OBTAINED BY EXTREME OR REQUIRED OF EXTREME BY THIS LAND LEASE OR OTHER - - OPERATIVE DOCUMENTS IS NOT ADEQUATE TO COVER LOSSES AGAINST OR FOR WHICH - - - THE INDEMNITIES AND RELEASES ARE PROVIDED. EXTREME'S LIABILITY, HOWEVER, FOR ANY FAILURE TO OBTAIN INSURANCE REQUIRED BY THIS LAND LEASE OR OTHER - - OPERATIVE DOCUMENTS WILL NOT BE LIMITED TO LOSSES AGAINST WHICH INDEMNITIES - - - ARE PROVIDED HEREIN, IT BEING UNDERSTOOD THAT SUCH INSURANCE IS INTENDED TO DO MORE THAN PROVIDE A SOURCE OF PAYMENT FOR LOSSES AGAINST WHICH BNPLC AND - ----- OTHER INTERESTED PARTIES ARE ENTITLED TO INDEMNIFICATION BY THIS LAND - - - LEASE. - (iii) Costs and expenses for which Extreme shall be responsible pursuant to this subparagraph 5.(c) will include appraisal fees, filing and recording fees, inspection fees, survey fees, taxes, brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees and Attorneys' Fees incurred by BNPLC with respect to the Property, whether such costs and expenses are incurred at the time of execution of this Land Lease or at any time during the Term. (iv) Extreme's obligations under this subparagraph 5.(c) shall survive the termination or expiration of this Land Lease. Any amount to be paid by Extreme under this subparagraph 5.(c) shall be due fifteen days after a notice requesting such payment is received by Extreme. (v) If an Interested Party notifies Extreme of any claim or proceeding included in, or any investigation or allegation concerning, Losses for which Extreme is responsible pursuant to this subparagraph 5.(c), Extreme shall assume on behalf of the Interested Party and conduct with due diligence and in good faith the investigation and defense thereof and the response thereto with counsel selected by Extreme, but reasonably satisfactory to the Interested Party; provided, that the Interested Party shall have the right to be represented by advisory counsel of its own selection and at its own expense; and provided further, that if any such claim, proceeding, investigation or allegation involves both Extreme and the Interested Party and the Interested Party shall have reasonably concluded that there are legal defenses[Land] -11- available to it which are inconsistent with or in addition to those available to Extreme, then the Interested Party shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, proceeding, investigation or allegation on its own behalf, and Extreme shall pay or reimburse the Interested Party for all Attorney's Fees incurred by the Interested Party because of the selection of such separate counsel. If Extreme fails to assume promptly (and in any event within fifteen days after being notified of the applicable claim, proceeding, investigation or allegation) the defense of the Interested Party, then the Interested Party may contest (or settle, with the prior consent of Extreme, which consent will not be unreasonably withheld) the claim, proceeding, investigation or allegation at Extreme's expense using counsel selected by the Interested Party. Moreover, if any such failure by Extreme continues for forty-five days or more after Extreme is notified of any such claim, proceeding, investigation or allegation, the Interested Party may elect not to contest or continue contesting the same and instead, in accordance with the written advice of counsel, settle (or pay in full) all claims related thereto without Extreme's consent and without releasing Extreme from any obligations to the Interested Party under this subparagraph 5.(c). (d) Exceptions and Qualifications to Indemnities. -------------------------------------------- (i) BNPLC acknowledges and agrees that nothing in subparagraph 4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require Extreme to pay or reimburse (w) any costs or expenses incurred by any Interested Party (including BNPLC or any transferee of BNPLC) to accomplish any Permitted Transfers described in clauses (1), (2), (3), (4) or (6) of the definition thereof in the Common Definitions and Provisions Agreement (Land), (x) Excluded Taxes, (y) Losses incurred or suffered by any Interested Party that are proximately caused by (and attributed by any applicable principles of comparative fault to) the Established Misconduct of that Interested Party, or (z) Losses incurred or suffered in connection with the execution of the Participation Agreement or Pledge Agreement by Participants (or supplements making them parties thereto) or in connection with any negotiation or due diligence Participants may undertake before entering into the Participation Agreement or Pledge Agreement. Further, without limiting BNPLC's rights (as provided in other provisions of this Land Lease and other Operative Documents) to include the following in the calculation of Stipulated Loss Value and the Break Even Price or to collect Base Rent, a Supplemental Payment and other amounts, the calculation of which depends upon Stipulated Loss Value or the Break Even Price, BNPLC acknowledges and agrees that nothing in subparagraph 4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require Extreme to pay or reimburse an Interested Party for costs paid by BNPLC with the proceeds of the Initial Funding Advance as part of the Transaction Expenses. Further, if an Interested Party receives a written notice of Losses that such Interested Party believes are covered by the indemnity in subparagraph 5.(c)(i), then such Interested Party will be expected to promptly furnish a copy of such notice to Extreme. The failure to so provide a copy of the notice to Extreme shall not excuse Extreme from its obligations under subparagraph 5.(c)(i); provided, that if Extreme is unaware of the matters described in the notice and such failure renders unavailable defenses that Extreme might otherwise assert, or precludes actions that Extreme might otherwise take, to minimize its obligations, then Extreme shall be excused from its obligation to indemnify such Interested Party (and any Affiliate of such Interested Party) against the Losses, if any, which would not have been incurred or suffered but for such failure. For example, if BNPLC fails to provide Extreme with a copy of a notice of an obligation covered by the indemnity set out in subparagraph 5.(c)(i) and Extreme is not otherwise already aware of such obligation, and if as a result of such failure BNPLC becomes liable for penalties and interest covered by the indemnity in excess of the penalties and interest that would have accrued if Extreme had been promptly[Land] -12- provided with a copy of the notice, then Extreme will be excused from any obligation to BNPLC (or any Affiliate of BNPLC) to pay the excess. 6 Environmental. (a) Environmental Covenants by Extreme. Extreme covenants that: ---------------------------------- (i) Extreme shall not conduct or permit others to conduct Hazardous Substance Activities, except Permitted Hazardous Substance Use and Remedial Work. (ii) Extreme shall not discharge or permit the discharge of anything on or from the Property that would require any permit under applicable Environmental Laws, other than (1) storm water runoff, (2) waste water discharges through a publicly owned treatment works, (3) discharges that are a necessary part of any Remedial Work, and (4) other similar discharges consistent with the definition herein of Permitted Hazardous Substance Use, in each case in strict compliance with Environmental Laws. (iii) Following any discovery that Remedial Work is required by Environmental Laws or otherwise believed by BNPLC to be reasonably required, and to the extent not inconsistent with the other provisions of this Land Lease, Extreme shall promptly perform and diligently and continuously pursue such Remedial Work, in each case in strict compliance with Environmental Laws. (iv) If requested by BNPLC in connection with any Remedial Work required by this subparagraph, Extreme shall retain independent environmental consultants acceptable to BNPLC to evaluate any significant new information generated during Extreme's implementation of the Remedial Work and to discuss with Extreme whether such new information indicates the need for any additional measures that Extreme should take to protect the health and safety of persons (including employees, contractors and subcontractors and their employees) or to protect the environment. Extreme shall implement any such additional measures to the extent required with respect to the Property by Environmental Laws or otherwise believed by BNPLC to be reasonably required and to the extent not inconsistent with the other provisions of this Land Lease. (b) Right of BNPLC to do Remedial Work Not Performed by Extreme. If -----------------------------------------------------------Extreme's failure to cure any breach of the covenants set forth in subparagraph6.(a) continues beyond the Environmental Cure Period (as defined below), BNPLCmay, in addition to any other remedies available to it, conduct all or any partof the Remedial Work. To the extent that Remedial Work is done by BNPLC pursuantto the preceding sentence (including any removal of Hazardous Substances), thecost thereof shall be a demand obligation owing by Extreme to BNPLC. As used inthis subparagraph, "Environmental Cure Period" means the period ending on theearlier of: (1) one hundred eighty days after Extreme is notified of the breachwhich must be cured within such period, (2) the date that any writ or order isissued for the levy or sale of any property owned by BNPLC (including theProperty) because of such breach, (3) the date that any criminal action isinstituted or overtly threatened against BNPLC or any of its directors, officersor employees because of such breach, or (4) any Designated Sale Date upon which,for any reason, Extreme or an Affiliate of Extreme or any Applicable Purchasershall not purchase BNPLC's interest in the Property pursuant to the PurchaseAgreement for a net price to BNPLC (when taken together with any SupplementalPayment made by Extreme pursuant to Paragraph 1(A)(2) of the Purchase Agreement, -----------------in the case of a purchase by an Applicable Purchaser) equal to Stipulated LossValue. (c) Environmental Inspections and Reviews. BNPLC reserves the right -------------------------------------to retain environmental consultants to review any environmental report preparedby Extreme or to conduct BNPLC's own[Land] -13- investigation to confirm whether Extreme is complying with the requirements ofthis Paragraph 6. Extreme grants to BNPLC and to BNPLC's agents, employees,consultants and contractors the right to enter upon the Property duringreasonable hours and after reasonable notice to inspect the Property and toperform such tests as BNPLC deems necessary or appropriate to review orinvestigate Hazardous Substances in, on, under or about the Property or anydischarge or suspected discharge of Hazardous Substances into groundwater orsurface water from the Property. Extreme shall promptly reimburse BNPLC for thefees of its environmental consultants and the costs of any such inspections andtests; provided, however, BNPLC's right to such reimbursement shall be limitedto the following circumstances: (1) a breach of this Paragraph 6 by Extremeshall, in fact, have occurred or an Event of Default shall have occurred and becontinuing at the time BNPLC engages the consultants or first initiates theinspections and tests; (2) BNPLC shall have engaged the consultants orundertaken the tests and inspections to establish the condition of the Propertyjust prior to any conveyance of the Property pursuant to the Option Agreement orto the expiration of this Land Lease; (3) BNPLC shall have engaged theconsultants or undertaken the inspections and tests to satisfy any regulatoryrequirements applicable to BNPLC or its Affiliates; or (4) BNPLC shall haveengaged the consultants or undertaken the tests because BNPLC was notified of aviolation of Environmental Laws concerning the Property by any governmentalauthority or owner of other land in the vicinity of the Land. (d) Communications Regarding Environmental Matters. ---------------------------------------------- (i) Extreme shall immediately advise BNPLC of (1) any discovery of any event or circumstance which would render any of the representations of Extreme herein or in the Closing Certificate concerning environmental matters materially inaccurate or misleading if made at the time of such discovery and assuming that Extreme was aware of all relevant facts, (2) any Remedial Work (or change in Remedial Work) required or undertaken by Extreme or its Affiliates in response to any (A) discovery of any Hazardous Substances on, under or about the Property other than Permitted Hazardous Substances or (B) any claim for damages resulting from Hazardous Substance Activities, (3) Extreme's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property which could cause the Property or any part thereof to be subject to any ownership, occupancy, transferability or use restrictions under Environmental Laws, or (4) any investigation or inquiry of any failure or alleged failure by Extreme to comply with Environmental Laws affecting the Property by any governmental authority responsible for enforcing Environmental Laws. In such event, Extreme shall deliver to BNPLC within thirty days after BNPLC's request, a preliminary written environmental plan setting forth a general description of the action that Extreme proposes to take with respect thereto, if any, to bring the Property into compliance with Environmental Laws or to correct any breach by Extreme of this Paragraph 6, including any proposed Remedial Work, the estimated cost and time of completion, the name of the contractor and a copy of the construction contract, if any, and such additional data, instruments, documents, agreements or other materials or information as BNPLC may request. (ii) Extreme shall provide BNPLC with copies of all material written communications with federal, state and local governments, or agencies relating to the matters listed in the preceding clause (i). Extreme shall also provide BNPLC with copies of any correspondence from third Persons which threaten litigation over any significant failure or alleged significant failure of Extreme to maintain or operate the Property in accordance with Environmental Laws. (iii) Prior to Extreme's submission of a Material Environmental Communication to any governmental or regulatory agency or third party, Extreme shall, to the extent practicable, deliver to BNPLC a draft of the proposed submission (together with the proposed date of submission), and in good faith assess and consider any comments of BNPLC regarding the same. Promptly after BNPLC's request, Extreme shall meet with BNPLC to discuss the submission, shall provide any additional information[Land] -14- requested by BNPLC and shall provide a written explanation to BNPLC addressing the issues raised by comments (if any) of BNPLC regarding the submission, including a reasoned analysis supporting any decision by Extreme not to modify the submission in accordance with comments of BNPLC. 7 Insurance Required and Condemnation. (a) Liability Insurance. Throughout the Term Extreme shall maintain -------------------commercial general liability insurance against claims for bodily and personalinjury, death and property damage occurring in or upon or resulting from anyoccurrence in or upon the Property under one or more insurance policies thatsatisfy the requirements set forth in Exhibit B. Extreme shall deliver and --------- maintain with BNPLC for each liability insurance policy required by this LandLease written confirmation of the policy and the scope of the coverage providedthereby issued by the applicable insurer or its authorized agent, whichconfirmation must also satisfy the requirements set forth in Exhibit B. --------- (b Failure to Obtain Insurance. If Extreme fails to obtain any ---------------------------insurance or to provide confirmation of any such insurance as required by thisLand Lease, BNPLC shall be entitled (but not required) to obtain the insurancethat Extreme has failed to obtain or for which Extreme has not provided therequired confirmation and, without limiting BNPLC's other remedies under thecircumstances, BNPLC may require Extreme to reimburse BNPLC for the cost of suchinsurance and to pay interest thereon computed at the Default Rate from the datesuch cost was paid by BNPLC until the date of reimbursement by Extreme. (c Condemnation. Immediately upon obtaining knowledge of the ------------institution of any proceedings for the condemnation of the Property or anyportion thereof, or any other similar governmental or quasi-governmentalproceedings arising out of injury or damage to the Property or any portionthereof, each party shall notify the other (provided, however, BNPLC shall haveno liability for its failure to provide such notice) of the pendency of suchproceedings. Extreme shall, at its expense, diligently prosecute any suchproceedings and shall consult with BNPLC, its attorneys and experts andcooperate with them as requested in the carrying on or defense of any suchproceedings. All proceeds of condemnation awards or proceeds of sale in lieu ofcondemnation with respect to the Property and all judgments, decrees and awardsfor injury or damage to the Property shall be paid to BNPLC as EscrowedProceeds, and all such proceeds will be applied as provided in Paragraph 8.BNPLC is hereby authorized, in the name of Extreme, at any time when an Event ofDefault shall have occurred and be continuing, or otherwise with Extreme's priorconsent, to execute and deliver valid acquittances for, and to appeal from, anysuch judgment, decree or award concerning condemnation of any of the Property.BNPLC shall not be in any event or circumstances liable or responsible forfailure to collect, or to exercise diligence in the collection of, any suchproceeds, judgments, decrees or awards. 8. Application of Insurance and Condemnation Proceeds. (a Collection and Application of Insurance and Condemnation Proceeds -----------------------------------------------------------------Generally. This Paragraph 8 shall govern the application of proceeds received by---------BNPLC or Extreme during the Term from any third party (1) as compensation forany restriction placed upon the use or development of the Property or for thecondemnation of the Property or any portion thereof, or (2) because of anyjudgment, decree or award for injury or damage to the Property (e.g.,damageresulting from a third party's release of Hazardous Materials onto theProperty); excluding, however, any funds paid to BNPLC by BNPLC's Parent, by anAffiliate of BNPLC or by any Participant that is made to compensate BNPLC forany Losses BNPLC may suffer or incur in connection with this Land Lease or theProperty. Except as provided in subparagraph 8.(d), Extreme will promptly payover to BNPLC any condemnation or other proceeds covered by this Paragraph 8which Extreme may receive from any condemning authority or other third party.All proceeds covered by this Paragraph 8, including those received by[Land] -15- BNPLC from Extreme or third parties, shall be applied as follows: (i First, proceeds covered by this Paragraph 8 will be used to reimburse BNPLC for any costs and expenses, including Attorneys' Fees, that BNPLC incurred to collect the proceeds. (ii Second, the proceeds remaining after such reimbursement to BNPLC (hereinafter, the "Remaining Proceeds") will be applied, as hereinafter more particularly provided, either as a Qualified Prepayment or to reimburse Extreme or BNPLC for the actual out-of-pocket costs of repairing or restoring the Property. Until, however, any Remaining Proceeds received by BNPLC are applied by BNPLC as a Qualified Prepayment or applied by BNPLC to reimburse costs of repairs to or restoration of the Property pursuant to this Paragraph 8, BNPLC shall hold and maintain such Remaining Proceeds as Escrowed Proceeds in an interest bearing account, and all interest earned on such account shall be added to and made a part of such Escrowed Proceeds. (b Advances of Escrowed Proceeds to Extreme. Except as otherwise ----------------------------------------provided below in this Paragraph 8, BNPLC shall advance all Remaining Proceedsheld by it as Escrowed Proceeds to reimburse Extreme for the actual out-of-pocket cost to Extreme of repairing or restoring the Property in accordance withthe requirements of this Land Lease and the other Operative Documents as theapplicable repair or restoration progresses and upon compliance by Extreme withsuch terms, conditions and requirements as may be reasonably imposed by BNPLC.In no event, however, shall BNPLC be required to pay Escrowed Proceeds toExtreme in excess of the actual out-of-pocket cost to Extreme of the applicablerepair or restoration, as evidenced by invoices or other documentationsatisfactory to BNPLC, it being understood that BNPLC may retain and apply anysuch excess as a Qualified Prepayment. (c Application of Escrowed Proceeds as a Qualified Prepayment. ----------------------------------------------------------Provided no Event of Default shall have occurred and be continuing, BNPLC shallapply any Remaining Proceeds paid to it (or other amounts available forapplication as a Qualified Prepayment) as a Qualified Prepayment on any datethat BNPLC is directed to do so by a notice from Extreme; however, if such anotice from Extreme specifies an effective date for a Qualified Prepayment thatis less than five Business Days after BNPLC's actual receipt of the notice,BNPLC may postpone the date of the Qualified Prepayment to any date not laterthan five Business Days after BNPLC's receipt of the notice. In any event,except when BNPLC is required by the preceding sentence to apply RemainingProceeds or other amounts as a Qualified Prepayment on the last day of a BaseRent Period, BNPLC may deduct Breakage Costs incurred in connection with anyQualified Prepayment from the Remaining Proceeds or other amounts available forapplication as the Qualified Prepayment, and Extreme will reimburse BNPLC uponrequest for any such Breakage Costs that BNPLC incurs but does not deduct. (d Special Provisions Applicable After Completion by Extreme of the ----------------------------------------------------------------Initial Renovations. If, after Extreme has completed any Initial Renovations-------------------which Extreme elects to undertake as provided in the Other Lease, any taking bycondemnation of any portion of the Property or any diminution, destruction,demolition or damage to any portion of the Property shall (in the good faithjudgment of BNPLC) reduce the then current "AS IS" market value by less than$500,000 and (in the good faith estimation of BNPLC) be unlikely to result inRemaining Proceeds of more than $500,000, and if no Event of Default shall haveoccurred and be continuing, then BNPLC will, upon Extreme's request, instructthe condemning authority or insurer, as applicable, to pay the RemainingProceeds resulting therefrom directly to Extreme. Extreme shall apply any suchRemaining Proceeds to the repair or restoration of the Property to a safe andsecure condition and to a value of no less than the value before taking orcasualty. (e Special Provisions Applicable After an Event of Default. ------------------------------------------------------- Notwithstanding the foregoing,[Land] -16 when any Event of Default shall have occurred and be continuing, BNPLC shall beentitled to receive and collect all condemnation or other proceeds governed bythis Paragraph 8 and to apply all Remaining Proceeds, when and to the extentdeemed appropriate by BNPLC in its sole discretion, either (A) to thereimbursement of Extreme or BNPLC for the out-of-pocket cost of repairing orrestoring the Property, or (B) as Qualified Prepayments. (f Extreme's Obligation to Restore. Regardless of the adequacy of -------------------------------any Remaining Proceeds available to Extreme hereunder, and notwithstanding otherprovisions of this Land Lease to the contrary, if the Property is damaged orless than all or substantially all of the Property is taken by condemnation,Extreme must: (i increase the value of the Property or the remainder thereof by restoring the same (in a manner consistent with the requirements and limitations imposed by this Land Lease and the other Operative Documents or otherwise acceptable to BNPLC), or decrease Stipulated Loss Value by tendering a payment to BNPLC for application as a Qualified Prepayment, as necessary to cause the then current AS IS market value of the Property to be not less than Stipulated Loss Value; and (ii restore the Property or the remainder thereof to a reasonably safe and sightly condition. (g Takings of All or Substantially All of the Property. In the event ---------------------------------------------------of any taking of all or substantially all of the Property, BNPLC shall beentitled to apply all Remaining Proceeds as a Qualified Prepayment. In addition,if Stipulated Loss Value immediately prior to any such taking exceeds the sum ofthe Remaining Proceeds resulting from such a condemnation, then BNPLC shall beentitled to recover the excess from Extreme upon demand as an additionalQualified Prepayment, whereupon this Land Lease shall terminate. Any taking ofso much of the Real Property as, in BNPLC's reasonable good faith judgment,makes it impracticable to restore or improve the remainder thereof as requiredby part (ii) of the preceding subparagraph shall be considered a taking ofsubstantially all the Property for purposes of this Paragraph 8. 9. Additional Representations, Warranties and Covenants of ExtremeConcerning the Property. Extreme represents, warrants and covenants as follows: (a Compliance with Covenants and Laws. The use of the Property ----------------------------------permitted by this Land Lease complies, or will comply after Extreme obtainsavailable permits as the tenant under this Land Lease, in all material respectswith all Applicable Laws. Extreme has obtained or will promptly obtain allutility, building, health and operating permits as may be required by anygovernmental authority or municipality having jurisdiction over the Property forany construction upon or use of the Property permitted by this Land Lease. (b Operation of the Property. During the Term, Extreme shall operate -------------------------the Property in a good and workmanlike manner and substantially in compliancewith all Applicable Laws and will pay or cause to be paid all fees or charges ofany kind in connection therewith. (If Extreme does not promptly correct anyfailure of the Property to comply with Applicable Laws that is the subject of awritten notice given to Extreme or BNPLC by any governmental authority, then forpurposes of the preceding sentence, Extreme shall be considered not to havemaintained the Property "substantially in accordance with Applicable Laws"whether or not the noncompliance would be substantial in the absence of thenotice.) During the Term, Extreme shall not use or occupy, or allow the use oroccupancy of, the Property in any manner which violates any Applicable Law orwhich constitutes a public or private nuisance or which makes void, voidable orcancelable any insurance then in force with respect thereto. During the Term, tothe extent that any of the following would, individually or in the aggregate,materially and adversely affect the value of the Property or the use of theProperty for purposes permitted by this Lease, Extreme shall not, withoutBNPLC's prior consent: (i) initiate or permit any zoning reclassification of theProperty; (ii) seek any variance under existing zoning ordinances applicable tothe Property; (iii) use or permit the use of the Property[Land] -17- in a manner that would result in such use becoming a nonconforming use underapplicable zoning ordinances or similar laws, rules or regulations; (iv) executeor file any subdivision plat affecting the Property; or (v) consent to theannexation of the Property to any municipality. If during the Term (A) a changein the zoning or other Applicable Laws affecting the permitted use ordevelopment of the Property shall occur that (in BNPLC's good faith judgment)reduces the value of the Property, or (B) conditions or circumstances on orabout the Property are discovered (such as the presence of an endangeredspecies) which substantially impede development and thereby (in BNPLC's goodfaith judgment) reduce the value of the Property, then Extreme shall upon demandpay BNPLC an amount equal to such reduction (as determined by BNPLC in goodfaith) for application as a Qualified Prepayment. Extreme shall not permit anydrilling or exploration for, or extraction, removal or production of, mineralsfrom the surface or subsurface of the Property, and Extreme shall not doanything that could reasonably be expected to significantly reduce the marketvalue of the Property. If Extreme receives a notice or claim from any federal,state or other governmental authority that the Property is not in compliancewith any Applicable Law, or that any action may be taken against BNPLC becausethe Property does not comply with any Applicable Law, Extreme shall promptlyfurnish a copy of such notice or claim to BNPLC. Notwithstanding the foregoing, Extreme may in good faith, by appropriateproceedings, contest the validity and applicability of any Applicable Law withrespect to the Property, and pending such contest Extreme shall not be deemed indefault hereunder because of the violation of such Applicable Law, if Extremediligently prosecutes such contest to completion in a manner reasonablysatisfactory to BNPLC, and if Extreme promptly causes the Property to complywith any such Applicable Law upon a final determination by a court of competentjurisdiction that the same is valid and applicable to the Property; provided,however, in any event such contest shall be concluded and the violation of suchApplicable Law must be corrected by Extreme and any claims asserted againstBNPLC or the Property because of such violation must be paid by Extreme, allprior to the earlier of (i) the date that any criminal prosecution is institutedor overtly threatened against BNPLC or any of its directors, officers oremployees because of such violation, (ii) the date that any action is taken byany governmental authority against BNPLC or any property owned by BNPLC(including the Property) because of such violation, or (iii) a Designated SaleDate upon which, for any reason, Extreme or an Affiliate of Extreme or anyApplicable Purchaser shall not purchase BNPLC's interest in the Propertypursuant to the Purchase Agreement for a price to BNPLC (when taken togetherwith any additional payments made by Extreme pursuant to Paragraph 1(A)(2) of -----------------the Purchase Agreement, in the case of a purchase by an Applicable Purchaser)equal to the Break Even Price. (c Debts for Construction, Maintenance, Operation or Development. -------------------------------------------------------------Extreme shall cause all debts and liabilities incurred in the construction,maintenance, operation or development of the Property, including all debts andliabilities for labor, material and equipment and all debts and charges forutilities servicing the Property, to be promptly paid; provided, that nothing inthis subparagraph will be construed to require Extreme to remove Liens Removableby BNPLC. Notwithstanding the foregoing, Extreme may in good faith, by appropriateproceedings, contest the validity, applicability or amount of any assertedmechanic's or materialmen's lien and pending such contest Extreme shall not bedeemed in default under this subparagraph because of the contested lien if (1)within sixty days after being asked to do so by BNPLC, Extreme bonds over toBNPLC's reasonable satisfaction all such contested liens against the Propertyalleged to secure an amount in excess of $500,000 (individually or in theaggregate), (2) Extreme diligently prosecutes such contest to completion in amanner reasonably satisfactory to BNPLC, and (3) Extreme promptly causes to bepaid any amount adjudged by a court of competent jurisdiction to be due, withall costs and interest thereon, promptly after such judgment becomes final;provided, however, that in any event each such contest shall be concluded andthe lien, interest and costs must be paid by Extreme prior to the earlier of (i)the date that any criminal prosecution is instituted or overtly threatenedagainst BNPLC or its directors, officers or employees because of the nonpaymentthereof, (ii) the date that any writ or order is issued under which the[Land] -18- Property or any other property in which BNPLC has an interest may be seized orsold or any other action is taken against BNPLC or any property in which BNPLChas an interest because of the nonpayment thereof, or (iii) a Designated SaleDate upon which, for any reason, Extreme or an Affiliate of Extreme or anyApplicable Purchaser shall not purchase BNPLC's interest in the Propertypursuant to the Purchase Agreement for a price to BNPLC (when taken togetherwith any additional payments made by Extreme pursuant to Paragraph 1(A)(2) of -----------------the Purchase Agreement, in the case of a purchase by an Applicable Purchaser)equal to the Break Even Price. (d Repair, Maintenance, Alterations and Additions. Extreme shall ----------------------------------------------keep the Property in good order, operating condition and appearance and shallcause all necessary repairs, renewals and replacements to be promptly made.Extreme will not allow any of the Property to be materially misused, abused orwasted. (e Permitted Encumbrances and Development Documents. Extreme shall ------------------------------------------------during the Term comply with and will cause to be performed all of the covenants,agreements and obligations imposed upon the owner of any interest in theProperty by the Permitted Encumbrances (including the Premises Leases) or theDevelopment Documents. Without limiting the foregoing, Extreme shall cause allamounts to be paid when due, the payment of which is secured by any Lien againstthe Property created by the Permitted Encumbrances. Without the prior consent ofBNPLC, Extreme shall not enter into, initiate, approve or consent to anymodification of any Permitted Encumbrance or Development Document that wouldcreate or expand or purport to create or expand obligations or restrictionswhich would encumber BNPLC's interest in the Property. (Whether BNPLC must giveany such consent requested by Extreme during the Term of this Land Lease shallbe governed by subparagraph 3(A) of the Closing Certificate and Agreement.) ----------------- (f Books and Records Concerning the Property. Extreme shall keep -----------------------------------------books and records that are accurate and complete in all material respects forthe Property and, subject to Paragraph 13.(c), will permit all such books andrecords to be inspected and copied by BNPLC. This subparagraph shall not beconstrued as requiring Extreme to regularly maintain separate books and recordsrelating exclusively to the Property; provided, however, that upon request,Extreme shall construct or abstract from its regularly maintained books andrecords information required by this subparagraph relating to the Property. 10. Financial Covenants, Reporting Covenants and Other Covenants Incorporated by Reference to Schedule 1. Throughout the Term of this Land ---------- Lease, Extreme shall comply with the requirements of Schedule 1 attached hereto. ---------- 11. Assignment and Subletting by Extreme. (a BNPLC's Consent Required. Without the prior consent of BNPLC, ------------------------Extreme shall not assign, transfer, mortgage, pledge or hypothecate this LandLease or any interest of Extreme hereunder and shall not sublet all or any partof the Property, by operation of law or otherwise; provided, that this provisionshall not be construed to prohibit any sublease of space within Improvementsexpressly permitted by the Other lease Agreement. (b Standard for BNPLC's Consent to Assignments and Certain Other -------------------------------------------------------------Matters. Consents and approvals of BNPLC which are required by this Paragraph 11-------will not be unreasonably withheld or delayed, but Extreme acknowledges thatBNPLC's withholding of such consent or approval shall be reasonable if BNPLCdetermines in good faith that (1) giving the approval may materially increaseBNPLC's risk of liability for any existing or future environmental problem, or(2) giving the approval is likely to increase BNPLC's administrative burden ofcomplying with or monitoring Extreme's compliance with the requirements of thisLand Lease.[Land] -19- (c Consent Not a Waiver. No consent by BNPLC to a sale, assignment, -------------------- transfer, mortgage, pledge or hypothecation of this Land Lease or Extreme'sinterest hereunder, and no assignment or subletting of the Property or any partthereof in accordance with this Land Lease or otherwise with BNPLC's consent,shall release Extreme from liability hereunder; and any such consent shall applyonly to the specific transaction thereby authorized and shall not relieveExtreme from any requirement of obtaining the prior consent of BNPLC to anyfurther sale, assignment, transfer, mortgage, pledge or hypothecation of thisLand Lease or any interest of Extreme hereunder. 12. Assignment by BNPLC. (a Restrictions on Transfers. Except by a Permitted Transfer, BNPLC ------------------------- shall not assign, transfer, mortgage, pledge, encumber or hypothecate this LandLease or the other Operative Documents or any interest of BNPLC in and to theProperty during the Term without the prior consent of Extreme, which consentExtreme may withhold in its sole discretion. Further, notwithstanding anythingto the contrary herein contained, if withholding taxes are imposed on the rentsand other amounts payable to BNPLC hereunder because of BNPLC's assignment ofthis Land Lease to any citizen of, or any corporation or other entity formedunder the laws of, a country other than the United States, Extreme shall not berequired to compensate BNPLC or any such assignee for the withholding tax. If,in breach of this subparagraph, BNPLC transfers the Property or any part thereofby a conveyance or that does not constitute a Permitted Transfer, with theresult that additional transfer taxes or other Impositions are assessed againstthe Property or the owner thereof, BNPLC shall be required to pay suchadditional transfer taxes or other Impositions. (b Effect of Permitted Transfer or other Assignment by BNPLC. If, ---------------------------------------------------------without breaching subparagraph 12.(a), BNPLC sells or otherwise transfers theProperty and assigns to the transferee all of BNPLC's rights under this LandLease and under the other Operative Documents, and if the transferee expresslyassumes all of BNPLC's obligations under this Land Lease and under the otherOperative Documents, then BNPLC shall thereby be released from any obligationsarising after such assumption under this Land Lease or under the other OperativeDocuments, and Extreme shall look solely to each successor in interest of BNPLCfor performance of such obligations. (As used in this subparagraph, "OperativeDocuments" is intended to mean not only the Operative Documents as defined inthe Common Definitions and Provisions Agreement (Land), but also the OperativeDocuments as defined in the Other Common Definitions and Provisions Agreement.) 13. BNPLC'S Right Of Access. (a During the Term, BNPLC and BNPLC's representatives may (subjectto subparagraphs 13.(c) and 13.(d)) enter the Property at any reasonable timeafter five Business Days advance written notice to Extreme for the purpose ofmaking inspections or performing any work BNPLC is authorized to undertake bythe next subparagraph or for the purpose confirming whether Extreme has compliedwith the requirements of this Land Lease or the other Operative Documents. (b If Extreme fails to perform any act or to take any actionrequired of it by this Land Lease or the Closing Certificate, or to pay anymoney which Extreme is required by this Land Lease or the Closing Certificate topay, and if such failure or action constitutes an Event of Default or rendersBNPLC or any director, officer, employee or Affiliate of BNPLC at risk ofcriminal prosecution or renders BNPLC's interest in the Property or any partthereof at risk of forfeiture by forced sale or otherwise, then in addition toany other remedies specified herein or otherwise available, BNPLC may, performor cause to be performed such act or take such action or pay such money. Anyexpenses so incurred by BNPLC, and any money so paid by BNPLC, shall be a demandobligation owing by Extreme to BNPLC. Further, BNPLC, upon making such payment,shall be subrogated to all[Land] -20- of the rights of the person, corporation or body politic receiving such payment.But nothing herein shall imply any duty upon the part of BNPLC to do any workwhich under any provision of this Land Lease Extreme may be required to perform,and the performance thereof by BNPLC shall not constitute a waiver of Extreme'sdefault. BNPLC may during the progress of any such work permitted by BNPLChereunder on or in the Property keep and store upon the Property all necessarymaterials, tools, and equipment. BNPLC shall not in any event be liable forinconvenience, annoyance, disturbance, loss of business, or other damage toExtreme or the subtenants or invitees of Extreme by reason of making suchrepairs or the performance of any such work on or in the Property, or on accountof bringing materials, supplies and equipment into or through the Propertyduring the course of such work (except for any liability in excess of theliability insurance limits established in Exhibit B resulting from death or ---------injury or damage to the property of third parties caused by the EstablishedMisconduct of BNPLC or its officers, employees, or agents in connectiontherewith), and the obligations of Extreme under this Land Lease shall notthereby be excused in any manner. (c Extreme shall have no obligation to provide proprietaryinformation (as defined in the next sentence) to BNPLC, except and to the extentthat (1) BNPLC reasonably determines that BNPLC cannot accomplish the purposesof BNPLC's inspection of the Property or exercise of other rights grantedpursuant to the various express provisions of this Land Lease and the otherOperative Documents without evaluating such information. For purposes of thisLand Lease "proprietary information" includes Extreme's intellectual property,trade secrets and other confidential information of value to Extreme about,among other things, Extreme's manufacturing processes, products, marketing andcorporate strategies, but in no event will "proprietary information" include anydisclosure of substances and materials (and their chemical composition) whichare or previously have been present in, on or under the Property at the time ofany inspections by BNPLC, nor will "proprietary information" include anyadditional disclosures reasonably required to permit BNPLC to determine whetherthe presence of such substances and materials has constituted a violation ofEnvironmental Laws. In addition, under no circumstances shall Extreme have anyobligation to disclose to BNPLC or any other party any proprietary informationof Extreme (including, without limitation, any pending applications for patentsor trademarks, any research and design and any trade secrets) except if and tothe limited extent reasonably necessary to comply with the express provisions ofthis Land Lease or the other Operative Documents. (d So long as Extreme remains in possession of the Property, BNPLCor BNPLC's representative will, before making any inspection or performing anywork on the Property authorized by this Land Lease, if then requested to do soby Extreme to maintain Extreme's security: (i) sign in at Extreme's security orinformation desk if Extreme has such a desk on the premises, (ii) wear avisitor's badge or other reasonable identification, (iii) permit an employee ofExtreme to observe such inspection or work, and (iv) comply with other similarreasonable nondiscriminatory security requirements of Extreme that do not,individually or in the aggregate, significantly interfere with inspections orwork of BNPLC authorized by this Land Lease. 14. Events of Default. Each of the following events shall be an "Event ofDefault" by Extreme under this Land Lease: (a Extreme shall fail to pay when due any installment of Rent duehereunder and such failure shall continue for three (3) Business Days afterExtreme is notified in writing thereof. (b Extreme shall fail to cause any representation or warranty of Extremecontained herein or in the Closing Certificate that was false or misleading inany material respect when made to be made true and not misleading (other than asdescribed in the other clauses of this Paragraph 14), or Extreme shall fail tocomply with any term, provision or covenant of this Land Lease or the ClosingCertificate (other than as described in the other clauses of this Paragraph 14),and in either case shall not cure such failure prior to the earlier of (A)thirty days[Land] -21- after written notice thereof is sent to Extreme or (B) the date any writ ororder is issued for the levy or sale of any property owned by BNPLC (includingthe Property) or any criminal prosecution is instituted or overtly threatenedagainst BNPLC or any of its directors, officers or employees because of suchfailure; provided, however, that so long as no such writ or order is issued andno such criminal prosecution is instituted or overtly threatened, the periodwithin which such failure may be cured by Extreme shall be extended for afurther period (not to exceed an additional sixty days) as shall be necessaryfor the curing thereof with diligence, if (but only if) (x) such failure issusceptible of cure but cannot with reasonable diligence be cured within suchthirty day period, (y) Extreme shall promptly have commenced to cure suchfailure and shall thereafter continuously prosecute the curing thereof withreasonable diligence and (z) the extension of the period for cure will not, inany event, cause the period for cure to extend beyond five days prior to theexpiration of this Land Lease. (c Extreme shall abandon the Property. (d Extreme or any Subsidiary shall fail to make any payment or paymentsof principal, premium or interest, of Debt of Extreme described in the nextsentence when due (taking into consideration the time Extreme may have to curesuch failure, if any, under the documents governing such Debt). As used in thisclause 14(a)(v), "Debt" shall include only Debt (as defined in the CommonDefinitions and Provisions Agreement (Land)) of Extreme or any of itsSubsidiaries now existing or arising in the future (1) payable to any InterestedParty, or (2) payable to any other Person and with respect to which $5,000,000or more is actually due and payable because of acceleration or otherwise. (e Extreme: (a) shall generally not, or be unable to, or shall admit inwriting its inability to, pay its debts as such debts become due; or (b) shallmake an assignment for the benefit of creditors, petition or apply to anytribunal for the appointment of a custodian, receiver or trustee for it or asubstantial part of its assets; or (c) shall file any petition or application tocommence any proceeding under any bankruptcy, reorganization, arrangement,readjustment of debt, dissolution or liquidation law or statute of anyjurisdiction, whether now or hereafter in effect; or (d) shall have had any suchpetition or application filed against it; or (e) by any act or omission shallindicate its consent to, approval of or acquiescence in any such petition,application or proceeding or order for relief or the appointment of a custodian,receiver or trustee for all or any substantial part of its property; or (f)shall suffer any such custodianship, receivership or trusteeship to continueundischarged for a period of sixty days or more. (f One or more final judgments, decrees or orders for the payment ofmoney in excess of $5,000,000 in the aggregate shall be rendered against Extremeand such judgments, decrees or orders shall continue unsatisfied and in effectfor a period of thirty consecutive days without Extreme's having obtained anagreement (or after the expiration or termination of an agreement) of thePersons entitled to enforce such judgment, decrees or orders not to enforce thesame pending negotiations with Extreme concerning the satisfaction or otherdischarge of the same. (For purposes of this provision, no judgment, decree ororder will be considered "final" until Extreme's right to appeal, if any, shallhave expired or been exhausted.) (g Extreme shall breach the requirements of Paragraph 10, which byreference to Schedule 1 establishes certain financial covenants and otherrequirements. (h as of the effective date of this Land Lease, any of therepresentations or warranties of Extreme contained in subparagraphs 2(A) - (K)of the Closing Certificate shall be false or misleading in any material respect. (i Extreme shall fail to pay the full amount of any SupplementalPayment required by the Purchase[Land] -22- Agreement on the Designated Sale Date. (j Extreme shall fail to comply with any term, provision or conditionof the Pledge Agreement after the expiration of any applicable notice and cureperiod set forth in the Pledge Agreement. 15. Remedies. (a Basic Remedies. At any time after an Event of Default and after --------------BNPLC has given any notice required by subparagraph 15.(b), BNPLC shall beentitled at BNPLC's option (and without limiting BNPLC in the exercise of anyother right or remedy BNPLC may have, and without any further demand or noticeexcept as expressly described in this subparagraph 15.(a)), to exercise any oneor more of the following remedies: (i By notice to Extreme, BNPLC may terminate Extreme's right to possession of the Property. A notice given in connection with unlawful detainer proceedings specifying a time within which to cure a default shall terminate Extreme's right to possession if Extreme fails to cure the default within the time specified in the notice. (ii Upon termination of Extreme's right to possession and without further demand or notice, BNPLC may re-enter the Property in any manner not prohibited by Applicable Law and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property on the Land may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of Extreme. (iii Upon termination of Extreme's right to possession, this Land Lease shall terminate and BNPLC may recover from Extreme: a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination; b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Extreme proves could have been reasonably avoided; c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the scheduled Term after the time of award exceeds the amount of such rental loss that Extreme proves could be reasonably avoided; and d) Any other amount necessary to compensate BNPLC for all the detriment proximately caused by Extreme's failure to perform Extreme's obligations under this Land Lease or which in the ordinary course of things would be likely to result therefrom, including the costs and expenses (including Attorneys' Fees, advertising costs and brokers' commissions) of recovering possession of the Property, removing persons or property therefrom, placing the Property in good order, condition, and repair, preparing and altering the Property for reletting, all other costs and expenses of reletting, and any loss incurred by BNPLC as a result of Extreme's failure to perform Extreme's obligations under the other Operative Documents. The "worth at the time of award" of the amounts referred to in subparagraph 15.(a)(iii)a) and subparagraph 15.(a)(iii)b) shall be computed by allowing interest at the Default Rate. The "worth[Land] -23- at the time of award" of the amount referred to in subparagraph 15.(a)(iii)c) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). e) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. (iv BNPLC shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in force even after lessee's breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations). Accordingly, even if Extreme has breached this Land Lease and abandoned the Property, this Land Lease shall continue in effect for so long as BNPLC does not terminate Extreme's right to possession, and BNPLC may enforce all of BNPLC's rights and remedies under this Land Lease, including the right to recover the Rent as it becomes due under this Land Lease. Extreme's right to possession shall not be deemed to have been terminated by BNPLC except pursuant to subparagraph 15.(a)(i) hereof. The following shall not constitute a termination of Extreme's right to possession: a) Acts of maintenance or preservation or efforts to relet the Property; b) The appointment of a receiver upon the initiative of BNPLC to protect BNPLC's interest under this Land Lease; or c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by Extreme. (b Notice Required So Long As the Purchase Option and Extreme's ------------------------------------------------------------Initial Remarketing Rights and Obligations Continue Under the Purchase----------------------------------------------------------------------Agreement. So long as Extreme remains in possession of the Property and there---------has been no termination of the Purchase Option and Extreme's Initial RemarketingRights and Obligations as provided Paragraph 4 of the Purchase Agreement, -----------BNPLC's right to exercise remedies provided in subparagraph 15.(a) will besubject to the condition precedent that BNPLC shall have notified Extreme, at atime when an Event of Default shall have occurred and be continuing, of BNPLC'sintent to exercise remedies provided in subparagraph 15.(a) at least sixty daysprior to exercising the remedies. The condition precedent is intended to provideExtreme with an opportunity to exercise the Purchase Option or Extreme's InitialRemarketing Rights and Obligations before losing possession of the Propertypursuant to subparagraph 15.(a). The condition precedent is not, however,intended to extend any period for curing an Event of Default. Accordingly, if anEvent of Default has occurred, and regardless of whether any Event of Default isthen continuing, BNPLC may proceed immediately to exercise remedies provided insubparagraph 15.(a) at any time after the earlier of (i) sixty days after BNPLChas given such a notice to Extreme, (ii) any date upon which Extremerelinquishes possession of the Property, or (iii) any termination of thePurchase Option and Extreme's Initial Remarketing Rights and Obligations. (c Enforceability. This Paragraph 15 shall be enforceable to the --------------maximum extent not prohibited by Applicable Law, and the unenforceability of anyprovision in this Paragraph shall not render any other provision unenforceable. (d Remedies Cumulative. No right or remedy herein conferred upon or -------------------reserved to BNPLC is intended to be exclusive of any other right or remedy, andeach and every such right and remedy shall be cumulative and in addition to anyother right or remedy given to BNPLC hereunder or now or hereafter existing infavor of BNPLC under Applicable Law or in equity. In addition to other remediesprovided in this Land Lease,[Land] -24- BNPLC shall be entitled, to the extent permitted by Applicable Law or in equity,to injunctive relief in case of the violation, or attempted or threatenedviolation, of any of the covenants, agreements, conditions or provisions of thisLand Lease, or to a decree compelling performance of any of the other covenants,agreements, conditions or provisions of this Land Lease to be performed byExtreme, or to any other remedy allowed to BNPLC at law or in equity. Nothingcontained in this Land Lease shall limit or prejudice the right of BNPLC toprove for and obtain in proceedings for bankruptcy or insolvency of Extreme byreason of the termination of this Land Lease, an amount equal to the maximumallowed by any statute or rule of law in effect at the time when, and governingthe proceedings in which, the damages are to be proved, whether or not theamount be greater, equal to, or less than the amount of the loss or damagesreferred to above. Without limiting the generality of the foregoing, nothingcontained herein shall modify, limit or impair any of the rights and remedies ofBNPLC under the Purchase Documents, and BNPLC shall not be required to give thesixty day notice described in subparagraph 15.(b) as a condition precedent toany acceleration of the Designated Sale Date or to taking any action to enforcethe Purchase Documents. 16. Default by BNPLC. If BNPLC should default in the performance of anyof its obligations under this Land Lease, BNPLC shall have the time reasonablyrequired, but in no event less than thirty days, to cure such default afterreceipt of notice from Extreme specifying such default and specifying whataction Extreme believes is necessary to cure the default. If Extreme prevails inany litigation brought against BNPLC because of BNPLC's failure to cure adefault within the time required by the preceding sentence, then Extreme shallbe entitled to an award against BNPLC for the monetary damages proximatelycaused to Extreme by such default. Notwithstanding the foregoing, BNPLC's right to cure as provided in thisParagraph 16 will not in any event extend the time within which BNPLC mustremove Liens Removable by BNPLC as required by Paragraph 17 beyond theDesignated Sale Date. 17. Quiet Enjoyment. Provided Extreme pays the Base Rent and allAdditional Rent payable hereunder as and when due and payable and keeps andfulfills all of the terms, covenants, agreements and conditions to be performedby Extreme hereunder, BNPLC shall not during the Term disturb Extreme'speaceable and quiet enjoyment of the Property; however, such enjoyment shall besubject to the terms, provisions, covenants, agreements and conditions of thisLand Lease, to Permitted Encumbrances, to Development Documents and to any otherclaims not constituting Liens Removable by BNPLC. If any Lien Removable by BNPLCis claimed against the Property, BNPLC will remove the Lien Removable by BNPLCpromptly. Any breach by BNPLC of this Paragraph shall render BNPLC liable toExtreme for any monetary damages proximately caused thereby, but as morespecifically provided in subparagraph 4.(b) above, no such breach shall entitleExtreme to terminate this Land Lease or excuse Extreme from its obligation topay Rent. 18. Surrender Upon Termination. Unless Extreme or an Applicable Purchaserpurchases or has purchased BNPLC's entire interest in the Property pursuant tothe terms of the Purchase Agreement and BNPLC's entire interest in theImprovements and other "Property" under (and as defined in) the Other PurchaseAgreement, Extreme shall, upon the termination of Extreme's right to occupancy,surrender to BNPLC the Property, including Improvements constructed by Extremeand fixtures and furnishings included in the Property, free of all HazardousSubstances (including Permitted Hazardous Substances) and tenancies and with allImprovements in substantially the same condition as of the date the same wereinitially completed, excepting only (i) ordinary wear and tear that occursbetween the maintenance, repairs and replacements required by other provisionsof this Land Lease or the Other Lease Agreement, and (ii) demolition,alterations and additions which are expressly permitted by the terms of thisLand Lease or the Other Lease Agreement and which have been completed by Extremein a good and workmanlike manner in accordance with all Applicable Laws. Anymovable furniture or movable personal property belonging to Extreme or any partyclaiming under Extreme, if not removed at the time of such termination and if[Land] -25- BNPLC shall so elect, shall be deemed abandoned and become the property of BNPLCwithout any payment or offset therefor. If BNPLC shall not so elect, BNPLC mayremove such property from the Property and store it at Extreme's risk andexpense. Nothing in this Paragraph 18 will be construed to require Extreme tosurrender the Property to BNPLC during the continuation of any breach by BNPLCof any obligation it has under the Purchase Agreement to convey the Property toExtreme or an Applicable Purchaser. 19. Holding Over by Extreme. Should Extreme not purchase BNPLC's right,title and interest in the Property as provided in the Purchase Agreement, butnonetheless continue to hold the Property after the termination of this LandLease without BNPLC's consent, whether such termination occurs by lapse of timeor otherwise, such holding over shall constitute and be construed as a tenancyfrom day to day only, at a daily Base Rent equal to: (i) Stipulated Loss Valueon the day in question, times (ii) the Default Rate for such day; divided by(iii) three hundred and sixty; subject, however, to all of the terms,provisions, covenants and agreements on the part of Extreme hereunder. Nopayments of money by Extreme to BNPLC after the termination of this Land Leaseshall reinstate, continue or extend the Term of this Land Lease and no extensionof this Land Lease after the termination thereof shall be valid unless and untilthe same shall be reduced to writing and signed by both BNPLC and Extreme. 20. Independent Obligations Evidenced by the Other Operative Documents.Extreme acknowledges and agrees that nothing contained in this Land Lease shalllimit, modify or otherwise affect any of Extreme's obligations under the otherOperative Documents, which obligations are intended to be separate, independentand in addition to, and not in lieu of, the obligations set forth herein. In theevent of any inconsistency between the express terms and provisions of thePurchase Documents and the express terms and provisions of this Land Lease, theexpress terms and provisions of the Purchase Documents shall control. In theevent of any inconsistency between the express terms and provisions of theClosing Certificate and the express terms and provisions of this Land Lease, theexpress terms and provisions of this Land Lease shall control; provided, nothingherein will limit or impair Extreme's obligations under the Closing Certificatefollowing any expiration of termination of this Land Lease. [The signature pages follow.][Land] -26- IN WITNESS WHEREOF, Extreme and BNPLC have caused this Lease Agreement(Land) to be executed as of June 1, 2000. "Extreme" EXTREME NETWORKS, INC. By:___________________________ Name:______________________ Title:_____________________ [Continuation of signature pages to Lease Agreement (Land) dated to be effective June 1, 2000] "BNPLC" BNP LEASING CORPORATION By: _______________________________ Lloyd G. Cox, Vice President Exhibit A --------- Legal DescriptionAll that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning.[Land] Exhibit B --------- Insurance RequirementsI. LIABILITY INSURANCE: A. Extreme must maintain commercial general liability ("CGL") insuranceon an occurrence basis, affording immediate protection to the limit of not lessthan $20,000,000 combined single limit for bodily and personal injury, death andproperty damage in respect of any one occurrence. The CGL insurance must beprimary to, and shall receive no contribution from, any insurance policies orself-insurance programs otherwise afforded to or available to the InterestedParties, collectively or individually. Further, the CGL insurance must includeblanket contractual liability coverage which insures contractual liability underthe indemnifications set forth in this Land Lease (though such coverage or theamount thereof shall in no way limit such indemnifications). B. Any deductible or self-insured retention applicable to the CGLinsurance shall not exceed $500,000. C. The forms of insurance policies (including endorsements) used toprovide the CGL insurance required by this Land Lease, and the insurance companyor companies providing the CGL insurance, must be acceptable to BNPLC. BNPLCshall have the right from time to time and at any time to review and approvesuch policy forms (including endorsements) and the insurance company orcompanies providing the insurance. Without limiting the generality of theforegoing, BNPLC may reasonably require (and unless and until Extreme isotherwise notified by BNPLC, BNPLC does require) that such insurance be providedunder forms and by companies consistent with the following: (1) Forms: CGL Insurance must be provided on Insurance Services ----- Office ("ISO") forms CG 0001 1093 or CG 0001 0196 or equivalent substitute forms providing the same or greater coverage. (2) Rating Requirements: Insurance must be provided through insurance ------------------- or reinsurance companies rated by the A.M. Best Company of Oldwick, New Jersey as having a policyholder's rating of A or better and a reported financial information rating of X or better. (3) Required Endorsements: CGL Insurance must be endorsed to provide --------------------- or include: (a) ISO additional insured form CG 2026 1185 or equivalent substitute form, without modification (and under the commercial umbrella, if any), designating as additional insureds "BNPLC and other Interested Parties, as defined in the Common Definitions and Provisions Agreement (Land) between Extreme Networks, Inc. and BNP Leasing Corporation dated June 1, 2000)"; and (b) provisions entitling BNPLC to 30 days' notice from the insurer prior to any cancellation of the CGL coverage. (4) Other Insurance: Each policy to contain standard CGL "other --------------- insurance" wording, unmodified in any way that would make it excess over or contributory with the additional insured's own commercial general liability coverage.[Land] III. OTHER INSURANCE RELATED REQUIREMENTS: A. BNPLC must be notified in writing immediately by Extreme of claimsagainst Extreme that might cause a reduction below seventy-five percent (75%) ofany aggregate limit of any policy. B. Extreme's CGL insurance must be evidenced by ACORD form 25"Certificate of Insurance" completed and interlineated in a manner satisfactoryto BNPLC to show compliance with the requirements of this Exhibit. Copies ofendorsements to the CGL insurance must be attached to such form. C. Such evidence of required insurance must be delivered upon executionof this Land Lease and new certificate or evidence of insurance must bedelivered no later than 10 days prior to expiration of existing policy. D. Extreme shall not cancel, fail to renew, or make or permit anymaterial reduction in any of the policies or certificates described in thisExhibit without the prior written consent of BNPLC. The certificates (ACORDforms 25) described in this Exhibit must contain the following expressprovision: "This is to certify that the policies of insurance described herein have been issued to the insured Extreme Networks, Inc. for whom this certificate is executed and are in force at this time. In the event of cancellation of coverage affecting the certificate holder, at least thirty days prior notice shall be given to the certificate holder." E. The limits of liability under the liability insurance required by thisLand Lease may be provided by a single policy of insurance or by a combinationof primary and umbrella policies, but in no event shall the total limits ofliability available for any one occurrence or accident be less than thoserequired by this Exhibit. F. Extreme shall provide copies, certified as complete and correct by anauthorized agent of the applicable insurer, of all insurance policies requiredby this Exhibit within ten days after receipt of a request for such copies fromBNPLC. Exhibit B - Page 2[Land] Exhibit C --------- Notice of LIBOR Period ElectionBNP Leasing Corporation12201 Merit DriveSuite 860Dallas, Texas 75251Attention: Lloyd G. Cox Re: Lease Agreement (Improvements) and Lease Agreement (Land), both datedas of June 1, 2000, and both between Extreme Networks, Inc., as tenant, and BNPLeasing Corporation, as landlordGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the two Lease Agreements referenced above. This letterconstitutes notice to you that the LIBOR Period Election under both of the LeaseAgreements shall be: ________________ month(s),beginning with the first Base Rent Period that commences on or after: ____________________, ____.NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE NUMBER OF MONTHS----SPECIFIED ABOVE IS NOT A PERMITTED NUMBER UNDER THE DEFINITION OF "LIBOR PERIODELECTION" IN THE COMMON DEFINITIONS AND PROVISIONS AGREEMENTS REFERENCED IN THELEASE AGREEMENTS, OR IF THE DATE SPECIFIED ABOVE CONCERNING THE COMMENCEMENT OFTHE LIBOR PERIOD ELECTION IS LESS THAN TEN BUSINESS DAYS AFTER YOUR RECEIPT OFTHIS NOTICE. HOWEVER, WE ASK THAT YOU NOTIFY US IMMEDIATELY IF FOR ANY REASONYOU BELIEVE THIS NOTICE IS DEFECTIVE. Executed this _____ day of ______________, 20__. Extreme Networks, Inc. Name:________________________ Title:_______________________[cc all Participants][Land] Schedule 1 ---------- FINANCIAL COVENANTS[DRAFTING NOTE: TK WILL MANUALLY SUBSTITUTE THE FINAL SCHEDULE 1 (A SEPARATE -------------WORD PROCESSING FILE) FOR THIS PAGE IN THE EXECUTION COPIES OF THIS DOCUMENT.][Land] ================================================================================ EXHIBIT 10.9 $48,000,000 LEASE AGREEMENT (Improvements) BETWEEN BNP LEASING CORPORATION ("BNPLC") AND EXTREME NETWORKS, INC. ("Extreme") June 1, 2000 (Santa Clara, California)================================================================================[Improvements] TABLE OF CONTENTS Page ---- 1. Term..................................................................................................... 2 (a) Scheduled Term...................................................................................... 2 -------------- (b) Election by Extreme to Terminate After Accelerating the Designated Sale Date........................ 2 ---------------------------------------------------------------------------- (c) Extension of the Term............................................................................... 3 ---------------------2. Use and Condition of the Property........................................................................ 3 (a) Use................................................................................................. 3 --- (b) Condition of the Property........................................................................... 4 ------------------------- (c) Consideration for and Scope of Waiver............................................................... 4 -------------------------------------3. Rent..................................................................................................... 4 (a) Base Rent Generally................................................................................. 4 ------------------- (b) Impact of Collateral Upon Formulas.................................................................. 5 ---------------------------------- (c) Calculation of and Due Dates for Base Rent.......................................................... 5 ------------------------------------------ (i) Determination of Payment Due Dates, Generally................................................ 5 --------------------------------------------- (ii) Special Adjustments to Base Rent Payment Dates and Periods................................... 6 ---------------------------------------------------------- (iii) Base Rent Formula for Periods During Which The Collateral Percentage is 100%................. 6 ---------------------------------------------------------------------------- (iv) Base Rent Formula for Periods During Which The Collateral Percentage is Less Than 100%....... 7 -------------------------------------------------------------------------------------- (d) Additional Rent..................................................................................... 8 --------------- (e) Arrangement Fee..................................................................................... 8 --------------- (f) Administrative Agency Fees.......................................................................... 8 -------------------------- (g) No Demand or Setoff................................................................................. 8 ------------------- (h) Default Interest and Order of Application........................................................... 8 -----------------------------------------4. Nature of this Agreement................................................................................. 8 (a) "Net" Lease Generally............................................................................... 8 --------------------- (b) No Termination...................................................................................... 8 -------------- (c) Tax Reporting....................................................................................... 9 ------------- (d) Characterization of this Improvements Lease......................................................... 10 -------------------------------------------5. Payment of Executory Costs and Losses Related to the Property............................................ 10 (a) Impositions......................................................................................... 10 ----------- (b) Increased Costs; Capital Adequacy Charges........................................................... 11 ----------------------------------------- (c) Extreme's Payment of Other Losses; General Indemnification.......................................... 12 ---------------------------------------------------------- (d) Exceptions and Qualifications to Indemnities........................................................ 13 --------------------------------------------6. Initial Renovations...................................................................................... 14 (a) Funds Advanced to Extreme From the Initial Funding Advance.......................................... 14 ---------------------------------------------------------- (b) Quality and Timing of the Initial Renovations....................................................... 14 --------------------------------------------- (c) Control of Work..................................................................................... 14 --------------- (d) Adequacy of Drawings, Specifications and Budgets.................................................... 14 ------------------------------------------------[Improvements] (e) Existing Condition of the Land and Improvements..................................................... 15 ----------------------------------------------- (f) Clean Up............................................................................................ 15 -------- (g) No Damage for Delays................................................................................ 15 -------------------- (h) No Fee For Construction Management.................................................................. 15 ----------------------------------7. Status of Property Acquired With Funds Provided by BNPLC................................................. 158. Environmental............................................................................................ 16 (a) Environmental Covenants by Extreme.................................................................. 16 ---------------------------------- (b) Right of BNPLC to do Remedial Work Not Performed by Extreme......................................... 16 ----------------------------------------------------------- (c) Environmental Inspections and Reviews............................................................... 17 ------------------------------------- (d) Communications Regarding Environmental Matters...................................................... 17 ----------------------------------------------9. Insurance Required and Condemnation...................................................................... 18 (a) Liability Insurance................................................................................. 18 ------------------- (b) Property Insurance.................................................................................. 18 ------------------ (c) Failure to Obtain Insurance......................................................................... 19 --------------------------- (d) Condemnation........................................................................................ 19 ------------10. Application of Insurance and Condemnation Proceeds....................................................... 19 (a) Collection and Application of Insurance and Condemnation Proceeds Generally......................... 19 --------------------------------------------------------------------------- (b) Advances of Escrowed Proceeds to Extreme............................................................ 20 ---------------------------------------- (c) Application of Escrowed Proceeds as a Qualified Prepayment.......................................... 20 ---------------------------------------------------------- (d) Special Provisions Applicable After Completion of Initial Renovations............................... 20 --------------------------------------------------------------------- (e) Special Provisions Applicable After an Event of Default............................................. 20 ------------------------------------------------------- (f) Extreme's Obligation to Restore..................................................................... 21 ------------------------------- (g) Takings of All or Substantially All of the Property................................................. 21 ---------------------------------------------------11. Additional Representations, Warranties and Covenants of Extreme Concerning the Property.................. 21 (a) Compliance with Covenants and Laws.................................................................. 21 ---------------------------------- (b) Operation of the Property........................................................................... 21 ------------------------- (c) Debts for Construction, Maintenance, Operation or Development....................................... 22 ------------------------------------------------------------- (d) Repair, Maintenance, Alterations and Additions...................................................... 23 ---------------------------------------------- (e) Permitted Encumbrances and Development Documents.................................................... 23 ------------------------------------------------ (f) Books and Records Concerning the Property........................................................... 23 -----------------------------------------12. Financial Covenants, Reporting Covenants and Other Covenants Incorporated by Reference to Schedule 1............................................................................... 24 ----------13. Assignment and Subletting by Extreme..................................................................... 24 (a) BNPLC's Consent Required............................................................................ 24 ------------------------ (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters............................... 24 --------------------------------------------------------------------- (c) Consent Not a Waiver................................................................................ 24 --------------------14. Assignment by BNPLC...................................................................................... 24 (a) Restrictions on Transfers........................................................................... 24 ------------------------- (b) Effect of Permitted Transfer or other Assignment by BNPLC........................................... 25 ---------------------------------------------------------15. BNPLC's Right of Access.................................................................................. 25[Improvements] 16. Events of Default....................................................................................... 26 17. Remedies................................................................................................ 28 (a) Basic Remedies..................................................................................... 28 -------------- (b) Notice Required So Long As the Purchase Option and Extreme's Initial Remarketing -------------------------------------------------------------------------------- Rights and Obligations Continue Under the Purchase Agreement....................................... 29 ------------------------------------------------------------ (c) Enforceability..................................................................................... 30 -------------- (d) Remedies Cumulative................................................................................ 30 ------------------- 18. Default by BNPLC........................................................................................ 30 19. Quiet Enjoyment......................................................................................... 30 20. Surrender Upon Termination.............................................................................. 31 21. Holding Over by Extreme................................................................................. 31 22. Independent Obligations Evidenced by the Other Operative Documents...................................... 31 [Improvements] Exhibits and Schedules Exhibit A.......................... Legal Description--------- Exhibit B.......................... Insurance Requirements--------- Exhibit C.......................... LIBOR Period Election Form--------- Schedule 1......................... Financial Covenants and Other Requirements---------- [Improvements] (IV) LEASE AGREEMENT (IMPROVEMENTS) This LEASE AGREEMENT (IMPROVEMENTS) (this "Improvements Lease") is madeand dated as of June 1, 2000 (the "Effective Date") by and between BNP LEASINGCORPORATION, a Delaware corporation ("BNPLC"), and EXTREME NETWORKS, INC., aDelaware corporation ("Extreme"). RECITALS Contemporaneously with the execution of this Improvements Lease, BNPLCand Extreme are executing a Common Definitions and Provisions Agreement(Improvements) dated as of the Effective Date (the "Common Definitions andProvisions Agreement (Improvements)"), which by this reference is incorporatedinto and made a part of this Improvements Lease for all purposes. As used inthis Improvements Lease, capitalized terms defined in the Common Definitions andProvisions Agreement (Improvements) and not otherwise defined in thisImprovements Lease are intended to have the respective meanings assigned to themin the Common Definitions and Provisions Agreement (Improvements). Pursuant to the Acquisition Contract, which covers the Land describedin Exhibit A, BNPLC is acquiring the Land and any appurtenances thereto and allexisting Improvements thereon from Seller contemporaneously with the executionof this Improvements Lease. In anticipation of BNPLC's acquisition of the Land and the existingImprovements thereon under the Acquisition Contract, BNPLC and Extreme havereached agreement as to the terms and conditions upon which BNPLC is willing tolease the existing Improvements and the Improvements to be constructed on theLand as hereinafter provided, and by this Improvements Lease BNPLC and Extremedesire to evidence such agreement. GRANTING CLAUSES BNPLC does hereby LEASE, DEMISE and LET unto Extreme for the termhereinafter set forth all right, title and interest of BNPLC, now owned orhereafter acquired, in and to: (1) any and all Improvements; and (2) all easements and other rights appurtenant to the Improvements, whether now owned or hereafter acquired by BNPLC.BNPLC's interest in all property described in clauses (1) and (2) above arehereinafter referred to collectively as the "Real Property". The Real Propertydoes not include the Land itself, it being understood that the Other LeaseAgreement constitutes a separate lease of the Land and the appurtenancesthereto, and only the Land and the appurtenances thereto, from BNPLC to Extreme. To the extent, but only to the extent, that assignable rights orinterests in, to or under the following have been or will be acquired by BNPLCunder the Acquisition Contract or acquired by BNPLC pursuant to Paragraph 7below, BNPLC also hereby grants and assigns to Extreme for the term of thisImprovements Lease the right to use and enjoy (and, in the case of contractrights, to enforce) such rights or interests of BNPLC:[Improvements] (a) any goods, equipment, furnishings, furniture and other tangible personal property of whatever nature that are located on the Land and all renewals or replacements of or substitutions for any of the foregoing; (b) the benefits, if any, conferred upon the owner of the Real Property by the Permitted Encumbrances (including the right to receive rents under and to otherwise enforce the Premises Leases) and Development Documents; and (c) any permits, licenses, franchises, certificates, and other rights and privileges against third parties related to the Real Property.Such rights and interests of BNPLC, whether now existing or hereafter arising,are hereinafter collectively called the "Personal Property". The Real Propertyand the Personal Property are hereinafter sometimes collectively called the"Property." However, the leasehold estate conveyed hereby and Extreme's rightshereunder are expressly made subject and subordinate to the terms and conditionsof this Improvements Lease, the Premises Leases and all other PermittedEncumbrances, and to any other claims or encumbrances not constituting LiensRemovable by BNPLC. GENERAL TERMS AND CONDITIONS The Property is leased by BNPLC to Extreme and is accepted and is to beused and possessed by Extreme upon and subject to the following terms andconditions: 1 TERM. (a) Scheduled Term. The term of this Improvements Lease (the -------------- "Term") shall commence on and include the Effective Date, and end on the firstBusiness Day of July, 2005, unless sooner terminated as expressly hereinprovided. (b) Election by Extreme to Terminate After Accelerating the -------------------------------------------------------Designated Sale Date. Extreme shall be entitled to accelerate the Designated --------------------Sale Date (and thus accelerate the purchase of BNPLC's interest in the Propertyby Extreme or by an Applicable Purchaser pursuant to the Purchase Agreement) bysending a notice to BNPLC as provided in clause (2) of the definition of"Designated Sale Date" in the Common Definitions and Provisions Agreement(Improvements). In the event, because of Extreme's election to so accelerate theDesignated Sale Date or for any other reason, the Designated Sale Date occursbefore the end of the scheduled Term, Extreme may terminate this ImprovementsLease on or after the Designated Sale Date; provided, however, as a condition toany such termination by Extreme, Extreme must have done the following prior tothe termination: (i) purchased or caused an Applicable Purchaser to purchase the Property pursuant to the Purchase Agreement and satisfied all of Extreme's other obligations under the Purchase Agreement; (ii) paid to BNPLC all Base Rent and all other Rent due on or before or accrued through the Designated Sale Date; and (iii) paid any Breakage Costs caused by BNPLC's sale of the Property pursuant to the Purchase Agreement.[Improvements] -2- (c) Extension of the Term. The Term may be extended at the option of ---------------------Extreme for two successive periods of five years each; provided, however, thatprior to any such extension the following conditions must have been satisfied:(A) at least one hundred eighty days prior to the commencement of any suchextension, BNPLC and Extreme must have agreed in writing upon, and received theconsent and approval of BNPLC's Parent and all other Participants to (1) acorresponding extension not only to the date for the expiration of the Termspecified above in this Section, but also to the date specified in clause (1) ofthe definition of Designated Sale Date in the Common Definitions and ProvisionsAgreement (Improvements), and (2) an adjustment to the Rent that Extreme will berequired to pay for the extension, it being expected that the Rent for theextension may be different than the Rent required for the original Term, and itbeing understood that the Rent for any extension must in all events besatisfactory to both BNPLC and Extreme, each in its sole and absolutediscretion; (B) no Event of Default shall have occurred and be continuing at thetime of Extreme's exercise of its option to extend; (C) prior to any suchextension, Extreme must have completed any Initial Renovations which it haselected to undertake as described in Paragraph 6; and (D) immediately prior toany such extension, this Improvements Lease must remain in effect. With respectto the condition that BNPLC and Extreme must have agreed upon the Rent requiredfor any extension of the Term, neither Extreme nor BNPLC is willing to submititself to a risk of liability or loss of rights hereunder for being judgedunreasonable. Accordingly, both Extreme and BNPLC hereby disclaim any obligationexpress or implied to be reasonable in negotiating the Rent for any suchextension. Subject to the changes to the Rent payable during any extension ofthe Term as provided in this Paragraph, if Extreme exercises its option toextend the Term as provided in this Paragraph, this Improvements Lease shallcontinue in full force and effect, and the leasehold estate hereby granted toExtreme shall continue without interruption and without any loss of priorityover other interests in or claims against the Property that may be created orarise after the date hereof and before the extension. 2 USE AND CONDITION OF THE PROPERTY. (a) Use. Subject to the Permitted Encumbrances, the Development ---Documents and the terms hereof, Extreme may use and occupy the Property duringthe Term, but only for the following purposes and other lawful purposesincidental thereto: (i) the making of Initial Renovations as described in Paragraph 6; (ii) administrative and office space; (iii) research and development, production, assembly, distribution and warehousing, in each case of products that are of substantially the same type and character as those regularly sold by Extreme in the ordinary course of its business as of the Effective Date; (iv) cafeteria, library and other support facilities that Extreme may provide to its employees; and (vi) other lawful purposes (including research and development or production of products that are not of substantially the same type and character as those regularly sold by Extreme in the ordinary course of its business as of the Effective Date) approved in advance and in writing by BNPLC, which approval will not be unreasonably withheld (but Extreme acknowledges that BNPLC's withholding of such approval shall be reasonable if BNPLC determines in good faith that (1) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, or (2) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring Extreme's compliance with the requirements of this Improvements Lease or other Operative Documents).[Improvements] -3- Nothing in this subparagraph will prevent a tenant under a Premises Lease, executed prior to the Effective Date, from using the space covered thereby for purposes expressly authorized by the terms and conditions of such Premises Lease. (b) Condition of the Property. Extreme acknowledges that it has -------------------------carefully and fully inspected the Property and accepts the Property in itspresent state, AS IS, and without any representation or warranty, express orimplied, as to the condition of such property or as to the use which may be madethereof. Extreme also accepts the Property without any covenant, representationor warranty, express or implied, by BNPLC or its Affiliates regarding the titlethereto or the rights of any parties in possession of any part thereof, exceptas expressly set forth in Paragraph 19. BNPLC shall not be responsible for anylatent or other defect or change of condition in the Land or in Improvements,fixtures and personal property forming a part of the Property or for anyviolations with respect thereto of Applicable Laws. Further, BNPLC shall not berequired to furnish to Extreme any facilities or services of any kind, includingwater, steam, heat, gas, air conditioning, electricity, light or power. (c) Consideration for and Scope of Waiver. The provisions of -------------------------------------subparagraph 2.(b) above have been negotiated by BNPLC and Extreme after dueconsideration for the Rent payable hereunder and are intended to be a completeexclusion and negation of any representations or warranties of BNPLC or itsAffiliates, express or implied, with respect to the Property that may arisepursuant to any law now or hereafter in effect or otherwise, except as expresslyset forth herein. However, such exclusion of representations and warranties by BNPLC is notintended to impair any representations or warranties made by other parties, thebenefit of which may pass to Extreme during the Term because of the definitionof Personal Property and Property above. 3 RENT. (a) Base Rent Generally. On each Base Rent Date through the end of -------------------the Term, Extreme shall pay BNPLC rent ("Base Rent"), calculated as providedbelow. Each payment of Base Rent must be received by BNPLC no later than 10:00a.m. (Pacific time) on the date it becomes due; if received after 10:00 a.m.(Pacific time) it will be considered for purposes of this Improvements Lease asreceived on the next following Business Day. At least five days prior to eachBase Rent Date, BNPLC shall notify Extreme in writing of the amount of eachinstallment of Base Rent that will be required on that date, calculated asprovided below. Any failure by BNPLC to so notify Extreme, however, shall notconstitute a waiver of BNPLC's right to payment, but absent such notice Extremeshall not be in default hereunder for any underpayment resulting therefrom ifExtreme, in good faith, reasonably estimates the payment required, makes atimely payment of the amount so estimated and corrects any underpayment withinthree Business Days after being notified by BNPLC of the underpayment. (b) Impact of Collateral Upon Formulas. To ease the administrative ----------------------------------burden of this Improvements Lease and the Pledge Agreement, the formulas forcalculating Base Rent set out below in subparagraph 3.(c) reflect a reduction inthe Base Rent equal to the interest that would accrue on any Collateral providedin accordance with the requirements of the Pledge Agreement from time to time ifthe Accounts (as defined in the Pledge Agreement) bore interest at the DepositRate. BNPLC has agreed to such reduction to provide Extreme with the economicequivalent of interest on such Collateral, and in return Extreme has agreed tothe provisions of the Pledge Agreement that excuse the actual payment ofinterest on the Accounts. By incorporating such reduction of Base Rent into theformulas below, and by providing for noninterest bearing Accounts in the PledgeAgreement, an unnecessary and cumbersome periodic exchange of equal paymentswill be avoided. It is not, however, the intent of BNPLC or Extreme tounderstate Base Rent or interest for financial reporting purposes. Accordingly,for purposes of any financial reports that this Improvements Lease requires of[Improvements] -4- Extreme from time to time, Extreme may report Base Rent as if there had been nosuch reduction and as if the Collateral from time to time provided in accordancewith the requirements of the Pledge Agreement had been maintained in Accountsbearing interest at the Deposit Rate. (c) Calculation of and Due Dates for Base Rent. Payments of Base ------------------------------------------Rent shall be calculated and become due as follows: (i) Determination of Payment Due Dates, Generally. --------------------------------------------- a0 For all Base Rent Periods subject to a LIBOR Period Election of one month or three months, Base Rent shall be due in one installment on the Base Rent Date upon which the Base Rent Period ends. b0 For Base Rent Periods subject to a LIBOR Period Election of six months, Base Rent shall be payable in two installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, and with the second installment becoming due on the Base Rent Date upon which the Base Rent Period ends. c0 For Base Rent Periods subject to a LIBOR Period Election of nine months, Base Rent shall be payable in three installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, with the second installment becoming due on the first Business Day of the sixth calendar month following the commencement of such Base Rent Period, and with the third installment becoming due on the Base Rent Date upon which the Base Rent Period ends. d0 For Base Rent Periods subject to a LIBOR Period Election of twelve months, Base Rent shall be payable in four installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, with the second installment becoming due on the first Business Day of the sixth calendar month following the commencement of such Base Rent Period, with the third installment becoming due on the first Business Day of the ninth calendar month following the commencement of such Base Rent Period, and with the fourth installment becoming due on the Base Rent Date upon which the Base Rent Period ends. (ii) Special Adjustments to Base Rent Payment Dates and Periods. ----------------------------------------------------------Notwithstanding the foregoing: a0 Any Base Rent Period that begins before, and does not otherwise end before, the first Business Day of the first calendar month following a Failed Collateral Test Date shall end upon but not include such first Business Day, and such first Business Day shall constitute a Base Rent Date, upon which Extreme must pay all accrued, unpaid Base Rent for the Base Rent Period just ended. b0 In addition to Base Rent due on a the first Business Day of the first calendar month following a Failed Collateral Test Date, Extreme must pay the Breakage Costs, if any, resulting from any early ending of a Base Rent Period pursuant to the preceding clause 3.(c)(ii)a).[Improvements] -5- c0 If Extreme or any Applicable Purchaser purchases BNPLC's interest in the Property pursuant to the Purchase Agreement, any accrued unpaid Base Rent and all outstanding Additional Rent shall be due on the date of purchase in addition to the purchase price and other sums due BNPLC under the Purchase Agreement. (iii) Base Rent Formula for Periods During Which The Collateral ---------------------------------------------------------Percentage is 100%. Each installment of Base Rent payable for any Base Rent------------------Period during which the Collateral Percentage is one hundred percent (100%)shall equal: . Stipulated Loss Value on the first day of such Base Rent Period, times . the sum of (a) the Secured Spread and (b) the Effective Rate/Deposit Rate Difference for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times . the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by . three hundred sixty. Assume, only for the purpose of illustration: that the CollateralPercentage for a hypothetical Base Rent Period is one hundred percent (100%);that prior to the first day of such Base Rent Period Qualified Prepayments havebeen received by BNPLC, leaving a Stipulated Loss Value of $15,000,000; that thesum of the Secured Spread and the Effective Rate/Deposit Rate Difference isforty-two and one-half basis points (42.5/100 of 1%); and that such Base RentPeriod contains exactly thirty days. Under such assumptions, the Base Rent forthe hypothetical Base Rent Period will equal: $15,000,000 x .425% x 30/360 = $5312.50 (iv) Base Rent Formula for Periods During Which The CollateralPercentage is Less Than 100%. Each installment of Base Rent payable for any BaseRent Period during which the Collateral Percentage is less than one hundredpercent (100%) shall equal: . Stipulated Loss Value on the first day of such Base Rent Period, times . the sum of: (A) the product of: (1) the Collateral Percentage for such Base Rent Period, times (2) the sum of (a) the Secured Spread and (b) the Effective Rate/Deposit Rate Difference for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, plus[Improvements] -6- (B) the product of: (1) one minus the Collateral Percentage for such Base Rent Period, times (2) the sum of (a) the Effective Rate with respect to such Base Rent Period, plus (b) the Unsecured Spread for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times . the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by . three hundred sixty. Assume, only for the purpose of illustration: that the Collateral Percentage for a hypothetical Base Rent Period is fifty-five percent (55%); that prior to the first day of such Base Rent Period Qualified Prepayments have been received by BNPLC, leaving a Stipulated Loss Value of $15,000,000; that the Effective Rate for the Base Rent Period is 6%; that the sum of the Secured Spread and the Effective Rate/Deposit Rate Difference is forty-two and one-half basis points (42.5/100 of 1%); that upon the commencement of such Base Rent Period the Unsecured Spread is two hundred twenty-five basis points (225/100 of 1%); and that such Base Rent Period contains exactly thirty days. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal: $15,000,000 x {(55% x .425%) + ([1 - 55%] x [6% + 2.25%])} x 30/360 = $49,328.12 (d) Additional Rent. All amounts which Extreme is required to pay to --------------- or on behalf of BNPLC pursuant to this Improvements Lease, together with everycharge, premium, interest and cost set forth herein which may be added fornonpayment or late payment thereof, shall constitute rent (all such amounts,other than Base Rent, are herein called "Additional Rent", and together BaseRent and Additional Rent are herein sometimes called "Rent"). (e) Arrangement Fee. Upon execution and delivery of this Improvements --------------- Lease by BNPLC, an Arrangement Fee (the "Arrangement Fee") will be paid to BNPLCfrom the Initial Funding Advance (and thus be included in Stipulated Loss Value)in the amount provided in the letter dated as of April 20, 2000 from BNPLC toExtreme. (f) Administrative Agency Fees. Upon execution and delivery of this --------------------------Improvements Lease by BNPLC, an administrative agency fee (an "AdministrativeAgency Fee") will be paid to BNPLC from the Initial Funding Advance (and thus beincluded in Stipulated Loss Value) in the amount provided in the letter dated asof April 20, 2000 from BNPLC to Extreme. Also, on each anniversary of the datehereof, Extreme shall pay to BNPLC an administrative agency fee (also, an"Administrative Agency Fee") in the amount set forth in the letter agreementdated as of April 20, 2000 from BNPLC to Extreme.[Improvements] -7- (g) No Demand or Setoff. Except as expressly provided herein, -------------------Extreme shall pay all Rent without notice or demand and without counterclaim,deduction, setoff or defense. (h) Default Interest and Order of Application. All Rent shall bear ----------------------------------------- interest, if not paid when first due, at the Default Rate in effect from time totime from the date due until paid; provided, that nothing herein contained willbe construed as permitting the charging or collection of interest at a rateexceeding the maximum rate permitted under Applicable Laws. BNPLC shall beentitled to apply any amounts paid by or on behalf of Extreme against any Rentthen past due in the order the same became due or in such other order as BNPLCmay elect. 4 Nature of this Agreement. (a) "Net" Lease Generally. Subject only to the exceptions listed in --------------------- subparagraph 5.(d) below, it is the intention of BNPLC and Extreme that BaseRent, the Arrangement Fees, Administrative Agency Fees, Upfront Syndication Feesand other payments herein specified shall be absolutely net to BNPLC and thatExtreme shall pay all costs, expenses and obligations of every kind relating tothe Property or this Improvements Lease which may arise or become due,including: (i) any taxes payable by virtue of BNPLC's receipt of amounts paid toor on behalf of BNPLC in accordance with Paragraph 5; (ii) any amount for whichBNPLC is or becomes liable with respect to the Permitted Encumbrances or theDevelopment Documents; and (iii) any costs incurred by BNPLC (includingAttorneys' Fees) because of BNPLC's acquisition or ownership of any interest inthe Property or because of this Improvements Lease or the transactionscontemplated herein. (b) No Termination. Except as expressly provided in this Improvements --------------Lease itself, this Improvements Lease shall not terminate, nor shall Extremehave any right to terminate this Improvements Lease, nor shall Extreme beentitled to any abatement of the Rent, nor shall the obligations of Extremeunder this Improvements Lease be excused, for any reason whatsoever, includingany of the following: (i) any damage to or the destruction of all or any part ofthe Property from whatever cause, (ii) the taking of the Property or any portionthereof by eminent domain or otherwise for any reason, (iii) the prohibition,limitation or restriction of Extreme's use or development of all or any portionof the Property or any interference with such use by governmental action orotherwise, (iv) any eviction of Extreme or of anyone claiming through or underExtreme, (v) any default on the part of BNPLC under this Improvements Lease orunder any other agreement to which BNPLC and Extreme are parties, (vi) theinadequacy in any way whatsoever of the design, construction, assembly orinstallation of any improvements, fixtures or tangible personal propertyincluded in the Property (it being understood that BNPLC has not made, does notmake and will not make any representation express or implied as to the adequacythereof), (vii) any latent or other defect in the Property or any change in thecondition thereof or the existence with respect to the Property of anyviolations of Applicable Laws, (viii) any breach by Seller of the AcquisitionContract or other agreements or promises or representations made in connectionwith the Acquisition Contract, (ix) any breach of a Premises Lease by any lesseethereunder, or (x) any other cause whether similar or dissimilar to theforegoing. It is the intention of the parties hereto that the obligations ofExtreme hereunder shall be separate and independent of the covenants andagreements of BNPLC, that Base Rent and all other sums payable by Extremehereunder shall continue to be payable in all events and that the obligations ofExtreme hereunder shall continue unaffected, unless the requirement to pay orperform the same shall have been terminated or limited pursuant to an expressprovision of this Improvements Lease. Without limiting the foregoing, Extremewaives to the extent permitted by Applicable Laws, except as otherwise expresslyprovided herein, all rights to which Extreme may now or hereafter be entitled bylaw (including any such rights arising because of any implied "warranty ofsuitability" or other warranty under Applicable Laws) (i) to quit, terminate orsurrender this Improvements Lease or the Property or any part thereof or (ii) toany abatement, suspension, deferment or reduction of the Rent.[Improvements] -8- However, nothing in this subparagraph 4.(b) shall be construed as awaiver by Extreme of any right Extreme may have at law or in equity to thefollowing remedies, whether because of BNPLC's failure to remove a LienRemovable by BNPLC or because of any other default by BNPLC under thisImprovements Lease that continues beyond the period for cure provided inParagraph 18: (i) the recovery of monetary damages, (ii) injunctive relief incase of the violation, or attempted or threatened violation, by BNPLC of any ofthe express covenants, agreements, conditions or provisions of this ImprovementsLease which are binding upon BNPLC (including the confidentiality provisions setforth in subparagraph 15.(c) below), or (iii) a decree compelling performance byBNPLC of any of the express covenants, agreements, conditions or provisions ofthis Improvements Lease which are binding upon BNPLC. (c) Tax Reporting. BNPLC and Extreme shall report this Improvements ------------- Lease and the Purchase Agreement for federal income tax purposes as aconditional sale unless prohibited from doing so by the Internal RevenueService. If the Internal Revenue Service shall challenge BNPLC'scharacterization of this Improvements Lease and the Purchase Agreement as aconditional sale for federal income tax reporting purposes, BNPLC shall notifyExtreme in writing of such challenge and consider in good faith any reasonablesuggestions by Extreme about an appropriate response. In any event, Extremeshall (subject only to the limitations set forth in this subparagraph) indemnifyand hold harmless BNPLC from and against all liabilities, costs, additionaltaxes (other than Excluded Taxes) and other expenses that may arise or becomedue because of such challenge or because of any resulting recharacterizationrequired by the Internal Revenue Service, including any additional taxes thatmay become due upon any sale under the Purchase Agreement to the extent (if any)that such additional taxes are not offset by tax savings resulting fromadditional depreciation deductions or other tax benefits to BNPLC of therecharacterization. If BNPLC receives a written notice of any challenge by theInternal Revenue Service that BNPLC believes will be covered by this Paragraph,then BNPLC shall promptly furnish a copy of such notice to Extreme. The failureto so provide a copy of the notice to Extreme shall not excuse Extreme from itsobligations under this Paragraph; provided, that if none of the officers ofExtreme and none of the employees of Extreme responsible for tax matters areaware of the challenge described in the notice and such failure by BNPLC rendersunavailable defenses that Extreme might otherwise assert, or precludes actionsthat Extreme might otherwise take, to minimize its obligations hereunder, thenExtreme shall be excused from its obligation to indemnify BNPLC againstliabilities, costs, additional taxes and other expenses, if any, which would nothave been incurred but for such failure. For example, if BNPLC fails to provideExtreme with a copy of a notice of a challenge by the Internal Revenue Servicecovered by the indemnities set out in this Improvements Lease and Extreme is nototherwise already aware of such challenge, and if as a result of such failureBNPLC becomes liable for penalties and interest covered by the indemnities inexcess of the penalties and interest that would have accrued if Extreme had beenpromptly provided with a copy of the notice, then Extreme will be excused fromany obligation to BNPLC to pay the excess. (d) Characterization of this Improvements Lease. For purposes of -------------------------------------------determining the appropriate financial accounting for this Improvements Lease andfor purposes of determining their respective rights and remedies under statelaw, BNPLC and Extreme believe and intend that (i) this Improvements Leaseconstitutes a true lease, not a mere financing arrangement, enforceable inaccordance with its express terms, and the preceding subparagraph is notintended to affect the enforcement of any other provisions of this ImprovementsLease or the Purchase Agreement, and (ii) the Purchase Agreement shallconstitute a separate and independent contract, enforceable in accordance withthe express terms and conditions set forth therein. In this regard, Extremeacknowledges that Extreme asked BNPLC to participate in the transactionsevidenced by this Improvements Lease and the Purchase Agreement as a landlordand owner of the Property, not as a lender. Although other transactions mighthave been used to accomplish similar results, Extreme expects to receive certainmaterial accounting and other advantages through the use of a lease transaction.Accordingly, and notwithstanding the reporting for income tax purposes describedin the preceding subparagraph, Extreme cannot equitably deny that thisImprovements Lease and the Purchase Agreement should be construed and enforcedin accordance with their respective terms,[Improvements] -9- rather than as a mortgage or other security device, in any action brought byBNPLC to enforce this Improvements Lease or the Purchase Agreement. 5 Payment of Executory Costs and Losses Related to the Property. (a) Impositions. Subject only to the exceptions listed in -----------subparagraph 5.(d) below, Extreme shall pay or cause to be paid prior todelinquency all ad valorem taxes assessed against the Property and otherImpositions. If requested by BNPLC from time to time, Extreme shall furnishBNPLC with receipts showing payment of all Impositions prior to the applicabledelinquency date therefor. Notwithstanding the foregoing, Extreme may in good faith, by appropriateproceedings, contest the validity, applicability or amount of any assertedImposition, and pending such contest Extreme shall not be deemed in defaultunder any of the provisions of this Improvements Lease because of the Impositionif (1) Extreme diligently prosecutes such contest to completion in a mannerreasonably satisfactory to BNPLC, and (2) Extreme promptly causes to be paid anyamount adjudged by a court of competent jurisdiction to be due, with all costs,penalties and interest thereon, promptly after such judgment becomes final;provided, however, in any event each such contest shall be concluded and thecontested Impositions must be paid by Extreme prior to the earlier of (i) thedate that any criminal prosecution is instituted or overtly threatened againstBNPLC or its directors, officers or employees because of the nonpayment thereofor (ii) the date any writ or order is issued under which any property owned orleased by BNPLC (including the Property) may be seized or sold or any otheraction is taken against BNPLC or against any property owned or leased by BNPLCbecause of the nonpayment thereof, or (iii) any Designated Sale Date upon which,for any reason, Extreme or an Affiliate of Extreme or any Applicable Purchasershall not purchase BNPLC's interest in the Property pursuant to the PurchaseAgreement for a price to BNPLC (when taken together with any additional paymentsmade by Extreme pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the -----------------case of a purchase by an Applicable Purchaser) equal to the Break Even Price. (b) Increased Costs; Capital Adequacy Charges. Subject only to the -----------------------------------------exceptions listed in subparagraph 5.(d) below: (i) If after the Effective Date there shall be any increase in the cost to BNPLC's Parent or any other Participant agreeing to make or making, funding or maintaining advances to BNPLC in connection with the Property because of any Banking Rules Change, then Extreme shall from time to time, pay to BNPLC for the account of BNPLC's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate BNPLC's Parent or the Participant for such increased cost. An increase in costs resulting from any imposition or increase of reserve requirements applicable to Collateral held from time to time by BNPLC's Parent or other Participants pursuant to the Pledge Agreement would be an increase covered by the preceding sentence. A certificate as to the amount of such increased cost, submitted to BNPLC and Extreme by BNPLC's Parent or the other Participant, shall be conclusive and binding upon Extreme, absent clear and demonstrable error. (ii) BNPLC's Parent or any other Participant may demand additional payments ("Capital Adequacy Charges") if BNPLC's Parent or the other Participant determines that any Banking Rules Change affects the amount of capital to be maintained by it and that the amount of such capital is increased by or based upon the existence of advances made or to be made to BNPLC to permit BNPLC to maintain BNPLC's investment in the Property. To the extent that BNPLC's Parent or another Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such investment or advances, Extreme shall pay to BNPLC for the account of BNPLC's Parent or the other Participant, as the case may be, the amount so demanded. Without limiting the foregoing, BNPLC and [Improvements] -10- Extreme hereby acknowledge and agree that the provisions for calculating Base Rent set forth herein reflect the assumption that the Pledge Agreement will cause a zero percent (0%) risk weight to be assigned to a percentage (equal to the Collateral Percentage) of the collective investment of BNPLC and the Participants in the Property pursuant to 12 Code of Federal Regulations, part 225, as from time to time supplemented or amended, or pursuant to any other similar or successor statute or regulation applicable to BNPLC and the Participants. If and so long as such risk weight is increased above the assumed amount of zero percent (0%) because of a Banking Rules Change, Capital Adequacy Charges may be collected to yield the same rate of return to BNPLC, BNPLC's Parent and any other Participants (net of their costs of maintaining required capital) that they would have enjoyed from this Improvements Lease absent such increase. (iii) Notwithstanding the foregoing provisions of this subparagraph 5.(b), Extreme shall not be obligated pay any claim for compensation pursuant to this subparagraph 5.(b) arising or accruing more than six months prior to the date Extreme is notified that BNPLC or a Participant intends to make the claim; provided, however, that Extreme shall not be excused by this subparagraph from providing such compensation for any period during which notice on behalf of BNPLC or the Participant, as the case may be, could not be provided because of the retroactive application of the statute, regulation or other basis for the claim. (iv) Any amount required to be paid by Extreme under this subparagraph 5.(b) shall be due fifteen days after a notice requesting such payment is received by Extreme. (c) Extreme's Payment of Other Losses; General Indemnification. ----------------------------------------------------------Subject only to the exceptions listed in subparagraph 5.(d) below: (i) All Losses (including Environmental Losses) asserted against or incurred or suffered by BNPLC or other Interested Parties at any time and from time to time by reason of, in connection with or arising out of (A) their ownership or alleged ownership of any interest in the Property or the Rents, (B) the use and operation of the Property, (C) the negotiation, administration or enforcement of the Operative Documents, (D) the making of Funding Advances, (E) any construction undertaken by Extreme or others on its behalf on or about the Property, (F) any Premises Lease, (G) the breach by Extreme of this Improvements Lease or any other document executed by Extreme in connection herewith, (H) any failure of the Property or Extreme itself to comply with Applicable Laws, (I) Permitted Encumbrances, (J) Hazardous Substance Activities, including those occurring prior to Effective Date, (K) any obligations under the Acquisition Contract that survive the closing under the Acquisition Contract, or (L) any bodily or personal injury or death or property damage occurring in or upon or in the vicinity of the Property through any cause whatsoever, shall be paid by Extreme, and Extreme shall indemnify and defend BNPLC and other Interested Parties from and against all such Losses. (ii) THE INDEMNITIES AND RELEASES PROVIDED HEREIN FOR THE BENEFIT OF BNPLC AND OTHER INTERESTED PARTIES, INCLUDING THE INDEMNITY SET FORTH IN ----- - - THE PRECEDING SUBPARAGRAPH 5.(c)(i), SHALL APPLY EVEN IF AND WHEN THE SUBJECT MATTERS OF THE INDEMNITIES AND RELEASES ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OR STRICT LIABILITY OF BNPLC OR ANOTHER INTERESTED PARTY. ----- - - FURTHER, SUCH INDEMNITIES AND RELEASES WILL APPLY EVEN IF INSURANCE OBTAINED BY EXTREME OR REQUIRED OF EXTREME BY THIS IMPROVEMENTS LEASE OR - - OTHER OPERATIVE DOCUMENTS IS NOT ADEQUATE TO COVER LOSSES AGAINST OR FOR - - - WHICH THE INDEMNITIES AND RELEASES ARE [Improvements] -11- PROVIDED. EXTREME'S LIABILITY, HOWEVER, FOR ANY FAILURE TO OBTAIN INSURANCE REQUIRED BY THIS IMPROVEMENTS LEASE OR OTHER OPERATIVE DOCUMENTS WILL NOT - - - - BE LIMITED TO LOSSES AGAINST WHICH INDEMNITIES ARE PROVIDED HEREIN, IT - BEING UNDERSTOOD THAT SUCH INSURANCE IS INTENDED TO DO MORE THAN PROVIDE A SOURCE OF PAYMENT FOR LOSSES AGAINST WHICH BNPLC AND OTHER INTERESTED - ----- - PARTIES ARE ENTITLED TO INDEMNIFICATION BY THIS IMPROVEMENTS LEASE. - - - (iii) Costs and expenses for which Extreme shall be responsible pursuant to this subparagraph 5.(c) will include appraisal fees, filing and recording fees, inspection fees, survey fees, taxes, brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees and Attorneys' Fees incurred by BNPLC with respect to the Property, whether such costs and expenses are incurred at the time of execution of this Improvements Lease or at any time during the Term. (iv) Extreme's obligations under this subparagraph 5.(c) shall survive the termination or expiration of this Improvements Lease. Any amount to be paid by Extreme under this subparagraph 5.(c) shall be due fifteen days after a notice requesting such payment is received by Extreme. (v) If an Interested Party notifies Extreme of any claim or proceeding included in, or any investigation or allegation concerning, Losses for which Extreme is responsible pursuant to this subparagraph 5.(c), Extreme shall assume on behalf of the Interested Party and conduct with due diligence and in good faith the investigation and defense thereof and the response thereto with counsel selected by Extreme, but reasonably satisfactory to the Interested Party; provided, that the Interested Party shall have the right to be represented by advisory counsel of its own selection and at its own expense; and provided further, that if any such claim, proceeding, investigation or allegation involves both Extreme and the Interested Party and the Interested Party shall have reasonably concluded that there are legal defenses available to it which are inconsistent with or in addition to those available to Extreme, then the Interested Party shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, proceeding, investigation or allegation on its own behalf, and Extreme shall pay or reimburse the Interested Party for all Attorney's Fees incurred by the Interested Party because of the selection of such separate counsel. If Extreme fails to assume promptly (and in any event within fifteen days after being notified of the applicable claim, proceeding, investigation or allegation) the defense of the Interested Party, then the Interested Party may contest (or settle, with the prior consent of Extreme, which consent will not be unreasonably withheld) the claim, proceeding, investigation or allegation at Extreme's expense using counsel selected by the Interested Party. Moreover, if any such failure by Extreme continues for forty-five days or more after Extreme is notified of any such claim, proceeding, investigation or allegation, the Interested Party may elect not to contest or continue contesting the same and instead, in accordance with the written advice of counsel, settle (or pay in full) all claims related thereto without Extreme's consent and without releasing Extreme from any obligations to the Interested Party under this subparagraph 5.(c). (d) Exceptions and Qualifications to Indemnities. -------------------------------------------- (i) BNPLC acknowledges and agrees that nothing in subparagraph 4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require Extreme to pay or reimburse (w) any costs or expenses incurred by any Interested Party (including BNPLC or any transferee of BNPLC) to accomplish any Permitted Transfers described in clauses (1), (2), (3), (4) or (6) of the definition thereof in the Common Definitions and Provisions Agreement (Improvements), (x) Excluded Taxes, (y) Losses[Improvements] -12- incurred or suffered by any Interested Party that are proximately caused by (and attributed by any applicable principles of comparative fault to) the Established Misconduct of that Interested Party, or (z) Losses incurred or suffered in connection with the execution of the Participation Agreement or Pledge Agreement by Participants (or supplements making them parties thereto) or in connection with any negotiation or due diligence Participants may undertake before entering into the Participation Agreement or Pledge Agreement. Further, without limiting BNPLC's rights (as provided in other provisions of this Improvements Lease and other Operative Documents) to include the following in the calculation of Stipulated Loss Value and the Break Even Price (as applicable) or to collect Base Rent, a Supplemental Payment and other amounts, the calculation of which depends upon Stipulated Loss Value or the Break Even Price, BNPLC acknowledges and agrees that nothing in subparagraph 4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require Extreme to pay or reimburse an Interested Party for costs paid by BNPLC with the proceeds of the Initial Funding Advance as part of the Transaction Expenses. Further, if an Interested Party receives a written notice of Losses that such Interested Party believes are covered by the indemnity in subparagraph 5.(c)(i), then such Interested Party will be expected to promptly furnish a copy of such notice to Extreme. The failure to so provide a copy of the notice to Extreme shall not excuse Extreme from its obligations under subparagraph 5.(c)(i); provided, that if Extreme is unaware of the matters described in the notice and such failure renders unavailable defenses that Extreme might otherwise assert, or precludes actions that Extreme might otherwise take, to minimize its obligations, then Extreme shall be excused from its obligation to indemnify such Interested Party (and any Affiliate of such Interested Party) against the Losses, if any, which would not have been incurred or suffered but for such failure. For example, if BNPLC fails to provide Extreme with a copy of a notice of an obligation covered by the indemnity set out in subparagraph 5.(c)(i) and Extreme is not otherwise already aware of such obligation, and if as a result of such failure BNPLC becomes liable for penalties and interest covered by the indemnity in excess of the penalties and interest that would have accrued if Extreme had been promptly provided with a copy of the notice, then Extreme will be excused from any obligation to BNPLC (or any Affiliate of BNPLC) to pay the excess. 6 Initial Renovations. (a) Funds Advanced to Extreme From the Initial Funding Advance. As ---------------------------------------------------------- provided in the definition of Initial Funding Advance in the Common Definitionsand Provisions Agreement, the Initial Funding Advance includes a sum paid toExtreme, which Extreme will expend for BNPLC, to cover the cost of renovating,remodeling, improving and furnishing existing Improvements as describedgenerally in Schedule 2 (collectively, the "Initial Renovations"). The InitialRenovations shall become and remain part of the Improvements and owned by BNPLCas provided herein. To the extent, if any, that funds received by Extreme fromthe Initial Funding Advance for the Initial Renovations exceed the actual costthereof, such excess shall for the benefit of BNPLC be paid by Extreme to BNPLC(with a notice designating such payment as a Qualified Prepayment made pursuantto this subparagraph) no later than the first day of the first Base Rent Periodto commence after the first anniversary of the Effective Date. (b) Quality and Timing of the Initial Renovations. Any Initial ---------------------------------------------Renovations that Extreme elects to undertake must be completed by Extreme nolater than the first anniversary of the Effective Date (a) in a safe and goodand workmanlike manner, (b) in accordance with Applicable Laws, (c) incompliance with (i) the other provisions of this Lease, (ii) the materialprovisions of the Permitted Encumbrances and (iii) the material provisions ofthe Development Documents, and (d) in a manner that, upon completion and takenas a whole, enhances the value of the Property by an amount commensurate withthe funds from the Initial Funding Advance used by Extreme to pay the costthereof.[Improvements] -13- (c) Control of Work. Subject to the other terms and conditions ---------------set forth in this Lease, Extreme shall have the sole right to initiate andcontrol all Initial Renovations undertaken by it, including the means, methods,sequences and procedures implemented to accomplish the design and constructioninvolved in making the Initial Renovations. (d) Adequacy of Drawings, Specifications and Budgets. BNPLC has ------------------------------------------------made and will make no representations as to the adequacy of any budgets, siteplans, renderings, plans, drawings or specifications for the InitialRenovations, and no modification of any such budgets, site plans, renderings,plans, drawings or specifications that may be required from time to time willentitle Extreme to any adjustment in the amount that has been paid to Extreme asdescribed in the definition of Initial Funding Advance in the Common Definitionsand Provisions Agreement. (e) Existing Condition of the Land and Improvements. Extreme is -----------------------------------------------familiar with the conditions of the Land and any existing Improvements on theLand. Extreme shall have no claim for damages against BNPLC or for anyadditional payment from BNPLC by reason of any condition (concealed orotherwise) of or affecting the Land or Improvements. (f Clean Up. Upon the completion of all such work, Extreme will --------remove all waste material and rubbish from and about the Land, as well as alltools, construction equipment, machinery and surplus materials. Extreme willkeep the Land and the Improvements thereon in a reasonably safe and sightlycondition as such work progresses. (g No Damage for Delays. Extreme shall have no claim for --------------------damages against BNPLC or for any additional payment from BNPLC by reason of anydelay in the work required to accomplish the Initial Renovations. Nor shallExtreme have any claim for an extension of the deadline specified insubparagraph 6.(b) for completing any Initial Renovations because of any suchperiod of delay, unless, however, such delay has been caused by BNPLC'sintentional interference with such work. In the event (and only to the extent)that any such intentional interference by BNPLC continues after Extreme provideswritten notice to cease, Extreme shall be entitled to an extension of suchdeadline. BNPLC's exercise of its rights and remedies permitted under this Leaseor the other Operative Documents will not be construed as intentionalinterference with Extreme's performance of any such work. (h No Fee For Construction Management. Extreme shall have no ----------------------------------claim for any fee or other compensation or for any reimbursement of internaladministrative or overhead expenses of Extreme by reason of the InitialRenovations (or any other services provided by Extreme under this Lease or otherOperative Documents), it being understood that Extreme is executing this Leasein consideration of the rights expressly granted to it herein. Further, forpurposes of calculating any Qualified Prepayment that Extreme must make asdescribed in subparagraph 6.(a), no such fee or other compensation or internaladministrative or overhead expenses of Extreme shall be included in the actualcosts of any Initial Renovations. 7. Status of Property Acquired With Funds Provided by BNPLC. AllImprovements constructed during the term of this Improvements Lease shall beowned by BNPLC and shall constitute "Property" covered by this ImprovementsLease. Further, to the extent heretofore or hereafter acquired (in whole or inpart) with any portion of the Initial Funding Advance or with other funds forwhich Extreme has received or hereafter receives reimbursement from the InitialFunding Advance, all furnishings, furniture, chattels, permits, licenses,franchises, certificates and other personal property of whatever nature shallhave been acquired on behalf of BNPLC by Extreme, shall be owned by BNPLC andshall constitute "Property" covered by this Improvements [Improvements] -14-Lease, as shall all renewals or replacements of or substitutions for any suchProperty. Extreme shall not authorize or permit the transfer of title to theImprovements or to any other such Property to pass through Extreme or Extreme'sAffiliates before it is transferred to BNPLC from contractors, suppliers,vendors or other third Persons. Nothing herein shall constitute authorization ofExtreme, as agent, to bind BNPLC to any construction contract or other agreementwith a third Person, but any construction contract or other agreement executedby Extreme for the acquisition or construction of Improvements or othercomponents of the Property may provide for the transfer of title as required bythe preceding sentence. Upon request of BNPLC, Extreme shall deliver to BNPLC aninventory describing all significant items of Personal Property (and, in thecase of tangible personal property, showing the make, model, serial number andlocation thereof) other than Improvements, with a certification by Extreme thatsuch inventory is true and complete and that all items specified in theinventory are covered by this Improvements Lease free and clear of any Lienother than the Permitted Encumbrances or Liens Removable by BNPLC. 8. Environmental. (a Environmental Covenants by Extreme. Extreme covenants that: ---------------------------------- (i Extreme shall not conduct or permit others to conduct Hazardous Substance Activities, except Permitted Hazardous Substance Use and Remedial Work. (ii Extreme shall not discharge or permit the discharge of anything on or from the Property that would require any permit under applicable Environmental Laws, other than (1) storm water runoff, (2) waste water discharges through a publicly owned treatment works, (3) discharges that are a necessary part of any Remedial Work, and (4) other similar discharges consistent with the definition herein of Permitted Hazardous Substance Use, in each case in strict compliance with Environmental Laws. (iii Following any discovery that Remedial Work is required by Environmental Laws or otherwise believed by BNPLC to be reasonably required, and to the extent not inconsistent with the other provisions of this Improvements Lease, Extreme shall promptly perform and diligently and continuously pursue such Remedial Work, in each case in strict compliance with Environmental Laws. (iv If requested by BNPLC in connection with any Remedial Work required by this subparagraph, Extreme shall retain independent environmental consultants acceptable to BNPLC to evaluate any significant new information generated during Extreme's implementation of the Remedial Work and to discuss with Extreme whether such new information indicates the need for any additional measures that Extreme should take to protect the health and safety of persons (including employees, contractors and subcontractors and their employees) or to protect the environment. Extreme shall implement any such additional measures to the extent required with respect to the Property by Environmental Laws or otherwise believed by BNPLC to be reasonably required and to the extent not inconsistent with the other provisions of this Improvements Lease. (b Right of BNPLC to do Remedial Work Not Performed by Extreme. -----------------------------------------------------------If Extreme's failure to cure any breach of the covenants set forth insubparagraph 8.(a) continues beyond the Environmental Cure Period (as definedbelow), BNPLC may, in addition to any other remedies available to it, conductall or any part of the Remedial Work. To the extent that Remedial Work is doneby BNPLC pursuant to the preceding sentence (including any removal of HazardousSubstances), the cost thereof shall be a demand obligation owing by Extreme toBNPLC. As used in this subparagraph, "Environmental Cure Period" means theperiod ending on the earlier of: (1) one hundred eighty days after Extreme isnotified of the breach which must be cured within such period, (2) the date thatany writ or order is issued for the levy or sale of any property owned by BNPLC(including the Property) because of such breach, (3) the date that any criminalaction is instituted or overtly threatened against[Improvements] -15- BNPLC or any of its directors, officers or employees because of such breach, or(4) any Designated Sale Date upon which, for any reason, Extreme or an Affiliateof Extreme or any Applicable Purchaser shall not purchase BNPLC's interest inthe Property pursuant to the Purchase Agreement for a net price to BNPLC (whentaken together with any Supplemental Payment made by Extreme pursuant toParagraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an-----------------Applicable Purchaser) equal to Stipulated Loss Value. (c Environmental Inspections and Reviews. BNPLC reserves the -------------------------------------right to retain environmental consultants to review any environmental reportprepared by Extreme or to conduct BNPLC's own investigation to confirm whetherExtreme is complying with the requirements of this Paragraph 8. Extreme grantsto BNPLC and to BNPLC's agents, employees, consultants and contractors the rightto enter upon the Property during reasonable hours and after reasonable noticeto inspect the Property and to perform such tests as BNPLC deems necessary orappropriate to review or investigate Hazardous Substances in, on, under or aboutthe Property or any discharge or suspected discharge of Hazardous Substancesinto groundwater or surface water from the Property. Extreme shall promptlyreimburse BNPLC for the fees of its environmental consultants and the costs ofany such inspections and tests; provided, however, BNPLC's right to suchreimbursement shall be limited to the following circumstances: (1) a breach ofthis Paragraph 8 by Extreme shall, in fact, have occurred or an Event of Defaultshall have occurred and be continuing at the time BNPLC engages the consultantsor first initiates the inspections and tests; (2) BNPLC shall have engaged theconsultants or undertaken the tests and inspections to establish the conditionof the Property just prior to any conveyance of the Property pursuant to theOption Agreement or to the expiration of this Improvements Lease; (3) BNPLCshall have engaged the consultants or undertaken the inspections and tests tosatisfy any regulatory requirements applicable to BNPLC or its Affiliates; or(4) BNPLC shall have engaged the consultants or undertaken the tests becauseBNPLC was notified of a violation of Environmental Laws concerning the Propertyby any governmental authority or owner of other land in the vicinity of theLand. (d Communications Regarding Environmental Matters. ---------------------------------------------- (i Extreme shall immediately advise BNPLC of (1) any discovery of any event or circumstance which would render any of the representations of Extreme herein or in the Closing Certificate concerning environmental matters materially inaccurate or misleading if made at the time of such discovery and assuming that Extreme was aware of all relevant facts, (2) any Remedial Work (or change in Remedial Work) required or undertaken by Extreme or its Affiliates in response to any (A) discovery of any Hazardous Substances on, under or about the Property other than Permitted Hazardous Substances or (B) any claim for damages resulting from Hazardous Substance Activities, (3) Extreme's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property which could cause the Property or any part thereof to be subject to any ownership, occupancy, transferability or use restrictions under Environmental Laws, or (4) any investigation or inquiry of any failure or alleged failure by Extreme to comply with Environmental Laws affecting the Property by any governmental authority responsible for enforcing Environmental Laws. In such event, Extreme shall deliver to BNPLC within thirty days after BNPLC's request, a preliminary written environmental plan setting forth a general description of the action that Extreme proposes to take with respect thereto, if any, to bring the Property into compliance with Environmental Laws or to correct any breach by Extreme of this Paragraph 8, including any proposed Remedial Work, the estimated cost and time of completion, the name of the contractor and a copy of the construction contract, if any, and such additional data, instruments, documents, agreements or other materials or information as BNPLC may request. (ii Extreme shall provide BNPLC with copies of all material written communications with federal, state and local governments, or agencies relating to the matters listed in the preceding clause [Improvements] -16- (i). Extreme shall also provide BNPLC with copies of any correspondence from third Persons which threaten litigation over any significant failure or alleged significant failure of Extreme to maintain or operate the Property in accordance with Environmental Laws. (iii Prior to Extreme's submission of a Material Environmental Communication to any governmental or regulatory agency or third party, Extreme shall, to the extent practicable, deliver to BNPLC a draft of the proposed submission (together with the proposed date of submission), and in good faith assess and consider any comments of BNPLC regarding the same. Promptly after BNPLC's request, Extreme shall meet with BNPLC to discuss the submission, shall provide any additional information requested by BNPLC and shall provide a written explanation to BNPLC addressing the issues raised by comments (if any) of BNPLC regarding the submission, including a reasoned analysis supporting any decision by Extreme not to modify the submission in accordance with comments of BNPLC. 9. Insurance Required and Condemnation. (a Liability Insurance. Throughout the Term Extreme shall -------------------maintain commercial general liability insurance against claims for bodily andpersonal injury, death and property damage occurring in or upon or resultingfrom any occurrence in or upon the Property under one or more insurance policiesthat satisfy the requirements set forth in Exhibit B. Extreme shall deliver and ---------maintain with BNPLC for each liability insurance policy required by thisImprovements Lease written confirmation of the policy and the scope of thecoverage provided thereby issued by the applicable insurer or its authorizedagent, which confirmation must also satisfy the requirements set forth inExhibit B.--------- (b Property Insurance. Throughout the Term Extreme will keep ------------------all Improvements (including all alterations, additions and changes made to theImprovements) insured against fire and other casualty under one or more propertyinsurance policies that satisfy the requirements set forth in Exhibit B. Extreme ---------shall deliver and maintain with BNPLC for each property insurance policyrequired by this Improvements Lease written confirmation of the policy and thescope of the coverage provided thereby issued by the applicable insurer or itsauthorized agent, which confirmation must also satisfy the requirements setforth in Exhibit B. If any of the Property is destroyed or damaged by fire, ---------explosion, windstorm, hail or by any other casualty against which insuranceshall have been required hereunder, (i) BNPLC may, but shall not be obligatedto, make proof of loss if not made promptly by Extreme after notice from BNPLC,(ii) each insurance company concerned is hereby authorized and directed to makepayment for such loss directly to BNPLC for application as required by Paragraph10, and (iii) BNPLC may settle, adjust or compromise any and all claims forloss, damage or destruction under any policy or policies of insurance (provided,that if any such claim is for less than $500,000, if no Event of Default shallhave occurred and be continuing, Extreme shall have the right to settle, adjustor compromise the claim as Extreme deems appropriate; and, provided further,that so long as no Event of Default shall have occurred and be continuing, BNPLCmust provide Extreme with at least forty-five days notice of BNPLC's intentionto settle any such claim before settling it unless Extreme shall already haveapproved of the settlement by BNPLC). If any casualty shall result in damage toor loss or destruction of the Property, Extreme shall give immediate noticethereof to BNPLC and Paragraph 10 shall apply. (c Failure to Obtain Insurance. If Extreme fails to obtain any ---------------------------insurance or to provide confirmation of any such insurance as required by thisImprovements Lease, BNPLC shall be entitled (but not required) to obtain theinsurance that Extreme has failed to obtain or for which Extreme has notprovided the required confirmation and, without limiting BNPLC's other remediesunder the circumstances, BNPLC may require Extreme to reimburse BNPLC for thecost of such insurance and to pay interest thereon computed at the Default Ratefrom the date such cost was paid by BNPLC until the date of reimbursement byExtreme.[Improvements] -17- (d Condemnation. Immediately upon obtaining knowledge of the ------------institution of any proceedings for the condemnation of the Property or anyportion thereof, or any other similar governmental or quasi-governmentalproceedings arising out of injury or damage to the Property or any portionthereof, each party shall notify the other (provided, however, BNPLC shall haveno liability for its failure to provide such notice) of the pendency of suchproceedings. Extreme shall, at its expense, diligently prosecute any suchproceedings and shall consult with BNPLC, its attorneys and experts andcooperate with them as requested in the carrying on or defense of any suchproceedings. All proceeds of condemnation awards or proceeds of sale in lieu ofcondemnation with respect to the Property and all judgments, decrees and awardsfor injury or damage to the Property shall be paid to BNPLC as EscrowedProceeds, and all such proceeds will be applied as provided in Paragraph 10.BNPLC is hereby authorized, in the name of Extreme, at any time when an Event ofDefault shall have occurred and be continuing, or otherwise with Extreme's priorconsent, to execute and deliver valid acquittances for, and to appeal from, anysuch judgment, decree or award concerning condemnation of any of the Property.BNPLC shall not be in any event or circumstances liable or responsible forfailure to collect, or to exercise diligence in the collection of, any suchproceeds, judgments, decrees or awards. 10. Application of Insurance and Condemnation Proceeds. (a Collection and Application of Insurance and Condemnation --------------------------------------------------------Proceeds Generally. This Paragraph 10 shall govern the application of proceeds------------------received by BNPLC or Extreme during the Term from any third party (1) under anyproperty insurance policy as a result of damage to the Property (includingproceeds payable under any insurance policy covering the Property which ismaintained by Extreme), (2) as compensation for any restriction placed upon theuse or development of the Property or for the condemnation of the Property orany portion thereof, or (3) because of any judgment, decree or award for injuryor damage to the Property; excluding, however, any funds paid to BNPLC byBNPLC's Parent, by an Affiliate of BNPLC or by any Participant that is made tocompensate BNPLC for any Losses BNPLC may suffer or incur in connection withthis Improvements Lease or the Property. Except as provided in subparagraph10.(d), Extreme will promptly pay over to BNPLC any insurance, condemnation orother proceeds covered by this Paragraph 10 which Extreme may receive from anyinsurer, condemning authority or other third party. All proceeds covered by thisParagraph 10, including those received by BNPLC from Extreme or third parties,shall be applied as follows: (i First, proceeds covered by this Paragraph 10 will be used to reimburse BNPLC for any costs and expenses, including Attorneys' Fees, that BNPLC incurred to collect the proceeds. (ii Second, the proceeds remaining after such reimbursement to BNPLC (hereinafter, the "Remaining Proceeds") will be applied, as hereinafter more particularly provided, either as a Qualified Prepayment or to reimburse Extreme or BNPLC for the actual out-of- pocket costs of repairing or restoring the Property. Until, however, any Remaining Proceeds received by BNPLC are applied by BNPLC as a Qualified Prepayment or applied by BNPLC to reimburse costs of repairs to or restoration of the Property pursuant to this Paragraph 10, BNPLC shall hold and maintain such Remaining Proceeds as Escrowed Proceeds in an interest bearing account, and all interest earned on such account shall be added to and made a part of such Escrowed Proceeds. (b Advances of Escrowed Proceeds to Extreme. Except as ----------------------------------------otherwise provided below in this Paragraph 10, BNPLC shall advance all RemainingProceeds held by it as Escrowed Proceeds to reimburse Extreme for the actual out-of-pocket cost to Extreme of repairing or restoring the Property inaccordance with the requirements of this Improvements Lease and the otherOperative Documents as the applicable repair or restoration progresses and uponcompliance by Extreme with such terms, conditions and requirements as may bereasonably[Improvements] -18- imposed by BNPLC. In no event, however, shall BNPLC be required to pay EscrowedProceeds to Extreme in excess of the actual out-of-pocket cost to Extreme of theapplicable repair or restoration, as evidenced by invoices or otherdocumentation satisfactory to BNPLC, it being understood that BNPLC may retainand apply any such excess as a Qualified Prepayment. (c Application of Escrowed Proceeds as a Qualified Prepayment. ----------------------------------------------------------Provided that Extreme has completed any Initial Renovations which Extreme electsto undertake and no Event of Default shall have occurred and be continuing,BNPLC shall apply any Remaining Proceeds paid to it (or other amounts availablefor application as a Qualified Prepayment) as a Qualified Prepayment on any datethat BNPLC is directed to do so by a notice from Extreme; however, if such anotice from Extreme specifies an effective date for a Qualified Prepayment thatis less than five Business Days after BNPLC's actual receipt of the notice,BNPLC may postpone the date of the Qualified Prepayment to any date not laterthan five Business Days after BNPLC's receipt of the notice. In any event,except when BNPLC is required by the preceding sentence to apply RemainingProceeds or other amounts as a Qualified Prepayment on the last day of a BaseRent Period, BNPLC may deduct Breakage Costs incurred in connection with anyQualified Prepayment from the Remaining Proceeds or other amounts available forapplication as the Qualified Prepayment, and Extreme will reimburse BNPLC uponrequest for any such Breakage Costs that BNPLC incurs but does not deduct. (d Special Provisions Applicable After Completion of Initial ---------------------------------------------------------Renovations. If, after Extreme has completed any Initial Renovations which-----------Extreme elects to undertake, any taking by condemnation of any portion of theProperty or any casualty resulting in the diminution, destruction, demolition ordamage to any portion of the Property shall (in the good faith judgment ofBNPLC) reduce the then current "AS IS" market value by less than $500,000 and(in the good faith estimation of BNPLC) be unlikely to result in RemainingProceeds of more than $500,000, and if no Event of Default shall have occurredand be continuing, then BNPLC will, upon Extreme's request, instruct thecondemning authority or insurer, as applicable, to pay the Remaining Proceedsresulting therefrom directly to Extreme. Extreme shall apply any such RemainingProceeds to the repair or restoration of the Property to a safe and securecondition and to a value of no less than the value before taking or casualty. (e Special Provisions Applicable After an Event of Default. -------------------------------------------------------Notwithstanding the foregoing, when any Event of Default shall have occurred andbe continuing, BNPLC shall be entitled to receive and collect all insurance,condemnation or other proceeds governed by this Paragraph 10 and to apply allRemaining Proceeds, when and to the extent deemed appropriate by BNPLC in itssole discretion, either (A) to the reimbursement of Extreme or BNPLC for the out-of-pocket cost of repairing or restoring the Property, or (B) as QualifiedPrepayments. (f Extreme's Obligation to Restore. Regardless of the adequacy -------------------------------of any Remaining Proceeds available to Extreme hereunder, and notwithstandingother provisions of this Improvements Lease to the contrary, if the Property isdamaged by fire or other casualty or less than all or substantially all of theProperty is taken by condemnation, Extreme must: (i promptly restore or improve the Property or the remainder thereof to a value no less than Stipulated Loss Value and to a reasonably safe and sightly condition; or (ii promptly restore the Property to a reasonably safe and sightly condition and pay to BNPLC for application as a Qualified Prepayment the amount (if any), as determined by BNPLC, needed to reduce Stipulated Loss Value to no more than the then current "AS IS" market value of the Property or remainder thereof.[Improvements] -19- (g Takings of All or Substantially All of the Property. In the ---------------------------------------------------event of any taking of all or substantially all of the Property, BNPLC shall beentitled to apply all Remaining Proceeds as a Qualified Prepayment. In addition,if Stipulated Loss Value immediately prior to any such taking exceeds the sum ofthe Remaining Proceeds resulting from such a condemnation, then BNPLC shall beentitled to recover the excess from Extreme upon demand as an additionalQualified Prepayment, whereupon this Improvements Lease shall terminate. Anytaking of so much of the Real Property as, in BNPLC's reasonable good faithjudgment, makes it impracticable to restore or improve the remainder thereof asrequired by part (ii) of the preceding subparagraph shall be considered a takingof substantially all the Property for purposes of this Paragraph 10. 11. Additional Representations, Warranties and Covenants of ExtremeConcerning the Property. Extreme represents, warrants and covenants as follows: (a Compliance with Covenants and Laws. The use of the Property ----------------------------------permitted by this Improvements Lease complies, or will comply after Extremeobtains available permits as the tenant under this Improvements Lease, in allmaterial respects with all Applicable Laws. Extreme has obtained or willpromptly obtain all utility, building, health and operating permits as may berequired by any governmental authority or municipality having jurisdiction overthe Property for the construction contemplated herein and the use of theProperty permitted by this Improvements Lease. (b Operation of the Property. During the Term, Extreme shall -------------------------operate the Property in a good and workmanlike manner and substantially incompliance with all Applicable Laws and will pay or cause to be paid all fees orcharges of any kind in connection therewith. (If Extreme does not promptlycorrect any failure of the Property to comply with Applicable Laws that is thesubject of a written notice given to Extreme or BNPLC by any governmentalauthority, then for purposes of the preceding sentence, Extreme shall beconsidered not to have maintained the Property "substantially in accordance withApplicable Laws" whether or not the noncompliance would be substantial in theabsence of the notice.) During the Term, Extreme shall not use or occupy, orallow the use or occupancy of, the Property in any manner which violates anyApplicable Law or which constitutes a public or private nuisance or which makesvoid, voidable or cancelable any insurance then in force with respect thereto.During the Term, to the extent that any of the following would, individually orin the aggregate, materially and adversely affect the value of the Property orthe use of the Property for purposes permitted by this Improvements Lease,Extreme shall not, without BNPLC's prior consent: (i) initiate or permit anyzoning reclassification of the Property; (ii) seek any variance under existingzoning ordinances applicable to the Property; (iii) use or permit the use of theProperty in a manner that would result in such use becoming a nonconforming useunder applicable zoning ordinances or similar laws, rules or regulations; (iv)execute or file any subdivision plat affecting the Property; or (v) consent tothe annexation of the Property to any municipality. If during the Term (A) achange in the zoning or other Applicable Laws affecting the permitted use ordevelopment of the Property shall occur that (in BNPLC's good faith judgment)reduces the value of the Property, or (B) conditions or circumstances on orabout the Property are discovered (such as the presence of an endangeredspecies) which substantially impede development and thereby (in BNPLC's goodfaith judgment) reduce the value of the Property, then Extreme shall upon demandpay BNPLC an amount equal to such reduction (as determined by BNPLC in goodfaith) for application as a Qualified Prepayment. Extreme shall not permit anydrilling or exploration for, or extraction, removal or production of, mineralsfrom the surface or subsurface of the Property, and Extreme shall not doanything that could reasonably be expected to significantly reduce the marketvalue of the Property. If Extreme receives a notice or claim from any federal,state or other governmental authority that the Property is not in compliancewith any Applicable Law, or that any action may be taken against BNPLC becausethe Property does not comply with any Applicable Law, Extreme shall promptlyfurnish a copy of such notice or claim to BNPLC.[Improvements] -20- Notwithstanding the foregoing, Extreme may in good faith, byappropriate proceedings, contest the validity and applicability of anyApplicable Law with respect to the Property, and pending such contest Extremeshall not be deemed in default hereunder because of the violation of suchApplicable Law, if Extreme diligently prosecutes such contest to completion in amanner reasonably satisfactory to BNPLC, and if Extreme promptly causes theProperty to comply with any such Applicable Law upon a final determination by acourt of competent jurisdiction that the same is valid and applicable to theProperty; provided, however, in any event such contest shall be concluded andthe violation of such Applicable Law must be corrected by Extreme and any claimsasserted against BNPLC or the Property because of such violation must be paid byExtreme, all prior to the earlier of (i) the date that any criminal prosecutionis instituted or overtly threatened against BNPLC or any of its directors,officers or employees because of such violation, (ii) the date that any actionis taken by any governmental authority against BNPLC or any property owned byBNPLC (including the Property) because of such violation, or (iii) a DesignatedSale Date upon which, for any reason, Extreme or an Affiliate of Extreme or anyApplicable Purchaser shall not purchase BNPLC's interest in the Propertypursuant to the Purchase Agreement for a price to BNPLC (when taken togetherwith any additional payments made by Extreme pursuant to Paragraph 1(A)(2) of -----------------the Purchase Agreement, in the case of a purchase by an Applicable Purchaser)equal to the Break Even Price. (c Debts for Construction, Maintenance, Operation or -------------------------------------------------Development. Extreme shall cause all debts and liabilities incurred in the----------- construction, maintenance, operation or development of the Property, includingall debts and liabilities for labor, material and equipment and all debts andcharges for utilities servicing the Property, to be promptly paid; provided,that nothing in this subparagraph will be construed to require Extreme to removeLiens Removable by BNPLC. Notwithstanding the foregoing, Extreme may in good faith, byappropriate proceedings, contest the validity, applicability or amount of anyasserted mechanic's or materialmen's lien and pending such contest Extreme shallnot be deemed in default under this subparagraph because of the contested lienif (1) within sixty days after being asked to do so by BNPLC, Extreme bonds overto BNPLC's reasonable satisfaction all such contested liens against the Propertyalleged to secure an amount in excess of $500,000 (individually or in theaggregate), (2) Extreme diligently prosecutes such contest to completion in amanner reasonably satisfactory to BNPLC, and (3) Extreme promptly causes to bepaid any amount adjudged by a court of competent jurisdiction to be due, withall costs and interest thereon, promptly after such judgment becomes final;provided, however, that in any event each such contest shall be concluded andthe lien, interest and costs must be paid by Extreme prior to the earlier of (i)the date that any criminal prosecution is instituted or overtly threatenedagainst BNPLC or its directors, officers or employees because of the nonpaymentthereof, (ii) the date that any writ or order is issued under which the Propertyor any other property in which BNPLC has an interest may be seized or sold orany other action is taken against BNPLC or any property in which BNPLC has aninterest because of the nonpayment thereof, or (iii) a Designated Sale Date uponwhich, for any reason, Extreme or an Affiliate of Extreme or any ApplicablePurchaser shall not purchase BNPLC's interest in the Property pursuant to thePurchase Agreement for a price to BNPLC (when taken together with any additionalpayments made by Extreme pursuant to Paragraph 1(A)(2) of the Purchase ----------------- Agreement, in the case of a purchase by an Applicable Purchaser) equal to theBreak Even Price. (d Repair, Maintenance, Alterations and Additions. Extreme ----------------------------------------------shall keep the Property in good order, operating condition and appearance andshall cause all necessary repairs, renewals and replacements to be promptlymade. Extreme will not allow any of the Property to be materially misused,abused or wasted, and Extreme shall promptly replace any worn-out fixtures andPersonal Property with fixtures and Personal Property comparable to the replaceditems when new. Except as required in connection with Initial Renovations madein accordance with Paragraph 6, Extreme shall not, without the prior consent ofBNPLC, (i) remove from the Property any fixture or Personal Property havingsignificant value except such as are replaced by Extreme by fixtures or PersonalProperty of equal suitability and value, free and clear of any lien or securityinterest (and for purposes of [Improvements] -21- this clause "significant value" will mean any fixture or Personal Property thathas a value of more than $100,000 or that, when considered together with allother fixtures and Personal Property removed and not replaced by Extreme byitems of equal suitability and value, has an aggregate value of $500,000 ormore) or (ii) make material new Improvements or alter Improvements in anymaterial respect. Without limiting the foregoing, Extreme will notify BNPLCbefore making any significant alterations to the Improvements after thecompletion of any Initial Renovations which Extreme elects to undertake. (e Permitted Encumbrances and Development Documents. Extreme ------------------------------------------------shall during the Term comply with and will cause to be performed all of thecovenants, agreements and obligations imposed upon the owner of any interest inthe Property by the Permitted Encumbrances (including the Premises Leases) orthe Development Documents. Without limiting the foregoing, Extreme shall causeall amounts to be paid when due, the payment of which is secured by any Lienagainst the Property created by the Permitted Encumbrances. Without the priorconsent of BNPLC, Extreme shall not enter into, initiate, approve or consent toany modification of any Permitted Encumbrance or Development Document that wouldcreate or expand or purport to create or expand obligations or restrictionswhich would encumber BNPLC's interest in the Property. (Whether BNPLC must giveany such consent requested by Extreme during the Term of this Improvements Leaseshall be governed by subparagraph 3(A) of the Closing Certificate and -----------------Agreement.) (f Books and Records Concerning the Property. Extreme shall -----------------------------------------keep books and records that are accurate and complete in all material respectsfor the Property and, subject to Paragraph 15.(c), will permit all such booksand records (including all contracts, statements, invoices, bills and claims forlabor, materials and services supplied for the construction and operation of anyImprovements) to be inspected and copied by BNPLC. This subparagraph shall notbe construed as requiring Extreme to regularly maintain separate books andrecords relating exclusively to the Property; provided, however, that uponrequest, Extreme shall construct or abstract from its regularly maintained booksand records information required by this subparagraph relating to the Property. 12. Financial Covenants, Reporting Covenants and Other CovenantsIncorporated by Reference to Schedule 1. Throughout the Term of this ----------Improvements Lease, Extreme shall comply with the requirements of Schedule 1 ----------attached hereto. 13. Assignment and Subletting by Extreme. (a BNPLC's Consent Required. Without the prior consent of ------------------------BNPLC, Extreme shall not assign, transfer, mortgage, pledge or hypothecate thisImprovements Lease or any interest of Extreme hereunder and shall not sublet allor any part of the Property, by operation of law or otherwise; provided, thatsubject to subparagraph 13.(c) below, (I) this provision shall not be construedto prohibit any Premises Lease described in the Common Definitions andProvisions Agreement (Improvements) or any transfer or sublease by a lesseethereunder which is authorized by any Premises Lease, and (II) if (and after)Extreme completes Initial Renovations, and so long as no Event of Default hasoccurred and is continuing: (1) Extreme shall be entitled to sublet no more than49% (computed on the basis of square footage) of the useable space in thenexisting and completed building Improvements, if any, so long as (i) anysublease by Extreme is made expressly subject and subordinate to the termshereof, and (ii) such sublease has a term equal to or less than the remainder ofthe then effective Term of this Improvements Lease; and (2) Extreme shall beentitled to assign or transfer this Improvements Lease or any interest ofExtreme hereunder to an Affiliate of Extreme if both Extreme and its Affiliateconfirm their joint and several liability hereunder by written notice given toBNPLC. (b Standard for BNPLC's Consent to Assignments and Certain -------------------------------------------------------Other Matters. Consents and approvals of BNPLC which are required by this-------------Paragraph 13 will not be unreasonably withheld or delayed, but [Improvements] -21- Extreme acknowledges that BNPLC's withholding of such consent or approval shallbe reasonable if BNPLC determines in good faith that (1) giving the approval maymaterially increase BNPLC's risk of liability for any existing or futureenvironmental problem, or (2) giving the approval is likely to increase BNPLC'sadministrative burden of complying with or monitoring Extreme's compliance withthe requirements of this Improvements Lease. (c Consent Not a Waiver. No consent by BNPLC to a sale, --------------------assignment, transfer, mortgage, pledge or hypothecation of this ImprovementsLease or Extreme's interest hereunder, and no assignment or subletting of theProperty or any part thereof in accordance with this Improvements Lease orotherwise with BNPLC's consent, shall release Extreme from liability hereunder;and any such consent shall apply only to the specific transaction therebyauthorized and shall not relieve Extreme from any requirement of obtaining theprior consent of BNPLC to any further sale, assignment, transfer, mortgage,pledge or hypothecation of this Improvements Lease or any interest of Extremehereunder. 14. Assignment by BNPLC. (a Restrictions on Transfers. Except by a Permitted Transfer, -------------------------BNPLC shall not assign, transfer, mortgage, pledge, encumber or hypothecate thisImprovements Lease or the other Operative Documents or any interest of BNPLC inand to the Property during the Term without the prior consent of Extreme, whichconsent Extreme may withhold in its sole discretion. Further, notwithstandinganything to the contrary herein contained, if withholding taxes are imposed onthe rents and other amounts payable to BNPLC hereunder because of BNPLC'sassignment of this Improvements Lease to any citizen of, or any corporation orother entity formed under the laws of, a country other than the United States,Extreme shall not be required to compensate BNPLC or any such assignee for thewithholding tax. If, in breach of this subparagraph, BNPLC transfers theProperty or any part thereof by a conveyance or that does not constitute aPermitted Transfer, with the result that additional transfer taxes or otherImpositions are assessed against the Property or the owner thereof, BNPLC shallbe required to pay such additional transfer taxes or other Impositions. (b Effect of Permitted Transfer or other Assignment by BNPLC. ---------------------------------------------------------If, without breaching subparagraph 14.(a), BNPLC sells or otherwise transfersthe Property and assigns to the transferee all of BNPLC's rights under thisImprovements Lease and under the other Operative Documents, and if thetransferee expressly assumes all of BNPLC's obligations under this ImprovementsLease and under the other Operative Documents, then BNPLC shall thereby bereleased from any obligations arising after such assumption under thisImprovements Lease or under the other Operative Documents, and Extreme shalllook solely to each successor in interest of BNPLC for performance of suchobligations. (As used in this subparagraph, "Operative Documents" is intended tomean not only the Operative Documents as defined in the Common Definitions andProvisions Agreement (Improvements), but also the Operative Documents as definedin the Other Common Definitions and Provisions Agreement.) 15. BNPLC's Right of Access. (a During the Term, BNPLC and BNPLC's representatives may(subject to subparagraphs 15.(c) and 15.(d)) enter the Property at anyreasonable time after five Business Days advance written notice to Extreme forthe purpose of making inspections or performing any work BNPLC is authorized toundertake by the next subparagraph or for the purpose confirming whether Extremehas complied with the requirements of this Improvements Lease or the otherOperative Documents. (b If Extreme fails to perform any act or to take any actionrequired of it by this Improvements Lease or the Closing Certificate, or to payany money which Extreme is required by this [Improvements] -23- Improvements Lease or the Closing Certificate to pay, and if such failure oraction constitutes an Event of Default or renders BNPLC or any director,officer, employee or Affiliate of BNPLC at risk of criminal prosecution orrenders BNPLC's interest in the Property or any part thereof at risk offorfeiture by forced sale or otherwise, then in addition to any other remediesspecified herein or otherwise available, BNPLC may, perform or cause to beperformed such act or take such action or pay such money. Any expenses soincurred by BNPLC, and any money so paid by BNPLC, shall be a demand obligationowing by Extreme to BNPLC. Further, BNPLC, upon making such payment, shall besubrogated to all of the rights of the person, corporation or body politicreceiving such payment. But nothing herein shall imply any duty upon the part ofBNPLC to do any work which under any provision of this Improvements LeaseExtreme may be required to perform, and the performance thereof by BNPLC shallnot constitute a waiver of Extreme's default. BNPLC may during the progress ofany such work permitted by BNPLC hereunder on or in the Property keep and storeupon the Property all necessary materials, tools, and equipment. BNPLC shall notin any event be liable for inconvenience, annoyance, disturbance, loss ofbusiness, or other damage to Extreme or the subtenants or invitees of Extreme byreason of making such repairs or the performance of any such work on or in theProperty, or on account of bringing materials, supplies and equipment into orthrough the Property during the course of such work (except for any liability inexcess of the liability insurance limits established in Exhibit B resulting from ---------death or injury or damage to the property of third parties caused by theEstablished Misconduct of BNPLC or its officers, employees, or agents inconnection therewith), and the obligations of Extreme under this ImprovementsLease shall not thereby be excused in any manner. (c Extreme shall have no obligation to provide proprietaryinformation (as defined in the next sentence) to BNPLC, except and to the extentthat (1) BNPLC reasonably determines that BNPLC cannot accomplish the purposesof BNPLC's inspection of the Property or exercise of other rights grantedpursuant to the various express provisions of this Improvements Lease and theother Operative Documents without evaluating such information. For purposes ofthis Improvements Lease "proprietary information" includes Extreme'sintellectual property, trade secrets and other confidential information of valueto Extreme about, among other things, Extreme's manufacturing processes,products, marketing and corporate strategies, but in no event will "proprietaryinformation" include any disclosure of substances and materials (and theirchemical composition) which are or previously have been present in, on or underthe Property at the time of any inspections by BNPLC, nor will "proprietaryinformation" include any additional disclosures reasonably required to permitBNPLC to determine whether the presence of such substances and materials hasconstituted a violation of Environmental Laws. In addition, under nocircumstances shall Extreme have any obligation to disclose to BNPLC or anyother party any proprietary information of Extreme (including, withoutlimitation, any pending applications for patents or trademarks, any research anddesign and any trade secrets) except if and to the limited extent reasonablynecessary to comply with the express provisions of this Improvements Lease orthe other Operative Documents. (d So long as Extreme remains in possession of the Property, BNPLCor BNPLC's representative will, before making any inspection or performing anywork on the Property authorized by this Improvements Lease, if then requested todo so by Extreme to maintain Extreme's security: (i) sign in at Extreme'ssecurity or information desk if Extreme has such a desk on the premises, (ii)wear a visitor's badge or other reasonable identification, (iii) permit anemployee of Extreme to observe such inspection or work, and (iv) comply withother similar reasonable nondiscriminatory security requirements of Extreme thatdo not, individually or in the aggregate, significantly interfere withinspections or work of BNPLC authorized by this Improvements Lease. 16. Events of Default. Each of the following events shall be an "Event ofDefault" by Extreme under this Improvements Lease:[Improvements] -24- (a Extreme shall fail to pay when due any installment of Rent duehereunder and such failure shall continue for three (3) Business Days afterExtreme is notified in writing thereof. (b Extreme shall fail to cause any representation or warranty ofExtreme contained herein or in the Closing Certificate that was false ormisleading in any material respect when made to be made true and not misleading(other than as described in the other clauses of this Paragraph 16), or Extremeshall fail to comply with any term, provision or covenant of this ImprovementsLease or of the Closing Certificate (other than as described in the otherclauses of this Paragraph 16), and in either case shall not cure such failureprior to the earlier of (A) thirty days after written notice thereof is sent toExtreme or (B) the date any writ or order is issued for the levy or sale of anyproperty owned by BNPLC (including the Property) or any criminal prosecution isinstituted or overtly threatened against BNPLC or any of its directors, officersor employees because of such failure; provided, however, that so long as no suchwrit or order is issued and no such criminal prosecution is instituted orovertly threatened, the period within which such failure may be cured by Extremeshall be extended for a further period (not to exceed an additional sixty days)as shall be necessary for the curing thereof with diligence, if (but only if)(x) such failure is susceptible of cure but cannot with reasonable diligence becured within such thirty day period, (y) Extreme shall promptly have commencedto cure such failure and shall thereafter continuously prosecute the curingthereof with reasonable diligence and (z) the extension of the period for curewill not, in any event, cause the period for cure to extend beyond five daysprior to the expiration of this Improvements Lease. (c Extreme shall abandon the Property. (d Extreme or any Subsidiary shall fail to make any payment orpayments of principal, premium or interest, of Debt of Extreme described in thenext sentence when due (taking into consideration the time Extreme may have tocure such failure, if any, under the documents governing such Debt). As used inthis clause 14(a)(v), "Debt" shall include only Debt (as defined in the CommonDefinitions and Provisions Agreement (Improvements)) of Extreme or any of itsSubsidiaries now existing or arising in the future (1) payable to any InterestedParty, or (2) payable to any other Person and with respect to which $5,000,000or more is actually due and payable because of acceleration or otherwise. (e Extreme: (a) shall generally not, or be unable to, or shall admitin writing its inability to, pay its debts as such debts become due; or (b)shall make an assignment for the benefit of creditors, petition or apply to anytribunal for the appointment of a custodian, receiver or trustee for it or asubstantial part of its assets; or (c) shall file any petition or application tocommence any proceeding under any bankruptcy, reorganization, arrangement,readjustment of debt, dissolution or liquidation law or statute of anyjurisdiction, whether now or hereafter in effect; or (d) shall have had any suchpetition or application filed against it; or (e) by any act or omission shallindicate its consent to, approval of or acquiescence in any such petition,application or proceeding or order for relief or the appointment of a custodian,receiver or trustee for all or any substantial part of its property; or (f)shall suffer any such custodianship, receivership or trusteeship to continueundischarged for a period of sixty days or more. (f One or more final judgments, decrees or orders for the payment ofmoney in excess of $5,000,000 in the aggregate shall be rendered against Extremeand such judgments, decrees or orders shall continue unsatisfied and in effectfor a period of thirty consecutive days without Extreme's having obtained anagreement (or after the expiration or termination of an agreement) of thePersons entitled to enforce such judgment, decrees or orders not to enforce thesame pending negotiations with Extreme concerning the satisfaction or otherdischarge of the same. (For purposes of this provision, no judgment, decree ororder will be considered "final" until Extreme's right to appeal, if any, shallhave expired or been exhausted.)[Improvements] -25- (g Extreme shall breach the requirements of Paragraph 12, which byreference to Schedule 1 establishes certain financial covenants and other ----------requirements. (h as of the effective date of this Improvements Lease, any of therepresentations or warranties of Extreme contained in subparagraphs 2(A) - (K)of the Closing Certificate shall be false or misleading in any material respect. (i Extreme shall fail to pay the full amount of any SupplementalPayment required by the Purchase Agreement on the Designated Sale Date. (j Extreme shall fail to comply with any term, provision orcondition of the Pledge Agreement after the expiration of any applicable noticeand cure period set forth in the Pledge Agreement. 17. Remedies. (a Basic Remedies. At any time after an Event of Default and --------------after BNPLC has given any notice required by subparagraph 17.(b), BNPLC shall beentitled at BNPLC's option (and without limiting BNPLC in the exercise of anyother right or remedy BNPLC may have, and without any further demand or noticeexcept as expressly described in this subparagraph 17.(a)), to exercise any oneor more of the following remedies: (i By notice to Extreme, BNPLC may terminate Extreme's right to possession of the Property. A notice given in connection with unlawful detainer proceedings specifying a time within which to cure a default shall terminate Extreme's right to possession if Extreme fails to cure the default within the time specified in the notice. (ii Upon termination of Extreme's right to possession and without further demand or notice, BNPLC may re-enter the Property in any manner not prohibited by Applicable Law and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property in the Improvements may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of Extreme. (iii) Upon termination of Extreme's right to possession, this Improvements Lease shall terminate and BNPLC may recover from Extreme: a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination; b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Extreme proves could have been reasonably avoided; c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the scheduled Term after the time of award exceeds the amount of such rental loss that Extreme proves could be reasonably avoided; and d) Any other amount necessary to compensate BNPLC for all the detriment proximately caused by Extreme's failure to perform Extreme's obligations under this Improvements Lease or which in the ordinary course of things would be likely to result therefrom, including the[Improvements] -26- costs and expenses (including Attorneys' Fees, advertising costs and brokers' commissions) of recovering possession of the Property, removing persons or property therefrom, placing the Property in good order, condition, and repair, preparing and altering the Property for reletting, all other costs and expenses of reletting, and any loss incurred by BNPLC as a result of Extreme's failure to perform Extreme's obligations under the other Operative Documents. The "worth at the time of award" of the amounts referred to in subparagraph 17.(a)(iii)a) and subparagraph 17.(a)(iii)b) shall be computed by allowing interest at the Default Rate. The "worth at the time of award" of the amount referred to in subparagraph 17.(a)(iii)c) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). e) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. (iv) BNPLC shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in force even after lessee's breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations). Accordingly, even if Extreme has breached this Improvements Lease and abandoned the Property, this Improvements Lease shall continue in effect for so long as BNPLC does not terminate Extreme's right to possession, and BNPLC may enforce all of BNPLC's rights and remedies under this Improvements Lease, including the right to recover the Rent as it becomes due under this Improvements Lease. Extreme's right to possession shall not be deemed to have been terminated by BNPLC except pursuant to subparagraph 17.(a)(i) hereof. The following shall not constitute a termination of Extreme's right to possession: a) Acts of maintenance or preservation or efforts to relet the Property; b) The appointment of a receiver upon the initiative of BNPLC to protect BNPLC's interest under this Improvements Lease; or c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by Extreme. (b) Notice Required So Long As the Purchase Option and Extreme's ------------------------------------------------------------Initial Remarketing Rights and Obligations Continue Under the Purchase----------------------------------------------------------------------Agreement. So long as Extreme remains in possession of the Property and there---------has been no termination of the Purchase Option and Extreme's Initial RemarketingRights and Obligations as provided Paragraph 4 of the Purchase Agreement, -----------BNPLC's right to exercise remedies provided in subparagraph 17.(a) will besubject to the condition precedent that BNPLC shall have notified Extreme, at atime when an Event of Default shall have occurred and be continuing, of BNPLC'sintent to exercise remedies provided in subparagraph 17.(a) at least sixty daysprior to exercising the remedies. The condition precedent is intended to provideExtreme with an opportunity to exercise the Purchase Option or Extreme's InitialRemarketing Rights and Obligations before losing possession of the Propertypursuant to subparagraph 17.(a). The condition precedent is not, however,intended to extend any period for curing an Event of Default. Accordingly, if anEvent of Default has occurred, and regardless of whether any Event of Default isthen continuing, BNPLC may proceed immediately to exercise remedies provided insubparagraph 17.(a) at any time after the earlier of (i) sixty days after BNPLChas given such a notice to Extreme, (ii) any date upon which Extremerelinquishes possession of the Property, or (iii) any termination of thePurchase Option and Extreme's Initial Remarketing Rights and Obligations.[Improvements] -27- (c) Enforceability. This Paragraph 17 shall be enforceable to the --------------maximum extent not prohibited by Applicable Law, and the unenforceability of anyprovision in this Paragraph shall not render any other provision unenforceable. (d) Remedies Cumulative. No right or remedy herein conferred upon or -------------------reserved to BNPLC is intended to be exclusive of any other right or remedy, andeach and every such right and remedy shall be cumulative and in addition to anyother right or remedy given to BNPLC hereunder or now or hereafter existing infavor of BNPLC under Applicable Law or in equity. In addition to other remediesprovided in this Improvements Lease, BNPLC shall be entitled, to the extentpermitted by Applicable Law or in equity, to injunctive relief in case of theviolation, or attempted or threatened violation, of any of the covenants,agreements, conditions or provisions of this Improvements Lease, or to a decreecompelling performance of any of the other covenants, agreements, conditions orprovisions of this Improvements Lease to be performed by Extreme, or to anyother remedy allowed to BNPLC at law or in equity. Nothing contained in thisImprovements Lease shall limit or prejudice the right of BNPLC to prove for andobtain in proceedings for bankruptcy or insolvency of Extreme by reason of thetermination of this Improvements Lease, an amount equal to the maximum allowedby any statute or rule of law in effect at the time when, and governing theproceedings in which, the damages are to be proved, whether or not the amount begreater, equal to, or less than the amount of the loss or damages referred toabove. Without limiting the generality of the foregoing, nothing containedherein shall modify, limit or impair any of the rights and remedies of BNPLCunder the Purchase Documents, and BNPLC shall not be required to give the sixtyday notice described in subparagraph 17.(b) as a condition precedent to anyacceleration of the Designated Sale Date or to taking any action to enforce thePurchase Documents. 18. Default by BNPLC. If BNPLC should default in the performance of any ofits obligations under this Improvements Lease, BNPLC shall have the timereasonably required, but in no event less than thirty days, to cure such defaultafter receipt of notice from Extreme specifying such default and specifying whataction Extreme believes is necessary to cure the default. If Extreme prevails inany litigation brought against BNPLC because of BNPLC's failure to cure adefault within the time required by the preceding sentence, then Extreme shallbe entitled to an award against BNPLC for the monetary damages proximatelycaused to Extreme by such default. Notwithstanding the foregoing, BNPLC's right to cure as provided in thisParagraph 18 will not in any event extend the time within which BNPLC mustremove Liens Removable by BNPLC as required by Paragraph 19 beyond theDesignated Sale Date. 19. Quiet Enjoyment. Provided Extreme pays the Base Rent and allAdditional Rent payable hereunder as and when due and payable and keeps andfulfills all of the terms, covenants, agreements and conditions to be performedby Extreme hereunder, BNPLC shall not during the Term disturb Extreme'speaceable and quiet enjoyment of the Property; however, such enjoyment shall besubject to the terms, provisions, covenants, agreements and conditions of thisImprovements Lease, to Permitted Encumbrances, to Development Documents and toany other claims not constituting Liens Removable by BNPLC. If any LienRemovable by BNPLC is claimed against the Property, BNPLC will remove the LienRemovable by BNPLC promptly. Any breach by BNPLC of this Paragraph shall renderBNPLC liable to Extreme for any monetary damages proximately caused thereby, butas more specifically provided in subparagraph 4.(b) above, no such breach shallentitle Extreme to terminate this Improvements Lease or excuse Extreme from itsobligation to pay Rent. 20. Surrender Upon Termination. Unless Extreme or an Applicable Purchaserpurchases or has purchased BNPLC's entire interest in the Property pursuant tothe terms of the Purchase Agreement and BNPLC's entire interest in theImprovements and other "Property" under (and as defined in) the Other PurchaseAgreement,[Improvements] -28- Extreme shall, upon the termination of Extreme's right to occupancy, surrenderto BNPLC the Property, including Improvements constructed by Extreme andfixtures and furnishings included in the Property, free of all HazardousSubstances (including Permitted Hazardous Substances) and tenancies and with allImprovements in substantially the same condition as of the date the same wereinitially completed, excepting only (i) ordinary wear and tear that occursbetween the maintenance, repairs and replacements required by other provisionsof this Improvements Lease or the Other Lease Agreement, and (ii) demolition,alterations and additions which are expressly permitted by the terms of thisImprovements Lease or the Other Lease Agreement and which have been completed byExtreme in a good and workmanlike manner in accordance with all Applicable Laws.Any movable furniture or movable personal property belonging to Extreme or anyparty claiming under Extreme, if not removed at the time of such termination andif BNPLC shall so elect, shall be deemed abandoned and become the property ofBNPLC without any payment or offset therefor. If BNPLC shall not so elect, BNPLCmay remove such property from the Property and store it at Extreme's risk andexpense. Nothing in this Paragraph 20 will be construed to require Extreme tosurrender the Property to BNPLC during the continuation of any breach by BNPLCof any obligation it has under the Purchase Agreement to convey the Property toExtreme or an Applicable Purchaser. 21. Holding Over by Extreme. Should Extreme not purchase BNPLC's right,title and interest in the Property as provided in the Purchase Agreement, butnonetheless continue to hold the Property after the termination of thisImprovements Lease without BNPLC's consent, whether such termination occurs bylapse of time or otherwise, such holding over shall constitute and be construedas a tenancy from day to day only, at a daily Base Rent equal to: (i) StipulatedLoss Value on the day in question, times (ii) the Default Rate for such day;divided by (iii) three hundred and sixty; subject, however, to all of the terms,provisions, covenants and agreements on the part of Extreme hereunder. Nopayments of money by Extreme to BNPLC after the termination of this ImprovementsLease shall reinstate, continue or extend the Term of this Improvements Leaseand no extension of this Improvements Lease after the termination thereof shallbe valid unless and until the same shall be reduced to writing and signed byboth BNPLC and Extreme. 22. Independent Obligations Evidenced by the Other Operative Documents.Extreme acknowledges and agrees that nothing contained in this ImprovementsLease shall limit, modify or otherwise affect any of Extreme's obligations underthe other Operative Documents, which obligations are intended to be separate,independent and in addition to, and not in lieu of, the obligations set forthherein. In the event of any inconsistency between the express terms andprovisions of the Purchase Documents and the express terms and provisions ofthis Improvements Lease, the express terms and provisions of the PurchaseDocuments shall control. In the event of any inconsistency between the expressterms and provisions of the Closing Certificate and the express terms andprovisions of this Improvements Lease, the express terms and provisions of thisImprovements Lease shall control; provided, nothing herein will limit or impairExtreme's obligations under the Closing Certificate following any expiration oftermination of this Improvements Lease. [The signature pages follow.][Improvements] -29- IN WITNESS WHEREOF, Extreme and BNPLC have caused this Lease Agreement(Improvements) to be executed as of June 1, 2000. "Extreme" EXTREME NETWORKS, INC. By: _________________________________ Name:____________________________ Title:___________________________ [Continuation of signature pages to Lease Agreement (Improvements) dated to beeffective June 1, 2000] "BNPLC" BNP LEASING CORPORATION By: _________________________________ Lloyd G. Cox, Vice President Exhibit A --------- Legal DescriptionAll that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning. Exhibit B --------- Insurance RequirementsI. LIABILITY INSURANCE: A. Extreme must maintain commercial general liability ("CGL") insuranceon an occurrence basis, affording immediate protection to the limit of not lessthan $20,000,000 combined single limit for bodily and personal injury, death andproperty damage in respect of any one occurrence. The CGL insurance must beprimary to, and shall receive no contribution from, any insurance policies orself-insurance programs otherwise afforded to or available to the InterestedParties, collectively or individually. Further, the CGL insurance must includeblanket contractual liability coverage which insures contractual liability underthe indemnifications set forth in this Improvements Lease (though such coverageor the amount thereof shall in no way limit such indemnifications). B. Any deductible or self-insured retention applicable to the CGLinsurance shall not exceed $500,000. C. The forms of insurance policies (including endorsements) used toprovide the CGL insurance required by this Improvements Lease, and the insurancecompany or companies providing the CGL insurance, must be acceptable to BNPLC.BNPLC shall have the right from time to time and at any time to review andapprove such policy forms (including endorsements) and the insurance company orcompanies providing the insurance. Without limiting the generality of theforegoing, BNPLC may reasonably require (and unless and until Extreme isotherwise notified by BNPLC, BNPLC does require) that such insurance be providedunder forms and by companies consistent with the following: (1) Forms: CGL Insurance must be provided on Insurance Services ----- Office ("ISO") forms CG 0001 1093 or CG 0001 0196 or equivalent substitute forms providing the same or greater coverage. (2) Rating Requirements: Insurance must be provided through insurance ------------------- or reinsurance companies rated by the A.M. Best Company of Oldwick, New Jersey as having a policyholder's rating of A or better and a reported financial information rating of X or better. (3) Required Endorsements: CGL Insurance must be endorsed to provide --------------------- or include: (a) ISO additional insured form CG 2026 1185 or equivalent substitute form, without modification (and under the commercial umbrella, if any), designating as additional insureds "BNPLC and other Interested Parties, as defined in the Common Definitions and Provisions Agreement (Improvements) between Extreme Networks, Inc. and BNP Leasing Corporation dated June 1, 2000)"; and (b) provisions entitling BNPLC to 30 days' notice from the insurer prior to any cancellation to the CGL coverage. (4) Other Insurance: Each policy to contain standard CGL "other --------------- insurance" wording, unmodified in any way that would make it excess over or contributory with the additional insured's own commercial general liability coverage.[Improvements] II. PROPERTY INSURANCE: A. Extreme must maintain property insurance in "special form" (includingtheft) or against "all risks," providing the broadest available coverage for allImprovements (as defined in the Common Provisions and Definitions Agreement) andequipment included in the Property, on a blanket basis if multiple buildings areinvolved, with no exclusions for vandalism, malicious mischief, or sprinklerleakage and all coverage perils normally included within the definitions ofextended coverage, vandalism, malicious mischief and, if the Property is in aflood zone, flood. In addition, boiler and machinery coverage must be maintainedat all times by endorsement to the property insurance policy or by separatepolicy. B. The property insurance required hereby must provide coverage in theamount no less than replacement value (exclusive of land, foundation, footings,excavations and grading) with endorsements for contingent liability fromoperation of building laws, increased cost of construction and demolition costswhich may be necessary to comply with building laws. Subject to the approval ofBNPLC, Extreme will be responsible for determining the amount of propertyinsurance to be maintained from time to time, but Extreme must maintain suchcoverage on an agreed value basis to eliminate the effects of coinsurance. C. Any deductible or self-insured retention applicable to the propertyinsurance shall not exceed $500,000. D. The property insurance shall cover not only the value of Extreme'sinterest in the Improvements, but also the interest of BNPLC, with BNPLC shownas an insured as its interests may appear. E. The forms of insurance policies (including endorsements) used toprovide the property insurance required by this Improvements Lease, and theinsurance company or companies providing the property insurance, must beacceptable to BNPLC. BNPLC shall have the right from time to time and at anytime to review and approve such policy forms (including endorsements) and theinsurance company or companies providing such insurance. Without limiting thegenerality of the foregoing, BNPLC may reasonably require (and unless and untilExtreme is otherwise notified by BNPLC, BNPLC does require) that such insurancebe provided under forms and by companies consistent with the following: (1) Rating Requirements: Insurance to be provided through insurance ------------------- or reinsurance companies rated by the A.M. Best Company of Oldwick, New Jersey as having (a) a policyholder's rating of A or better, (b) a reported financial information rating of no less than X, and (c) in the case of each insurance or reinsurance company, a reported financial information rating which indicates an adjusted policyholders' surplus equal to or greater than the underwriting exposure that such company has under the insurance or reinsurance it is providing for the Property. (2) Required Endorsements: Extreme's property insurance must be ---------------------endorsed to provide or include: (a) a waiver of subrogation in favor of "BNPLC and other Interested Parties, as defined in the Common Definitions and Provisions Agreement (Improvements) between Extreme Networks, Inc. and BNP Leasing Corporation dated June 1, 2000)"; (b) that Extreme's insurance is primary, with any policies of BNPLC or other Interested Parties being excess, secondary and noncontributing; (c) that the protection afforded to BNPLC by such insurance shall not be reduced or impaired by acts or omissions of Extreme or any other beneficiary or insured; and Exhibit B - Page 2[Improvements] (d) that BNPLC must be notified at least thirty days prior to any cancellation of insurance coverage.III. OTHER INSURANCE RELATED REQUIREMENTS: A. BNPLC must be notified in writing immediately by Extreme of claimsagainst Extreme that might cause a reduction below seventy-five percent (75%) ofany aggregate limit of any policy. B. Extreme's property insurance must be evidenced by ACORD form 27"Evidence of Property Insurance" completed and interlineated in a mannersatisfactory to BNPLC to show compliance with the requirements of this Exhibit.Copies of endorsements to the property insurance must be attached to such form. C. Extreme's CGL insurance must be evidenced by ACORD form 25"Certificate of Insurance" completed and interlineated in a manner satisfactoryto BNPLC to show compliance with the requirements of this Exhibit. Copies ofendorsements to the CGL insurance must be attached to such form. D. Such evidence of required insurance must be delivered upon executionof this Improvements Lease and new certificate or evidence of insurance must bedelivered no later than 10 days prior to expiration of existing policy. E. Extreme shall not cancel, fail to renew, or make or permit anymaterial reduction in any of the policies or certificates described in thisExhibit without the prior written consent of BNPLC. The certificates (ACORDforms 27 and 25) described in this Exhibit must contain the following expressprovision: "This is to certify that the policies of insurance described herein have been issued to the insured Extreme Networks, Inc. for whom this certificate is executed and are in force at this time. In the event of cancellation of coverage affecting the certificate holder, at least thirty days prior notice shall be given to the certificate holder." F. The limits of liability under the liability insurance required by thisImprovements Lease may be provided by a single policy of insurance or by acombination of primary and umbrella policies, but in no event shall the totallimits of liability available for any one occurrence or accident be less thanthose required by this Exhibit. G. Extreme shall provide copies, certified as complete and correct by anauthorized agent of the applicable insurer, of all insurance policies requiredby this Exhibit within ten days after receipt of a request for such copies fromBNPLC. Exhibit B - Page 3[Improvements] Exhibit C --------- Notice of LIBOR Period ElectionBNP Leasing Corporation12201 Merit DriveSuite 860Dallas, Texas 75251Attention: Lloyd G. Cox Re: Lease Agreement (Improvements) and Lease Agreement (Land), both datedas of June 1, 2000, and both between Extreme Networks, Inc., as tenant, and BNPLeasing Corporation, as landlordGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the two Lease Agreements referenced above. This letterconstitutes notice to you that the LIBOR Period Election under both of the LeaseAgreements shall be: ________________ month(s),beginning with the first Base Rent Period that commences on or after: ______________, ____.NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE NUMBER OF MONTHS----SPECIFIED ABOVE IS NOT A PERMITTED NUMBER UNDER THE DEFINITION OF "LIBOR PERIODELECTION" IN THE COMMON DEFINITIONS AND PROVISIONS AGREEMENTS REFERENCED IN THELEASE AGREEMENTS, OR IF THE DATE SPECIFIED ABOVE CONCERNING THE COMMENCEMENT OFTHE LIBOR PERIOD ELECTION IS LESS THAN TEN BUSINESS DAYS AFTER YOUR RECEIPT OFTHIS NOTICE. HOWEVER, WE ASK THAT YOU NOTIFY US IMMEDIATELY IF FOR ANY REASONYOU BELIEVE THIS NOTICE IS DEFECTIVE. Executed this _____ day of ______________, 20___. Extreme Networks, Inc. Name:_________________________________ Title:________________________________[cc all Participants] [Improvements] Schedule 1 ---------- FINANCIAL COVENANTS[DRAFTING NOTE: TK WILL MANUALLY SUBSTITUTE THE FINAL SCHEDULE 1 (A SEPARATE -------------- WORD PROCESSING FILE) FOR THIS PAGE IN THE EXECUTION COPIES OF THIS DOCUMENT.] [Improvements] ================================================================================ EXHIBIT 10.10 PURCHASE AGREEMENT (LAND) BETWEEN BNP LEASING CORPORATION ("BNPLC") AND EXTREME NETWORKS, INC. ("Extreme") June 1, 2000 (Santa Clara, California)================================================================================ TABLE OF CONTENTS ----------------- Page ---- 1. Extreme's Options and Obligations on the Designated Sale Date........................................ 1 (A) Right to Purchase; Initial Remarketing Rights and Obligations............................... 1 ------------------------------------------------------------- (B) Determinations Concerning Price............................................................. 3 ------------------------------- (C) Designation of the Purchaser................................................................ 4 ---------------------------- (D) Effect of the Purchase Option and Extreme's Initial Remarketing Rights and Obligations on ----------------------------------------------------------------------------------------- Subsequent Title Encumbrances............................................................... 4 ----------------------------- (E) Security for the Purchase Option and Extreme's Initial Remarketing Rights and Obligations... 4 ----------------------------------------------------------------------------------------- (F) Delivery of Books and Records If BNPLC Retains the Property................................. 5 ----------------------------------------------------------- 2. Extreme's Rights and Options After the Designated Sale Date.......................................... 5 (A) Extreme's Extended Right to Remarket........................................................ 5 ------------------------------------ (B) Definition of Minimum Extended Remarketing Price............................................ 5 ------------------------------------------------ (C) BNPLC's Right to Sell....................................................................... 6 --------------------- (D) Extreme's Right to Excess Sales Proceeds.................................................... 7 ---------------------------------------- (E) Permitted Transfers During Extreme's Extended Remarketing Period............................ 7 ---------------------------------------------------------------- 3. Terms of Conveyance Upon Purchase.................................................................... 7 4. Survival and Termination of the Rights and Obligations of Extreme and BNPLC.......................... 8 (A) Status of this Agreement Generally.......................................................... 8 ---------------------------------- (B) Automatic Termination of Extreme's Rights................................................... 8 ----------------------------------------- (C) Termination of Extreme's Extended Remarketing Rights to Permit a Sale by BNPLC.............. 9 ------------------------------------------------------------------------------ (D) Payment Only to BNPLC....................................................................... 9 --------------------- (E) Remedies Under the Other Operative Documents................................................ 9 -------------------------------------------- (F) Occupancy by Extreme Prior to Closing of a Sale............................................. 9 ----------------------------------------------- 5. Security for Extreme's Obligations; Return of Funds.................................................. 96. Certain Remedies Cumulative.......................................................................... 10 7. Attorneys' Fees and Legal Expenses................................................................... 10 8. Estoppel Certificate................................................................................. 10 9. Successors and Assigns............................................................................... 10 [Land] Exhibits and Schedules ----------------------Exhibit A......................................................Legal Description--------- Exhibit B...................Requirements Re: Form of Grant Deed and Ground Lease--------- Exhibit C............................................Bill of Sale and Assignment--------- Exhibit D..........................................Acknowledgment and Disclaimer--------- Exhibit E................................................Secretary's Certificate--------- Exhibit F.................................Certificate Concerning Tax Withholding---------[Land] PURCHASE AGREEMENT (LAND) This PURCHASE AGREEMENT (LAND) (this "Agreement") is made and dated as ofJune 1, 2000 (the "Effective Date") by and between BNP LEASING CORPORATION, aDelaware corporation ("BNPLC"), and EXTREME NETWORKS, INC., a Californiacorporation ("Extreme"). RECITALS Contemporaneously with the execution of this Agreement, BNPLC and Extremeare executing a Common Definitions and Provisions Agreement (Land) dated as ofthe Effective Date (the "Common Definitions and Provisions Agreement (Land)"),which by this reference is incorporated into and made a part of this Agreementfor all purposes. As used in this Agreement, capitalized terms defined in theCommon Definitions and Provisions Agreement (Land) and not otherwise defined inthis Agreement are intended to have the respective meanings assigned to them inthe Common Definitions and Provisions Agreement (Land). Pursuant to the Acquisition Contract, which covers the Land described inExhibit A, BNPLC is acquiring the Land and any appurtenances thereto and the---------existing Improvements thereon from Seller contemporaneously with the executionof this Agreement. Pursuant to the Lease Agreement (Land) executed by BNPLC andExtreme contemporaneously with this Agreement (the "Land Lease"), BNPLC isleasing the Land to Extreme. (All of BNPLC's interests, including those createdby the documents delivered at the closing under the Acquisition Contract, in theLand and in all other real and personal property from time to time covered bythe Land Lease and included within the "Property" as defined therein arehereinafter collectively referred to as the "Property". The Property does notinclude the Improvements, it being understood that the Other Purchase Agreementconstitutes a separate agreement providing for the possible sale of theImprovements and the appurtenances thereto, and only the Improvements and theappurtenances thereto, from BNPLC to Extreme or a third party designated byExtreme.) Extreme and BNPLC have reached agreement upon the terms and conditions uponwhich Extreme will purchase or arrange for the purchase of the Property, and bythis Agreement they desire to evidence such agreement. AGREEMENTS 1. Extreme's Options and Obligations on the Designated Sale Date. (A) Right to Purchase; Initial Remarketing Rights and Obligations. -------------------------------------------------------------Whether or not an Event of Default shall have occurred and be continuing or theLand Lease shall have been terminated, but subject to Paragraph 4 below: (1) Extreme shall have the right (the "Purchase Option") to purchase or cause an Affiliate of Extreme to purchase the Property and BNPLC's interest in Escrowed Proceeds, if any, on the Designated Sale Date for a cash price equal to the Break Even Price (as defined below). (2) If neither Extreme nor an Affiliate of Extreme purchases the Property and BNPLC's interest in any Escrowed Proceeds on the Designated Sale Date as provided in the preceding subparagraph 1.(A)(1), then Extreme shall have the following rights and obligations (collectively, "Extreme's Initial Remarketing Rights and Obligations"): (a) First, Extreme shall have the right (but not the obligation) to cause an Applicable Purchaser who is not an Affiliate of Extreme to purchase the Property and BNPLC's interest in any Escrowed Proceeds on the Designated Sale Date for a cash purchase price (the "Third Party Price") determined as provided below. If, however, the Break Even Price exceeds the sum of any Third Party Price tendered or to be tendered to BNPLC by an Applicable Purchaser and any Supplemental Payment paid by Extreme as described below, then BNPLC may affirmatively elect to decline such tender from the Applicable Purchaser and to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser pursuant to this subparagraph (a "Voluntary Retention of the Property"). (b) Second, if the Third Party Price actually paid by an Applicable Purchaser to BNPLC on the Designated Sale Date exceeds the Break Even Price, Extreme shall be entitled to such excess, subject, however, to BNPLC's right to offset against such excess any and all sums that are then due from Extreme to BNPLC under the other Operative Documents. (c) Third, if for any reason whatsoever (including a Voluntary Retention of the Property or a decision by Extreme not to exercise its right to purchase or cause an Applicable Purchaser to purchase from BNPLC as described above) neither Extreme nor an Applicable Purchaser pays a net cash price to BNPLC on the Designated Sale Date equal to or in excess of the Break Even Price in connection with a sale of the Property and BNPLC's interest in any Escrowed Proceeds pursuant to this Agreement, then Extreme shall have the obligation to pay to BNPLC on the Designated Sale Date a supplemental payment (the "Supplemental Payment") equal to the lesser of (1) the amount by which the Break Even Price exceeds such net cash price (if any) actually received by BNPLC on the Designated Sale Date (such excess being hereinafter called a "Deficiency") or (2) the Maximum Remarketing Obligation. As used herein, the "Maximum Remarketing Obligation" means a dollar amount determined in accordance with the following provisions: 1) The "Maximum Remarketing Obligation" will equal the product of (i) Stipulated Loss Value on the Designated Sale Date, times (ii) 100% minus the Residual Risk Percentage, provided that both of the following conditions are satisfied: (x) Extreme shall not have elected to accelerate the Designated Sale Date as provided in clause (2) of the definition of Designated Sale Date in the Common Definitions and Provisions Agreement (Land). (y) No Event of Default, other than an Issue 97-1 Non-performance-related Subjective Event of Default, shall occur on or be continuing on the Designated Sale Date. 2) If either of the conditions listed in subparagraph 1) preceding are not satisfied, the "Maximum Remarketing Obligation" will equal the Break Even Price.If any Supplemental Payment or other amount payable to BNPLC pursuant to thissubparagraph 1.(A) is not actually paid to BNPLC on the Designated Sale Date,Extreme shall pay interest on the past due amount computed at the Default Ratefrom the Designated Sale Date.[Land] 2 (B) Determinations Concerning Price. ------------------------------- (1) Determination of the Break Even Price. As used herein, -------------------------------------"Break Even Price" means an amount equal, on the Designated Sale Date, toStipulated Loss Value, plus all out-of-pocket costs and expenses (including ----appraisal costs, withholding taxes (if any) not constituting Excluded Taxes, andAttorneys' Fees) incurred by BNPLC in connection with any sale of BNPLC'sinterests in the Property under this Agreement or in connection with collectingpayments due hereunder, but less the aggregate amounts (if any) of Direct --------Payments to Participants and Deposit Taker Losses. (2) Determination of Third Party Price. The Third Party Price ----------------------------------required of any Applicable Purchaser purchasing from BNPLC undersubparagraph 1.(A)(2)(a) will be determined as follows: (a) Extreme may give a notice (a "Remarketing Notice") to BNPLC and to each of the Participants no earlier than one hundred twenty days before the Designated Sale Date and no later than ninety days before the Designated Sale Date, specifying an amount as the Third Party Price that Extreme believes in good faith to constitute reasonably equivalent value for the Property and any Escrowed Proceeds. Once given, a Remarketing Notice shall not be rescinded or modified without BNPLC's written consent. (b) If BNPLC believes in good faith that the Third Party Price specified by Extreme in a Remarketing Notice does not constitute reasonably equivalent value for the Property and any Escrowed Proceeds, BNPLC may at any time before sixty days prior to the Designated Sale Date respond to the Remarketing Notice with a notice back to Extreme, objecting to the Third Party Price so specified by Extreme. If BNPLC receives a Remarketing Notice, yet does not respond with an objection as provided in the preceding sentence, the Third Party Price suggested by Extreme in the Remarketing Notice will be the Third Party Price for purposes of this Agreement. If, however, BNPLC does respond with an objection as provided in this subparagraph, and if Extreme and BNPLC do not otherwise agree in writing upon a Third Party Price, then the Third Party Price will be the lesser of (I) fair market value of the Property, plus the amount of any Escrowed Proceeds, as determined by a professional independent appraiser selected by BNPLC, or (II) the Break Even Price. (c) If for any reason, including an acceleration of the Designated Sale Date as provided in the definition thereof in the Common Definitions and Provisions Agreement (Land), Extreme does not deliver a Remarketing Notice to BNPLC within the time period specified above, then the Third Party Price will be an amount determined in good faith by BNPLC as constituting reasonably equivalent value for the Property and any Escrowed Proceeds, but in no event more than the Break Even Price.If any payment to BNPLC by an Applicable Purchaser hereunder is held toconstitute a preference or a voidable transfer under Applicable Law, or must forany other reason be refunded by BNPLC to the Applicable Purchaser or to anotherPerson, and if such payment to BNPLC reduced or had the effect of reducing aSupplemental Payment or increased or had the effect of increasing any excesssale proceeds paid to Extreme pursuant to subparagraph 1(A)(2)(b) or pursuant tosubparagraph 2.(D), then Extreme shall pay to BNPLC upon demand an amount equalto the reduction of the Supplemental Payment or to the increase of the excesssale proceeds paid to Extreme, as applicable, and this Agreement shall continueto [Land] 3 be effective or shall be reinstated as necessary to permit BNPLC to enforce its right to collect such amount from Extreme. (C) Designation of the Purchaser. To give BNPLC the opportunity ----------------------------before the Designated Sale Date to prepare the deed and other documents thatBNPLC must tender pursuant to Paragraph 3 (collectively, the "Sale ClosingDocuments"), Extreme must, by a notice to BNPLC given at least seven days priorto the Designated Sale Date, specify irrevocably, unequivocally and withparticularity the party who will purchase the Property in order to satisfy theobligations of Extreme set forth in subparagraph 1(A). If for any reason Extreme ----fails to so specify a party who will in accordance with the terms and conditionsset forth herein purchase the Property (be it Extreme itself, an Affiliate ofExtreme or another Applicable Purchaser), BNPLC shall be entitled to postponethe tender of the Sale Closing Documents until a date after the Designated SaleDate and not more than twenty days after Extreme finally does so specify aparty, but such postponement will not relieve or postpone the obligation ofExtreme to make a Supplemental Payment on the Designated Sale Date as providedin Paragraph 1.(A)(2)(c). (D) Effect of the Purchase Option and Extreme's Initial Remarketing ---------------------------------------------------------------Rights and Obligations on Subsequent Title Encumbrances. Any conveyance of the-------------------------------------------------------Property to Extreme or any Applicable Purchaser pursuant to this Paragraph 1.(A)shall cut off and terminate any interest in the Land or other Property claimedby, through or under BNPLC, including any interest claimed by the Participantsand including any Liens Removable by BNPLC (such as, but not limited to, anyjudgment liens established against the Property because of a judgment renderedagainst BNPLC and any leasehold or other interests conveyed by BNPLC in theordinary course of BNPLC's business), but not including personal obligations ofExtreme to BNPLC under the Land Lease or other Operative Documents (includingobligations arising under the indemnities therein). Anyone accepting or takingany interest in the Property by or through BNPLC after the date of thisAgreement shall acquire such interest subject to the Purchase Option andExtreme's Initial Remarketing Rights and Obligations. Further, Extreme and anyApplicable Purchaser shall be entitled to pay any payment required by thisAgreement for the purchase of the Property directly to BNPLC notwithstanding anyprior conveyance or assignment by BNPLC, voluntary or otherwise, of any right orinterest in this Agreement or the Property, and neither Extreme nor anyApplicable Purchaser shall be responsible for the proper distribution orapplication of any such payments by BNPLC; and any such payment to BNPLC shalldischarge the obligation of Extreme to cause such payment to all Personsclaiming an interest in such payment. Contemporaneously with the execution ofthis Agreement, the parties shall record a memorandum of this Agreement forpurposes of effecting constructive notice to all Persons of Extreme's rightsunder this Agreement, including its rights under this subparagraph. (E) Security for the Purchase Option and Extreme's Initial ------------------------------------------------------Remarketing Rights and Obligations. To secure BNPLC's obligation to sell the-----------------------------------Property pursuant to Paragraph 1.(A) and to pay any damages to Extreme caused bya breach of such obligations, including any such breach caused by a rejection ortermination of this Agreement in any bankruptcy or insolvency proceedinginstituted by or against BNPLC, as debtor, BNPLC does hereby grant to Extreme alien and security interest against all rights, title and interests of BNPLC fromtime to time in and to the Land and other Property. Extreme may enforce suchlien and security interest judicially after any such breach by BNPLC, but nototherwise. Contemporaneously with the execution of this Agreement, Extreme andBNPLC will execute a memorandum of this Agreement which is in recordable formand which specifically references the lien granted in this subparagraph, andExtreme shall be entitled to record such memorandum at any time prior to theDesignated Sale Date. (F) Delivery of Books and Records If BNPLC Retains the Property. ----------------------------------------------------------Unless Extreme or its Affiliate or another Applicable Purchaser purchases theProperty pursuant to Paragraph 1.(A), promptly after the Designated Sale DateExtreme shall deliver to BNPLC copies of books and records of Extreme which willbe necessary or useful to any future owner's or occupant's use of the Property.[Land] 4 2. Extreme's Rights and Options after the Designated Sale Date. (A) Extreme's Extended Right to Remarket. During the two ------------------------------------ years following the Designated Sale Date ("Extreme's Extended RemarketingPeriod"), Extreme shall have the right ("Extreme's Extended Remarketing Right")to cause an Applicable Purchaser who is not an Affiliate of Extreme to purchasethe Property for a cash purchase price not below the Minimum ExtendedRemarketing Price (as defined below). Extreme's Extended Remarketing Rightshall, however, be subject to all of the following conditions: (1) The Property and BNPLC's interest in Escrowed Proceeds, if any, shall not have been sold on the Designated Sale Date as provided in Paragraph 1 or within the thirty days thereafter as provided in subparagraph 4.(B). (2) No Voluntary Retention occurred as described in subparagraph 1.(A)(2)(a). (3) Extreme's Extended Remarketing Right shall not have been terminated pursuant to subparagraph 4.(B) below because of Extreme's failure to make any Supplemental Payment required on the Designated Sale Date. (4) Extreme's Extended Remarketing Right shall not have been terminated by BNPLC pursuant to subparagraph 4.(C) below to facilitate BNPLC's sale of the Property to a third party in accordance with subparagraph 2.(C). (5) At least thirty days prior to the date upon which BNPLC is to convey the Property to an Applicable Purchaser because of Extreme's exercise of Extreme's Extended Remarketing Right (the "Final Sale Date"), Extreme shall have notified BNPLC of (x) the date proposed by Extreme as the Final Sale Date (which must be a Business Day), (y) the full legal name of the Applicable Purchaser and such other information as will be required to prepare the Sale Closing Documents, and (z) the amount of the purchase price that the Applicable Purchaser will pay (consistent with the minimum required pursuant to the other provisions of this subparagraph 2.(A)) for the Property. (B) Definition of Minimum Extended Remarketing Price. As ------------------------------------------------used herein, the "Minimum Extended Remarketing Price" means, subject toreduction as provided in subparagraph 2.(C) below, an amount equal to the sum ofthe following: (1) the amount by which the Break Even Price computed on the Designated Sale Date exceeds any Supplemental Payment actually paid to BNPLC on the Designated Sale Date, together with interest on such excess computed at the Default Rate from the period commencing on the Designated Sale Date and ending on the Final Sale Date, plus ---- (2) all out-of-pocket costs and expenses (including withholding taxes [if any], other than Excluded Taxes, and Attorneys' Fees) incurred by BNPLC in connection with the sale to the Applicable Purchaser, to the extent not already included in the computation of Break Even Price, and plus -------- (3) the sum of all Impositions, insurance premiums and other Losses of every kind suffered or incurred by BNPLC or any other Interested Party with respect to the ownership, operation or maintenance of the Property on or after the Designated Sale Date, together with interest on such Impositions, insurance premiums and other Losses computed at the Default Rate from the date paid or incurred to the Final Sale Date.[Land] 5 If, however, Losses described in the preceding clause (3) consist of claimsagainst BNPLC or another Interested Party that have not been liquidated prior tothe Final Sale Date (and, thus, such Losses have yet to be fixed in amount as ofthe Final Sale Date), then Extreme may elect to exclude any such Losses from thecomputation of the Minimum Extended Remarketing Price by providing to BNPLC, forthe benefit of BNPLC and other Interested Parties, a written agreement toindemnify and defend BNPLC and other Interested Parties against such Losses. Tobe effective hereunder for purposes of reducing the Minimum Extended RemarketingPrice (and, thus, the Break Even Price), any such written indemnity must befully executed and delivered by Extreme on or prior to the Final Sale Date, mustinclude provisions comparable to subparagraphs 5(c)(ii), (iii), (iv) and (v) of ------------------------------------------- the Land Lease and otherwise must be in form and substance satisfactory toBNPLC. (C) BNPLC's Right to Sell. After the Designated Sale Date, if the ---------------------Property has not already been sold by BNPLC pursuant to Paragraph 1 or thisParagraph 2, BNPLC shall have the right to sell the Property or offer theProperty for sale to any third party on any terms believed to be appropriate byBNPLC in its sole good faith business judgment; provided, however, that so longas the conditions to Extreme's Extended Remarketing Rights specified insubparagraph 2.(A) continue to be satisfied: (1) BNPLC shall not sell the Property to an Affiliate of BNPLC on terms less favorable than those which BNPLC would require from a prospective purchaser not an Affiliate of BNPLC; (2) If BNPLC receives or desires to make a written proposal (whether in the form of a "letter of intent" or other nonbinding expression of interest or in the form of a more definitive purchase and sale agreement) for a sale of the Property to a prospective purchaser (a "Third Party Sale Proposal"), and if on the basis of such Third Party Sale Proposal BNPLC expects to enter into or to pursue negotiations for a definitive purchase and sale agreement with the prospective purchaser, then prior to executing any such definitive agreement, BNPLC shall submit the Third Party Sale Proposal to Extreme with a notice (the "Third Party Sale Notice") explaining that (A) BNPLC is then prepared to accept a price not below an amount specified in such Third Party Sale Notice (the "Third Party Target Price") if BNPLC and the prospective purchaser reach agreement on other terms and conditions to be incorporated into a definitive purchase and sale agreement, and (B) Extreme's Extended Remarketing Right may be terminated pursuant to subparagraph 4.(C) of this Agreement unless Extreme causes an Applicable Purchaser to consummate a purchase of the Property pursuant to this Paragraph 2 within ninety days after the date of such Third Party Sale Notice.For a period of ninety days (but only ninety days) after the date of any ThirdParty Sale Notice, the Minimum Extended Remarketing Price shall be limited inamount so that it does not exceed the Third Party Target Price specified byBNPLC therein. Accordingly, if BNPLC has delivered a Third Party Sale Noticespecifying a Third Party Target Price below the Minimum Extended RemarketingPrice calculated as provided in subparagraph 2.(B) within the ninety days priorto the Final Sale Date for any sale to an Applicable Purchaser by BNPLC pursuantto this Paragraph 2, then the Minimum Extended Remarketing Price applicable tosuch sale shall be reduced to the amount of the Third Party Target Price sospecified. Such a reduction, however, will apply only to a sale to an ApplicablePurchaser actually consummated within the ninety days after the date of theapplicable Third Party Sale Notice. (D) Extreme's Right to Excess Sales Proceeds. If the cash price ----------------------------------------actually paid by any third party purchasing the Property from BNPLC duringExtreme's Extended Remarketing Period, including any price paid by an ApplicablePurchaser purchasing from BNPLC pursuant to this Paragraph 2, exceeds theMinimum Extended Remarketing Price (calculated as provided in subparagraph2.(B), without reduction pursuant to [Land] 6 subparagraph 2.(C)), then Extreme shall be entitled to the excess; provided,that BNPLC may offset and retain from the excess any and all sums that are thendue and unpaid from Extreme to BNPLC under any of the Operative Documents. (E) Permitted Transfers During Extreme's Extended Remarketing Period. ----------------------------------------------------------------Any "Permitted Transfer" described in clause (6) of the definition thereof in ---------- the Common Definitions and Provisions Agreement (Land) to an Affiliate of BNPLCor that covers BNPLC's entire interest in the Land will be subject to Extreme'sExtended Remarketing Right if, at the time of the Permitted Transfer, Extreme'sExtended Remarketing Right has not expired or been terminated as providedherein. Any other Permitted Transfer described in clause (6) of the definitionthereof, however, will not be subject to Extreme's Extended Remarketing Right.Thus, for example, BNPLC's conveyance of a utility easement or space lease morethan thirty days after the Designated Sale Date to a Person not an Affiliate ofBNPLC shall not be subject to Extreme's Extended Remarketing Right, thoughfollowing the conveyance of the lesser estate, Extreme's Extended RemarketingRight may continue to apply to BNPLC's remaining interest in the Land and anyPersonal Property. 3 Terms of Conveyance Upon Purchase. As necessary to consummate any saleof the Property to Extreme or an Applicable Purchaser pursuant to thisAgreement, BNPLC must, subject to any postponement permitted by subparagraph1.(C), promptly after the tender of the purchase price and any other payments toBNPLC required pursuant to Paragraph 1 or Paragraph 2, as applicable, convey allof BNPLC's right, title and interest in the Land and other Property to Extremeor the Applicable Purchaser, as the case may be, by BNPLC's execution,acknowledgment (where appropriate) and delivery of the Sale Closing Documents.Such conveyance by BNPLC will be subject only to the Permitted Encumbrances andany other encumbrances that do not constitute Liens Removable by BNPLC. However,such conveyance shall not include the rights of BNPLC or other InterestedParties under the indemnities provided in the Operative Documents, includingrights to any payments then due from Extreme under the indemnities or that maybecome due thereafter because of any expense or liability incurred by BNPLC oranother Interested Party resulting in whole or in part from events orcircumstances occurring or alleged to have occurred before such conveyance. Allcosts, both foreseen and unforeseen, of any purchase by Extreme or an ApplicablePurchaser hereunder shall be the responsibility of the purchaser. The SaleClosing Documents used to accomplish such conveyance shall consist of thefollowing: (1) a Corporation Grant Deed in the form attached as Exhibit B-1 or ----------- Exhibit B-2 or Exhibit B-4, as required by Exhibit B, (2) if required by Exhibit----------- ----------- --------- -------B, a Ground Lease in the form attached as Exhibit B-3, which Extreme or the- -----------Applicable Purchase must execute and return to BNPLC, (3) a Bill of Sale andAssignment in the form attached as Exhibit C, (4) an Acknowledgment of ---------Disclaimer of Representations and Warranties, in the form attached as Exhibit D, ---------which Extreme or the Applicable Purchaser must execute and return to BNPLC, (5)a Secretary's Certificate in the form attached as Exhibit E, and (6) a ---------certificate concerning tax withholding in the form attached as Exhibit F. If for ---------any reason BNPLC fails to tender the Sale Closing Documents as required by thisParagraph 3, BNPLC may cure such refusal at any time before thirty days afterreceipt of a demand for such cure from Extreme. 4 Survival and Termination of the Rights and Obligations of Extreme andBnplc. (A) Status of this Agreement Generally. Except as expressly provided ----------------------------------herein, this Agreement shall not terminate; nor shall Extreme have any right toterminate this Agreement; nor shall Extreme be entitled to any reduction of theBreak Even Price, any Deficiency, the Maximum Remarketing Obligation, anySupplemental Payment or the Minimum Extended Remarketing Price hereunder; norshall the obligations of Extreme to BNPLC under Paragraph 1 be affected, byreason of (i) any damage to or the destruction of all or any part of theProperty from whatever cause (though it is understood that Extreme will receiveany remaining Escrowed Proceeds yet to be applied as provided in the Land Leasethat may result from such damage if Extreme purchases the Property and theEscrowed Proceeds as herein provided), (ii) the taking of or damage to theProperty or any portion thereof by eminent domain or otherwise for any reason(though it is understood that Extreme will receive any remaining [Land] 7 Escrowed Proceeds yet to be applied as provided in the Land Lease that mayresult from such taking or damage if Extreme purchases the Property and theEscrowed Proceeds as herein provided), (iii) the prohibition, limitation orrestriction of Extreme's us e of all or any portion of the Property or anyinterference with such use by governmental action or otherwise, (iv) anyeviction of Extreme or any party claiming under Extreme by paramount title orotherwise, (v) Extreme's prior acquisition or ownership of any interest in theProperty, (vi) any default on the part of BNPLC under this Agreement, the LandLease or any other agreement to which BNPLC is a party, or (vii) any othercause, whether similar or dissimilar to the foregoing, any existing or futurelaw to the contrary notwithstanding. It is the intention of the parties heretothat the obligations of Extreme hereunder (including the obligation to make anySupplemental Payment as provided in Paragraph 1) shall be separate andindependent covenants and agreements from BNPLC's obligations under thisAgreement or any other agreement between BNPLC and Extreme; provided, however,that nothing in this subparagraph shall excuse BNPLC from its obligation totender the Sale Closing Documents in substantially the form attached hereto asexhibits when required by Paragraph 3. Further, nothing in this subparagraphshall be construed as a waiver by Extreme of any right Extreme may have at lawor in equity to the following remedies, whether because of BNPLC's failure toremove a Lien Removable by BNPLC or because of any other default by BNPLC underthis Agreement: (i) the recovery of monetary damages, (ii) injunctive relief incase of the violation, or attempted or threatened violation, by BNPLC of any ofthe express covenants, agreements, conditions or provisions of this Agreementwhich are binding upon BNPLC, or (iii) a decree compelling performance by BNPLCof any of the express covenants, agreements, conditions or provisions of thisAgreement which are binding upon BNPLC. (B) Automatic Termination of Extreme's Rights. Without limiting -----------------------------------------BNPLC's right to enforce Extreme's obligation to pay any Supplemental Payment orother amounts required by this Agreement, the rights of Extreme (to bedistinguished from the obligations of Extreme) included in Extreme's InitialRemarketing Rights and Obligations, the Purchase Option and Extreme's ExtendedRemarketing Rights shall all terminate automatically if Extreme shall fail topay the full amount of any Supplemental Payment required by subparagraph1.(A)(2)(c) on the Designated Sale Date or if BNPLC shall elect a VoluntaryRetention of the Property as provided in subparagraph 1.(A)(2)(a).Notwithstanding anything in this subparagraph to the contrary, however, evenafter a failure to pay any required Supplemental Payment on the Designated SaleDate, Extreme may nonetheless tender to BNPLC the full Break Even Price and allamounts then due under the Operative Documents, together with interest on thetotal Break Even Price computed at the Default Rate from the Designated SaleDate to the date of tender, on any Business Day within thirty days after theDesignated Sale Date, and if presented with such a tender within thirty daysafter the Designated Sale Date, BNPLC must accept it and promptly thereafterdeliver any Escrowed Proceeds and the Sale Closing Documents listed in Paragraph3 to Extreme. (C) Termination of Extreme's Extended Remarketing Rights to Permit a ----------------------------------------------------------------Sale by BNPLC. At any time more than ninety days after BNPLC has delivered a-------------Third Party Sale Notice to Extreme as described in subparagraph 2.(C)(2), BNPLCmay terminate Extreme's Extended Remarketing Rights contemporaneously with theconsummation of a sale of the Property by BNPLC to any third party (be it theprospective purchaser named in the Third Party Sale Notice or another thirdparty) at a price equal to or in excess of the Third Party Target Pricespecified in the Third Party Sale Notice, so as to permit the sale of theProperty unencumbered by Extreme's Extended Remarketing Rights. (D) Payment Only to BNPLC. All amounts payable under this Agreement ---------------------by Extreme and, if applicable, by an Applicable Purchaser must be paid directlyto BNPLC, and no payment to any other party shall be effective for the purposesof this Agreement. In addition to the payments required under subparagraph1.(A), on the Designated Sale Date Extreme must pay all amounts then due toBNPLC under the Land Lease or other Operative Documents. This subparagraph shallnot, however, be construed to limit Extreme's right to require the deduction ofDirect Payments to Participants and Deposit Taker Losses in the calculation ofthe Break Even Price as provided in subparagraph 1.(B)(1).[Land] 8 (E) Remedies Under the Other Operative Documents. No repossession of --------------------------------------------or re-entering upon the Property or exercise of any other remedies available toBNPLC under the Land Lease or other Operative Documents shall terminateExtreme's rights or obligations hereunder, all of which shall survive BNPLC'sexercise of remedies under the other Operative Documents. Extreme acknowledgesthat the consideration for this Agreement is separate and independent of theconsideration for the Land Lease and the Closing Certificate, and Extreme'sobligations hereunder shall not be affected or impaired by any event orcircumstance that would excuse Extreme from performance of its obligations undersuch other Operative Documents. (F) Occupancy by Extreme Prior to Closing of a Sale. Prior to the -----------------------------------------------closing of any sale of the Property to Extreme or an Applicable Purchaserhereunder, Extreme's occupancy of the Land and its use of the Property shallcontinue to be subject to the terms and conditions of the Land Lease, includingthe terms setting forth Extreme's obligation to pay rent, prior to anytermination or expiration of the Land Lease pursuant to its express terms andconditions. 5 Security for Extreme's Obligations; Return of Funds. Extreme'sobligations under this Agreement are secured by the Pledge Agreement, referenceto which is hereby made for a description of the Collateral covered thereby andthe rights and remedies provided to BNPLC thereby. Although the collateral agentappointed for BNPLC as provided in the Pledge Agreement shall be entitled tohold all Collateral as security for the full and faithful performance by Extremeof Extreme's covenants and obligations under this Agreement, the Collateralshall not be considered an advance payment of the Break Even Price or anySupplemental Payment or a measure of BNPLC's damages should Extreme breach thisAgreement. If Extreme does breach this Agreement and fails to cure the samewithin any time specified herein for the cure, BNPLC may, from time to time,without prejudice to any other remedy and without notice to Extreme, require thecollateral agent to immediately apply the proceeds of any disposition of theCollateral (and any cash included in the Collateral) to amounts then duehereunder from Extreme. If by a Permitted Transfer BNPLC conveys its interest inthe Property before the Designated Sale Date, BNPLC may also assign BNPLC'sinterest in the Collateral to the transferee. BNPLC shall be entitled to returnany Collateral not sold or used to satisfy the obligations secured by the PledgeAgreement directly to Extreme notwithstanding any prior actual or attemptedconveyance or assignment by Extreme, voluntary or otherwise, of any right toreceive the same; neither BNPLC nor the collateral agent named in the PledgeAgreement shall be responsible for the proper distribution or application byExtreme of any such Collateral returned to Extreme; and any such return ofCollateral to Extreme shall discharge any obligation of BNPLC to deliver suchCollateral to all Persons claiming an interest in the Collateral. Further, BNPLCshall be entitled to deliver any Escrowed Proceeds it holds on the DesignatedSale Date directly to Extreme or to any Applicable Purchaser purchasing BNPLC'sinterest in the Property and the Escrowed Proceeds pursuant to this Agreementnotwithstanding any prior actual or attempted conveyance or assignment byExtreme, voluntary or otherwise, of any right to receive the same; BNPLC shallnot be responsible for the proper distribution or application by Extreme or anyApplicable Purchaser of any such Escrowed Proceeds paid over to Extreme or theApplicable Purchaser; and any such payment of Escrowed Proceeds to Extreme or anApplicable Purchaser shall discharge any obligation of BNPLC to deliver the sameto all Persons claiming an interest therein. 6 Certain Remedies Cumulative. No right or remedy herein conferred uponor reserved to BNPLC is intended to be exclusive of any other right or remedyBNPLC has with respect to the Property, and each and every right and remedyshall be cumulative and in addition to any other right or remedy given hereunderor now or hereafter existing at law or in equity or by statute. In addition toother remedies available under this Agreement, either party shall be entitled,to the extent permitted by applicable law, to a decree compelling performance ofany of the other party's agreements hereunder.[Land] 9 7 Attorneys' Fees and Legal Expenses. If either party to this Agreementcommences any legal action or other proceeding to enforce any of the terms ofthis Agreement, or because of any breach by the other party or disputehereunder, the party prevailing in such action or proceeding shall be entitledto recover from the other party all Attorneys' Fees incurred in connectiontherewith, whether or not such controversy, claim or dispute is prosecuted to afinal judgment. Any such Attorneys' Fees incurred by either party in enforcing ajudgment in its favor under this Agreement shall be recoverable separately fromsuch judgment, and the obligation for such Attorneys' Fees is intended to beseverable from other provisions of this Agreement and not to be merged into anysuch judgment. 8 Estoppel Certificate. Upon request by BNPLC, Extreme shall execute,acknowledge and deliver a written statement certifying that this Agreement isunmodified and in full effect (or, if there have been modifications, that thisAgreement is in full effect as modified, and setting forth such modification)and either stating that no default exists hereunder or specifying each suchdefault of which Extreme has knowledge. Any such statement may be relied upon byany Participant or prospective purchaser or assignee of BNPLC with respect tothe Property. 9 Successors and Assigns. The terms, provisions, covenants andconditions hereof shall be binding upon Extreme and BNPLC and their respectivepermitted successors and assigns and shall inure to the benefit of Extreme andBNPLC and all permitted transferees, mortgagees, successors and assignees ofExtreme and BNPLC with respect to the Property; provided, that (A) the rights ofBNPLC hereunder shall not pass to Extreme or any Applicable Purchaser or anysubsequent owner claiming through Extreme or an Applicable Purchaser, (B) BNPLCshall not assign this Agreement or any rights hereunder except pursuant to aPermitted Transfer, and (C) Extreme shall not assign this Agreement or anyrights hereunder without the prior written consent of BNPLC. [Signature pages follow.][Land] 10 IN WITNESS WHEREOF, Extreme and BNPLC have caused this Agreement to beexecuted as of June 1, 2000. "Extreme" EXTREME NETWORKS, INC. By: ______________________________ Name:_________________________ Title:________________________ [Continuation of signature pages to Purchase Agreement (Land) dated to beeffective June 1, 2000] "BNPLC" BNP LEASING CORPORATION By: ______________________________ Lloyd G. Cox, Vice President Exhibit A --------- LEGAL DESCRIPTIONAll that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning.[Land] Exhibit B --------- Requirements Re: Form of Grant Deed and Ground LeaseThe form of deed to be used to convey BNPLC's interest in the Land to Extreme oran Applicable Purchaser will depend upon whether BNPLC's interest in theImprovements has been or is being conveyed at the same time to the same party.If BNPLC's interests in both the Land and the Improvements are to be conveyed toExtreme or an Applicable Purchaser at the same time, because a sale under thisPurchase Agreement and a sale under the Other Purchase Agreement (covering theImprovements) are being consummated at the same time and to the same party, thenthe one deed in form attached as Exhibit B-1 will be used to convey both. -----------If, however, a sale of BNPLC's interest in the Improvements pursuant to theOther Purchase Agreement has not been consummated before, and is not beingconsummated contemporaneously with the sale of BNPLC's interest in the Landunder this Agreement, then BNPLC's interest in the Land will be conveyed by adeed in the from attached as Exhibit B-2, and BNPLC and the grantee under such -----------deed shall, as a condition to BNPLC's obligation to deliver the deed, executeand deliver a Ground Lease covering the Land in the form attached hereto asExhibit B-3.-----------Finally, BNPLC's interest in the Land will be conveyed by a deed in the fromattached as Exhibit B-4 if BNPLC's interest in the Improvements has been soldpursuant to the Other Purchase Agreement before a sale of BNPLC's interest inthe Land under this Agreement, or if BNPLC's interest in the Improvements isbeing sold contemporaneously with a sale of BNPLC's interest in the Land, butthe purchaser of the Improvements is not the same as the purchaser of the Land.[Land] Exhibit B-1 ----------- CORPORATION GRANT DEEDRECORDING REQUESTED BYAND WHEN RECORDED MAIL TO:-------------------------NAME:[Extreme or the Applicable Purchaser]ADDRESS: ___________________________ATTN: ___________________________CITY: ___________________________STATE:___________________________Zip: ___________________________MAIL TAX STATEMENTS TO:----------------------NAME:[Extreme or the Applicable Purchaser]ADDRESS: ___________________________ATTN: ___________________________CITY: ___________________________STATE:___________________________Zip: ___________________________ CORPORATION GRANT DEED (Covering Land and Improvements)FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNPLEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest inthe land situated in Santa Clara, California, described on Annex A attachedhereto and hereby made a part hereof and all improvements on such land, togetherwith the any other right, title and interest of Grantor in and to any easements,rights-of-way, privileges and other rights appurtenant to such land or theimprovements thereon; provided, however, that this grant is subject to theencumbrances described on Annex B (the "Permitted Encumbrances"). Grantee herebyassumes the obligations (including any personal obligations) of Grantor, if any,created by or under, and agrees to be bound by the terms and conditions of, thePermitted Encumbrances to the extent that the same concern or apply to the landor improvements conveyed by this deed.[Land] BNP LEASING CORPORATINGDate: As of __________ By: ___________________________ Its: Attest: ___________________________ Its: [Extreme or Applicable Purchaser]Date: As of __________ By: ___________________________ Its: Attest: ___________________________ Its: STATE OF _____________ ) ) SSCOUNTY OF ____________ ) On ___________________ before me,__________, personally appeared_________and__________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature_________________________________[Land] Exhibit B-1 - Page 2 STATE OF _____________ ) ) SSCOUNTY OF ____________ ) On ___________________ before me,__________, personally appeared__________and___________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature____________________________[Land] Exhibit B-1 - Page 3 Annex A LEGAL DESCRIPTION[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES--------------FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH EXTREME REQUESTS BNPLC'SCONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANYSUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTINGNOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED ISACTUALLY EXECUTED AND DELIVERED.]All that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning.[Land] Exhibit B-1 - Page 4 Annex B Permitted Encumbrances[DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY---------------BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONALENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING NOTE" WILL BEDELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCHADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS"PERMITTED ENCUMBRANCES" UNDER THE LAND LEASE OR THE OTHER LEASE AGREEMENT FROMTIME TO TIME OR BECAUSE OF EXTREME'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TOAN ADJUSTMENT.] This conveyance is subject to all encumbrances not constituting a "LienRemovable by BNPLC" (as defined in the Common Definitions and ProvisionsAgreement (Land) incorporated by reference into the Lease Agreement (Land)referenced in the last item of the list below), including the following mattersto the extent the same are still valid and in force:1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 20004. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed, From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983 Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records.6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects:A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as [Land] Exhibit B-1 - Page 5 follows: Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows: Parcel 1: Commencing at the point of intersection of the Westerly line of that certain 24.74 acre parcel of land shown upon that Record of Survey filed for recorded August 10, 1979 in Book 447 of Maps, at page 33, Santa Clara County Records, with a line parallel with and 10 feet Southerly of, measured at right angles to, the Northerly line of said parcel; thence along said parallel line N. 89 degrees 25 minutes 00 seconds E. 107.00 feet; thence parallel with said Westerly line S. 0 degrees 00 minutes 27 seconds E. 319.16 feet; thence S. 34 degrees 02 minutes 45 seconds W. 87.51 feet, more or less, to intersection with a line parallel with and 58 feet Easterly of measured at right angles to, said Westerly line; thence along last said parallel line S. 0 degrees 00 minutes 27 seconds E. 294.30 feet, more or less, to intersection with a line parallel with and 5 feet Northerly of, measured at right angles to, the Northerly line of that real property conveyed to the City of Santa Clara by that deed filed for record November 30, 1983 in Book I 111 of Official Records, at page 606, said County Records; thence along last said parallel line the following three (3) courses: N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87 degrees 09 minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00 seconds E. 334.69 feet; thence continuing parallel with the Southerly line of first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet, more or less, to termination in the Easterly line of that certain parcel of real property conveyed to MPJ Partnership, by that Grant Deed filed for record August 25, 1983 in Book H 838 of Official Records, at page 215, said County Records. Parcel 2: A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline. Parcel 3:[Land] Exhibit B-1 - Page 6 A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip. Parcel 4: A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip. Parcel 5: A strip of land 10 feet in width, the centerline of said strip being described as follows: Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line. Parcel 6: A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee.[Land] Exhibit B-1 - Page 7 Exhibit B-2 ----------- CORPORATION GRANT DEEDRECORDING REQUESTED BYAND WHEN RECORDED MAIL TO:-------------------------NAME: [Extreme or the Applicable Purchaser]ADDRESS: _______________________________ATTN: _______________________________CITY: _______________________________STATE:_______________________________Zip: _______________________________MAIL TAX STATEMENTS TO:----------------------NAME: [Extreme or the Applicable Purchaser]ADDRESS: _______________________________ATTN: _______________________________CITY: _______________________________STATE:_______________________________Zip: _______________________________ CORPORATION GRANT DEED (Covering Land but not the Improvements On the Land)FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNPLEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest inthe land situated in Santa Clara, California, described on Annex A attachedhereto and hereby made a part hereof (the "Land"), together with the any otherright, title and interest of Grantor in and to any easements, rights-of-way,privileges and other rights appurtenant to the Land; provided, however, thatthis grant is subject to the encumbrances described on Annex B (the "PermittedEncumbrances") and any reservations or qualifications set forth below. Granteehereby assumes the obligations (including any personal obligations) of Grantor,if any, created by or under, and agrees to be bound by the terms and conditionsof, the Permitted Encumbrances to the extent that the same concern or apply tothe Land.Although this deed conveys Grantor's interest in the Land itself, this deed doesnot convey any interest in any buildings or other improvements on the Land(collectively, "Improvements") or any rights or easements appurtenant toImprovements. Grantor retains and reserves all right, title and interest ofGrantor in and to Improvements and any rights and easements appurtenant toImprovements, together with a leasehold estate in and to the Land and any rightsand easements appurtenant to the Land, which leasehold estate will permit theconstruction, maintenance and use of Improvements by Grantor and Grantor'ssuccessors and assigns on and subject to the terms and conditions set forth inthe Ground Lease dated of even date herewith, executed by Grantee, as lessor,and Grantor, as lessee. Reference is made to such Ground Lease, all the termsand conditions of which are incorporated into this deed as if set forth herein.[Land] Exhibit B-2 - Page 2 BNP LEASING CORPORATINGDate: As of __________ By: ___________________________ Its: Attest: ___________________________ Its: [Extreme or Applicable Purchaser]Date: As of __________ By: ___________________________ Its: Attest: ___________________________ Its: STATE OF _____________ ) ) SSCOUNTY OF ____________ ) On ___________________ before me,_________, personally appeared________ and___________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature____________________[Land] Exhibit B-2 - Page 2 STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me,_________ , personally appeared________ and____________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature_______________________[Land] Exhibit B-2 - Page 3 Annex A LEGAL DESCRIPTION[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES---------------FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH EXTREME REQUESTS BNPLC'SCONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANYSUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTINGNOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED ISACTUALLY EXECUTED AND DELIVERED.]All that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning.[Land] Exhibit B-2 - Page 4 Annex B Permitted Encumbrances[DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY---------------BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONALENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING NOTE" WILL BEDELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCHADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS"PERMITTED ENCUMBRANCES" UNDER THE LAND LEASE OR THE OTHER LEASE AGREEMENT FROMTIME TO TIME OR BECAUSE OF EXTREME'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TOAN ADJUSTMENT.] This conveyance is subject to all encumbrances not constituting a "LienRemovable by BNPLC" (as defined in the Common Definitions and ProvisionsAgreement (Land) incorporated by reference into the Lease Agreement (Land)referenced in the last item of the list below), including the following mattersto the extent the same are still valid and in force:1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 20004. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed, From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983 Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records.6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects: A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as [Land] Exhibit B-2 - Page 5 follows: Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows: Parcel 1: Commencing at the point of intersection of the Westerly line of that certain 24.74 acre parcel of land shown upon that Record of Survey filed for recorded August 10, 1979 in Book 447 of Maps, at page 33, Santa Clara County Records, with a line parallel with and 10 feet Southerly of, measured at right angles to, the Northerly line of said parcel; thence along said parallel line N. 89 degrees 25 minutes 00 seconds E. 107.00 feet; thence parallel with said Westerly line S. 0 degrees 00 minutes 27 seconds E. 319.16 feet; thence S. 34 degrees 02 minutes 45 seconds W. 87.51 feet, more or less, to intersection with a line parallel with and 58 feet Easterly of measured at right angles to, said Westerly line; thence along last said parallel line S. 0 degrees 00 minutes 27 seconds E. 294.30 feet, more or less, to intersection with a line parallel with and 5 feet Northerly of, measured at right angles to, the Northerly line of that real property conveyed to the City of Santa Clara by that deed filed for record November 30, 1983 in Book I 111 of Official Records, at page 606, said County Records; thence along last said parallel line the following three (3) courses: N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87 degrees 09 minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00 seconds E. 334.69 feet; thence continuing parallel with the Southerly line of first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet, more or less, to termination in the Easterly line of that certain parcel of real property conveyed to MPJ Partnership, by that Grant Deed filed for record August 25, 1983 in Book H 838 of Official Records, at page 215, said County Records. Parcel 2: A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline. Parcel 3:[Land] Exhibit B-2 - Page 6 A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip. Parcel 4: A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip. Parcel 5: A strip of land 10 feet in width, the centerline of said strip being described as follows: Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line. Parcel 6: A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee.[Land] Exhibit B-2 - Page 7 Exhibit B-3 ----------- GROUND LEASE This GROUND LEASE (this "Ground Lease"), by and between BNP LEASINGCORPORATION, a Delaware corporation ("BNPLC"), whose address is 12201 MeritDrive, Suite 860,Dallas, Texas 75251, and [Extreme or the Applicable Purchaser],a ___________ ("Lessor"), whose address is ____________________. as of____________, ____ (the "GL Effective Date"). RECITALS This Ground Lease is being executed pursuant to a Purchase Agreement (Land)dated as of June 1, 2000 (the "Purchase Agreement"), between BNP LeasingCorporation and Extreme Networks, Inc., covering the land described in Annex 1 -------attached hereto (the "Land"). Incorporated by reference into the PurchaseAgreement is a Common Definitions and Provisions Agreement (Land) dated as ofthe effective date of the Purchase Agreement (the "CDPA"), between BNP LeasingCorporation and Extreme Networks, Inc. The CDPA is hereby incorporated into andmade a part of this Ground Lease for all purposes. Capitalized terms defined inthe CDPA and used but not otherwise defined herein are intended in this GroundLease to have the respective meanings ascribed to them in the CDPA. Theprovisions in Article II of the CDPA are intended to apply to this Ground Leaseas if set forth herein and as if this Ground Lease were one of the "OperativeDocuments" as defined therein. Lessor and BNPLC have reached agreement as to the terms and conditions uponwhich Lessor is willing to lease the Land described in Annex 1 to BNPLC for a -------term of approximately just less that 35 years, and by this Ground Lease Lessorand BNPLC desire to evidence such agreement. GRANTING CLAUSES NOW, THEREFORE, in consideration of the rent to be paid and the covenantsand agreements to be performed by BNPLC, as hereinafter set forth, Lessor doeshereby LEASE, DEMISE and LET unto BNPLC for the term hereinafter set forth theLand, together with: (1 all easements and rights-of-way now owned or hereafter acquired by Lessor for use in connection with the Land or as a means of access thereto; and (2 all right, title and interest of Lessor, now owned or hereafter acquired, in and to (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any and all sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and any abutting land not owned by Lessor.The Land and all of the property described in the preceding clauses (1) and (2)are hereinafter referred to collectively as the "Real Property". To the extent, but only to the extent, that assignable rights or interestsin, to or under the following have been or will be acquired by Lessor as theowner of any interest in the Real Property, Lessor also hereby grants andassigns to BNPLC for the term of this Ground Lease (and thereafter, if BNPLCpurchases the Real Property from [Land] Lessor pursuant to the Repurchase Option described in Paragraph 12) the right touse and enjoy (and, in the case of contract rights, to enforce) such rights orinterests of Lessor: (a) the Permitted Encumbrances; and (b) any general intangibles, permits, licenses, franchises, certificates, and other rights and privileges related to the Real Property that BNPLC (rather than Lessor) would have acquired if BNPLC had itself acquired the fee estate in the Real Property (excluding, however, any rights and privileges of Lessor under this Ground Lease, any rights or privileges of Lessor under the Purchase Agreement or other Operative Documents, and [without limiting Lessor's obligations under subparagraphs 4.(B), 6.(B) or 6.(C)] any rights and privileges of Lessor under the Development Documents described in Annex 3). -------Such rights and interests of Lessor, whether now existing or hereafter arising,are hereinafter collectively called the "GL Personal Property". The RealProperty and the GL Personal Property are hereinafter sometimes collectivelycalled the "GL Property." Provided, however, the leasehold estate conveyed hereby and BNPLC's rightshereunder are expressly made subject and subordinate to the PermittedEncumbrances, including those listed on Annex 2. FURTHER, IF AND SO LONG AS THE -------OTHER LEASE AGREEMENT AND THE OTHER PURCHASE AGREEMENT (BOTH AS DEFINED IN THE- - - - - - CDPA) REMAIN IN FORCE, THE RIGHTS AND OBLIGATIONS OF LESSOR AND BNPLC HEREUNDER---- - -----SHALL BE SUBJECT TO ANY CONTRARY PROVISIONS THEREIN. ACCORDINGLY, BNPLC'S RIGHTS -----UNDER PARAGRAPH 7 BELOW SHALL BE SUBJECT TO THE PROVISIONS GOVERNING INSURANCEAND CONDEMNATION IN THE OTHER LEASE AGREEMENT, IF AND SO LONG AS THE OTHER LEASE - - - - -AGREEMENT REMAINS IN FORCE.- GENERAL TERMS AND CONDITIONS The GL Property is leased by Lessor to BNPLC and is accepted and is to beused and possessed by BNPLC upon and subject to the following terms andconditions: 1. Ground Lease Term and Early Termination by BNPLC. The term of thisGround Lease (the "Ground Lease Term") shall commence on and include the GLEffective Date and end on last Business Day prior to the thirty-fifthanniversary of the GL Effective Date. However, subject to the prior approval ofany Leasehold Mortgagee, BNPLC shall have the right to terminate this GroundLease by giving a notice to Lessor stating that BNPLC unequivocally elects toterminate effective as of a date specified in such notice, which may be any datemore than thirty days after the notice and after the expiration or terminationof the Lease pursuant to its terms. 2. No Other Ground Lease Termination. Except as expressly providedherein, this Ground Lease shall not terminate, nor shall Lessor have any rightto terminate this Ground Lease, nor shall the obligations of Lessor under thisGround Lease be excused, for any reason whatsoever, including any of thefollowing: (i) any damage to or the destruction of all or any part of the GLProperty from whatever cause, (ii) the taking of the GL Property or any portionthereof by eminent domain or otherwise for any reason, (iii) any default on thepart of BNPLC under this Ground Lease or under any other agreement to whichLessor and BNPLC are parties, or (iv) any other cause whether similar ordissimilar to the foregoing, any existing or future law to the contrarynotwithstanding. It is the intention of the parties hereto that the obligationsof Lessor hereunder shall be separate and independent of the covenants andagreements of BNPLC. However, nothing in this Paragraph shall be construed as awaiver by Lessor of any right Lessor may have at law or in equity to recovermonetary damages for any default under this Ground Lease by BNPLC.[Land] Exhibit B-3 - Page 2 3. Ground Lease Rent. On each anniversary of the GL Effective Date,BNPLC shall make a payment to Lessor of rent for the then preceding year("Ground Lease Rent"), in currency that at the time of payment is legal tenderfor public and private debts in the United States of America. Each such paymentof Ground Lease Rent shall equal the Fair Rental Value, determined as providedin Annex 4. ------- 4. Use of GL Property. (A0 Permitted Uses and Construction of Improvements. Subject -----------------------------------------------to the Permitted Encumbrances and the terms hereof, BNPLC may use and occupy theGL Property for any purpose permitted by Applicable Laws and may construct,maintain and use any Improvements on the Land which are permitted by ApplicableLaws. (B0 Cooperation by Lessor and its Affiliates. ---------------------------------------- (1 After the expiration or any earlier termination of the Lease, if a use of the GL Property by BNPLC or any new Improvements or any removal or modification of Improvements proposed by BNPLC would violate any Permitted Encumbrance, Development Document or Applicable Law unless Lessor or any of its Affiliates, as an owner of adjacent property or otherwise, gave its consent or approval thereto or agreed to join in a modification of a Permitted Encumbrance or Development Document, then Lessor shall give and cause its Affiliates to give such consent or approval or join in such modification. (2 To the extent, if any, that any Permitted Encumbrance, Development Document or Applicable Law requires the consent or approval of Lessor or any of its Affiliates or of the City of Santa Clara or any other Person to an assignment of this Ground Lease or a transfer of any interest in the GL Property by BNPLC or its successors or assigns, Lessor will without charge give and cause its Affiliates to give such consent or approval and will cooperate in any way reasonably requested by BNPLC to assist BNPLC to obtain such consent or approval from the City or any other Person; provided, however, the assignment or transfer is not then prohibited by the Lease. (3 Lessor's obligations under this subparagraph 4.(B) shall be binding upon any successor or assign of Lessor with respect to the Land and other properties encumbered by the Permitted Encumbrances or subject to the Development Documents, and such obligations shall survive any sale of Lessor's interest in the GL Property to BNPLC because of BNPLC's exercise of the Repurchase Option (as defined in Paragraph 12). (C0 Title to Improvements. Any and all Improvements of whatever ---------------------nature at any time constructed, placed or maintained upon any part of the Landshall be and remain the property of BNPLC and BNPLC's sublessee's, assignees,licensees and concessionaires, as their interests may appear; provided, any suchImprovements which remain on the Land when this Ground Lease expires or isterminated shall become and thereupon be the property of Lessor, free and clearof any Liens Removable by BNPLC. It is the intention of Lessor and BNPLC thatseverance of fee title to the Land and the Improvements shall not change thecharacter of the Improvements as real property. BNPLC may at any time afterLessor ceases to have possession of the GL Property as tenant under the Leaseand prior to the expiration or termination of this Ground Lease remove all orany Improvements from the Land without the consent of Lessor and without anyobligation to Lessor or its Affiliates to provide compensation or to constructother Improvements on or about the Land. 5. Assignment and Subletting; Pass Through of BNPLC'S LiabilityInsurance and Indemnity Rights. BNPLC may sublet or assign this Ground Leasewithout the consent of Lessor or any of its Affiliates, subject only tolimitations set forth in the Lease for the benefit of Lessor so long as thoselimitations [Land] Exhibit B-3 - Page 3 remain in force. To the extent that BNPLC may from time to time after the expiration orearlier termination of the Other Lease Agreement require any subtenant to agreeto maintain liability insurance against claims of third parties and agree tomake BNPLC an additional or named insured under such insurance, BNPLC shall alsorequire the subtenant to agree to make Lessor an additional or named insured.However, BNPLC shall have no liability to Lessor for a breach by the subtenantof any such agreements, and to the extent that BNPLC's rights as an additionalor named insured are subject to exceptions or limitations concerning BNPLC's ownacts or omissions or the acts or omissions of anyone other than the subtenant,so too may Lessor's rights as an additional or named insured be subject toexceptions or limitations concerning Lessor's own acts or omissions or the actsor omissions of anyone other than the subtenant. To the extent that BNPLC may itself from time to time after the expirationor earlier termination of the Other Lease Agreement maintain liability insuranceagainst claims of third parties which may arise because of any occurrence on oralleged to have occurred on or about the GL Property, BNPLC shall cause Lessorto be an additional or named insured under such insurance, provided Lessor paysor reimburses BNPLC for any additional insurance premium required to have Lessormade an insured. To the extent that BNPLC may from time to time after the expiration orearlier termination of the Other Lease Agreement require any subtenant to agreeto indemnify BNPLC against Environmental Losses or other Losses concerning theGL Property, BNPLC shall also require the subtenant to agree to indemnifyLessor. However, BNPLC shall have no liability to Lessor for a breach by thesubtenant of any such agreement, and to the extent that BNPLC's rights as anindemnitee of the subtenant are subject to exceptions or limitations concerningBNPLC's own acts or omissions or the acts or omissions of anyone other than thesubtenant, so too may Lessor's rights as an indemnitee be subject to exceptionsor limitations concerning Lessor's own acts or omissions or the acts oromissions of anyone other than the subtenant. 6. Representations, Warranties and Covenants of Lessor Concerning theProperty. Lessor represents, warrants and covenants as follows: (A0 Title to the Property. This Ground Lease shall vest in BNPLC good ---------------------and marketable title to a leasehold estate in the Land, subject only to theterms and conditions hereof, the Permitted Encumbrances, the DevelopmentDocuments and any Liens Removable by BNPLC. Lessor shall not, without the priorconsent of BNPLC, create, place or authorize, or through any act or failure toact, acquiesce in the placing of, any deed of trust, mortgage or other Lien,whether statutory, constitutional or contractual against or covering the GLProperty or any part thereof (other than Permitted Encumbrances and LiensRemovable by BNPLC), regardless of whether the same are expressly or otherwisesubordinate to the Operative Documents or BNPLC's interest in the Property. (B0 Modification of Permitted Encumbrances and Development Documents. ----------------------------------------------------------------Without the prior consent of BNPLC, Lessor shall not enter into, initiate,approve or consent to any modification of any Permitted Encumbrance orDevelopment Document that would create or expand or purport to create or expandobligations or restrictions which would encumber the GL Property or anyimprovements constructed thereon. (C0 Performance and Preservation of the Development Documents and -------------------------------------------------------------Permitted Encumbrances for the Benefit of BNPLC. Not only during the term of the-----------------------------------------------Other Lease Agreement, but thereafter throughout the term of this Ground Lease,Lessor shall comply with and perform the obligations imposed by the PermittedEncumbrances and the Development Documents upon Lessor or upon any owner of theLand, and shall do whatever is required to preserve the rights and benefitsconferred or intended to be conferred by the Permitted Encumbrances and theDevelopment Documents, as necessary to facilitate any construction contemplatedin the Other Lease Agreement and the use of the Improvements by BNPLC and itssuccessors, assigns and subtenants under this Ground Lease after the expirationor any earlier termination of the Other Lease Agreement. Further, if[Land] Exhibit B-3 - Page 4 Lessor or any Affiliate of Lessor now or hereafter owns, acquires or leases land(other than the Land) that is the subject of a Permitted Encumbrance orDevelopment Document, then Lessor shall, and shall cause its Affiliate to,assume liability for and indemnify BNPLC and other Interested Parties and defendand hold them harmless from and against all Losses (including Losses caused byany decline in the value of the Property or of the Improvements) that they wouldnot have incurred or suffered but for (i) a termination of such PermittedEncumbrance or Development Document, to which Lessor or its Affiliate agreed, orwhich resulted from a breach thereof by Lessor or its Affiliate, or (ii) arefusal of Lessor or its Affiliate to agree to any waiver or modificationrequested by BNPLC of restrictions upon the Property or the transfer thereofimposed by such Permitted Encumbrance or Development Document, or (iii) anythingdone, authorized or suffered by Lessor or its Affiliate in violation of suchPermitted Encumbrance or Development Document. Lessor's obligations under thissubparagraph 6.(C) shall be binding upon any successor or assign of Lessor orits Affiliates with respect to their interest in properties subject to theDevelopment Documents and Permitted Encumbrances. 7. Insurance and Condemnation. (A0 Entitlement to Insurance and Condemnation Proceeds. All --------------------------------------------------insurance and condemnation proceeds payable with respect to any damage to ortaking of the GL Property shall be payable to and become the property of BNPLC;provided, however, Lessor shall be entitled to receive condemnation proceedsawarded for the value of Lessor's remainder interest in the Land exclusive ofthe Improvements. BNPLC is authorized to take all action necessary on behalf ofboth BNPLC and Lessor (as lessor under this Ground Lease) to collect insuranceand condemnation proceeds. (B0 Collection of Insurance Proceeds. In the event any of the GL --------------------------------Property is destroyed or damaged by fire, explosion, windstorm, hail or by anyother casualty against which insurance shall have been required hereunder, (i)BNPLC may make proof of loss, (ii) each insurance company concerned is herebyauthorized and directed to make payment for such loss directly to BNPLC forapplication as required by subparagraph 7.(A), and (iii) BNPLC's consent must beobtained for any settlement, adjustment or compromise of any claims for loss,damage or destruction under any policy or policies of insurance. (C0 Collection of Condemnation Proceeds. All proceeds of -----------------------------------condemnation awards or proceeds of sale in lieu of condemnation with respect tothe GL Property and all judgments, decrees and awards for injury or damage tothe GL Property shall be paid to BNPLC and applied as provided in subparagraph7.(A) above. BNPLC is hereby authorized, in the name of Lessor, to execute anddeliver valid acquittances for, and to appeal from, any such judgment, decree oraward concerning condemnation of any of the GL Property. BNPLC shall not be, inany event or circumstances, liable or responsible for failure to collect, or toexercise diligence in the collection of, any such proceeds, judgments, decreesor awards. 8. Leasehold Mortgages. (A0 By Leasehold Mortgage BNPLC may encumber BNPLC's leaseholdestate in the GL Property created by this Ground Lease, as well as BNPLC'srights and interests in buildings, fixtures, equipment and Improvements situatedon the Land and rents, issues, profits, revenues and other income to be derivedby BNPLC therefrom. (B0 Any Leasehold Mortgagee or other party, including anycorporation formed by a Leasehold Mortgagee, may become the legal owner of theleasehold estate created by this Ground Lease, and of the Improvements,equipment, fixtures and other property assigned as additional security pursuantto a Leasehold Mortgage, by foreclosure of a Leasehold Mortgage or as a resultof the assignment or conveyance in lieu of foreclosure. Further, any suchLeasehold Mortgagee or other party may itself, after becoming the legal ownerand holder of the leasehold estate created by this Ground Lease, or of anyImprovements, equipment, fixtures and other Exhibit B-3 - Page 5[Land] property assigned as additional security pursuant to a Leasehold Mortgage,convey or pledge the same without the consent of Lessor. (C0 Lessor shall serve notice of any default by BNPLC hereunderupon any Leasehold Mortgagee. No notice of a default by BNPLC shall be deemedeffective until it is so served. Any Leasehold Mortgagee shall have the right tocorrect or cure any such default within the same period of time after receipt ofsuch notice as is given to BNPLC under this Ground Lease to correct or curedefaults, plus an additional period of thirty days thereafter. Lessor willaccept performance by any Leasehold Mortgagee of any covenant, condition oragreement on BNPLC's part to be performed hereunder with the same force andeffect as though performed by BNPLC. (D0 If this Ground Lease should terminate by reason of adisaffirmance or rejection of this Ground Lease by BNPLC or any receiver,liquidator or trustee for the property of BNPLC, or by any governmentalauthority which had taken possession of the business or property of BNPLC byreason of the insolvency or alleged insolvency of BNPLC, then: (1 Lessor shall give notice thereof to each Leasehold Mortgagee; and upon request of any Leasehold Mortgagee made within sixty days after Lessor has given such notice, Lessor shall enter into a new ground lease of the GL Property with such Leasehold Mortgagee for the remainder of the Ground Lease Term, at the same Ground Lease Rent and on the same terms and conditions as contained in this Ground Lease. (2 The estate of the Leasehold Mortgagee, as lessee under the new lease, shall have priority equal to the estate of BNPLC hereunder. That is, there shall be no charge, lien or burden upon the GL Property prior to or superior to the estate granted by such new lease which was not prior to or superior to the estate of BNPLC under this Ground Lease as of the date immediately preceding the termination of this Ground Lease. (3 Notwithstanding the foregoing, if Lessor shall receive requests to enter into a new ground lease from more than one Leasehold Mortgagee, Lessor shall be required to enter into only one new ground lease, and the new ground lease shall be to the requesting Leasehold Mortgagee who holds the highest priority lien or interest in BNPLC's leasehold estate in the Land. If the liens or security interests of two or more such requesting Leasehold Mortgagees which shared the highest priority just prior to the termination of this Ground Lease, the new ground lease shall name all such Leasehold Mortgagees as co- tenants thereunder. (E0 If BNPLC has agreed with any Leasehold Mortgagee that suchLeasehold Mortgagee's consent will be required to any modification or earlytermination of this Ground Lease by BNPLC, and if Lessor has been notified ofsuch agreement, such consent will be required. (F0 No Leasehold Mortgagee will assume any liability under thisGround Lease either by virtue of its Leasehold Mortgage or by any subsequentreceipt or collection of rents or profits generated from the GL Property, unlessand until the Leasehold Mortgagee acquires BNPLC's leasehold estate in the GLProperty at foreclosure or by deed in lieu of foreclosure. (G0 Although the foregoing provisions concerning LeaseholdMortgages and Leasehold Mortgagees will be self operative, Lessor agrees toinclude, in addition to the items specified in Paragraph 11, confirmation of theforegoing in any statement provided to a Leasehold Mortgagee or prospectiveLeasehold Mortgagee pursuant to Paragraph 11. Exhibit B-3 - Page 6[Land] 9. Events of Default. (A0 Definition of Ground Lease Default. Each of the following ----------------------------------events shall be deemed to be a "Ground Lease Default" by BNPLC under this GroundLease: (1 BNPLC shall fail to pay when due any installment of Ground Lease Rent due hereunder and such failure shall continue for sixty days after BNPLC receives notice thereof. (2 BNPLC shall fail to comply with any term, provision or covenant of this Ground Lease (other than as described in the other clauses of this subparagraph 9.(A)), and shall not cure such failure prior to the earlier of (A) ninety days after notice thereof is sent to BNPLC, or (B) the date any writ or order is issued for the levy or sale of any property owned by Lessor or its Affiliates (including the GL Property) because of such failure or any criminal action is instituted against BNPLC or any of its directors, officers or employees because of such failure; provided, however, that so long as no such writ or order is issued and no such criminal actions is instituted, if such failure is susceptible of cure but cannot with reasonable diligence be cured within such ninety day period, and if BNPLC shall promptly have commenced to cure the same and shall thereafter prosecute the curing thereof with reasonable diligence, the period within which such failure may be cured shall be extended for such further period as shall be necessary for the curing thereof with reasonable diligence. (B0 Remedy. Upon the occurrence of a Ground Lease Default which ------is not cured within any applicable period expressly permitted by subparagraph9.(A), Lessor's sole and exclusive remedies shall be to sue BNPLC for thecollection of any amount due under this Ground Lease, to sue for the specificenforcement of BNPLC's obligations hereunder, or to enjoin the continuation ofthe Ground Lease Default; provided, however, no limitation of Lessor's remediescontained herein will prevent Lessor from recovering any reasonable costs Lessormay incur to mitigate its damages by curing a Ground Lease Default that BNPLChas failed to cure itself (so long as the cure by Lessor is pursued in a lawfulmanner and the costs Lessor seeks to recover do not exceed the actual damages tobe mitigated). Lessor may not terminate this Ground Lease or BNPLC's right topossession under this Ground Lease. Any judgment which Lessor may obtain againstBNPLC for amounts due under this Ground Lease may be collected only throughresort of a judgement lien against BNPLC's interest in the GL Property and anyImprovements. BNPLC shall have no personal liability for the payment amounts dueunder this or for the performance of any obligations of BNPLC under this GroundLease. 10. Quiet Enjoyment. Neither Lessor nor any third party lawfullyclaiming any right or interest in the GL Property shall during the Ground LeaseTerm disturb BNPLC's peaceable and quiet enjoyment of the GL Property; however,such enjoyment shall be subject to the terms, provisions, covenants, agreementsand conditions of this Ground Lease and the Permitted Encumbrances, to whichthis Ground Lease is subject and subordinate as hereinabove set forth. 11. Estoppel Certificate. Lessor shall from time to time, within tendays after receipt of request by BNPLC, deliver a statement in writingcertifying: (A0 that this Ground Lease is unmodified and in full force andeffect (or if modified that this Ground Lease as so modified is in full forceand effect); (B0 that to the knowledge of Lessor BNPLC has not previouslyassigned or hypothecated its rights or interests under this Ground Lease, exceptas is described in such statement with as much specificity as Lessor is able toprovide; (C0 the term of this Ground Lease and the Ground Lease Rentthen in effect and any additional Exhibit B-3 - Page 7[Land] charges; (D0 that BNPLC is not in default under any provision of thisGround Lease (or if in default, the nature thereof in detail) and a statement asto any outstanding obligations on the part of Lessor or BNPLC; and (E0 such other matters as are reasonably requested by BNPLC.Lessor's failure to deliver such statement within such time shall be conclusiveupon BNPLC (i) that this Ground Lease is in full force and effect, withoutmodification except as may be represented by BNPLC, (ii) that there are nouncured defaults in BNPLC's performance hereunder. 12. Option To Repurchase. Subject to the terms and conditions setforth in Annex 5, BNPLC (and any assignee of BNPLC's entire interest in the GL -------Property, but not any subtenant or assignee of a lesser interest) shall have theoption (the "Repurchase Option") to purchase Lessor's interest in the GLProperty. To secure BNPLC's right to recover any damages caused by a breach ofthe Repurchase Option or other provisions of this Ground Lease by Lessor,including any such breach caused by a rejection or termination of this GroundLease in any bankruptcy or insolvency proceeding instituted by or againstLessor, as debtor, Lessor does hereby grant to BNPLC a lien and securityinterest against the Land and against all rights, title and interests of Lessorfrom time to time in and to the GL Property. [The signature pages follow.] Exhibit B-3 - Page 8[Land] IN WITNESS WHEREOF, this Ground Lease is hereby executed inmultiple originals as of the date first written above. "Lessor" [Extreme or the Applicable Purchaser] By: ____________________________________ Name: ___________________________ Title: __________________________ Exhibit B-3 - Page 9[Land] [Continuation of signature pages to GROUND LEASE dated as of ___________, ____] "BNPLC" BNP LEASING CORPORATION By: ____________________________________ Name: ___________________________ Title: __________________________ Exhibit B-3 - Page 10[Land] STATE OF ___________ ) )COUNTY OF _____________ ) On _____________, _____, before me, ________________________,personally appeared ____________________________, personally known to me (orproved to me on the basis of satisfactory evidence) to be the person whose nameis subscribed to the within instrument and acknowledged to me that he executedthe same in his authorized capacity, and that by his signature on the instrumentthe person, or the entity upon behalf of which the person acted, executed theinstrument. WITNESS my hand and official seal. Signature ______________________________ Exhibit B-3 - Page 11[Land] STATE OF ________ ) )COUNTY OF __________ ) On ___________, _____, before me, ________________________, personallyappeared ____________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the person whose name is subscribed to the withininstrument and acknowledged to me that he executed the same in his authorizedcapacity, and that by his signature on the instrument the person, or the entityupon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. Signature ______________________________ Exhibit B-3 - Page 12[Land] Annex 1 ------- Legal Description[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES --------------FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH EXTREME REQUESTS BNPLC'SCONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANYSUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTINGNOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED ISACTUALLY EXECUTED AND DELIVERED.]All that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning. Exhibit B-3 - Page 13[Land] Annex 2 ------- Permitted EncumbrancesThe leasehold and other interests in the Land hereby conveyed by Lessor areconveyed subject to the following matters to the extent the same are still validand in force:[THE SAME LIST OF PERMITTED ENCUMBRANCES ATTACHED TO THE GRANT DEED FROM BNPLCTO EXTREME OR THE APPLICABLE PURCHASER SHALL BE INSERTED HERE.] Exhibit B-3 - Page 14[Land] Annex 3 ------- List of Development DocumentsNone.[Land] Exhibit B-3 - Page 15 Annex 4 ------- DETERMINATION OF FAIR RENTAL VALUE Each annual payment of Ground Lease Rent will equal the Fair RentalValue, computed as of the most recent Rental Determination Date when suchpayment becomes due. As used in this Annex: "Fair Rental Value" means (and all appraisers and other persons involved in the determination of the Fair Rental Value will be so advised) the annual rent, as determined in accordance with this Annex, that would be agreed upon between a willing tenant, under no compulsion to lease, and a willing landlord, under no compulsion to lease, for unimproved land comparable in size and location to the Land, ---------- exclusive of any Improvements but assuming that there is no higher and better use for such land than as a site for improvements of comparable size and utility to the Improvements, at the time a determination is required under hereunder and taking into consideration the condition of the Land, the encumbrances affecting the title to the Land and all applicable zoning, land use approvals and other governmental permits relating to the Land at the time of such determination; and "Rental Determination Date" means the GL Effective Date and each fifth anniversary of the GL Effective Date. If Lessor and BNPLC have not agreed upon Fair Rental Value as of anyRental Determination Date within one hundred eighty days after the such date,then Fair Rental Value will be determined as follows: (a0 Lessor and BNPLC shall each appoint a real estate appraiser who is familiar with rental values for properties in the vicinity of the Land and who has not previously acted for either party. Each party will make the appointment no later than ten days after receipt of notice from the other party that the appraisal process described in this Annex has been invoked. The agreement of the two appraisers as to Fair Rental Value will be binding upon Lessor and BNPLC. If the two appraisers cannot agree upon the Fair Rental Value within ten days following their appointment, they shall within another ten days agree upon a third real estate appraiser. Immediately thereafter, each of the first two appraisers will submit his best estimate of the appropriate Fair Rental Value (together with a written report supporting such estimate) to the third appraiser and the third appraiser will choose between the two estimates. The estimate of Fair Rental Value chosen by the third appraiser as the closest to the prevailing annual fair rental value will be binding upon Lessor and BNPLC. Notification in writing of this estimate shall be made to Lessor and BNPLC within fifteen days following the selection of the third appraiser. (b0 If appraisers must be selected under the procedure set out above and either BNPLC or Lessor fails to appoint an appraiser or fails to notify the other party of such appointment within fifteen days after receipt of notice that the prescribed time for appointing the appraisers has passed, then the other party's appraiser will determine the Fair Rental Value. All appraisers selected for the appraisal process set out in this Annex will be disinterested, reputable, qualified real estate appraisers with the designation of MAI or equivalent and with at least 5 years experience in appraising properties comparable to the Land. (c0 If a third appraiser must be chosen under the procedure set out above, he or she will be chosen on the basis of objectivity and competence, not on the basis of his relationship with the other appraisers or the parties to this Ground Lease, and the first two appraisers will be so advised. Although the first two appraisers will be instructed to attempt in good faith to agree upon the third appraiser, if for any reason they cannot agree within the prescribed time, either Lessor and BNPLC may require the first two appraisers to immediately submit its top choice for the third appraiser to the then highest ranking officer of the California Bar Association who will agree to help and who has no attorney/client or other significant[Land] Exhibit B-3 - Page 16 relationship to either Lessor or BNPLC. Such officer will have complete discretion to select the most objective and competent third appraiser from between the choices of each of the first two appraisers, and will do so within twenty days after such choices are submitted to him. (d0 Either Lessor or BNPLC may notify the appraiser selected by the other party to demand the submission of an estimate of Fair Rental Value or a choice of a third appraiser as required under the procedure described above; and if the submission of such an estimate or choice is required but the other party's appraiser fails to comply with the demand within fifteen days after receipt of such notice, then the Fair Rental Value or choice of the third appraiser, as the case may be, selected by the other appraiser (i.e., the notifying party's appraiser) will be binding upon Lessor and BNPLC. (e0 Lessor and BNPLC shall each bear the expense of the appraiser appointed by it, and the expense of the third appraiser and of any officer of the California Bar Association who participates in the appraisal process described above will be shared equally by Lessor and BNPLC.[Land] Exhibit B-3 - Page 17 Annex 5 ------- REPURCHASE OPTION Subject to the terms of this Annex, BNPLC shall have an option (the"Option") to buy Lessor's fee interest in the GL Property at any time during theterm of this Ground Lease for a purchase price (the "Option Price") to Lessorequal to the fair market value of the GL Property, determined as described inthe next paragraph. For the purposes of this Annex, "fair market value" of the GL Propertymeans (and all appraisers and other persons involved in the determination of theOption Price will be so advised) the price that would be agreed upon between awilling buyer, under no compulsion to buy, and a willing seller, under nocompulsion to sell, for the Land, exclusive of any Improvements as if the Landwere unimproved, but assuming that there is no higher and better use for the ----------Land than as a site for the construction of improvements of comparable size andutility to the Improvements, at the time of BNPLC's exercise of the Option andtaking into consideration the encumbrances affecting the title to the Land andall applicable zoning, land use approvals and other governmental permitsrelating to the Land at the time of the exercise of the Option. If BNPLC exercises the Option, which BNPLC may do by notifying Lessorthat BNPLC has elected to buy Lessor's interest in the GL Property as providedherein, then: (a0 To the extent, if any, required as a condition imposed by law to the conveyance of the fee interest in the GL Property to BNPLC, Lessor shall promptly at its expense do whatever is necessary to obtain approvals of a new Parcel Map or lot line adjustments. (b0 Upon BNPLC's tender of the Option Price to Lessor, Lessor will convey to BNPLC by general warranty deed and assignment, subject only to the Permitted Encumbrances, good and marketable title to the fee estate in the Land , to Lessor's interest in all other GL Property and, to the extent still in force, to Lessor's Extended Remarketing Rights under the Purchase Agreement. (c0 BNPLC's obligation to close the purchase shall be subject to the following terms and conditions, all of which are for the benefit of BNPLC: (1) BNPLC shall have been furnished with evidence satisfactory to BNPLC that Lessor can convey title as required by the preceding subparagraph; (2) nothing shall have occurred or been discovered after BNPLC exercised the Option that could significantly and adversely affect title to the GL Property or BNPLC's use thereof, (3) all of the representations of Lessor in this Ground Lease shall continue to be true as if made effective on the date of the closing and, with respect to any such representations which may be limited to the knowledge of Lessor or any of Lessor's representatives, would continue to be true on the date of the closing if all relevant facts and circumstances were known to Lessor and such representatives, (4) BNPLC shall find the Option Price acceptable after it is determined as provided in this Annex, and (5) BNPLC shall have been tendered the deed and other documents which are described in this Annex as documents to be delivered to BNPLC at the closing of BNPLC's purchase. (d0 Closing of the purchase will be scheduled on the first Business Day following thirty days after the Option Price is established in accordance with the terms and conditions of this Annex and after any approvals described in subparagraph (a) above are obtained, and prior to closing BNPLC's occupancy of the GL Property shall continue to be subject to the terms and conditions of this Ground Lease, including the terms setting forth BNPLC's obligation to pay rent. Closing shall take place at the offices of any title insurance company reasonably selected by BNPLC to insure title under the title insurance policy described below.[Land] Exhibit B-3 - Page 18 (e0 Any transfer taxes or notices or registrations required by law in connection with the sale contemplated by this Annex will be the responsibility of Lessor. (f0 Lessor will deliver a certificate of nonforeign status to BNPLC at closing as needed to comply with the provisions of the Foreign Investors Real Property Tax Act (FIRPTA) or any comparable federal, state or local law in effect at the time. (g0 Lessor will also pay for and deliver to BNPLC at the closing an owner's title insurance policy in the full amount of the Option Price, issued by a title insurance company designated by BNPLC (or written confirmation from the title company that it is then prepared to issue such a policy), and subject only to standard printed exceptions which the title insurance company refuses to delete or modify in a manner acceptable to BNPLC and to Permitted Encumbrances. (h0 Lessor shall also deliver at the closing all other documents or things reasonably required to be delivered to BNPLC or by the title insurance company to evidence Lessor's ability to transfer the GL Property to BNPLC. If Lessor and BNPLC do not otherwise agree upon the amount of theOption Price within twenty days after BNPLC exercises the Option, the OptionPrice shall be determined in accordance with the following procedure: (1 Lessor and BNPLC shall each appoint a real estate appraiser who is familiar with properties in the vicinity of the Land and who has not previously acted for either party. Each party will make the appointment no later than ten days after receipt of notice from the other party that the appraisal process described in this Annex has been invoked. The agreement of the two appraisers as to the Option Price will be binding upon Lessor and BNPLC. If the two appraisers cannot agree upon the Option Price within ten days following their appointment, they shall within another ten days agree upon a third real estate appraiser. Immediately thereafter, each of the first two appraisers will submit his best estimate of the appropriate Option Price (together with a written report supporting such estimate) to the third appraiser and the third appraiser will choose between the two estimates. The estimate of Option Price chosen by the third appraiser as the closest to the prevailing fair market value will be binding upon Lessor and BNPLC. Notification in writing of the Option Price shall be made to Lessor and BNPLC within fifteen days following the selection of the third appraiser. (2 If appraisers must be selected under the procedure set out above and either BNPLC or Lessor fails to appoint an appraiser or fails to notify the other party of such appointment within fifteen days after receipt of notice that the prescribed time for appointing the appraisers has passed, then the other party's appraiser will determine the Option Price. All appraisers selected for the appraisal process set out in this Annex will be disinterested, reputable, qualified real estate appraisers with the designation of MAI or equivalent and with at least 5 years experience in appraising properties comparable to the Land. (3 If a third appraiser must be chosen under the procedure set out above, he will be chosen on the basis of objectivity and competence, not on the basis of his relationship with the other appraisers or the parties to this Ground Lease, and the first two appraisers will be so advised. Although the first two appraisers will be instructed to attempt in good faith to agree upon the third appraiser, if for any reason they cannot agree within the prescribed time, either Lessor and BNPLC may require the first two appraisers to immediately submit its top choice for the third appraiser to the then highest ranking officer of the California Bar Association who will agree to help and who has no attorney/client or other significant relationship to either Lessor or BNPLC. Such officer [Land] Exhibit B-3 - Page 19 will have complete discretion to select the most objective and competent third appraiser from between the choices of each of the first two appraisers, and will do so within ten days after such choices are submitted to him. (4 Either Lessor or BNPLC may notify the appraiser selected by the other party to demand the submission of an estimate of Option Price or a choice of a third appraiser as required under the procedure described above; and if the submission of such an estimate or choice is required but the other party's appraiser fails to comply with the demand within fifteen days after receipt of such notice, then the Option Price or choice of the third appraiser, as the case may be, selected by the other appraiser (i.e., the notifying party's appraiser) will be binding upon Lessor and BNPLC. (5 Lessor and BNPLC shall each bear the expense of the appraiser appointed by it, and the expense of the third appraiser and of any officer of the California Bar Association who participates in the appraisal process described above will be shared equally by Lessor and BNPLC.[Land] Exhibit B-3 - Page 20 Exhibit B-4 ----------- CORPORATION GRANT DEEDRECORDING REQUESTED BYAND WHEN RECORDED MAIL TO:-------------------------NAME: [Extreme or the Applicable Purchaser]ADDRESS: ___________________ATTN: ___________________CITY: ___________________STATE: ___________________Zip: ___________________MAIL TAX STATEMENTS TO:----------------------NAME: [Extreme or the Applicable Purchaser]ADDRESS: ___________________ATTN: ___________________CITY: ___________________STATE: ___________________Zip: ___________________ CORPORATION GRANT DEED (Covering Land but not the Improvements On the Land)FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNPLEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest inthe land situated in Santa Clara, California, described on Annex A attachedhereto and hereby made a part hereof (the "Land"), together with the any otherright, title and interest of Grantor in and to any easements, rights-of-way,privileges and other rights appurtenant to the Land; provided, however, thatthis grant is subject to the encumbrances described on Annex B (the "PermittedEncumbrances") and any reservations or qualifications set forth below. Granteehereby assumes the obligations (including any personal obligations) of Grantor,if any, created by or under, and agrees to be bound by the terms and conditionsof, the Permitted Encumbrances to the extent that the same concern or apply tothe Land.Although this deed conveys Grantor's interest in the Land itself, this deed doesnot convey any interest in any buildings or other improvements on the Land(collectively, "Improvements") or any rights or easements appurtenant toImprovements. Prior to or contemporaneously with the delivery of this deed,Grantor has conveyed or is conveying the Improvements and appurtenant rights andeasements to another party.[Land] BNP LEASING CORPORATIONDate: As of ____________ By: ________________________ Its: Attest: ________________________ Its: [Extreme or Applicable Purchaser]Date: As of ____________ By: _________________________ Its: Attest: ________________________ Its:STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me, ______________, personally appeared________ and _________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature____________________[Land] Exhibit B-4 - Page 2 STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me, _______________, personally appeared__________ and __________, personally known to me (or proved to me on the basisof satisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature_____________________[Land] Exhibit B-4 - Page 3 Annex A LEGAL DESCRIPTION[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES -------------FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH EXTREME REQUESTS BNPLC'SCONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANYSUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTINGNOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED ISACTUALLY EXECUTED AND DELIVERED.]All that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning.[Land] Exhibit B-4 - Page 4 Annex B Permitted Encumbrances[DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY -------------BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONALENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING NOTE" WILL BEDELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCHADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS"PERMITTED ENCUMBRANCES" UNDER THE LAND LEASE OR THE OTHER LEASE AGREEMENT FROMTIME TO TIME OR BECAUSE OF EXTREME'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TOAN ADJUSTMENT.] This conveyance is subject to all encumbrances not constituting a "LienRemovable by BNPLC" (as defined in the Common Definitions and ProvisionsAgreement (Land) incorporated by reference into the Lease Agreement (Land)referenced in the last item of the list below), including the following mattersto the extent the same are still valid and in force:1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 20004. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed, From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983 Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records.6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects: A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as[Land] Exhibit B-4 - Page 5 follows: Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows: Parcel 1: Commencing at the point of intersection of the Westerly line of that certain 24.74 acre parcel of land shown upon that Record of Survey filed for recorded August 10, 1979 in Book 447 of Maps, at page 33, Santa Clara County Records, with a line parallel with and 10 feet Southerly of, measured at right angles to, the Northerly line of said parcel; thence along said parallel line N. 89 degrees 25 minutes 00 seconds E. 107.00 feet; thence parallel with said Westerly line S. 0 degrees 00 minutes 27 seconds E. 319.16 feet; thence S. 34 degrees 02 minutes 45 seconds W. 87.51 feet, more or less, to intersection with a line parallel with and 58 feet Easterly of measured at right angles to, said Westerly line; thence along last said parallel line S. 0 degrees 00 minutes 27 seconds E. 294.30 feet, more or less, to intersection with a line parallel with and 5 feet Northerly of, measured at right angles to, the Northerly line of that real property conveyed to the City of Santa Clara by that deed filed for record November 30, 1983 in Book I 111 of Official Records, at page 606, said County Records; thence along last said parallel line the following three (3) courses: N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87 degrees 09 minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00 seconds E. 334.69 feet; thence continuing parallel with the Southerly line of first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet, more or less, to termination in the Easterly line of that certain parcel of real property conveyed to MPJ Partnership, by that Grant Deed filed for record August 25, 1983 in Book H 838 of Official Records, at page 215, said County Records. Parcel 2: A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline. Parcel 3:[Land] Exhibit B-4 - Page 6 A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip. Parcel 4: A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip. Parcel 5: A strip of land 10 feet in width, the centerline of said strip being described as follows: Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line. Parcel 6: A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee.[Land] Exhibit B-4 - Page 7 Exhibit C --------- BILL OF SALE AND ASSIGNMENT Reference is made to: (1) that certain Purchase Agreement (Land)between BNP Leasing Corporation ("Assignor") and Extreme Networks, Inc., datedas of June 1, 2000, (the "Purchase Agreement") and (2) that certain LeaseAgreement (Land) between Assignor, as landlord, and Extreme Networks, Inc., astenant, dated as of June __, 2000 (the "Land Lease"). (Capitalized terms usedand not otherwise defined in this document are intended to have the meaningsassigned to them in the Common Definitions and Provisions Agreement (Land)incorporated by reference into both the Purchase Agreement and Land Lease.) As contemplated by the Purchase Agreement, Assignor hereby sells,transfers and assigns unto [EXTREME OR THE APPLICABLE PURCHASER, AS THE CASE MAYBE], a _____________ ("Assignee"), all of Assignor's right, title and interestin and to the following property, if any, to the extent such property isassignable: (a) the Land Lease; (b) any pending or future award made because of any condemnationaffecting the Property or because of any conveyance to be made in lieu thereof,and any unpaid award for damage to the Property and any unpaid proceeds ofinsurance or claim or cause of action for damage, loss or injury to theProperty; and (c) all other property included within the definition of "Property"as set forth in the Purchase Agreement.Provided, however, excluded from this conveyance and reserved to Assignor areany rights or privileges of Assignor under the following ("Excluded Rights"):(1) the indemnities set forth in the Land Lease, whether such rights arepresently known or unknown, including rights of the Assignor to be indemnifiedagainst environmental claims of third parties as provided in the Land Leasewhich may not presently be known, (2) provisions in the Land Lease thatestablish the right of Assignor to recover any accrued unpaid rent under theLand Lease which may be outstanding as of the date hereof, (3) agreementsbetween Assignor and "BNPLC's Parent" or any "Participant," both as defined inthe Land Lease, or any modification or extension thereof, or (4) any otherinstrument being delivered to Assignor contemporaneously herewith pursuant tothe Purchase Agreement. To the extent that this conveyance does include anyrights to receive future payments under the Land Lease, such rights ("IncludedRights") shall be subordinate to Assignor's Excluded Rights, and Assignee herebywaives any rights to enforce Included Rights until such time as Assignor hasreceived all payments to which it remains entitled by reason of Excluded Rights.If any amount shall be paid to Assignee on account of any Included Rights at anytime before Assignor has received all payments to which it is entitled becauseof Excluded Rights, such amount shall be held in trust by Assignee for thebenefit of Assignor, shall be segregated from the other funds of Assignee andshall forthwith be paid over to Assignor to be held by Assignor as collateralfor, or then or at any time thereafter applied in whole or in part by Assignoragainst, the payments due to Assignor because of Excluded Rights, whethermatured or unmatured, in such order as Assignor shall elect. Assignor does for itself and its successors covenant and agree towarrant and defend the title to the property assigned herein against the justand lawful claims and demands of any person claiming under or through a LienRemovable by BNPLC, but not otherwise. Assignee hereby assumes and agrees to keep, perform and fulfillAssignor's obligations, if any, relating to any permits or contracts, underwhich Assignor has rights being assigned herein.[Land] IN WITNESS WHEREOF, the parties have executed this instrument as of_______________, _____. ASSIGNOR: -------- BNP LEASING CORPORATION a Delaware corporation By:__________________________________ Its:_________________________________ ASSIGNEE: -------- [Extreme or the Applicable Purchaser], a ____________________ By:__________________________________ Its:_________________________________[Land] Exhibit C - Page 2 STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me, _______, personally appeared ______and _______, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature _________________________STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me, _______, personally appeared ______and _______, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature _________________________[Land] Exhibit C - Page 3 Annex A LEGAL DESCRIPTION[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES --------------FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH EXTREME REQUESTS BNPLC'SCONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANYSUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTINGNOTE" WILL BE DELETED BEFORE THE DOCUMENT TO WHICH THIS DESCRIPTION IS ATTACHEDIS ACTUALLY EXECUTED AND DELIVERED.]All that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning.[Land] Exhibit C - Page 4 Exhibit D --------- ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES(this "Certificate") is made as of ___________________, ____, by [Extreme or theApplicable Purchaser, as the case may be], a ___________________ ("Grantee"). Contemporaneously with the execution of this Certificate, BNP LeasingCorporation, a Delaware corporation ("BNPLC"), is executing and delivering toGrantee (1) a corporate grant deed and (2) a Bill of Sale and Assignment (theforegoing documents and any other documents to be executed in connectiontherewith are herein called the "Conveyancing Documents" and any of theproperties, rights or other matters assigned, transferred or conveyed pursuantthereto are herein collectively called the "Subject Property"). Notwithstanding any provision contained in the Conveyancing Documentsto the contrary, Grantee acknowledges that BNPLC makes no representations orwarranties of any nature or kind, whether statutory, express or implied, withrespect to environmental matters or the physical condition of the SubjectProperty, and Grantee, by acceptance of the Conveyancing Documents, accepts theSubject Property "AS IS," "WHERE IS," "WITH ALL FAULTS" and without any such ----- -------- ---------------representation or warranty by Grantor as to environmental matters, the physicalcondition of the Subject Property, compliance with subdivision or plattingrequirements or construction of any improvements. Without limiting thegenerality of the foregoing, Grantee hereby further acknowledges and agrees thatwarranties of merchantability and fitness for a particular purpose are excludedfrom the transaction contemplated by the Conveyancing Documents, as are anywarranties arising from a course of dealing or usage of trade. Grantee herebyassumes all risk and liability (and agrees that BNPLC shall not be liable forany special, direct, indirect, consequential, or other damages) resulting orarising from or relating to the ownership, use, condition, location,maintenance, repair, or operation of the Subject Property, except for damagesproximately caused by (and attributed by any applicable principles ofcomparative fault to) the Established Misconduct of BNPLC. As used in thepreceding sentence, "Established Misconduct" is intended to have, and be limitedto, the meaning given to it in the Common Definitions and Provisions Agreement(Land) incorporated by reference into the Purchase Agreement between BNPLC andExtreme Networks, Inc. dated as of June 1, 2000, pursuant to which PurchaseAgreement BNPLC is delivering the Conveyancing Documents. The provisions of this Certificate shall be binding on Grantee, itssuccessors and assigns and any other party claiming through Grantee. Granteehereby acknowledges that BNPLC is entitled to rely and is relying on thisCertificate. EXECUTED as of ________________, ____. [Extreme or the Applicable Purchaser] By:_____________________________________ Name:________________________________ Title:_______________________________[Land] Exhibit E --------- SECRETARY'S CERTIFICATE The undersigned, [Secretary or Assistant Secretary] of BNP LeasingCorporation, a Delaware corporation (the "Corporation"), hereby certifies asfollows: 1. That he is the duly, elected, qualified and acting Secretary [orAssistant Secretary] of the Corporation and has custody of the corporaterecords, minutes and corporate seal. 2. That the following named persons have been properly designated,elected and assigned to the office in the Corporation as indicated below; thatsuch persons hold such office at this time and that the specimen signatureappearing beside the name of such officer is his or her true and correctsignature.[The following blanks must be completed with the names and signatures of theofficers who will be signing the deed and other Sale Closing Documents on behalfof the Corporation.]Name Title Signature---- ----- --------- _______________ _________________ ________________________________________ _________________ _________________________ 3. That the resolutions attached hereto and made a part hereof wereduly adopted by the Board of Directors of the Corporation in accordance with theCorporation's Articles of Incorporation and Bylaws. Such resolutions have notbeen amended, modified or rescinded and remain in full force and effect. IN WITNESS WHEREOF, I have hereunto signed my name and affixed the sealof the Corporation on this __, day of ___, __. _________________________________ [signature and title][Land] CORPORATE RESOLUTIONS OF BNP LEASING CORPORATION WHEREAS, pursuant to that certain Purchase Agreement (Land) (hereincalled the "Purchase Agreement") dated as of June 1, 2000, by and between BNPLeasing Corporation (the "Corporation") and [Extreme or the Applicable Purchaseras the case may be] ("Purchaser"), the Corporation agreed to sell and Purchaseragreed to purchase or cause the Applicable Purchaser (as defined in the PurchaseAgreement) to purchase the Corporation's interest in the property (the"Property") located in Santa Clara, California more particularly describedtherein. NOW THEREFORE, BE IT RESOLVED, that the Board of Directors of theCorporation, in its best business judgment, deems it in the best interest of theCorporation and its shareholders that the Corporation convey the Property toPurchaser or the Applicable Purchaser pursuant to and in accordance with theterms of the Purchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and eachof them, are hereby authorized and directed in the name and on behalf of theCorporation to cause the Corporation to fulfill its obligations under thePurchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and eachof them, are hereby authorized and directed to take or cause to be taken any andall actions and to prepare or cause to be prepared and to execute and deliverany and all deeds and other documents, instruments and agreements that shall benecessary, advisable or appropriate, in such officer's sole and absolutediscretion, to carry out the intent and to accomplish the purposes of theforegoing resolutions.[Land] Exhibit E - Page 2 Exhibit F --------- FIRPTA STATEMENT Section 1445 of the Internal Revenue Code of 1986, as amended, providesthat a transferee of a U.S. real property interest must withhold tax if thetransferor is a foreign person. Sections 18805, 18815 and 26131 of theCalifornia Revenue and Taxation Code, as amended, provide that a transferee of aCalifornia real property interest must withhold income tax if the transferor isa nonresident seller. To inform [Extreme or the Applicable Purchaser] (the "Transferee") thatwithholding of tax is not required upon the disposition of a California realproperty interest by transferor, BNP Leasing Corporation (the "Seller"), theundersigned hereby certifies the following on behalf of the Seller: 1. The Seller is not a foreign corporation, foreign partnership,foreign trust, or foreign estate (as those terms are defined in the InternalRevenue Code and Income Tax Regulations); 2. The United States employer identification number for the Seller is_____________________; 3.The office address of the Seller is _______________________________________ _________________. 4. The Seller is qualified to do business in California. The Seller understands that this certification may be disclosed to theInternal Revenue Service and/or to the California Franchise Tax Board by theTransferee and that any false statement contained herein could be punished byfine, imprisonment, or both. The Seller understands that the Transferee is relying on this affidavitin determining whether withholding is required upon said transfer. Under penalties of perjury I declare that I have examined thiscertification and to the best of my knowledge and belief it is true, correct andcomplete, and I further declare that I have authority to sign this document onbehalf of the Seller. Dated: ___________, ____. By:_________________________ Name:______________________ Title:_____________________[Land] ================================================================================ EXHIBIT 10.11 PURCHASE AGREEMENT (IMPROVEMENTS) BETWEEN BNP LEASING CORPORATION ("BNPLC") AND EXTREME NETWORKS, INC. ("Extreme") June 1, 2000 (Santa Clara, California)================================================================================ TABLE OF CONTENTS ----------------- Page ---- 1. EXTREME'S OPTIONS AND OBLIGATIONS ON THE DESIGNATED SALE DATE............................................ 1 (A) Right to Purchase; Initial Remarketing Rights and Obligation........................................ 1 ------------------------------------------------------------ (B) Determinations Concerning Price..................................................................... 3 ------------------------------- (C) Designation of the Purchaser........................................................................ 4 ---------------------------- (D) Effect of the Purchase Option and Extreme's Initial Remarketing Rights and Obligations.............. 4 -------------------------------------------------------------------------------------- on Subsequent Title Encumbrances -------------------------------- (E) Security for the Purchase Option and Extreme's Initial Remarketing Rights and Obligations........... 4 ----------------------------------------------------------------------------------------- (F) Delivery of Books and Records If BNPLC Retains the Property......................................... 5 -----------------------------------------------------------2. EXTREME'S RIGHTS AND OPTIONS AFTER THE DESIGNATED SALE DATE.............................................. 5 (A) Extreme's Extended Right to Remarket................................................................ 5 ------------------------------------ (B) Definition of Minimum Extended Remarketing Price.................................................... 6 ------------------------------------------------ (C) BNPLC's Right to Sell............................................................................... 6 --------------------- (D) Extreme's Right to Excess Sales Proceeds............................................................ 7 ---------------------------------------- (E) Permitted Transfers During Extreme's Extended Remarketing Period.................................... 7 ----------------------------------------------------------------3. TERMS OF CONVEYANCE UPON PURCHASE........................................................................ 74. SURVIVAL AND TERMINATION OF THE RIGHTS AND OBLIGATIONS OF EXTREME AND BNPLC.............................. 8 (A) Status of this Agreement Generally.................................................................. 8 ---------------------------------- (B) Automatic Termination of Extreme's Rights........................................................... 8 ----------------------------------------- (C) Termination of Extreme's Extended Remarketing Rights to Permit a Sale by BNPLC...................... 9 ------------------------------------------------------------------------------ (D) Payment Only to BNPLC............................................................................... 9 --------------------- (E) Remedies Under the Other Operative Documents........................................................ 9 -------------------------------------------- (F) Occupancy by Extreme Prior to Closing of a Sale..................................................... 9 -----------------------------------------------5. SECURITY FOR EXTREME'S OBLIGATIONS; RETURN OF FUNDS...................................................... 96. CERTAIN REMEDIES CUMULATIVE.............................................................................. 107. ATTORNEYS' FEES AND LEGAL EXPENSES....................................................................... 108. ESTOPPEL CERTIFICATE..................................................................................... 109. SUCCESSORS AND ASSIGNS................................................................................... 10 Exhibits and Schedules ---------------------- Exhibit A..................................................... Legal Description--------- Exhibit B..................................................... Grant Deed Form Requirements--------- Exhibit C..................................................... Bill of Sale and Assignment--------- Exhibit D..................................................... Acknowledgment and Disclaimer--------- Exhibit E..................................................... Secretary's Certificate--------- Exhibit F..................................................... Certificate Concerning Tax Withholding--------- PURCHASE AGREEMENT (IMPROVEMENTS) This PURCHASE AGREEMENT (IMPROVEMENTS) (this "Agreement") is made and datedas of June 1, 2000 (the "Effective Date") by and between BNP LEASINGCORPORATION, a Delaware corporation ("BNPLC"), and EXTREME NETWORKS, INC., aDelaware corporation ("Extreme"). RECITALS Contemporaneously with the execution of this Agreement, BNPLC and Extremeare executing a Common Definitions and Provisions Agreement (Improvements) datedas of the Effective Date (the "Common Definitions and Provisions Agreement(Improvements)"), which by this reference is incorporated into and made a partof this Agreement for all purposes. As used in this Agreement, capitalized termsdefined in the Common Definitions and Provisions Agreement (Improvements) andnot otherwise defined in this Agreement are intended to have the respectivemeanings assigned to them in the Common Definitions and Provisions Agreement(Improvements). Pursuant to the Acquisition Contract, which covers the Land described inExhibit A, BNPLC is acquiring the Land and any appurtenances thereto and the---------existing Improvements thereon from Seller contemporaneously with the executionof this Agreement. Pursuant to the Lease Agreement (Improvements) executed byBNPLC and Extreme contemporaneously with this Agreement (the "ImprovementsLease"), BNPLC is leasing the Improvements on the Land to Extreme and agreeingto provide funding for renovations, remodeling, improvements and furnishing ofthe Improvements, all of which will be owned by BNPLC. (All of BNPLC'sinterests, including those created by the documents delivered at the closingunder the Acquisition Contract, in the Improvements and in all other real andpersonal property from time to time covered by the Improvements Lease andincluded within the "Property" as defined therein are hereinafter collectivelyreferred to as the "Property". The Property does not include the Land itself, itbeing understood that the Other Purchase Agreement constitutes a separateagreement providing for the possible sale of the Land and the appurtenancesthereto, and only the Land and the appurtenances thereto, from BNPLC to Extremeor a third party designated by Extreme.) Extreme and BNPLC have reached agreement upon the terms and conditions uponwhich Extreme will purchase or arrange for the purchase of the Property, and bythis Agreement they desire to evidence such agreement. AGREEMENTS 1. EXTREME'S OPTIONS AND OBLIGATIONS ON THE DESIGNATED SALE DATE. (A) Right to Purchase; Initial Remarketing Rights and Obligation. ------------------------------------------------------------Whether or not an Event of Default shall have occurred and be continuing or theImprovements Lease shall have been terminated, but subject to Paragraph 4 below: (1) Extreme shall have the right (the "Purchase Option") to purchase or cause an Affiliate of Extreme to purchase the Property and BNPLC's interest in Escrowed Proceeds, if any, on the Designated Sale Date for a cash price equal to the Break Even Price (as defined below). (2) If neither Extreme nor an Affiliate of Extreme purchases the Property and BNPLC's interest in any Escrowed Proceeds on the Designated Sale Date as provided in the preceding subparagraph 1.(A)(1), then Extreme shall have the following rights and obligations (collectively, "Extreme's Initial Remarketing Rights and Obligations"): (a) First, Extreme shall have the right (but not the obligation) to cause an Applicable Purchaser who is not an Affiliate of Extreme to purchase the Property and BNPLC's interest in any Escrowed Proceeds on the Designated Sale Date for a cash purchase price (the "Third Party Price") determined as provided below. If, however, the Break Even Price exceeds the sum of any Third Party Price tendered or to be tendered to BNPLC by an Applicable Purchaser and any Supplemental Payment paid by Extreme as described below, then BNPLC may affirmatively elect to decline such tender from the Applicable Purchaser and to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser pursuant to this subparagraph (a "Voluntary Retention of the Property"). (b) Second, if the Third Party Price actually paid by an Applicable Purchaser to BNPLC on the Designated Sale Date exceeds the Break Even Price, Extreme shall be entitled to such excess, subject, however, to BNPLC's right to offset against such excess any and all sums that are then due from Extreme to BNPLC under the other Operative Documents. (c) Third, if for any reason whatsoever (including a Voluntary Retention of the Property or a decision by Extreme not to exercise its right to purchase or cause an Applicable Purchaser to purchase from BNPLC as described above) neither Extreme nor an Applicable Purchaser pays a net cash price to BNPLC on the Designated Sale Date equal to or in excess of the Break Even Price in connection with a sale of the Property and BNPLC's interest in any Escrowed Proceeds pursuant to this Agreement, then Extreme shall have the obligation to pay to BNPLC on the Designated Sale Date a supplemental payment (the "Supplemental Payment") equal to the lesser of (1) the amount by which the Break Even Price exceeds such net cash price (if any) actually received by BNPLC on the Designated Sale Date (such excess being hereinafter called a "Deficiency") or (2) the Maximum Remarketing Obligation. As used herein, the "Maximum Remarketing Obligation" means a dollar amount determined in accordance with the following provisions: 1) The "Maximum Remarketing Obligation" will equal the product of (i) Stipulated Loss Value on the Designated Sale Date, times (ii) 100% minus the Residual Risk Percentage, provided that both of the following conditions are satisfied: (x) Extreme shall not have elected to accelerate the Designated Sale Date as provided in clause (2) of the definition of Designated Sale Date in the Common Definitions and Provisions Agreement (Improvements). (y) No Event of Default, other than an Issue 97-1 Non-performance-related Subjective Event of Default, shall occur on or be continuing on the Designated Sale Date. 2) If either of the conditions listed in subparagraph 1) preceding are not satisfied, the "Maximum Remarketing Obligation" will equal the Break Even Price.If any Supplemental Payment or other amount payable to BNPLC pursuant to thissubparagraph 1.(A) is not actually paid to BNPLC on the Designated Sale Date,Extreme shall pay interest on the past due amount computed at the Default Ratefrom the Designated Sale Date. 2 (B) Determinations Concerning Price. ------------------------------- (1) Determination of the Break Even Price. As used herein, ------------------------------------- "Break Even Price" means an amount equal, on the Designated Sale Date, to Stipulated Loss Value, plus all out-of-pocket costs and expenses (including appraisal costs, withholding taxes (if any) not constituting Excluded Taxes, and Attorneys' Fees) incurred by BNPLC in connection with any sale of BNPLC's interests in the Property under this Agreement or in connection with collecting payments due hereunder, but less the aggregate amounts (if -------- any) of Direct Payments to Participants and Deposit Taker Losses. (2) Determination of Third Party Price. The Third Party Price ---------------------------------- required of any Applicable Purchaser purchasing from BNPLC under subparagraph 1.(A)(2)(a) will be determined as follows: (a) Extreme may give a notice (a "Remarketing Notice") to BNPLC and to each of the Participants no earlier than one hundred twenty days before the Designated Sale Date and no later than ninety days before the Designated Sale Date, specifying an amount as the Third Party Price that Extreme believes in good faith to constitute reasonably equivalent value for the Property and any Escrowed Proceeds. Once given, a Remarketing Notice shall not be rescinded or modified without BNPLC's written consent. (b) If BNPLC believes in good faith that the Third Party Price specified by Extreme in a Remarketing Notice does not constitute reasonably equivalent value for the Property and any Escrowed Proceeds, BNPLC may at any time before sixty days prior to the Designated Sale Date respond to the Remarketing Notice with a notice back to Extreme, objecting to the Third Party Price so specified by Extreme. If BNPLC receives a Remarketing Notice, yet does not respond with an objection as provided in the preceding sentence, the Third Party Price suggested by Extreme in the Remarketing Notice will be the Third Party Price for purposes of this Agreement. If, however, BNPLC does respond with an objection as provided in this subparagraph, and if Extreme and BNPLC do not otherwise agree in writing upon a Third Party Price, then the Third Party Price will be the lesser of (I) fair market value of the Property, plus the amount of any Escrowed Proceeds, as determined by a professional independent appraiser selected by BNPLC, or (II) the Break Even Price. (c) If for any reason, including an acceleration of the Designated Sale Date as provided in the definition thereof in the Common Definitions and Provisions Agreement (Improvements), Extreme does not deliver a Remarketing Notice to BNPLC within the time period specified above, then the Third Party Price will be an amount determined in good faith by BNPLC as constituting reasonably equivalent value for the Property and any Escrowed Proceeds, but in no event more than the Break Even Price. If any payment to BNPLC by an Applicable Purchaser hereunder is held to constitute a preference or a voidable transfer under Applicable Law, or must for any other reason be refunded by BNPLC to the Applicable Purchaser or to another Person, and if such payment to BNPLC reduced or had the effect of reducing a Supplemental Payment or increased or had the effect of increasing any excess sale proceeds paid to Extreme pursuant to subparagraph 1(A)(2)(b) or pursuant to subparagraph 2.(D), then Extreme shall pay to BNPLC upon demand an amount equal to the reduction of the Supplemental Payment or to the increase of the excess sale proceeds paid to Extreme, as applicable, and this Agreement shall continue to be effective or shall be reinstated as necessary to permit BNPLC to enforce its right to collect such amount from Extreme. 3 (C) Designation of the Purchaser. To give BNPLC the opportunity ----------------------------before the Designated Sale Date to prepare the deed and other documents thatBNPLC must tender pursuant to Paragraph 3 (collectively, the "Sale ClosingDocuments"), Extreme must, by a notice to BNPLC given at least seven days priorto the Designated Sale Date, specify irrevocably, unequivocally and withparticularity the party who will purchase the Property in order to satisfy theobligations of Extreme set forth in subparagraph 1(A). If for any reason Extremefails to so specify a party who will in accordance with the terms and conditionsset forth herein purchase the Property (be it Extreme itself, an Affiliate ofExtreme or another Applicable Purchaser), BNPLC shall be entitled to postponethe tender of the Sale Closing Documents until a date after the Designated SaleDate and not more than twenty days after Extreme finally does so specify aparty, but such postponement will not relieve or postpone the obligation ofExtreme to make a Supplemental Payment on the Designated Sale Date as providedin Paragraph 1.(A)(2)(c). (D) Effect of the Purchase Option and Extreme's Initial Remarketing ---------------------------------------------------------------Rights and Obligations on Subsequent Title Encumbrances. Any conveyance of the-------------------------------------------------------Property to Extreme or any Applicable Purchaser pursuant to this Paragraph 1.(A)shall cut off and terminate any interest in the Improvements or other Propertyclaimed by, through or under BNPLC, including any interest claimed by theParticipants and including any Liens Removable by BNPLC (such as, but notlimited to, any judgment liens established against the Property because of ajudgment rendered against BNPLC and any leasehold or other interests conveyed byBNPLC in the ordinary course of BNPLC's business), but not including personalobligations of Extreme to BNPLC under the Improvements Lease or other OperativeDocuments (including obligations arising under the indemnities therein). Anyoneaccepting or taking any interest in the Property by or through BNPLC after thedate of this Agreement shall acquire such interest subject to the PurchaseOption and Extreme's Initial Remarketing Rights and Obligations. Further,Extreme and any Applicable Purchaser shall be entitled to pay any paymentrequired by this Agreement for the purchase of the Property directly to BNPLCnotwithstanding any prior conveyance or assignment by BNPLC, voluntary orotherwise, of any right or interest in this Agreement or the Property, andneither Extreme nor any Applicable Purchaser shall be responsible for the properdistribution or application of any such payments by BNPLC; and any such paymentto BNPLC shall discharge the obligation of Extreme to cause such payment to allPersons claiming an interest in such payment. Contemporaneously with theexecution of this Agreement, the parties shall record a memorandum of thisAgreement for purposes of effecting constructive notice to all Persons ofExtreme's rights under this Agreement, including its rights under thissubparagraph. (E) Security for the Purchase Option and Extreme's Initial ------------------------------------------------------Remarketing Rights and Obligations. To secure BNPLC's obligation to sell the----------------------------------Property pursuant to Paragraph 1.(A) and to pay any damages to Extreme caused bya breach of such obligations, including any such breach caused by a rejection ortermination of this Agreement in any bankruptcy or insolvency proceedinginstituted by or against BNPLC, as debtor, BNPLC does hereby grant to Extreme alien and security interest against all rights, title and interests of BNPLC fromtime to time in and to the Improvements and other Property. Extreme may enforcesuch lien and security interest judicially after any such breach by BNPLC, butnot otherwise. Contemporaneously with the execution of this Agreement, Extremeand BNPLC will execute a memorandum of this Agreement which is in recordableform and which specifically references the lien granted in this subparagraph,and Extreme shall be entitled to record such memorandum at any time prior to theDesignated Sale Date. (F) Delivery of Books and Records If BNPLC Retains the Property. -----------------------------------------------------------Unless Extreme or its Affiliate or another Applicable Purchaser purchases theProperty pursuant to Paragraph 1.(A), promptly after the Designated Sale DateExtreme shall deliver to BNPLC copies of all plans and specifications for theProperty prepared in connection with any Initial Renovations made ascontemplated by the Improvements Lease, together with all other books andrecords of Extreme which will be necessary or useful to any future owner's oroccupant's use of the Property in the manner permitted by the ImprovementsLease. 2. EXTREME'S RIGHTS AND OPTIONS AFTER THE DESIGNATED SALE DATE. 4 (A) Extreme's Extended Right to Remarket. During the two years ------------------------------------following the Designated Sale Date ("Extreme's Extended Remarketing Period"),Extreme shall have the right ("Extreme's Extended Remarketing Right") to causean Applicable Purchaser who is not an Affiliate of Extreme to purchase theProperty for a cash purchase price not below the Minimum Extended RemarketingPrice (as defined below). Extreme's Extended Remarketing Right shall, however,be subject to all of the following conditions: (1) The Property and BNPLC's interest in Escrowed Proceeds, if any, shall not have been sold on the Designated Sale Date as provided in Paragraph 1 or within the thirty days thereafter as provided in subparagraph 4.(B). (2) No Voluntary Retention of the Property shall have occurred as described in subparagraph 1.(A)(2)(a). (3) Extreme's Extended Remarketing Right shall not have been terminated pursuant to subparagraph 4.(B) below because of Extreme's failure to make any Supplemental Payment required on the Designated Sale Date. (4) Extreme's Extended Remarketing Right shall not have been terminated by BNPLC pursuant to subparagraph 4.(C) below to facilitate BNPLC's sale of the Property to a third party in accordance with subparagraph 2.(C). (5) At least thirty days prior to the date upon which BNPLC is to convey the Property to an Applicable Purchaser because of Extreme's exercise of Extreme's Extended Remarketing Right (the "Final Sale Date"), Extreme shall have notified BNPLC of (x) the date proposed by Extreme as the Final Sale Date (which must be a Business Day), (y) the full legal name of the Applicable Purchaser and such other information as will be required to prepare the Sale Closing Documents, and (z) the amount of the purchase price that the Applicable Purchaser will pay (consistent with the minimum required pursuant to the other provisions of this subparagraph 2.(A)) for the Property. (B) Definition of Minimum Extended Remarketing Price. As used herein, ------------------------------------------------the "Minimum Extended Remarketing Price" means, subject to reduction as providedin subparagraph 2.(C) below, an amount equal to the sum of the following: (1) the amount by which the Break Even Price computed on the Designated Sale Date exceeds any Supplemental Payment actually paid to BNPLC on the Designated Sale Date, together with interest on such excess computed at the Default Rate from the period commencing on the Designated Sale Date and ending on the Final Sale Date, plus ---- (2) all out-of-pocket costs and expenses (including withholding taxes [if any], other than Excluded Taxes, and Attorneys' Fees) incurred by BNPLC in connection with the sale to the Applicable Purchaser, to the extent not already included in the computation of Break Even Price, and --- plus ---- (3) the sum of all Impositions, insurance premiums and other Losses of every kind suffered or incurred by BNPLC or any other Interested Party with respect to the ownership, operation or maintenance of the Property on or after the Designated Sale Date, together with interest on such Impositions, insurance premiums and other Losses computed at the Default Rate from the date paid or incurred to the Final Sale Date.If, however, Losses described in the preceding clause (3) consist of claimsagainst BNPLC or another Interested Party that have not been liquidated prior tothe Final Sale Date (and, thus, such Losses have yet to be fixed in 5 amount as of the Final Sale Date), then Extreme may elect to exclude any suchLosses from the computation of the Minimum Extended Remarketing Price byproviding to BNPLC, for the benefit of BNPLC and other Interested Parties, awritten agreement to indemnify and defend BNPLC and other Interested Partiesagainst such Losses. To be effective hereunder for purposes of reducing theMinimum Extended Remarketing Price (and, thus, the Break Even Price), any suchwritten indemnity must be fully executed and delivered by Extreme on or prior tothe Final Sale Date, must include provisions comparable to subparagraphs -------------5(c)(ii), (iii), (iv) and (v) of the Improvements Lease and otherwise must be in-----------------------------form and substance satisfactory to BNPLC. (C) BNPLC's Right to Sell. After the Designated Sale Date, if the ---------------------Property has not already been sold by BNPLC pursuant to Paragraph 1 or thisParagraph 2, BNPLC shall have the right to sell the Property or offer theProperty for sale to any third party on any terms believed to be appropriate byBNPLC in its sole good faith business judgment; provided, however, that so longas the conditions to Extreme's Extended Remarketing Rights specified insubparagraph 2.(A) continue to be satisfied: (1) BNPLC shall not sell the Property to an Affiliate of BNPLC on terms less favorable than those which BNPLC would require from a prospective purchaser not an Affiliate of BNPLC; (2) If BNPLC receives or desires to make a written proposal (whether in the form of a "letter of intent" or other nonbinding expression of interest or in the form of a more definitive purchase and sale agreement) for a sale of the Property to a prospective purchaser (a "Third Party Sale Proposal"), and if on the basis of such Third Party Sale Proposal BNPLC expects to enter into or to pursue negotiations for a definitive purchase and sale agreement with the prospective purchaser, then prior to executing any such definitive agreement, BNPLC shall submit the Third Party Sale Proposal to Extreme with a notice (the "Third Party Sale Notice") explaining that (A) BNPLC is then prepared to accept a price not below an amount specified in such Third Party Sale Notice (the "Third Party Target Price") if BNPLC and the prospective purchaser reach agreement on other terms and conditions to be incorporated into a definitive purchase and sale agreement, and (B) Extreme's Extended Remarketing Right may be terminated pursuant to subparagraph 4.(C) of this Agreement unless Extreme causes an Applicable Purchaser to consummate a purchase of the Property pursuant to this Paragraph 2 within ninety days after the date of such Third Party Sale Notice.For a period of ninety days (but only ninety days) after the date of any ThirdParty Sale Notice, the Minimum Extended Remarketing Price shall be limited inamount so that it does not exceed the Third Party Target Price specified byBNPLC therein. Accordingly, if BNPLC has delivered a Third Party Sale Noticespecifying a Third Party Target Price below the Minimum Extended RemarketingPrice calculated as provided in subparagraph 2.(B) within the ninety days priorto the Final Sale Date for any sale to an Applicable Purchaser by BNPLC pursuantto this Paragraph 2, then the Minimum Extended Remarketing Price applicable tosuch sale shall be reduced to the amount of the Third Party Target Price sospecified. Such a reduction, however, will apply only to a sale to an ApplicablePurchaser actually consummated within the ninety days after the date of theapplicable Third Party Sale Notice. (D) Extreme's Right to Excess Sales Proceeds. If the cash price ----------------------------------------actually paid by any third party purchasing the Property from BNPLC duringExtreme's Extended Remarketing Period, including any price paid by an ApplicablePurchaser purchasing from BNPLC pursuant to this Paragraph 2, exceeds theMinimum Extended Remarketing Price (calculated as provided in subparagraph2.(B), without reduction pursuant to subparagraph 2.(C)), then Extreme shall beentitled to the excess; provided, that BNPLC may offset and retain from theexcess any and all sums that are then due and unpaid from Extreme to BNPLC underany of the Operative Documents. 6 (E) Permitted Transfers During Extreme's Extended Remarketing Period. ----------------------------------------------------------------Any "Permitted Transfer" described in clause (6) of the definition thereof in ----------the Common Definitions and Provisions Agreement (Improvements) to an Affiliateof BNPLC or that covers BNPLC's entire interest in the Improvements will besubject to Extreme's Extended Remarketing Right if, at the time of the PermittedTransfer, Extreme's Extended Remarketing Right has not expired or beenterminated as provided herein. Any other Permitted Transfer described in clause(6) of the definition thereof, however, will not be subject to Extreme'sExtended Remarketing Right. Thus, for example, BNPLC's conveyance of a utilityeasement or space lease more than thirty days after the Designated Sale Date toa Person not an Affiliate of BNPLC shall not be subject to Extreme's ExtendedRemarketing Right, though following the conveyance of the lesser estate,Extreme's Extended Remarketing Right may continue to apply to BNPLC's remaininginterest in the Improvements and any Personal Property. 3. TERMS OF CONVEYANCE UPON PURCHASE. As necessary to consummate any saleof the Property to Extreme or an Applicable Purchaser pursuant to thisAgreement, BNPLC must, subject to any postponement permitted by subparagraph1.(C), promptly after the tender of the purchase price and any other payments toBNPLC required pursuant to Paragraph 1 or Paragraph 2 (as applicable), and thisParagraph 3 (as applicable), convey all of BNPLC's right, title and interest inthe Improvements and other Property to Extreme or the Applicable Purchaser, asthe case may be, by BNPLC's execution, acknowledgment (where appropriate) anddelivery of the Sale Closing Documents. Such conveyance by BNPLC will be subjectonly to the Permitted Encumbrances and any other encumbrances that do notconstitute Liens Removable by BNPLC. However, such conveyance shall not includethe rights of BNPLC or other Interested Parties under the indemnities providedin the Operative Documents, including rights to any payments then due fromExtreme under the indemnities or that may become due thereafter because of anyexpense or liability incurred by BNPLC or another Interested Party resulting inwhole or in part from events or circumstances occurring or alleged to haveoccurred before such conveyance. All costs, both foreseen and unforeseen, of anypurchase by Extreme or an Applicable Purchaser hereunder shall be theresponsibility of the purchaser. The Sale Closing Documents used to accomplishsuch conveyance shall consist of the following: (1) a Corporation Grant Deed inthe form attached as Exhibit B-1 or Exhibit B-2 or Exhibit B-3, as required by ----------- ----------- -----------Exhibit B, (2) a Bill of Sale and Assignment in the form attached as Exhibit C,--------- ---------(3) an Acknowledgment of Disclaimer of Representations and Warranties, in theform attached as Exhibit D, which Extreme or the Applicable Purchaser must ---------execute and return to BNPLC, (4) a Secretary's Certificate in the form attachedas Exhibit E, and (5) a certificate concerning tax withholding in the form ---------attached as Exhibit F. If for any reason BNPLC fails to tender the Sale Closing ---------Documents as required by this Paragraph 3, BNPLC may cure such refusal at anytime before thirty days after receipt of a demand for such cure from Extreme. 4 SURVIVAL AND TERMINATION OF THE RIGHTS AND OBLIGATIONS OF EXTREME ANDBNPLC. (A) Status of this Agreement Generally. Except as expressly provided ----------------------------------herein, this Agreement shall not terminate; nor shall Extreme have any right toterminate this Agreement; nor shall Extreme be entitled to any reduction of theBreak Even Price, any Deficiency, the Maximum Remarketing Obligation, anySupplemental Payment or the Minimum Extended Remarketing Price hereunder; norshall the obligations of Extreme to BNPLC under Paragraph 1 be affected, byreason of (i) any damage to or the destruction of all or any part of theProperty from whatever cause (though it is understood that Extreme will receiveany remaining Escrowed Proceeds yet to be applied as provided in theImprovements Lease that may result from such damage if Extreme purchases theProperty and the Escrowed Proceeds as herein provided), (ii) the taking of ordamage to the Property or any portion thereof by eminent domain or otherwise forany reason (though it is understood that Extreme will receive any remainingEscrowed Proceeds yet to be applied as provided in the Improvements Lease thatmay result from such taking or damage if Extreme purchases the Property and theEscrowed Proceeds as herein provided), (iii) the prohibition, limitation orrestriction of Extreme's use of all or any portion of the Property or anyinterference with such use by governmental action or otherwise, (iv) anyeviction of Extreme or any party claiming under Extreme by paramount title orotherwise, (v) Extreme's prior acquisition or ownership of any interest in theProperty, (vi) any default on the part of BNPLC under this Agreement, theImprovements Lease or any other agreement to which 7 BNPLC is a party, or (vii) any other cause, whether similar or dissimilar to theforegoing, any existing or future law to the contrary notwithstanding. It is theintention of the parties hereto that the obligations of Extreme hereunder(including the obligation to make any Supplemental Payment as provided inParagraph 1) shall be separate and independent covenants and agreements fromBNPLC's obligations under this Agreement or any other agreement between BNPLCand Extreme; provided, however, that nothing in this subparagraph shall excuseBNPLC from its obligation to tender the Sale Closing Documents in substantiallythe form attached hereto as exhibits when required by Paragraph 3. Further,nothing in this subparagraph shall be construed as a waiver by Extreme of anyright Extreme may have at law or in equity to the following remedies, whetherbecause of BNPLC's failure to remove a Lien Removable by BNPLC or because of anyother default by BNPLC under this Agreement: (i) the recovery of monetarydamages, (ii) injunctive relief in case of the violation, or attempted orthreatened violation, by BNPLC of any of the express covenants, agreements,conditions or provisions of this Agreement which are binding upon BNPLC, or(iii) a decree compelling performance by BNPLC of any of the express covenants,agreements, conditions or provisions of this Agreement which are binding uponBNPLC. (B) Automatic Termination of Extreme's Rights. Without limiting -----------------------------------------BNPLC's right to enforce Extreme's obligation to pay any Supplemental Payment orother amounts required by this Agreement, the rights of Extreme (to bedistinguished from the obligations of Extreme) included in Extreme's InitialRemarketing Rights and Obligations, the Purchase Option and Extreme's ExtendedRemarketing Rights shall all terminate automatically if Extreme shall fail topay the full amount of any Supplemental Payment required by subparagraph1.(A)(2)(c) on the Designated Sale Date or if BNPLC shall elect a VoluntaryRetention of the Property as provided in subparagraph 1.(A)(2)(a).Notwithstanding anything in this subparagraph to the contrary, however, evenafter a failure to pay any required Supplemental Payment on the Designated SaleDate, Extreme may nonetheless tender to BNPLC the full Break Even Price and allamounts then due under the Operative Documents, together with interest on thetotal Break Even Price computed at the Default Rate from the Designated SaleDate to the date of tender, on any Business Day within thirty days after theDesignated Sale Date, and if presented with such a tender within thirty daysafter the Designated Sale Date, BNPLC must accept it and promptly thereafterdeliver any Escrowed Proceeds and the Sale Closing Documents listed in Paragraph3 to Extreme. (C) Termination of Extreme's Extended Remarketing Rights to Permit a ----------------------------------------------------------------Sale by BNPLC. At any time more than ninety days after BNPLC has delivered a-------------Third Party Sale Notice to Extreme as described in subparagraph 2.(C)(2), BNPLCmay terminate Extreme's Extended Remarketing Rights contemporaneously with theconsummation of a sale of the Property by BNPLC to any third party (be it theprospective purchaser named in the Third Party Sale Notice or another thirdparty) at a price equal to or in excess of the Third Party Target Pricespecified in the Third Party Sale Notice, so as to permit the sale of theProperty unencumbered by Extreme's Extended Remarketing Rights. (D) Payment Only to BNPLC. All amounts payable under this Agreement ---------------------by Extreme and, if applicable, by an Applicable Purchaser must be paid directlyto BNPLC, and no payment to any other party shall be effective for the purposesof this Agreement. In addition to the payments required under subparagraph1.(A), on the Designated Sale Date Extreme must pay all amounts then due toBNPLC under the Land Lease or other Operative Documents. This subparagraph shallnot, however, be construed to limit Extreme's right to require the deduction ofDirect Payments to Participants and Deposit Taker Losses in the calculation ofthe Break Even Price as provided in subparagraph 1.(B)(1). In additional to the payments required under subparagraph 1.(A), on theDesignated Sale Date Extreme must pay all amounts then due to BNPLC under theImprovements Lease or other Operative Documents. (E) Remedies Under the Other Operative Documents. No repossession of --------------------------------------------or re-entering upon the Property or exercise of any other remedies available toBNPLC under the Land Lease or other Operative Documents shall terminateExtreme's rights or obligations hereunder, all of which shall survive BNPLC'sexercise of remedies under the other Operative Documents. Extreme acknowledgesthat the consideration for this Agreement is separate and independent of theconsideration for the Land Lease and the Closing 8 Certificate, and Extreme's obligations hereunder shall not be affected orimpaired by any event or circumstance that would excuse Extreme from performanceof its obligations under such other Operative Documents. (F) Occupancy by Extreme Prior to Closing of a Sale. Prior to the -----------------------------------------------closing of any sale of the Property to Extreme or an Applicable Purchaserhereunder, Extreme's occupancy of the Land and its use of the Property shallcontinue to be subject to the terms and conditions of the Land Lease, includingthe terms setting forth Extreme's obligation to pay rent, prior to anytermination or expiration of the Land Lease pursuant to its express terms andconditions. 5 SECURITY FOR EXTREME'S OBLIGATIONS; RETURN OF FUNDS. Extreme'sobligations under this Agreement are secured by the Pledge Agreement, referenceto which is hereby made for a description of the Collateral covered thereby andthe rights and remedies provided to BNPLC thereby. Although the collateral agentappointed for BNPLC as provided in the Pledge Agreement shall be entitled tohold all Collateral as security for the full and faithful performance by Extremeof Extreme's covenants and obligations under this Agreement, the Collateralshall not be considered an advance payment of the Break Even Price or anySupplemental Payment or a measure of BNPLC's damages should Extreme breach thisAgreement. If Extreme does breach this Agreement and fails to cure the samewithin any time specified herein for the cure, BNPLC may, from time to time,without prejudice to any other remedy and without notice to Extreme, require thecollateral agent to immediately apply the proceeds of any disposition of theCollateral (and any cash included in the Collateral) to amounts then duehereunder from Extreme. If by a Permitted Transfer BNPLC conveys its interest inthe Property before the Designated Sale Date, BNPLC may also assign BNPLC'sinterest in the Collateral to the transferee. BNPLC shall be entitled to returnany Collateral not sold or used to satisfy the obligations secured by the PledgeAgreement directly to Extreme notwithstanding any prior actual or attemptedconveyance or assignment by Extreme, voluntary or otherwise, of any right toreceive the same; neither BNPLC nor the collateral agent named in the PledgeAgreement shall be responsible for the proper distribution or application byExtreme of any such Collateral returned to Extreme; and any such return ofCollateral to Extreme shall discharge any obligation of BNPLC to deliver suchCollateral to all Persons claiming an interest in the Collateral. Further, BNPLCshall be entitled to deliver any Escrowed Proceeds it holds on the DesignatedSale Date directly to Extreme or to any Applicable Purchaser purchasing BNPLC'sinterest in the Property and the Escrowed Proceeds pursuant to this Agreementnotwithstanding any prior actual or attempted conveyance or assignment byExtreme, voluntary or otherwise, of any right to receive the same; BNPLC shallnot be responsible for the proper distribution or application by Extreme or anyApplicable Purchaser of any such Escrowed Proceeds paid over to Extreme or theApplicable Purchaser; and any such payment of Escrowed Proceeds to Extreme or anApplicable Purchaser shall discharge any obligation of BNPLC to deliver the sameto all Persons claiming an interest therein. 6 CERTAIN REMEDIES CUMULATIVE. No right or remedy herein conferred uponor reserved to BNPLC is intended to be exclusive of any other right or remedyBNPLC has with respect to the Property, and each and every right and remedyshall be cumulative and in addition to any other right or remedy given hereunderor now or hereafter existing at law or in equity or by statute. In addition toother remedies available under this Agreement, either party shall be entitled,to the extent permitted by applicable law, to a decree compelling performance ofany of the other party's agreements hereunder. 7 ATTORNEYS' FEES AND LEGAL EXPENSES. If either party to this Agreementcommences any legal action or other proceeding to enforce any of the terms ofthis Agreement, or because of any breach by the other party or disputehereunder, the party prevailing in such action or proceeding shall be entitledto recover from the other party all Attorneys' Fees incurred in connectiontherewith, whether or not such controversy, claim or dispute is prosecuted to afinal judgment. Any such Attorneys' Fees incurred by either party in enforcing ajudgment in its favor under this Agreement shall be recoverable separately fromsuch judgment, and the obligation for such Attorneys' Fees is intended to beseverable from other provisions of this Agreement and not to be merged into anysuch judgment. 9 8 ESTOPPEL CERTIFICATE. Upon request by BNPLC, Extreme shall execute,acknowledge and deliver a written statement certifying that this Agreement isunmodified and in full effect (or, if there have been modifications, that thisAgreement is in full effect as modified, and setting forth such modification)and either stating that no default exists hereunder or specifying each suchdefault of which Extreme has knowledge. Any such statement may be relied upon byany Participant or prospective purchaser or assignee of BNPLC with respect tothe Property. 9 SUCCESSORS AND ASSIGNS. The terms, provisions, covenants andconditions hereof shall be binding upon Extreme and BNPLC and their respectivepermitted successors and assigns and shall inure to the benefit of Extreme andBNPLC and all permitted transferees, mortgagees, successors and assignees ofExtreme and BNPLC with respect to the Property; provided, that (A) the rights ofBNPLC hereunder shall not pass to Extreme or any Applicable Purchaser or anysubsequent owner claiming through Extreme or an Applicable Purchaser, (B) BNPLCshall not assign this Agreement or any rights hereunder except pursuant to aPermitted Transfer, and (C) Extreme shall not assign this Agreement or anyrights hereunder without the prior written consent of BNPLC. [Signature pages follow.] 10 IN WITNESS WHEREOF, Extreme and BNPLC have caused this Agreement to beexecuted as of June 1, 2000. "Extreme" EXTREME NETWORKS, INC. By: ___________________________ Name:______________________ Title:_____________________ [Continuation of signature pages to Purchase Agreement (Land) dated to beeffective June 1, 2000] "BNPLC" BNP LEASING CORPORATION By: ______________________________ Lloyd G. Cox, Vice President Exhibit A --------- LEGAL DESCRIPTIONAll that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning. Exhibit B --------- Requirements Re: Form of Grant Deed and Ground LeaseThe form of deed to be used to convey BNPLC's interest in the Land to Extreme oran Applicable Purchaser will depend upon whether BNPLC's interest in theImprovements has been or is being conveyed at the same time to the same party.If BNPLC's interests in both the Land and the Improvements are to be conveyed toExtreme or an Applicable Purchaser at the same time, because a sale under thisPurchase Agreement and a sale under the Other Purchase Agreement (covering theImprovements) are being consummated at the same time and to the same party, thenthe one deed in form attached as Exhibit B-1 will be used to convey both. ----------- If, however, a sale of BNPLC's interest in the Improvements pursuant to theOther Purchase Agreement has not been consummated before, and is not beingconsummated contemporaneously with the sale of BNPLC's interest in the Landunder this Agreement, then BNPLC's interest in the Land will be conveyed by adeed in the from attached as Exhibit B-2, and BNPLC and the grantee under suchdeed shall, as a condition to BNPLC's obligation to deliver the deed, executeand deliver a Ground Lease covering the Land in the form attached hereto asExhibit B-3.-----------Finally, BNPLC's interest in the Land will be conveyed by a deed in the fromattached as Exhibit B-4 if BNPLC's interest in the Improvements has been soldpursuant to the Other Purchase Agreement before a sale of BNPLC's interest inthe Land under this Agreement, or if BNPLC's interest in the Improvements isbeing sold contemporaneously with a sale of BNPLC's interest in the Land, butthe purchaser of the Improvements is not the same as the purchaser of the Land. Exhibit B-1 ----------- CORPORATION GRANT DEEDRECORDING REQUESTED BY AND WHEN RECORDED MAIL TO:-------------------------NAME: [Extreme or the Applicable Purchaser] ADDRESS: _____________________________ATTN: _____________________________ CITY: _____________________________STATE: ________________________________ Zip: _____________________________MAIL TAX STATEMENTS TO:----------------------NAME: [Extreme or the Applicable Purchaser] ADDRESS: _____________________________ATTN: _____________________________ CITY: _____________________________STATE: ________________________________ Zip: _____________________________ CORPORATION GRANT DEED (Covering Land and Improvements)FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNPLEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest inthe land situated in Santa Clara, California, described on Annex A attachedhereto and hereby made a part hereof and all improvements on such land, togetherwith the any other right, title and interest of Grantor in and to any easements,rights-of-way, privileges and other rights appurtenant to such land or theimprovements thereon; provided, however, that this grant is subject to theencumbrances described on Annex B (the "Permitted Encumbrances"). Grantee herebyassumes the obligations (including any personal obligations) of Grantor, if any,created by or under, and agrees to be bound by the terms and conditions of, thePermitted Encumbrances to the extent that the same concern or apply to the landor improvements conveyed by this deed. BNP LEASING CORPORATIONDate: As of_____________ By: ___________________________ Its: Attest: ___________________________ Its: [Extreme or Applicable Purchaser]Date: As of_____________ By: ___________________________ Its: Attest: ___________________________ Its:STATE OF _____________ ) ) SSCOUNTY OF _____________ ) On___________________ before me,_________, personally appeared _________and________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature________________________________ Exhibit B-1 - Page 2 STATE OF _____________ ) ) SSCOUNTY OF _____________ ) On___________________ before me,_________, personally appeared _________and____________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature____________________________ Exhibit B-1 - Page 3 Annex A LEGAL DESCRIPTION[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES---------------FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH EXTREME REQUESTS BNPLC'SCONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANYSUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTINGNOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED ISACTUALLY EXECUTED AND DELIVERED.]All that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning. Exhibit B-1 - Page 4 Annex B Permitted Encumbrances[DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY---------------BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONALENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING NOTE" WILL BEDELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCHADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS"PERMITTED ENCUMBRANCES" UNDER THE LAND LEASE OR THE OTHER LEASE AGREEMENT FROMTIME TO TIME OR BECAUSE OF EXTREME'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TOAN ADJUSTMENT.] This conveyance is subject to all encumbrances not constituting a "LienRemovable by BNPLC" (as defined in the Common Definitions and ProvisionsAgreement (Land) incorporated by reference into the Lease Agreement (Land)referenced in the last item of the list below), including the following mattersto the extent the same are still valid and in force:1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 20004. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed, From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983 Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records.6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects:A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as Exhibit B-1 - Page 5 follows: follows: Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows: Parcel 1: Commencing at the point of intersection of the Westerly line of that certain 24.74 acre parcel of land shown upon that Record of Survey filed for recorded August 10, 1979 in Book 447 of Maps, at page 33, Santa Clara County Records, with a line parallel with and 10 feet Southerly of, measured at right angles to, the Northerly line of said parcel; thence along said parallel line N. 89 degrees 25 minutes 00 seconds E. 107.00 feet; thence parallel with said Westerly line S. 0 degrees 00 minutes 27 seconds E. 319.16 feet; thence S. 34 degrees 02 minutes 45 seconds W. 87.51 feet, more or less, to intersection with a line parallel with and 58 feet Easterly of measured at right angles to, said Westerly line; thence along last said parallel line S. 0 degrees 00 minutes 27 seconds E. 294.30 feet, more or less, to intersection with a line parallel with and 5 feet Northerly of, measured at right angles to, the Northerly line of that real property conveyed to the City of Santa Clara by that deed filed for record November 30, 1983 in Book I 111 of Official Records, at page 606, said County Records; thence along last said parallel line the following three (3) courses: N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87 degrees 09 minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00 seconds E. 334.69 feet; thence continuing parallel with the Southerly line of first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet, more or less, to termination in the Easterly line of that certain parcel of real property conveyed to MPJ Partnership, by that Grant Deed filed for record August 25, 1983 in Book H 838 of Official Records, at page 215, said County Records. Parcel 2: A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline. Parcel 3: A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on Exhibit B-1 - Page 6 the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip. Parcel 4: A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip. Parcel 5: A strip of land 10 feet in width, the centerline of said strip being described as follows: Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line. Parcel 6: A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee. Exhibit B-1 - Page 7 Exhibit B-2 ----------- CORPORATION GRANT DEEDRECORDING REQUESTED BYAND WHEN RECORDED MAIL TO:-------------------------NAME: [Extreme or the Applicable Purchaser]ADDRESS: ___________________ATTN: ___________________CITY: ___________________STATE: ___________________Zip: ___________________MAIL TAX STATEMENTS TO:----------------------NAME: [Extreme or the Applicable Purchaser]ADDRESS: ___________________ATTN: ___________________CITY: ___________________STATE: ___________________Zip: ___________________ CORPORATION GRANT DEED (Covering Improvements but not the Land under the Improvements)FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNPLEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest inthe buildings and other improvements (the "Improvements") on the land situatedin Santa Clara, California, described on Annex A attached hereto and hereby madea part hereof (the "Land"), together with the any other right, title andinterest of Grantor in and to any easements, rights-of-way, privileges and otherrights appurtenant to the Improvements; provided, however, that this grant issubject to the encumbrances described on Annex B (the "Permitted Encumbrances")and any reservations or qualifications set forth below. Grantee hereby assumesthe obligations (including any personal obligations) of Grantor, if any, createdby or under, and agrees to be bound by the terms and conditions of, thePermitted Encumbrances to the extent that the same concern or apply to theImprovements.Although this deed conveys Grantor's interest in the Improvements, this deeddoes not convey any interest in the Land under the Improvements or any rights oreasements appurtenant to Improvements. Grantor retains and reserves all right,title and interest of Grantor in and to the Land and any rights and easementsappurtenant to Land. Further, this deed does not convey any right of access overor right to use the Land, it being understood that the right of Grantee or itssuccessors and assigns to maintain or use the improvements conveyed hereby shallbe on and subject to the terms and conditions of any separate ground lease ordeed that Grantee may from time to time obtain from the owner of the Land. IfGrantee does not obtain a separate deed or ground lease giving Grantee theauthority to maintain the Improvements on the Land, Grantee shall remove orabandon the Improvements promptly upon request of the owner of the Land. Nothingherein or in the agreements pursuant to which this deed is being delivered shallbe construed as an obligation on the part of Grantor to deliver or cooperatereasonably in obtaining for Grantee any deed or ground lease covering the Landdescribed on Annex A. BNP LEASING CORPORATIONDate: As of ____________ By: ___________________________ Its: Attest: ___________________________ Its: [Extreme or Applicable Purchaser]Date: As of ____________ By: ___________________________ Its: Attest: ___________________________ Its:STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me,__________, personally appeared __________and ______________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature _______________________________ Exhibit B-2 - Page 2 STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me, ___________, personally appeared ________and ____________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature ______________________________ Exhibit B-2 - Page 3 Annex A LEGAL DESCRIPTION[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES --------------FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH EXTREME REQUESTS BNPLC'SCONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANYSUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTINGNOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED ISACTUALLY EXECUTED AND DELIVERED.]All that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning. Exhibit B-2 - Page 4 Annex B Permitted Encumbrances[DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY --------------BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONALENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING NOTE" WILL BEDELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCHADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS"PERMITTED ENCUMBRANCES" UNDER THE LAND LEASE OR THE OTHER LEASE AGREEMENT FROMTIME TO TIME OR BECAUSE OF EXTREME'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TOAN ADJUSTMENT.] This conveyance is subject to all encumbrances not constituting a "LienRemovable by BNPLC" (as defined in the Common Definitions and ProvisionsAgreement (Improvements) incorporated by reference into the Lease Agreement(Improvements) referenced in the last item of the list below), including thefollowing matters to the extent the same are still valid and in force:1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 20004. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed, From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983 Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records.6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects: A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as Exhibit B-2 - Page 5 follows: Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows: Parcel 1: Commencing at the point of intersection of the Westerly line of that certain 24.74 acre parcel of land shown upon that Record of Survey filed for recorded August 10, 1979 in Book 447 of Maps, at page 33, Santa Clara County Records, with a line parallel with and 10 feet Southerly of, measured at right angles to, the Northerly line of said parcel; thence along said parallel line N. 89 degrees 25 minutes 00 seconds E. 107.00 feet; thence parallel with said Westerly line S. 0 degrees 00 minutes 27 seconds E. 319.16 feet; thence S. 34 degrees 02 minutes 45 seconds W. 87.51 feet, more or less, to intersection with a line parallel with and 58 feet Easterly of measured at right angles to, said Westerly line; thence along last said parallel line S. 0 degrees 00 minutes 27 seconds E. 294.30 feet, more or less, to intersection with a line parallel with and 5 feet Northerly of, measured at right angles to, the Northerly line of that real property conveyed to the City of Santa Clara by that deed filed for record November 30, 1983 in Book I 111 of Official Records, at page 606, said County Records; thence along last said parallel line the following three (3) courses: N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87 degrees 09 minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00 seconds E. 334.69 feet; thence continuing parallel with the Southerly line of first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet, more or less, to termination in the Easterly line of that certain parcel of real property conveyed to MPJ Partnership, by that Grant Deed filed for record August 25, 1983 in Book H 838 of Official Records, at page 215, said County Records. Parcel 2: A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline. Parcel 3: A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on Exhibit B-2 - Page 6 the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip. Parcel 4: A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip. Parcel 5: A strip of land 10 feet in width, the centerline of said strip being described as follows: Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line. Parcel 6: A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee. Exhibit B-2 - Page 7 Exhibit B-3 ----------- CORPORATION GRANT DEEDRECORDING REQUESTED BYAND WHEN RECORDED MAIL TO:-------------------------NAME: [Extreme or the Applicable Purchaser]ADDRESS: ___________________ATTN: ___________________CITY: ___________________STATE: ___________________Zip: ___________________MAIL TAX STATEMENTS TO:----------------------NAME: [Extreme or the Applicable Purchaser]ADDRESS: ___________________ATTN: ___________________CITY: ___________________STATE: ___________________Zip: ___________________ CORPORATION GRANT DEED (Covering Improvements but not Land under the Improvements)FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNPLEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to[Extreme or the Applicable Purchaser] ("Grantee") all of Grantor's interest inthe buildings and other improvements (the "Improvements") on the land situatedin Santa Clara, California, described on Annex A attached hereto and hereby madea part hereof (the "Land"), together with the any other right, title andinterest of Grantor in and to any easements, rights-of-way, privileges and otherrights appurtenant to the Improvements; provided, however, that this grant issubject to the encumbrances described on Annex B (the "Permitted Encumbrances")and any reservations or qualifications set forth below. Grantee hereby assumesthe obligations (including any personal obligations) of Grantor, if any, createdby or under, and agrees to be bound by the terms and conditions of, thePermitted Encumbrances to the extent that the same concern or apply to theImprovements.Although this deed conveys Grantor's interest in the Improvements on the Land,this deed does not convey any interest in the Land itself or any rights oreasements appurtenant to Land. Prior to or contemporaneously with the deliveryof this deed, Grantor has conveyed or is conveying the Land and appurtenantrights and easements to another party, subject to the terms and conditions of aGround Lease dated ________, filed or to be filed for record in the Santa ClaraCounty records. Grantor is assigning it's rights as lessee under the GroundLease to Grantee by a separate instrument dated of even date herewith. BNP LEASING CORPORATIONDate: As of ____________ By: ________________________________ Its: Attest: ________________________________ Its: [Extreme or Applicable Purchaser]Date: As of ____________ By: ________________________________ Its: Attest: ________________________________ Its:STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me,_________, personally appeared ___________and _____________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature _________________________________ Exhibit B-3 - Page 2 STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me, ___________, personally appeared ________and __________, personally known to me (or proved to me on the basis ofsatisfactory evidence) to be the persons whose names are subscribed to thewithin instrument and acknowledged to me that they executed the same in theirauthorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature _______________________________ Exhibit B-3 - Page 3 Annex A LEGAL DESCRIPTION[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES --------------FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH EXTREME REQUESTS BNPLC'SCONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANYSUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTINGNOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED ISACTUALLY EXECUTED AND DELIVERED.]All that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning. Exhibit B-3 - Page 4 Annex B Permitted Encumbrances[DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY --------------BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONALENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING NOTE" WILL BEDELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCHADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS"PERMITTED ENCUMBRANCES" UNDER THE LAND LEASE OR THE OTHER LEASE AGREEMENT FROMTIME TO TIME OR BECAUSE OF EXTREME'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TOAN ADJUSTMENT.] This conveyance is subject to all encumbrances not constituting a "LienRemovable by BNPLC" (as defined in the Common Definitions and ProvisionsAgreement (Improvements) incorporated by reference into the Lease Agreement(Improvements) referenced in the last item of the list below), including thefollowing matters to the extent the same are still valid and in force:1. TAXES for the fiscal year 2000-2001, a lien not yet due or payable.2. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5, (commencing with Section 75) to the Revenue and Taxation Code of the State of California.3. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara For: electric wire overhang purposes Recorded: November 28, 1960 in Book 4995, Page 160, Official Records Affects: Northerly 5 feet of said land, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 20004. The fact that the ownership of said land does not include any right of ingress or egress to or from Lawrence Expressway contiguous thereto, said right having been relinquished by deed, From: Jefferson Union Elementary School District of the County of Santa Clara To: County of Santa Clara, State of California Recorded: June 4, 1965 in Book 6982, Page 1, Official Records Said land, however, abuts on a public street other than the one referred to above, over which rights of vehicular access have not been relinquished.5. An Agreement, affecting said land, for the purposes stated herein and subject to the terms, covenants, conditions, restrictions, and easements, if any, contained therein For: Postponed Traffic Signal Improvements Dated: October 4, 1983 Executed by: City of Santa Clara, California, a municipal corporation and MPJ, a California partnership Recorded: November 16, 1983 in Book I 070, Page 333, Official Records.6. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: roadway purposes and public utilities Recorded: November 30, 1983 in Book I 111, Page 606, Official Records Affects: A portion of that certain 24.740 acre parcel of land as shown on that certain Record of Survey filed for record in Book 447 of Maps, at page 33, Santa Clara County Records, described as Exhibit B-3 - Page 5 follows: Beginning at a point in the Northerly line of Monroe Avenue, as shown on said map at the Westerly terminus of the course shown as N. 89 degrees 25 minutes 00 seconds E. 760.70; thence from said point of beginning along said Northerly line N. 89 degrees 25 minutes 00 seconds E. 760.70 feet and N. 2.00 feet; thence leaving said Northerly line along a line parallel with said course of N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 334.99 feet; thence leaving said parallel line N. 87 degrees 09 minutes 00 seconds W. 66.79 feet; thence along a line parallel with said course N. 89 degrees 25 minutes 00 seconds E.; S. 89 degrees 25 minutes 00 seconds W. 359.00 feet; thence leaving said Westerly line along a tangent curve to the right, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to a point of cusp in the Westerly line of said 24.740 acre parcel; thence along said Westerly line S. 0 degrees 00 minutes 27 seconds E. 6.00 feet; thence leaving said Westerly line along a tangent curve to the left, with a radius of 50.00 feet, through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of 79.04 feet to the point of beginning, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.7. An easement affecting the portion of said land and for the purpose stated herein and incidental purposes, In Favor Of: City of Santa Clara, a municipal corporation For: underground electrical distribution and/or communication systems Recorded: May 17, 1984 in Book I 552, Page 595, Official Records Affects. as follows: Parcel 1: Commencing at the point of intersection of the Westerly line of that certain 24.74 acre parcel of land shown upon that Record of Survey filed for recorded August 10, 1979 in Book 447 of Maps, at page 33, Santa Clara County Records, with a line parallel with and 10 feet Southerly of, measured at right angles to, the Northerly line of said parcel; thence along said parallel line N. 89 degrees 25 minutes 00 seconds E. 107.00 feet; thence parallel with said Westerly line S. 0 degrees 00 minutes 27 seconds E. 319.16 feet; thence S. 34 degrees 02 minutes 45 seconds W. 87.51 feet, more or less, to intersection with a line parallel with and 58 feet Easterly of measured at right angles to, said Westerly line; thence along last said parallel line S. 0 degrees 00 minutes 27 seconds E. 294.30 feet, more or less, to intersection with a line parallel with and 5 feet Northerly of, measured at right angles to, the Northerly line of that real property conveyed to the City of Santa Clara by that deed filed for record November 30, 1983 in Book I 111 of Official Records, at page 606, said County Records; thence along last said parallel line the following three (3) courses: N. 89 degrees 25 minutes 00 seconds E. 351.81 feet; S. 87 degrees 09 minutes 00 seconds E. 66.79 feet; N. 89 degrees 25 minutes 00 seconds E. 334.69 feet; thence continuing parallel with the Southerly line of first said parcel N. 89 degrees 25 minutes 00 seconds E. 181.89 feet, more or less, to termination in the Easterly line of that certain parcel of real property conveyed to MPJ Partnership, by that Grant Deed filed for record August 25, 1983 in Book H 838 of Official Records, at page 215, said County Records. Parcel 2: A portion of said 24.74 acre parcel of land contiguous to and Northerly of said real property conveyed by deed recorded in Book I 111, at page 606, contiguous to and Westerly of hereinabove described strip of land and bounded on the North by a line parallel with and 5 feet Northerly of, measured at right angles to, that course N. 89 degrees 25 minutes 00 seconds E. 351.81 feet in the hereinabove described centerline. Parcel 3: A strip of land 10 feet in width and 30 feet in length of centerline of said strip being parallel with and 325.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on Exhibit B-3 - Page 6 the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet, as the centerline of a strip of land 15 feet in width, to termination of said centerline and strip. Parcel 4: A strip of land 10 feet in width and 12 feet in length the centerline of said strip being parallel with and 116.5 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel and terminating on the West in the Easterly line of first hereinabove described strip; thence continuing Easterly along last said parallel line for a distance of 15 feet in width, lying 5 feet Northerly and 10 feet Southerly of said parallel line to the Easterly terminus of said strip. Parcel 5: A strip of land 10 feet in width, the centerline of said strip being described as follows: Commencing at the point of intersection of the Northerly line of first hereinabove described strip of land with a line parallel with and 824.5 feet Easterly of, measured at right angles to, that course in the Westerly boundary of said 24.75 acre parcel bearing N. 0 degrees 00 minutes 27 seconds W.; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 367.96 feet, more or less, to a line parallel with and 327 feet Southerly of, measured at right angles to, said Northerly line of the 24.74 acre parcel; thence along last said parallel line S. 89 degrees 25 minutes 00 seconds W. 78 feet to a line parallel with and 746.5 feet Easterly of, measured at right angles to, said Westerly line of the 24.74 acre parcel; thence along last said parallel line N. 0 degrees 00 minutes 27 seconds W. 203 feet; thence continuing as the centerline of a strip of land 15 feet in width N. 0 degrees 00 minutes 27 seconds W. 15 feet, more or less, to termination of said strip and centerline in a line parallel with and 109 feet Southerly of, measured at right angles to, last said Northerly line. Parcel 6: A 15 foot square parcel of land contiguous to and Southerly of last hereinabove described 10 foot wide strip of land and centered on the Southerly prolongation of hereinabove mentioned course N. 0 degrees 00 minutes 27 seconds W. 203 feet, and as shown on the survey prepared by Anthony C. McCants, L.S. 5944, dated April 27, 2000, revised May 22, 2000.8. Lease Agreement (Land) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee, and Lease Agreement (Improvements) dated as of June 1, 2000, by and between BNP Leasing Corporation, as lessor, and Extreme Networks, Inc., as lessee. Exhibit B-3 - Page 7 Exhibit C --------- BILL OF SALE AND ASSIGNMENT Reference is made to: (1) that certain Purchase Agreement (Improvements)between BNP Leasing Corporation ("Assignor") and Extreme Networks, Inc., datedas of June 1, 2000, (the "Purchase Agreement") and (2) that certain LeaseAgreement (Improvements) between Assignor, as landlord, and Extreme Networks,Inc., as tenant, dated as of June 1, 2000 (the "Improvements Lease").(Capitalized terms used and not otherwise defined in this document are intendedto have the meanings assigned to them in the Common Definitions and ProvisionsAgreement (Improvements) incorporated by reference into both the PurchaseAgreement and Improvements Lease.) As contemplated by the Purchase Agreement, Assignor hereby sells, transfersand assigns unto [EXTREME OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE], a_____________ ("Assignee"), all of Assignor's right, title and interest in andto the following property, if any, to the extent such property is assignable: (a) the Improvements Lease [DRAFTING NOTE: THE FOLLOWING WILL BE ADDEDONLY IF APPLICABLE BECAUSE OF THE SIMULTANEOUS DELIVERY OF A GRANT DEED IN THEFORM OF EXHIBIT B-3: and the Ground Lease dated _________, between _________, as ----------- lessor, and Assignor, as lessee, filed for record on in ___________ of SantaClara County records (the "Ground Lease")]; (b) any pending or future award made because of any condemnation affectingthe Property or because of any conveyance to be made in lieu thereof, and anyunpaid award for damage to the Property and any unpaid proceeds of insurance orclaim or cause of action for damage, loss or injury to the Property; and (c) all other property included within the definition of "Property" as setforth in the Purchase Agreement, including but not limited to any of thefollowing transferred to Assignor by the tenant pursuant to Paragraph 7 of the -----------Improvements Lease or otherwise acquired by Assignor, at the time of theexecution and delivery of the Improvements Lease and Purchase Agreement orthereafter, by reason of Assignor's status as the owner of any interest in theProperty: (1) any goods, equipment, furnishings, furniture, chattels andtangible personal property of whatever nature that are located on the Propertyand all renewals or replacements of or substitutions for any of the foregoing;(ii) the rights of Assignor, existing at the time of the execution of theImprovements Lease and Purchase Agreement or thereafter arising, under PermittedEncumbrances or Development Documents (both as defined in the ImprovementsLease); and (iii) any other permits, licenses, franchises, certificates, andother rights and privileges related to the Property that Assignee would haveacquired if Assignee had itself acquired the Improvements covered by theImprovements Lease and constructed the Improvements included in the Property.Provided, however, excluded from this conveyance and reserved to Assignor areany rights or privileges of Assignor under the following ("Excluded Rights"):(1) the indemnities set forth in the Improvements Lease, whether such rights arepresently known or unknown, including rights of the Assignor to be indemnifiedagainst environmental claims of third parties as provided in the ImprovementsLease which may not presently be known, (2) provisions in the Improvements Leasethat establish the right of Assignor to recover any accrued unpaid rent underthe Improvements Lease which may be outstanding as of the date hereof, (3)agreements between Assignor and "BNPLC's Parent" or any "Participant," both asdefined in the Improvements Lease, or any modification or extension thereof, or(4) any other instrument being delivered to Assignor contemporaneously herewithpursuant to the Purchase Agreement. To the extent that this conveyance doesinclude any rights to receive future payments under the Improvements Lease, suchrights ("Included Rights") shall be subordinate to Assignor's Excluded Rights,and Assignee hereby waives any rights to enforce Included Rights until such timeas Assignor has received all payments to which it remains entitled by reason ofExcluded Rights. If any amount shall be paid to Assignee on account of anyIncluded Rights at any time before Assignor has received all payments to whichit is entitled because of Excluded Rights, such amount shall be held in trust byAssignee for the benefit of Assignor, shall be segregated from the other fundsof Assignee and shall forthwith be paid over to Assignor to be held by Assignoras collateral for, or then or at any time thereafter applied in whole or in part by Assignor against, the payments due to Assignor because of ExcludedRights, whether matured or unmatured, in such order as Assignor shall elect. Assignor does for itself and its successors covenant and agree towarrant and defend the title to the property assigned herein against the justand lawful claims and demands of any person claiming under or through a LienRemovable by BNPLC, but not otherwise. Assignee hereby assumes and agrees to keep, perform and fulfillAssignor's obligations, if any, relating to any permits or contracts, underwhich Assignor has rights being assigned herein. IN WITNESS WHEREOF, the parties have executed this instrument as of_______________, _____. ASSIGNOR: -------- BNP LEASING CORPORATION a Delaware corporation By:_____________________________________ Its:____________________________________ ASSIGNEE: -------- [Extreme or the Applicable Purchaser], a ____________________ By:_____________________________________ Its:____________________________________ Exhibit C - Page 2 STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me,__________ , personally appeared ____________ and ____________, personally known to me (or proved to me on thebasis of satisfactory evidence) to be the persons whose names are subscribed tothe within instrument and acknowledged to me that they executed the same intheir authorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature _______________________________STATE OF ____________ ) ) SSCOUNTY OF ___________ ) On ___________________ before me,__________ , personally appeared ___________ and ____________, personally known to me (or proved to me on thebasis of satisfactory evidence) to be the persons whose names are subscribed tothe within instrument and acknowledged to me that they executed the same intheir authorized capacities, and that by their signatures on the instrument theperson, or the entity upon behalf of which the persons acted, executed theinstrument. WITNESS my hand and official seal. Signature _______________________________ Exhibit C - Page 3 Annex A LEGAL DESCRIPTION[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE OTHER LEASE CHANGES --------------FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH EXTREME REQUESTS BNPLC'SCONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANYSUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTINGNOTE" WILL BE DELETED BEFORE THE DOCUMENT TO WHICH THIS DESCRIPTION IS ATTACHEDIS ACTUALLY EXECUTED AND DELIVERED.]All that certain real property situated in the City of Santa Clara, County ofSanta Clara, State of California, described as follows:Being a portion of that certain 24.740 acre parcel as shown on that certainRecord of Survey filed in Book 447 of Maps, at Page 33, Santa Clara CountyRecords, described as follows:Beginning at the Northwest corner of said 24.740 acre parcel; thence from saidpoint of beginning along the Northerly line of said 24.470 acre parcel N. 89degrees 25 minutes 00 seconds E. 995.17 feet; thence leaving said Northerlylines S. 0 degrees 10 minutes 00 seconds W. 705.02 feet to a point in theSoutherly line of said 24.740 acre parcel; thence along said Southerly line thefollowing courses: S. 89 degrees 25 minutes 00 seconds W. 181.82 feet; S. 2.00feet and S. 89 degrees 25 minutes 00 seconds W. 760.70 feet; thence leaving saidSoutherly line along a tangent curve to the right, with a radius of 50.00 feet,through a central angle of 90 degrees 34 minutes 33 seconds for an arc length of79.4 feet to a point in the Westerly line of said 24.470 acre parcel; thencealong said Westerly line N. 0 degrees 00 minutes 27 seconds W. 656.49 feet tothe point of beginning. Exhibit C - Page 4 Exhibit D --------- ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this"Certificate") is made as of ___________________, ____, by [Extreme or theApplicable Purchaser, as the case may be], a ___________________ ("Grantee"). Contemporaneously with the execution of this Certificate, BNP LeasingCorporation, a Delaware corporation ("BNPLC"), is executing and delivering toGrantee (1) a corporate grant deed and (2) a Bill of Sale and Assignment (theforegoing documents and any other documents to be executed in connectiontherewith are herein called the "Conveyancing Documents" and any of theproperties, rights or other matters assigned, transferred or conveyed pursuantthereto are herein collectively called the "Subject Property"). Notwithstanding any provision contained in the Conveyancing Documents tothe contrary, Grantee acknowledges that BNPLC makes no representations orwarranties of any nature or kind, whether statutory, express or implied, withrespect to environmental matters or the physical condition of the SubjectProperty, and Grantee, by acceptance of the Conveyancing Documents, accepts theSubject Property "AS IS," "WHERE IS," "WITH ALL FAULTS" and without any such -- -- ----- -- ---- --- ------ representation or warranty by Grantor as to environmental matters, the physicalcondition of the Subject Property, compliance with subdivision or plattingrequirements or construction of any improvements. Without limiting thegenerality of the foregoing, Grantee hereby further acknowledges and agrees thatwarranties of merchantability and fitness for a particular purpose are excludedfrom the transaction contemplated by the Conveyancing Documents, as are anywarranties arising from a course of dealing or usage of trade. Grantee herebyassumes all risk and liability (and agrees that BNPLC shall not be liable forany special, direct, indirect, consequential, or other damages) resulting orarising from or relating to the ownership, use, condition, location,maintenance, repair, or operation of the Subject Property, except for damagesproximately caused by (and attributed by any applicable principles ofcomparative fault to) the Established Misconduct of BNPLC. As used in thepreceding sentence, "Established Misconduct" is intended to have, and be limitedto, the meaning given to it in the Common Definitions and Provisions Agreement(Improvements) incorporated by reference into the Purchase Agreement betweenBNPLC and Extreme Networks, Inc. dated as of June 1, 2000, pursuant to whichPurchase Agreement BNPLC is delivering the Conveyancing Documents. The provisions of this Certificate shall be binding on Grantee, itssuccessors and assigns and any other party claiming through Grantee. Granteehereby acknowledges that BNPLC is entitled to rely and is relying on thisCertificate. EXECUTED as of ________________, ____. [Extreme or the Applicable Purchaser] By:______________________________________ Name:_________________________________ Title:________________________________ Exhibit E --------- SECRETARY'S CERTIFICATE The undersigned, [Secretary or Assistant Secretary] of BNP LeasingCorporation, a Delaware corporation (the "Corporation"), hereby certifies asfollows: 1. That he is the duly, elected, qualified and acting Secretary [orAssistant Secretary] of the Corporation and has custody of the corporaterecords, minutes and corporate seal. 2. That the following named persons have been properly designated,elected and assigned to the office in the Corporation as indicated below; thatsuch persons hold such office at this time and that the specimen signatureappearing beside the name of such officer is his or her true and correctsignature.[The following blanks must be completed with the names and signatures of theofficers who will be signing the deed and other Sale Closing Documents on behalfof the Corporation.]Name Title Signature---- ----- ---------___________________ ________________ ____________________________________________ ________________ _________________________ 3. That the resolutions attached hereto and made a part hereof were dulyadopted by the Board of Directors of the Corporation in accordance with theCorporation's Articles of Incorporation and Bylaws. Such resolutions have notbeen amended, modified or rescinded and remain in full force and effect. IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal ofthe Corporation on this __, day of __, _. ____________________________ [signature and title] CORPORATE RESOLUTIONS OF BNP LEASING CORPORATION WHEREAS, pursuant to that certain Purchase Agreement (Improvements) (hereincalled the "Purchase Agreement") dated as of June 1, 2000, by and between BNPLeasing Corporation (the "Corporation") and [Extreme or the Applicable Purchaseras the case may be] ("Purchaser"), the Corporation agreed to sell and Purchaseragreed to purchase or cause the Applicable Purchaser (as defined in the PurchaseAgreement) to purchase the Corporation's interest in the property (the"Property") located in Santa Clara, California more particularly describedtherein. NOW THEREFORE, BE IT RESOLVED, that the Board of Directors of theCorporation, in its best business judgment, deems it in the best interest of theCorporation and its shareholders that the Corporation convey the Property toPurchaser or the Applicable Purchaser pursuant to and in accordance with theterms of the Purchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and each ofthem, are hereby authorized and directed in the name and on behalf of theCorporation to cause the Corporation to fulfill its obligations under thePurchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and each ofthem, are hereby authorized and directed to take or cause to be taken any andall actions and to prepare or cause to be prepared and to execute and deliverany and all deeds and other documents, instruments and agreements that shall benecessary, advisable or appropriate, in such officer's sole and absolutediscretion, to carry out the intent and to accomplish the purposes of theforegoing resolutions. Exhibit E - Page 2 Exhibit F --------- FIRPTA STATEMENT Section 1445 of the Internal Revenue Code of 1986, as amended, providesthat a transferee of a U.S. real property interest must withhold tax if thetransferor is a foreign person. Sections 18805, 18815 and 26131 of theCalifornia Revenue and Taxation Code, as amended, provide that a transferee of aCalifornia real property interest must withhold income tax if the transferor isa nonresident seller. To inform [Extreme or the Applicable Purchaser] (the "Transferee") thatwithholding of tax is not required upon the disposition of a California realproperty interest by transferor, BNP Leasing Corporation (the "Seller"), theundersigned hereby certifies the following on behalf of the Seller: 1. The Seller is not a foreign corporation, foreign partnership, foreigntrust, or foreign estate (as those terms are defined in the Internal RevenueCode and Income Tax Regulations); 2. The United States employer identification number for the Seller is_____________________; 3. The office address of the Seller is _______________________________________ _________________. 4. The Seller is qualified to do business in California. The Seller understands that this certification may be disclosed to theInternal Revenue Service and/or to the California Franchise Tax Board by theTransferee and that any false statement contained herein could be punished byfine, imprisonment, or both. The Seller understands that the Transferee is relying on this affidavit indetermining whether withholding is required upon said transfer. Under penalties of perjury I declare that I have examined thiscertification and to the best of my knowledge and belief it is true, correct andcomplete, and I further declare that I have authority to sign this document onbehalf of the Seller. Dated: ___________, ____. By:___________________________ Name:_________________________ Title:________________________ ================================================================================ EXHIBIT 10.12 PLEDGE AGREEMENT (LAND) AMONG BNP LEASING CORPORATION ("BNPLC") BNP PARIBAS, AS AGENT ("Agent") EXTREME NETWORKS, INC. ("Extreme") AND PARTICIPANTS AS DESCRIBED HEREIN June 1, 2000================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION........................................................................... -1- Section 1.1 Capitalized Terms Used But Not Defined in This Agreement...................................... -1- -------------------------------------------------------- Section 1.2 Definitions................................................................................... -1- ----------- Account.......................................................................................... -1- Account Office................................................................................... -2- Agent............................................................................................ -2- BNPLC............................................................................................ -2- BNPLC's Corresponding Obligations to Participants................................................ -2- Cash Collateral.................................................................................. -2- Certificate of Deposit........................................................................... -2- Collateral....................................................................................... -2- Collateral Imbalance............................................................................. -2- Collateral Percentage............................................................................ -2- Default.......................................................................................... -3- Deposit Taker.................................................................................... -3- Deposit Taker Losses............................................................................. -3- Deposit Taker's Acknowledgment and Agreement..................................................... -3- Disqualified Deposit Taker....................................................................... -3- Event of Default................................................................................. -3- Extreme.......................................................................................... -4- Extreme's Purchase Agreement Obligations......................................................... -4- Initially Qualified Deposit Taker................................................................ -5- Lien............................................................................................. -5- Material Lease Default........................................................................... -5- Minimum Collateral Percentage.................................................................... -5- Minimum Collateral Value......................................................................... -6- Notice of Security Interest...................................................................... -6- Other Liable Party............................................................................... -6- Participants..................................................................................... -6- Participation Agreement.......................................................................... -6- Percentage....................................................................................... -6- Qualified Pledge................................................................................. -6- Secured Obligations.............................................................................. -6- Supplement....................................................................................... -6- Transaction Documents............................................................................ -6- Value............................................................................................ -7- Section 1.3 Attachments.................................................................................. -7- ----------- Section 1.4 Amendment of Defined Instruments............................................................. -7- -------------------------------- Section 1.5 References and Titles........................................................................ -7- --------------------- ARTICLE II SECURITY INTEREST....................................................................................... -7- Section 2.1 Pledge and Grant of Security Interest........................................................ -7- ------------------------------------- Section 2.2 Return of Collateral After the Secured Obligations are Satisfied in Full..................... -8- ------------------------------------------------------------------------ ARTICLE III DETERMINATION OF THE COLLATERAL PERCENTAGE............................................................. -8- Section 3.1 Determination of the Collateral Percentage Generally......................................... -8- ---------------------------------------------------- Section 3.2 Limitations on Extreme's Right to Lower the Collateral Percentage............................ -8- ----------------------------------------------------------------- Section 3.3 Minimum Collateral Percentages Dependent Upon the Adjusted EBITDAR Coverage Ratio............ -9- --------------------------------------------------------------------------------- ARTICLE IV PROVISIONS CONCERNING DEPOSIT TAKERS.................................................................. -9- Section 4.1 Qualification of Deposit Takers Generally.................................................... -9- ----------------------------------------- Section 4.2 Existing Deposit Takers...................................................................... -9- ----------------------- Section 4.3 Replacement of Participants Proposed by Extreme.............................................. -10- ----------------------------------------------- Section 4.4 Mandatory Substitution for Disqualified Deposit Takers....................................... -10- ------------------------------------------------------ Section 4.5 Voluntary Substitution of Deposit Takers..................................................... -10- ---------------------------------------- Section 4.6 Delivery of Notice of Security Interest by Extreme and Agent................................. -10- ------------------------------------------------------------ Section 4.7 Constructive Possession of Collateral........................................................ -11- ------------------------------------- Section 4.8 Attempted Setoff by Deposit Takers........................................................... -11- ---------------------------------- Section 4.9 Deposit Taker Losses......................................................................... -11- -------------------- Section 4.10 Losses Resulting from Failure of Deposit Taker to Comply with this Agreement................ -11- ---------------------------------------------------------------------------- ARTICLE V DELIVERY AND MAINTENANCE OF CASH COLLATERAL............................................................ -12- Section 5.1 Delivery of Funds by Extreme................................................................. -12- ---------------------------- Section 5.2 Transition Account........................................................................... -12- ------------------ Section 5.3 Allocation of Cash Collateral Among Deposit Takers........................................... -12- -------------------------------------------------- Section 5.4 Issuance and Redemption of Certificates of Deposit........................................... -13- -------------------------------------------------- Section 5.5 Status of the Accounts Under the Reserve Requirement Regulations............................. -13- ---------------------------------------------------------------- Section 5.6 Acknowledgment by Extreme that Requirements of this Agreement are Commercially Reasonable.... -13- ----------------------------------------------------------------------------------------- ARTICLE VI WITHDRAWAL OF CASH COLLATERAL......................................................................... -14- Section 6.1 Withdrawal of Collateral Prior to the Designated Sale Date................................... -14- ---------------------------------------------------------- Section 6.2 Withdrawal and Application of Cash Collateral to Reduce or Satisfy the Secured ------------------------------------------------------------------------------ Obligations to the Participants............................................................. -14- ------------------------------- Section 6.3 Withdrawal and Application of Cash Collateral to Reduce or Satisfy the Secured ------------------------------------------------------------------------------ Obligations to BNPLC........................................................................ -15- --------------------- Section 6.4 Withdrawal of Cash Collateral From Accounts Maintained by Disqualified Deposit Takers........ -15- ------------------------------------------------------------------------------------- ARTICLE VII REPRESENTATIONS AND COVENANTS OF Extreme............................................................. -15- Section 7.1 Representations of Extreme................................................................... -15- -------------------------- Section 7.2 Covenants of Extreme......................................................................... -16- -------------------- ARTICLE VIII AUTHORIZED ACTION BY AGENT......................................................................... -17- Section 8.1 Power of Attorney............................................................................ -17- ----------------- ARTICLE IX DEFAULT AND REMEDIES................................................................................. -18- Section 9.1 Remedies..................................................................................... -18- -------- ARTICLE X OTHER RECOURSE........................................................................................ -18- Section 10.1 Recovery Not Limited........................................................................ -18- -------------------- ARTICLE XI PROVISIONS CONCERNING AGENT........................................................................... -19- Section 11.1 Appointment and Authority................................................................... -19- ------------------------- Section 11.2 Exculpation, Agent's Reliance, Etc.......................................................... -19- ---------------------------------- Section 11.3 Participant's Credit Decisions.............................................................. -20- ------------------------------ Section 11.4 Indemnity................................................................................... -20- --------- Section 11.5 Agent's Rights as Participant and Deposit Taker............................................. -20- ----------------------------------------------- Section 11.6 Investments................................................................................. -20- ----------- Section 11.7 Benefit of Article XI....................................................................... -21- --------------------- Section 11.8 Resignation................................................................................. -21- ----------- ARTICLE XII MISCELLANEOUS........................................................................................ -21- Section 12.1 Provisions Incorporated From Other Operative Documents....................................... -21- ------------------------------------------------------ Section 12.2 Cumulative Rights, etc...................................................................... -21- ---------------------- Section 12.3 Survival of Agreements...................................................................... -21- ---------------------- Section 12.4 Other Liable Party.......................................................................... -22- ------------------ Section 12.5 Termination................................................................................. -22- ----------- Attachment 1.........................................................................Form of Certificate of DepositAttachment 2..................................................................Supplement to Pledge Agreement (Land)Attachment 3.......................................Notice of Extreme's Election to Change the Collateral PercentageAttachment 4............................................................................Notice of Security InterestAttachment 5...............................................................................Examples of CalculationsAttachment 6.....................................Notice of Extreme's Requirement to Withdraw Excess Cash CollateralAttachment 7.....................................Notice of Extreme's Requirement of Direct Payments to ParticipantsAttachment 8.....................................Notice of Extreme's Requirement of Direct Payments to ParticipantsAttachment 9........................................................Notice of Extreme's Requirement of a Withdrawal of Cash Collateral from a Disqualified Deposit TakerSchedule 1...............................................................Financial Covenants and Negative Covenants---------- -iv- PLEDGE AGREEMENT (LAND) This PLEDGE AGREEMENT (LAND) (this "Agreement") is made as of June 1, 2000(the "Effective Date"), by EXTREME NETWORKS, INC., a California corporation("Extreme"); BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"); BNPPARIBAS ("BNPLC's Parent"), as a "Participant"; and BNP PARIBAS, acting in itscapacity as agent for BNPLC and the Participants (in such capacity, "Agent"). RECITALS -------- A. Extreme and BNPLC are parties to: (i) a Common Definitions andProvisions Agreement (Land) dated as of the Effective Date (the "CommonDefinitions and Provisions Agreement (Land)"); and (ii) a Purchase Agreement(Land) dated as of the Effective Date (the "Purchase Agreement"), pursuant towhich Extreme has agreed to make a "Supplemental Payment" (as defined in theCommon Definitions and Provisions Agreement (Land)), in consideration of therights granted to Extreme by the Purchase Agreement. B. Pursuant to a Participation Agreement dated the date hereof (the"Participation Agreement"), BNPLC's Parent has agreed with BNPLC to participatein the risks and rewards to BNPLC of the Purchase Agreement and other OperativeDocuments (as defined in the Common Definitions and Provisions Agreement(Land)), and the parties to this Agreement anticipate that other financialinstitutions may become parties to the Participation Agreement as Participants,agreeing to participate in the risks and rewards to BNPLC of the PurchaseAgreement and other Operative Documents. C. Extreme may from time to time deliver cash collateral for itsobligations to BNPLC under the Purchase Agreement and for BNPLC's correspondingobligations to Participants under the Participation Agreement. This Agreementsets forth the terms and conditions governing such cash collateral. AGREEMENT --------- NOW, THEREFORE, in consideration of the above recitals and for other goodand valuable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.1 Capitalized Terms Used But Not Defined in This Agreement. All -------------------------------------------------------- capitalized terms used in this Agreement which are defined in Article I ofthe Common Definitions and Provisions Agreement (Land) and not otherwise definedherein shall have the same meanings herein as set forth in the CommonDefinitions and Provisions Agreement (Land). All terms used in this Agreementwhich are defined in the UCC and not otherwise defined herein shall have thesame meanings herein as set forth therein, except where the context otherwiserequires. Section 1.2 Definitions. When used in this Agreement, the following terms -----------shall have the following respective meanings: "Account" shall mean any deposit account maintained by a Deposit Taker into which Cash Collateral may be deposited at any time, excluding the Transition Account. "Account Office" shall mean, with respect to any Account maintained by any Deposit Taker, the office of such Deposit Taker in California or New York at which such Account is maintained as specified in the applicable Deposit Taker's Acknowledgment and Agreement. "Agent" shall have the meaning given to that term in the introductory paragraph hereof. "BNPLC" shall have the meaning given to that term in the introductory paragraph hereof. "BNPLC's Corresponding Obligations to Participants" shall mean BNPLC's obligations under the Participation Agreement to pay Participants their respective Percentages of (or amounts equal to their respective Percentages of) sums "actually received by BNPLC" (as defined in the Participation Agreement) in satisfaction of Extreme's Purchase Agreement Obligations; provided, however, any modification of the Participation Agreement executed after the date hereof without Extreme's written consent shall not be considered for purposes of determining BNPLC's Corresponding Obligations to Participants under this Agreement. "Cash Collateral" shall mean (i) all money of Extreme which Extreme has delivered to Agent for deposit with a Deposit Taker pursuant to this Agreement, and (ii) any additional money delivered to Agent as Collateral pursuant to Section 4.9. "Certificate of Deposit" shall mean a certificate of deposit issued by a Deposit Taker as required by Section 5.4 below to evidence an Account into which Cash Collateral has been deposited pursuant to this Agreement. Each Certificate of Deposit shall be issued in an amount equal to the Value of the Account which it evidences and shall otherwise be in the form set forth as ATTACHMENT 1. ------------ "Collateral" shall have the meaning given to that term in Section 2.1 hereof. "Collateral Imbalance" shall mean on any date prior to the Designated Sale Date that the Value (without duplication) of Accounts maintained by and Certificates of Deposit issued by the Deposit Taker for any Participant (other than a Disqualified Deposit Taker) does not equal such Participant's Percentage, multiplied by the lesser of (1) the Minimum Collateral Value in effect on such date, or (2) the aggregate Value of all Collateral subject to this Agreement on such date. For purposes of determining whether a Collateral Imbalance exists, the Value of any Accounts maintained by a bank that is acting as Deposit Taker for two or more Participants will be deemed to be held for them in proportion to their respective Percentages, and the Value of any Accounts maintained by a bank as Deposit Taker for both a Participant and BNPLC (as in the case of BNPLC's Parent acting as Deposit Taker for itself, as a Participant, and for BNPLC) will be deemed to be held for the Participant only to the extent necessary to prevent or mitigate a Collateral Imbalance and otherwise for BNPLC. "Collateral Percentage" shall mean the percentage designated by Extreme in accordance with this Agreement from time to time, but never less than the Minimum Collateral Percentage established as provided in Part III of Schedule 1. ---------- "Default" means any Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an Event of Default. -2- "Deposit Taker" for BNPLC shall mean BNPLC's Parent and for each Participant shall mean the Participant itself; provided, that each of BNPLC and the Participants, for itself only, may from time to time designate another Deposit Taker as provided in Sections 4.4 and 4.5 below. "Deposit Taker Losses" shall mean the Value of any Cash Collateral delivered to a Deposit Taker, but that the Deposit Taker will not (because of the insolvency of the Deposit Taker, offsets by the Deposit Taker in violation of the Deposit Taker's Acknowledgment and Agreement, or otherwise) return to Extreme or return to Agent for disposition or application as provided herein or as required by applicable law. "Deposit Taker's Acknowledgment and Agreement" shall have the meaning given to that term in subsection 4.1.2 hereof. "Disqualified Deposit Taker" shall mean any Deposit Taker with whom Agent may decline to deposit Collateral pursuant to Section 4.1. "Event of Default" shall mean the occurrence of any of the following: (a) the failure by Extreme to pay all or any part of Extreme's Purchase Agreement Obligations when due, after giving effect to any applicable notice and grace periods expressly provided for in the Purchase Agreement; (b) the failure by Extreme to provide funds as and when required by Section 5.1 of this Agreement, if within seven Business Days after such failure commences Extreme does not (1) cure such failure by delivering the funds required by Section 5.1, and (2) pay to BNPLC as additional Rent under the Land Lease an amount equal to interest at the Default Rate (as defined in the Land Lease) on such funds for the period from which they were first due to the date of receipt by Agent; (c) the failure of the pledge or security interest contemplated herein in the Transition Account or any Account, Certificate of Deposit or Cash Collateral to be a Qualified Pledge (regardless of the characterization of the Transition Account or any Accounts, Certificates of Deposit or Cash Collateral as deposit accounts, instruments or general intangibles under the UCC), unless: (I) such failure would not exist but for a breach of this Agreement by Agent or a breach of a Deposit Taker's Acknowledgment and Agreement by a Deposit Taker, or (II) within five Business Days after Extreme becomes aware of such failure, Extreme shall (1) notify Agent, BNPLC and the Participants of such failure, and (2) cure such failure, and (3) to the extent required by Section 7.2.9, pay to BNPLC any additional Base Rent that has accrued under the Land Lease because of (or that would have accrued if BNPLC had been aware of) such failure, together with interest at the Default Rate on any such additional Base Rent; (d) the failure of any representation herein by Extreme to be true (other than a failure described in another clause of this definition of Event of Default), if such failure is not cured within thirty days after Extreme receives written notice thereof from Agent; -3- (e) the failure of any representation made by Extreme in subsection 7.1.1 to be true, if within fifteen (15) days after Extreme becomes aware of such failure, Extreme does not (1) notify Agent, BNPLC and the Participants of such failure, and (2) cure such failure, and (3) pay to BNPLC any additional Base Rent that has accrued under the Land Lease because of (or that would have accrued if BNPLC had been aware of) such failure, and (4) pay to BNPLC interest at the Default Rate on any such additional Base Rent; (f) the failure by Extreme timely and properly to observe, keep or perform any covenant, agreement, warranty or condition herein required to be observed, kept or performed (other than a failure described in another clause of this definition of Event of Default), if such failure is not cured within thirty days after Extreme receives written notice thereof from Agent; and (g) the failure by BNPLC to pay when due on or after the Designated Sale Date any of BNPLC's Corresponding Obligations to Participants, after giving effect to any applicable notice and grace periods expressly provided for in the Participation Agreement. Notwithstanding the foregoing, if ever the aggregate Value of Cash Collateral held by Agent and the Deposit Takers exceeds the Minimum ------- Collateral Value then in effect, a failure of the pledge or security interest contemplated herein in such excess Cash Collateral to be a valid, ----------- perfected, first priority pledge or security interest shall not constitute an Event of Default under this Agreement. Accordingly, to provide a cure as required to avoid an Event of Default under clauses (c) or (e) of this definition, Extreme could deliver additional Cash Collateral - the pledge of which or security interest in which created by this Agreement is a Qualified Pledge - sufficient in amount to cause the aggregate Value of the Cash Collateral then held by Agent and the Deposit Takers subject to a Qualified Pledge hereunder to equal or exceed the Minimum Collateral Value. "Extreme" shall have the meaning given to that term in the introductory paragraph hereof. "Extreme's Purchase Agreement Obligations" shall mean all of Extreme's obligations under the Purchase Agreement, including (i) Extreme's obligation to pay any Supplemental Payment as required under subparagraph ------------ 1(A) of the Purchase Agreement, and (ii) any damages incurred by BNPLC ---- because of (A) Extreme's breach of the Purchase Agreement or (B) the rejection by Extreme of the Purchase Agreement in any bankruptcy or insolvency proceeding. "Initially Qualified Deposit Taker" means (1) BNP PARIBAS, acting through any branch, office or agency that can lawfully maintain an Account as a Deposit Taker hereunder, and (2) any of the fifty largest (measured by total assets) U.S. banks, or one of the one hundred largest (measured by total assets) banks in the world, with debt ratings of at least (i) A- (in the case of long term debt) and A-1 (in the case of short term debt) or the equivalent thereof by Standard and Poor's Corporation, and (ii) A3 (in the case of long term debt) and P-2 (in the case of short term debt) or the equivalent thereof by Moody's Investor Service, Inc. The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, Extreme shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the status of any bank as an Initially Qualified Deposit Taker. "Lien" shall mean, with respect to any property or assets, any right or interest therein of a creditor to secure indebtedness of any kind which is owed to him or any other arrangement with such creditor which provides for the payment of such indebtedness out of such property or assets -4- or which allows him to have such indebtedness satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or any other charge or encumbrance for security purposes, whether arising by law or agreement or otherwise, but excluding any right of setoff which arises without agreement in the ordinary course of business. "Lien" also means any filed financing statement, any registration with an issuer of uncertificated securities, or any other arrangement which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement is undertaken before or after such Lien exists. "Material Lease Default" shall mean any of the following: (1) any "Event of Default" under and as defined in the Land Lease, including any such Event of Default consisting of a failure of Extreme to comply with the requirements of Schedule I attached to the ---------- Land Lease; and (2)(a) any failure of Extreme to make any payment required by and when first due under the Land Lease, regardless of whether any period provided in the Land Lease for the cure of such failure by Extreme shall have expired, and (b) any other default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an "Event of Default" under and as defined in the Land Lease, if such other default, event or failure involves a material noncompliance with Applicable Law. (For purposes of this definition, "material" noncompliance with Applicable Law will include any noncompliance, the correction of which has been requested by a governmental authority, or because of which a threat of action against the Property or BNPLC has been asserted by a governmental authority.) "Minimum Collateral Percentage" shall mean the percentage established as such from time to time as described in Part III of Schedule 1. ---------- "Minimum Collateral Value" shall mean (1) as of the Designated Sale Date or any prior date, an amount equal to the Collateral Percentage multiplied by the Stipulated Loss Value determined as of that date in accordance with the Land Lease; and (2) as of any date after the Designated Sale Date, an amount equal to the Break Even Price plus any unpaid interest accrued on past due amounts payable pursuant to Paragraph 1(a) of the Purchase Agreement. "Notice of Security Interest" shall have the meaning given to that term in subsection 4.1.1 hereof. "Other Liable Party" shall mean any Person, other than Extreme, who may now or may at any time hereafter be primarily or secondarily liable for any of the Secured Obligations or who may now or may at any time hereafter have granted to Agent a pledge of or security interest in any of the Collateral. "Participants" shall mean BNPLC's Parent and any other financial institutions which may hereafter become parties to (i) this Agreement by completing, executing and delivering to Extreme and Agent a Supplement, and (ii) the Participation Agreement. "Participation Agreement" shall have the meaning given to such term in Recital B hereof. --------- -5- "Percentage" shall mean with respect to each Participant and the Deposit Taker for such Participant, such Participant's "Percentage" under and as defined in the Participation Agreement for purposes of computing such Participant's right thereunder to receive payments of (or amounts equal to a percentage of) any sales proceeds or Supplemental Payment received by BNPLC under the Purchase Agreement. Percentages may be adjusted from time to time as provided in the Participation Agreement or as provided in supplements thereto executed as provided in the Participation Agreement. "Qualified Pledge" means a pledge or security interest that constitutes a valid, perfected, first priority pledge or security interest. "Secured Obligations" shall mean and include both Extreme's Purchase Agreement Obligations and BNPLC's Corresponding Obligations to Participants. "Supplement" shall mean a supplement to this Agreement in the form of ATTACHMENT 2. ------------ "Transaction Documents" shall mean, collectively, this Agreement, the Land Lease, the Purchase Agreement and the Participation Agreement. "Transition Account" shall have the meaning given it in Section 5.2. "UCC" shall mean the Uniform Commercial Code as in effect in the State of California from time to time, and the Uniform Commercial Code as in effect in any other jurisdiction which governs the perfection or non- perfection of the pledge of and security interests in the Collateral created by this Agreement. "Value" shall mean with respect to any Account, Certificate of Deposit or Cash Collateral on any date, a dollar value determined as follows (without duplication): (a) cash shall be valued at its face amount on such date; (b) an Account shall be valued at the principal balance thereof on such date; and (c) a Certificate of Deposit shall be valued at the face amount thereof. Section 1.3 Attachments. All attachments to this Agreement are a part -----------hereof for all purposes. Section 1.4 Amendment of Defined Instruments. Unless the context otherwise --------------------------------requires or unless otherwise provided herein, references in this Agreement to aparticular agreement, instrument or document (including references to the LandLease, Purchase Agreement and Participation Agreement) also refer to and includeall valid renewals, extensions, amendments, modifications, supplements orrestatements of any such agreement, instrument or document; provided thatnothing contained in this Section shall be construed to authorize any Person toexecute or enter into any such renewal, extension, amendment, modification,supplement or restatement. Section 1.5 References and Titles. All references in this Agreement to --------------------- Attachments, Articles, Sections, subsections, and other subdivisions refer tothe Attachments, Articles, Sections, subsections and other subdivisions of thisAgreement unless expressly provided otherwise. Titles appearing at the -6- beginning of any subdivision are for convenience only and do not constitute anypart of any such subdivision and shall be disregarded in construing the languagecontained in this Agreement. The words "this Agreement", "herein", "hereof","hereby", "hereunder" and words of similar import refer to this Agreement as awhole and not to any particular subdivision unless expressly so limited. Thephrases "this Article," "this Section" and "this subsection" and similar phrasesrefer only to the Articles, Sections or subsections hereof in which the phraseoccurs. The word "or" is not exclusive, and the word "including" (in all of itsforms) means "including without limitation". Pronouns in masculine, feminine andneuter gender shall be construed to include any other gender, and words in thesingular form shall be construed to include the plural and vice versa unless thecontext otherwise requires. ARTICLE II SECURITY INTEREST Section 2.1 Pledge and Grant of Security Interest. As security for the ------------------------------------- Secured Obligations, Extreme hereby pledges and assigns to Agent (for theratable benefit of BNPLC and the Participants) and grants to Agent (for theratable benefit of BNPLC and the Participants) a continuing security interestand lien in and against all right, title and interest of Extreme in and to thefollowing property, whether now owned or hereafter acquired by Extreme(collectively and severally, the "Collateral"): (a) All Cash Collateral, all Accounts, the Transition Account and all Certificates of Deposit issued from time to time and general intangibles arising therefrom or relating thereto (however, "general intangibles" as used in this clause shall not include any general intangibles not related to Cash Collateral, Accounts, the Transition Account or Certificates of Deposit issued from time to time, and thus will not include, without limitation, any intellectual property of Extreme); and all documents, instruments and agreements evidencing the same; and all extensions, renewals, modifications and replacements of the foregoing; and any interest or other amounts payable in connection therewith; and (b) All proceeds of the foregoing (including whatever is receivable or received when Collateral or proceeds is invested, sold, collected, exchanged, returned, substituted or otherwise disposed of, whether such disposition is voluntary or involuntary, including rights to payment and return premiums and insurance proceeds under insurance with respect to any Collateral, and all rights to payment with respect to any cause of action affecting or relating to the Collateral).The pledge, assignment and grant of a security interest made by Extremehereunder is for security of the Secured Obligations only; the parties to thisAgreement do not intend that Extreme's delivery of the Collateral to Agent asherein provided will constitute an advance payment of any Secured Obligations orliquidated damages, nor do the parties intend that the Collateral increase thedollar amount of the Secured Obligations. Section 2.2 Return of Collateral After the Secured Obligations are ------------------------------------------------------ Satisfied in Full. If any proceeds of Collateral remain after all Secured-----------------Obligations have been paid in full, Agent will deliver or direct the DepositTakers to deliver such proceeds to Extreme or other Persons entitled thereto bylaw. ARTICLE III DETERMINATION OF THE COLLATERAL PERCENTAGE Section 3.1 Determination of the Collateral Percentage Generally. ---------------------------------------------------- Effective as of the date of this Agreement, and until a new CollateralPercentage becomes effective, the Collateral Percentage is 100%. Subject to theprovisions of this Article III, Extreme may from time to time designate a newCollateral Percentage which is any multiple of 10% from 0% to 100% (i.e., 0%,10%, 20%, 30%, etc.) by written notice delivered to Agent, BNPLC and theParticipants in the form of ATTACHMENT 3. Any new Collateral Percentage so ------------ designated shall not become effective, however, until the commencement of the -7- next following Base Rent Period which is at least ten Business Days after thereceipt of such notice by Agent, BNPLC and the Participants. Further, if Extremeprovides more than one notice of a change in the Collateral Percentage to beeffective on a the first day of a particular Base Rent Period, then the latestsuch notice from Extreme which satisfies the requirements of the precedingsentence (and of Sections 3.2 and 3.3) will control. Without limiting mandatorychanges in the Collateral Percentage required by Section 3.3, in no event shallthe Collateral Percentage be changed more often than once in any calendarquarter because of any election by Extreme to designate a new CollateralPercentage as provided in this Section. After any Collateral Percentage becomeseffective as provided in this Article, it shall remain in effect until adifferent Collateral Percentage becomes effective as provided in this Article. Section 3.2 Limitations on Extreme's Right to Lower the Collateral ------------------------------------------------------ Percentage. Notwithstanding the foregoing, no designation by Extreme of a new----------Collateral Percentage will be effective to reduce the Collateral Percentage ifthe designation is given, or the reduction would otherwise become effective, onor after the Designated Sale Date or when any of the following shall haveoccurred and be continuing: 3.2.1 any Material Lease Default; 3.2.2 any Event of Default under and as defined in this Agreement; 3.2.3 any Default under and as defined in this Agreement -excluding, however, any such Default limited to a failure of Extreme described in clause (c) or clause (e) of the definition of Event of Default above, with respect to which the time for cure specified in clause (c) or clause (e), as applicable, has not expired. Section 3.3 Minimum Collateral Percentages Dependent Upon the Adjusted ---------------------------------------------------------- EBITDAR Coverage Ratio. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN----------------------CONTAINED, THE COLLATERAL PERCENTAGE SHALL NOT BE LESS THAN THE MINIMUMCOLLATERAL PERCENTAGE ESTABLISHED FROM TIME TO TIME AS DESCRIBED IN PART III OFSCHEDULE 1. Accordingly, and because a new Base Rent Period will begin on the----------first Business Day of the first calendar month following any Failed CollateralTest Date as provided in subparagraph 3(c)(ii)a) of the Land Lease, Extreme -----------------------shall be required by Section 5.1 to deliver additional Collateral on the firstBusiness Day of the first calendar month after any Failed Collateral Test Date. ARTICLE IV PROVISIONS CONCERNING DEPOSIT TAKERS Section 4.1 Qualification of Deposit Takers Generally. Agent may decline -----------------------------------------to deposit or maintain Collateral hereunder with any Person designated as aDeposit Taker, if such Person has failed to satisfy or no longer satisfies thefollowing requirements: 4.1.1 Such Person must have received from Agent and Extreme a completed, executed Notice of Security Interest in the form of ATTACHMENT 4 ------------ (a "Notice of Security Interest") which specifically identifies any and all Accounts in which such Person shall hold Cash Collateral delivered to it pursuant to this Agreement and which designates Account Offices with respect to all such Accounts in New York or California. 4.1.2 Such Person must have executed the Acknowledgment and Agreement at the end of such Notice of Security Interest (the "Deposit Taker's Acknowledgment and Agreement") and returned the same to Agent. Further, such Person must have complied with the Deposit Taker's Acknowledgment and Agreement, and the representations set forth therein with respect to such Person must continue to be true and correct. -8- 4.1.3 Such Person must be a commercial bank, organized under the laws of the United States of America or a state thereof or under the laws of another country which is doing business in the United States of America; must be authorized to maintain deposit accounts for others through Account Offices in New York or California (as specified in the Deposit Taker's Acknowledgment and Agreement); and must be an Affiliate of BNPLC or the Participant for whom such Person will act as Deposit Taker or must have a combined capital, surplus and undivided profits of at least $500,000,000. 4.1.4 Such Person must have complied with the provisions in this Agreement applicable to Deposit Takers, including the provisions of Section 5.4 concerning the issuance and redemption of Certificates of Deposit. Section 4.2 Existing Deposit Takers. BNPLC's Parent (as Deposit Taker for ----------------------- itself and for BNPLC) has received a Notice of Security Agreement dated theEffective Date and has responded to such a notice with a Deposit Taker'sAcknowledgment and Agreement dated the Effective Date, as contemplated insubsections 4.1.1 and 4.1.2. Section 4.3 Replacement of Participants Proposed by Extreme. So long as no ----------------------------------------------- Event of Default has occurred and is continuing, BNPLC shall not unreasonablywithhold its approval for a substitution under the Participation Agreement of anew Participant proposed by Extreme for any Participant, the Deposit Taker forwhom would no longer meet the requirements for an Initially Qualified DepositTaker; provided, however, that (A) the proposed substitution can be accomplishedwithout a release or breach by BNPLC of its rights and obligations under theParticipation Agreement; (B) the new Participant will agree (by executing aSupplement and a supplement to the Participation Agreement as contemplatedtherein and by other agreements as may be reasonably required by BNPLC andExtreme) to become a party to the Participation Agreement and to this Agreement,to designate an Initially Qualified Deposit Taker as the Deposit Taker for itunder this Agreement and to accept a Percentage under the ParticipationAgreement equal to the Percentage of the Participant to be replaced; (C) the newParticipant (or Extreme) will provide the funds required to pay the terminationfee by Section 6.4 of the Participation Agreement to accomplish the ----------- substitution; (D) Extreme (or the new Participant) agrees in writing toindemnify and defend BNPLC for any and all Losses incurred by BNPLC inconnection with or because of the substitution, including the cost of preparingsupplements to the Participation Agreement and this Agreement and including anycost of defending and paying any claim asserted by the Participant to bereplaced because of the substitution (but not including any liability of BNPLCto such Participant for damages caused by BNPLC's bad faith or gross negligencein the performance of BNPLC's obligations under the Participation Agreementprior to the substitution); (E) the new Participant shall be a reputablefinancial institution having a net worth of no less than seven and one halfpercent (7.5%) of total assets and total assets of no less than$10,000,000,000.00 (all according to then recent audited financial statements);and (F) in no event will BNPLC be required to approve a substitution pursuant tothis Section 4.3 which will replace a Participant that is an Affiliate of BNPLC.BNPLC shall attempt in good faith to assist (and cause BNPLC's Parent to attemptin good faith to assist) Extreme in identifying a new Participant that Extrememay propose to substitute for an existing Participant pursuant to this Section,as Extreme may reasonably request from time to time. However, in no event shallBNPLC itself, or any of its Affiliates, be required to take the Percentage ofany Participant to be replaced. Section 4.4 Mandatory Substitution for Disqualified Deposit Takers. If any ------------------------------------------------------ Deposit Taker shall cease to satisfy the requirements set forth in Section 4.1,the party for whom such Disqualified Deposit Taker has been designated asDeposit Taker (i.e., BNPLC or the applicable Participant) shall promptly (1)provide notice thereof to Agent and Extreme, and (2) designate a substituteDeposit Taker and cause the substitute to satisfy the requirements set forth inSection 4.1. Pending the designation of the substitute and the satisfaction byit of the requirements set forth in Section 4.1, Agent may withdraw Collateralheld by -9- the Disqualified Deposit Taker and deposit such Collateral with other DepositTakers, subject to Section 5.3 below. Section 4.5 Voluntary Substitution of Deposit Takers. With the written ---------------------------------------- approval of Agent, which approval will not be unreasonably withheld, BNPLC orany Participant may at any time designate for itself a new Deposit Taker (inreplacement of any prior Deposit Taker acting for it hereunder); provided, thePerson so designated has satisfied the requirements set forth in Section 4.1;and, provided further, unless the designation of a new Deposit Taker is requiredby Section 4.4 to replace a Disqualified Deposit Taker, at the time of thereplacement such Person must be an Initially Qualified Deposit Taker. Section 4.6 Delivery of Notice of Security Interest by Extreme and ------------------------------------------------------Agent. To the extent required for the designation of a new Deposit Taker by-----BNPLC or any Participant pursuant to Section 4.5, or to permit the substitutionor replacement of a Deposit Taker for BNPLC or any Participant as provided inSections 4.4 and 4.5, Extreme and Agent shall promptly execute and deliver anyproperly completed Notice of Security Interest requested by BNPLC or theapplicable Participant. Section 4.7 Constructive Possession of Collateral. The possession by a ------------------------------------- Deposit Taker of any deposit accounts, money, instruments, chattel paper orother property constituting Collateral or evidencing Collateral shall be deemedto be possession by Agent or a person designated by Agent, for purposes ofperfecting the security interest granted to Agent hereunder pursuant to the UCCor other Applicable Law; and notifications to a Deposit Taker by other Personsholding any such property, and Acknowledgments, receipts or confirmations fromany such Persons delivered to a Deposit Taker, shall be deemed notifications to,or Acknowledgments, receipts or confirmations from, financial intermediaries,bailees or agents (as applicable) of such Deposit Taker for the benefit of Agentfor the purposes of perfecting such security interests under Applicable Law. Section 4.8 Attempted Setoff by Deposit Takers. By delivery of a ----------------------------------Deposit Taker's Acknowledgment and Agreement, each Deposit Taker shall berequired to agree not to setoff or attempt a setoff, without in each case first -------------------------- obtaining the prior written authorization of Agent, Secured Obligations owed to--------------------------------------------------it against any Collateral held by it from time to time. Further, by delivery ofa Deposit Taker's Acknowledgment and Agreement, each Deposit Taker shall berequired to agree not to setoff or attempt a setoff, without in each case first --------------------------obtaining the prior written authorization of both Extreme and Agent, obligations-------------------------------------------------------------------owed to it other than Secured Obligations against any Collateral held by it fromtime to time. Any Deposit Taker for BNPLC or a Participant shall not bepermitted by BNPLC or the applicable Participant, as the case may be, to violatesuch agreements. However, Extreme acknowledges and agrees (without limiting itsright to recover damages from a Deposit Taker that violates such agreements)that Agent shall not be responsible for, or be deemed to have taken any actionagainst Extreme because of, any Deposit Taker's violation of such agreements;and, neither BNPLC nor any Participant shall be responsible for, or be deemed tohave taken any action against Extreme because of, any violation of suchagreements by a Deposit Taker for another party. Section 4.9 Deposit Taker Losses. Agent shall not be responsible for --------------------any Deposit Taker Losses. However, Deposit Taker Losses with respect to aDeposit Taker for a particular Participant shall reduce the amount of BNPLC'sCorresponding Obligations to Participants which are payable to such Participantas provided in Section 2.2 of the Participation Agreement. Further, when Deposit ----------- Taker Losses with respect to a Deposit Taker for a particular Participant areincurred in excess of the payments of Secured Obligations that such Participantwould then have been entitled to receive under the Participation Agreement butfor such Deposit Taker Losses, such Participant must immediately pay the excessto Agent as additional Collateral hereunder, failing which Extreme may recoverany damages suffered by it because of the Deposit Taker Losses from such DepositTaker or such Participant. -10- Section 4.10 Losses Resulting from Failure of Deposit Taker to Comply --------------------------------------------------------with this Agreement. Any Participant, the Deposit Taker for whom has failed to-------------------comply with the requirements of this Agreement or any Notices of SecurityInterest and any Deposit Taker's Acknowledgments and Agreements (the"Responsible Participant") must defend, indemnify, and hold harmless BNPLC,Agent and the other Participants from and against any Losses resulting from suchfailure. Without limiting the foregoing, if the failure of a Deposit Taker for aResponsible Participant to comply strictly with the terms of this Agreement(including, without limitation, the provisions of Section 5.4 concerning theissuance and redemption of Certificates of Deposit and the requirement that anycash deposits be held in a deposit account located in either New York orCalifornia) causes, in whole or in part, the security interest of Agent in theCollateral held by such Deposit Taker to be unperfected, then any and all Lossessuffered as a result of such nonperfection shall be borne solely by theResponsible Participant and shall not be shared by BNPLC, Agent or the otherParticipants. ARTICLE V DELIVERY AND MAINTENANCE OF CASH COLLATERAL Section 5.1 Delivery of Funds by Extreme. On the first day of any Base ----------------------------Rent Period, and on any other date designated in a notice given by Agent toExtreme at least three Business Days prior to the date so designated, Extrememust deliver to Agent, subject to the pledge and security interest createdhereby, funds as Cash Collateral then needed (if any) to cause the Value of theCollateral to be no less than the Minimum Collateral Value. Each delivery offunds required by the preceding sentence must be received by Agent no later than12:00 noon (San Francisco time) on the date it is required; if received after12:00 noon it will be considered for purposes of the Improvements Lease asreceived on the next following Business Day. At least five Business Days priorto the first day of any Base Rent Period upon which it is expected that Extremewill be required to deliver additional funds pursuant to this Section, Extremeshall notify BNPLC, Agent and each of the Participants thereof and of the amountExtreme expects to deliver to Agent as Cash Collateral on the applicable BaseRent Date. In addition to required deliveries of Cash Collateral as provided inthe foregoing provisions, Extreme may on any date (whether or not the first dayof a Base Rent Period) deliver additional Cash Collateral to Agent as necessaryto prevent any Default from becoming an Event of Default. Upon receipt of anyfunds delivered to it by Extreme as Cash Collateral, Agent shall immediatelydeposit the same with the Deposit Takers in accordance with the requirements ofSections 5.3 and 5.4 below. Section 5.2 Transition Account. Pending deposit in the Accounts or ------------------other application as provided herein, all Cash Collateral received by Agentshall be credited to and held by Agent in an account (the "Transition Account")styled "Extreme Collateral Account, held for the benefit of BNP LeasingCorporation and the Participants," separate and apart from all other propertyand funds of Extreme or other Persons, and no other property or funds shall bedeposited in the Transition Account. The books and records of Agent shallreflect that the Transition Account and all Cash Collateral on deposit thereinare owned by Extreme, subject to a pledge and security interest in favor ofAgent for the benefit of BNPLC and Participants. Section 5.3 Allocation of Cash Collateral Among Deposit Takers. Funds --------------------------------------------------received by Agent from Extreme as Cash Collateral will be allocated for depositamong the Deposit Takers as follows: first, to the extent possible the funds will be allocated as required ----- to rectify and prevent any Collateral Imbalance; and second, the funds will be allocated to the Deposit Taker for BNPLC, ------ unless the Deposit Taker for BNPLC has become a Disqualified Deposit Taker, in which case the funds will be allocated to other Deposit Takers who are not Disqualified Deposit Takers as Agent deems appropriate. -11- Further, if for any reason a Collateral Imbalance is determined by Agent toexist, Agent shall, as required to rectify or mitigate the Collateral Imbalance,promptly reallocate Collateral among Deposit Takers by withdrawing CashCollateral from some Accounts and redepositing it in other Accounts. (If anyparty to this Agreement believes that the Value of the Accounts held by aparticular Deposit Taker causes a Collateral Imbalance to exist, that party willpromptly notify BNPLC, Extreme and Agent.) Subject to the foregoing, andprovided that Agent does not thereby create or exacerbate a CollateralImbalance, Agent may withdraw and redeposit Cash Collateral in order toreallocate the same among Deposit Takers from time to time as Agent deemsappropriate. For purposes of illustration only, examples of the allocationsrequired by this Section are set forth in ATTACHMENT 5. ------------ Section 5.4 Issuance and Redemption of Certificates of Deposit. Upon --------------------------------------------------the receipt of any deposit of Cash Collateral from Agent, each Deposit Takershall issue a Certificate of Deposit evidencing the Account into which suchdeposit is made and deliver such Certificate of Deposit to Agent for the benefitof BNPLC and the Participants. Each Certificate of Deposit shall be issued in anamount equal to the Value of the Account which it evidences and shall otherwisebe in the form set forth as ATTACHMENT 1 to this Agreement. Upon depositing any ------------Cash Collateral into an Account that is already evidenced by an outstandingCertificate of Deposit, Agent will surrender the outstanding Certificate ofDeposit, and in exchange the Deposit Taker receiving the deposit will issue anew Certificate of Deposit, evidencing the total amount of Cash Collateral inthe Account after the deposit. A Deposit Taker that has issued a Certificate ofDeposit may require the surrender of the Certificate of Deposit as a conditionto a withdrawal from the Account evidenced thereby, including any withdrawalrequired or permitted by this Agreement. Upon surrender of a Certificate ofDeposit in connection with a withdrawal of less than all of the Cash Collateralin the Account evidenced thereby, the applicable Deposit Taker will concurrentlyissue a new Certificate of Deposit to Agent, evidencing the balance of the CashCollateral remaining on deposit in the Account after the withdrawal.Notwithstanding the foregoing, if any Certificate of Deposit held by Agent shallbe destroyed, lost or stolen, the Deposit Taker that issued the Certificate,upon the written request of Agent, shall issue a new Certificate of Deposit toAgent in lieu of and in substitution for the Certificate of Deposit sodestroyed, lost or stolen. However, as applicant for the substitute Certificateof Deposit, Agent must indemnify (at no cost to Extreme) the applicable DepositTaker against any liability on the Certificate of Deposit destroyed, lost orstolen, and Agent shall furnish to the Deposit Taker an affidavit of an officerof Agent setting forth the fact of destruction, loss or theft and confirming thestatus of Agent as holder of the Certificate of Deposit immediately prior to thedestruction, loss or theft. If any Certificate of Deposit held by Agent shallbecome mutilated, the Deposit Taker that issued the Certificate, upon thewritten request of Agent, shall issue a new Certificate of Deposit to Agent inexchange and substitution for the mutilated Certificate of Deposit. Agent shallhold all Certificates of Deposit for the benefit of BNPLC and the Participants,subject to the pledge and security interest created hereby. Section 5.5 Status of the Accounts Under the Reserve Requirement ----------------------------------------------------Regulations. Deposit Takers shall be permitted to structure the Accounts as-----------nonpersonal time deposits under 12 C.F.R., Part II, Chapter 204 (commonly knownas "Regulation D"). Accordingly, each Deposit Taker may require at least sevendays advance notice of any withdrawal or transfer of funds from Accounts itmaintains and may limit the number of withdrawals or transfers from suchAccounts to no more than six in any calendar month, notwithstanding anything tothe contrary herein or in any deposit agreement that Extreme and any DepositTaker may enter into with respect to any Account. As necessary to satisfy theseven days notice requirement with respect to withdrawals by Agent when requiredby Extreme pursuant to the provisions below, Agent shall notify Deposit Takerspromptly after receipt of any notice from Extreme described in subsection 6.1.2or 6.2.1 or in Section 6.3. Section 5.6 Acknowledgment by Extreme that Requirements of this ---------------------------------------------------Agreement are Commercially Reasonable. Extreme acknowledges and agrees that the-------------------------------------requirements set forth herein concerning receipt, -12- deposit, withdrawal, allocation, application and distribution of Cash Collateralby Agent, including the requirements and time periods set forth in the nextArticle, are commercially reasonable. ARTICLE VI WITHDRAWAL OF CASH COLLATERALExtreme may not withdraw Cash Collateral, except as follows: Section 6.1 Withdrawal of Collateral Prior to the Designated Sale Date. ----------------------------------------------------------Extreme may require Agent to present Certificates of Deposit for payment andwithdraw Cash Collateral from Accounts on any date prior to the Designated SaleDate and to deliver such Cash Collateral to Extreme (which delivery shall befree and clear of all liens and security interests hereunder); provided, however, that in each case: 6.1.1 Such withdrawal and delivery of the Cash Collateral to Extreme will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value. 6.1.2 by a notice in the form of ATTACHMENT 6, Extreme must give ------------ Agent, BNPLC and the Participants notice of the required withdrawal at least ten days prior to the date upon which the withdrawal is to occur. 6.1.3 No Default or Event of Default shall have occurred and be continuing at the time Extreme gives the notice required by the preceding subsection or on the date upon which the withdrawal is required. 6.1.4 Extreme must pay to Agent any and all costs incurred by Agent in connection with the withdrawal. 6.1.5 Agent shall determine the Accounts from which to make any withdrawal required by Extreme pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance. Section 6.2 Withdrawal and Application of Cash Collateral to Reduce or ----------------------------------------------------------Satisfy the Secured Obligations to the Participants. To reduce the "Break Even---------------------------------------------------Price" or "Supplemental Payment" required under (and as defined in) the PurchaseAgreement (and, thus, to reduce the Secured Obligations), Extreme may requireAgent to withdraw Cash Collateral then held by or for Agent pursuant to thisAgreement on the Designated Sale Date and to deliver the same on the DesignatedSale Date or on any date thereafter prior to an Event of Default (which deliveryshall be free and clear of all liens and security interests hereunder) directlyto the Participants in proportion to their respective rights to payment ofBNPLC's Corresponding Obligations to Participants and for application thereto orthe reduction thereof pursuant to Section 2.2 of the Participation Agreement; -----------provided, that: 6.2.1 by a notice in the form of ATTACHMENT 7, Extreme must have ------------ notified Agent, BNPLC and each of the Participants of the required withdrawal and payment to Participants at least ten days prior to the date upon which it is to occur; 6.2.2 the required withdrawal shall be made as determined by Agent, first, from the Accounts maintained by the Deposit Takers for the Participants, and then (to the extent necessary) from the Accounts maintained by the Deposit Taker for BNPLC; and 6.2.3 in any event, no withdrawals or payments directly to Participants shall be required by this Section 6.2 (or permitted over the objection of BNPLC) in excess of those required to satisfy BNPLC's Corresponding Obligations to Participants or to reduce such obligations to zero under the Participation Agreement. -13- Section 6.3 Withdrawal and Application of Cash Collateral to Reduce or ----------------------------------------------------------Satisfy the Secured Obligations to BNPLC. To satisfy Extreme's Purchase----------------------------------------Agreement Obligations, Extreme may require Agent to withdraw any Cash Collateralheld by the Deposit Taker for BNPLC pursuant to this Agreement on the DesignatedSale Date and to deliver the same on the Designated Sale Date or on any datethereafter prior to an Event of Default (which delivery shall be free and clearof all liens and security interests hereunder) directly to BNPLC as a payment onbehalf of Extreme of amounts due under the Purchase Agreement; provided, that bya notice in the form of ATTACHMENT 8, Extreme must have notified Agent and BNPLCof the required withdrawal and payment to BNPLC at least ten days prior to thedate upon which it is to occur. Section 6.4 Withdrawal of Cash Collateral From Accounts Maintained by ---------------------------------------------------------Disqualified Deposit Takers. Extreme may from time to time prior to the---------------------------Designated Sale Date (regardless of the existence of any Default or Event ofDefault) require Agent to withdraw any or all Cash Collateral from any Accountmaintained by a Disqualified Deposit Taker and deposit it, still subject to thepledge and grant of security interest hereunder, with other Deposit Takers whoare not Disqualified Deposit Takers (in accordance with the requirements ofSections 5.3 and 5.4) on any date prior to the Designated Sale Date; provided,that by a notice in the form of ATTACHMENT 9, Extreme must have notified Agent,BNPLC and each of the Participants of the required withdrawal at least ten daysprior to the date upon which it is to occur. ARTICLE VII REPRESENTATIONS AND COVENANTS OF EXTREME Section 7.1 Representations of Extreme. Extreme represents to BNPLC, Agent --------------------------and the Participants as follows: 7.1.1 Extreme is the legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time Extreme acquires rights in the Collateral, will be the legal and beneficial owner thereof). No other Person has (or, in the case of after-acquired Collateral, at the time Extreme acquires rights therein, will have) any right, title, claim or interest (by way of Lien, purchase option or otherwise) in, against or to the Collateral, except for rights created hereunder. 7.1.2 Agent has (or in the case of after-acquired Collateral, at the time Extreme acquires rights therein, will have) a valid, first priority, perfected pledge of and security interest in the Collateral, regardless of the characterization of the Collateral as deposit accounts, instruments or general intangibles under the UCC, but assuming that the representations of each Deposit Taker in its Deposit Taker's Acknowledgment and Agreement are true. 7.1.3 Extreme has delivered to Agent, together with all necessary stock powers, endorsements, assignments and other necessary instruments of transfer, the originals of all documents, instruments and agreements evidencing Accounts, Certificates of Deposit or Cash Collateral. 7.1.4 Extreme's chief executive office is located at the address of Extreme set forth in Article II of the Common Definitions and Provisions Agreement (Land) or at another address in California specified in a notice that Extreme has given to Agent as required by Section 7.2.4. 7.1.5 To the knowledge of Extreme, neither the ownership or the intended use of the Collateral by Extreme, nor the pledge of Accounts or the grant of the security interest by Extreme to Agent herein, nor the exercise by Agent of its rights or remedies hereunder, will (i) violate any provision of (a) Applicable Law, (b) the articles or certificate of incorporation, charter or bylaws of Extreme, or (c) any agreement, judgment, license, order or permit applicable to or binding upon Extreme, or (ii) result in or require the creation of any Lien, charge or encumbrance upon any -14- assets or properties of Extreme except as expressly contemplated in this Agreement. Except as expressly contemplated in this Agreement, to the knowledge of Extreme no consent, approval, authorization or order of, and no notice to or filing with any court, governmental authority or third party is required in connection with the pledge or grant by Extreme of the security interest contemplated herein or the exercise by Agent of its rights and remedies hereunder. Section 7.2 Covenants of Extreme. Extreme hereby agrees as follows: -------------------- 7.2.1 Extreme, at Extreme's expense, shall promptly procure, execute and deliver to Agent all documents, instruments and agreements and perform all acts which are necessary, or which Agent may reasonably request, to establish, maintain, preserve, protect and perfect the Collateral, the pledge thereof to Agent or the security interest granted to Agent therein and the first priority of such pledge or security interest or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the preceding sentence, Extreme shall (A) procure, execute and deliver to Agent all stock powers, endorsements, assignments, financing statements and other instruments of transfer requested by Agent, (B) deliver to Agent promptly upon receipt all originals of Collateral consisting of instruments, documents and chattel paper, (C) cause the security interest of Agent in any Collateral consisting of securities to be recorded or registered in the books of any financial intermediary or clearing corporation requested by Agent, and (D) reimburse Agent upon request for any legal opinion Agent may elect to obtain from a nationally recognized commercial law firm authorized to practice in New York concerning the enforceability, first priority and perfection of Agent's security interest in any Collateral maintained in New York, if BNPLC or any Participant should at any time elect to use a Deposit Taker that will maintain one or more Accounts in New York. 7.2.2 Extreme shall not use or consent to any use of any Collateral in violation of any provision of this Agreement or any other Transaction Document or any Applicable Law. 7.2.3 Extreme shall pay promptly when due all taxes and other governmental charges, all Liens and all other charges now or hereafter imposed upon, relating to or affecting any Collateral. 7.2.4 Without thirty days' prior written notice to Agent, Extreme shall not change Extreme's name or place of business (or, if Extreme has more than one place of business, its chief executive office). 7.2.5 Extreme shall appear in and defend, on behalf of Agent, any action or proceeding which may affect Extreme's title to or Agent's interest in the Collateral. 7.2.6 Subject to the express rights of Extreme under Article VI, Extreme shall not surrender or lose possession of (other than to Agent or a Deposit Taker pursuant hereto), sell, encumber, lease, rent, option, or otherwise dispose of or transfer any Collateral or right or interest therein, and Extreme shall keep the Collateral free of all Liens. 7.2.7 Extreme will not take any action which would in any manner impair the value or enforceability of Agent's pledge of or security interest in any Collateral, nor will Extreme fail to take any action which is required to prevent (and which Extreme knows is required to prevent) an impairment of the value or enforceability of Agent's pledge of or security interest in any Collateral. 7.2.8 Extreme shall pay (and shall indemnify and hold harmless Agent from and against) all Losses incurred by Agent in connection with or because of (A) the interest acquired by Agent in any Collateral pursuant to this Agreement, or (B) the negotiation or administration of this Agreement, whether such Losses are incurred at the time of execution of this Agreement or at any -15- time in the future. Costs and expenses included in such Losses may include, without limitation, all filing and recording fees, taxes, UCC search fees and Attorneys' Fees incurred by Agent with respect to the Collateral. 7.2.9 Without limiting the foregoing, within five Business Days after Extreme becomes aware of any failure of the pledge or security interest contemplated herein in the Transition Account or any Account, Certificate of Deposit or Cash Collateral to be a valid, perfected, first priority pledge or security interest (regardless of the characterization of the Transition Account or any Accounts, Certificates of Deposit or Cash Collateral as deposit accounts, instruments or general intangibles under the UCC), Extreme shall notify Agent, BNPLC and the Participants of such failure. In addition, if the failure would not exist but for Extreme's delivery of Cash Collateral to Agent subject to prior Liens or other claims by one or more third parties, or but for the grant by Extreme itself of any Lien or other interest in the Collateral to one or more third parties, then, in addition to any other remedies available to BNPLC or Agent under the circumstances, Extreme must pay to BNPLC any additional Base Rent that has accrued under the Land Lease because of (or that would have accrued if BNPLC had been aware of) the failure, together with interest at the Default Rate on any such additional Base Rent. ARTICLE VIII AUTHORIZED ACTION BY AGENT Section 8.1 Power of Attorney. Extreme hereby irrevocably appoints Agent as -----------------Extreme's attorney-in-fact for the purpose of authorizing Agent to perform (butAgent shall not be obligated to and shall incur no liability to Extreme or anythird party for failure to perform) any act which Extreme is obligated by thisAgreement to perform, and to exercise, consistent with the other provisions ofthis Agreement, such rights and powers as Extreme might exercise with respect tothe Collateral during any period in which a Default or Event of Default hasoccurred and is continuing, including the right to (a) collect by legalproceedings or otherwise and endorse, receive and receipt for all dividends,interest, payments, proceeds and other sums and property now or hereafterpayable on or on account of the Collateral; (b) enter into any extension,reorganization, deposit, merger, consolidation or other agreement pertaining to,or deposit, surrender, accept, hold or apply other property in exchange for theCollateral; (c) insure, process, preserve and enforce the Collateral; (d) makeany compromise or settlement, and take any action it deems advisable, withrespect to the Collateral; (e) pay any indebtedness of Extreme relating to theCollateral; and (f) execute UCC financing statements and other documents,instruments and agreements required hereunder. Extreme agrees that such care asAgent gives to the safekeeping of its own property of like kind shall constitutereasonable care of the Collateral when in Agent's possession; provided, however, -------- -------that Agent shall not be obligated to Extreme to give any notice or take anyaction to preserve rights against any other Person in connection with theSecured Obligations or with respect to the Collateral. ARTICLE IX DEFAULT AND REMEDIES Section 9.1 Remedies. In addition to all other rights and remedies granted --------to Agent, BNPLC or the Participants by this Agreement, the Land Lease, thePurchase Agreement, the Participation Agreement, the UCC and other ApplicableLaws, Agent may, upon the occurrence and during the continuance of any Event ofDefault, exercise any one or more of the following rights and remedies, all ofwhich will be in furtherance of its rights as a secured party under the UCC: (a) Agent may collect, receive, appropriate or realize upon the Collateral or otherwise foreclose or enforce the pledge of or security interests in any or all Collateral in any manner permitted by Applicable Law or in this Agreement; and -16- (b) Agent may notify any or all Deposit Takers to pay all or any portion of the Collateral held by such Deposit Taker(s) directly to Agent.Agent shall distribute the proceeds of all Collateral received by Agent afterthe occurrence of an Event of Default to BNPLC and the Participants forapplication to the Secured Obligations. If any proceeds of Collateral remainafter all Secured Obligations have been paid in full, Agent will deliver ordirect the Deposit Takers to deliver such proceeds to Extreme or other Personsentitled thereto. In any case where notice of any sale or disposition of anyCollateral is required, Extreme hereby agrees that seven (7) Business Daysnotice of such sale or disposition is reasonable. ARTICLE X OTHER RECOURSE Section 10.1 Recovery Not Limited. To the fullest extent permitted by --------------------applicable law, Extreme waives any right to require that Agent, BNPLC or theParticipants proceed against any other Person, exhaust any Collateral or othersecurity for the Secured Obligations, or to have any Other Liable Party joinedwith Extreme in any suit arising out of the Secured Obligations or thisAgreement, or pursue any other remedy in their power. Extreme waives any and allnotice of acceptance of this Agreement. Extreme further waives notice of thecreation, modification, rearrangement, renewal or extension for any period ofany of the Secured Obligations of any Other Liable Party from time to time andany defense arising by reason of any disability or other defense of any OtherLiable Party or by reason of the cessation from any cause whatsoever of theliability of any Other Liable Party. Until all of the Secured Obligations shallhave been paid in full, Extreme shall have no right to subrogation,reimbursement, contribution or indemnity against any Other Liable Party andExtreme waives the right to enforce any remedy which Agent, BNPLC or anyParticipant has or may hereafter have against any Other Liable Party, and waivesany benefit of and any right to participate in any other security whatsoever nowor hereafter held by Agent, BNPLC or any Participant. Extreme authorizes Agent,BNPLC and the Participants, without notice or demand and without any reservationof rights against Extreme and without affecting Extreme's liability hereunder oron the Secured Obligations, from time to time to (a) take or hold any otherproperty of any type from any other Person as security for the SecuredObligations, and exchange, enforce, waive and release any or all of such otherproperty, (b) after any Event of Default, apply or require the application ofthe Collateral (in accordance with this Agreement) or such other property in anyorder they may determine and to direct the order or manner of sale thereof asthey may determine, (c) renew, extend for any period, accelerate, modify,compromise, settle or release any of the obligations of any Other Liable Partywith respect to any or all of the Secured Obligations or other security for theSecured Obligations, and (d) release or substitute any Other Liable Party. ARTICLE XI PROVISIONS CONCERNING AGENT In the event of any conflict between the following and other provisions inthis Agreement, the following will control: Section 11.1 Appointment and Authority. BNPLC and each Participant hereby -------------------------irrevocably authorizes Agent, and Agent hereby undertakes, to take all actionsand to exercise such powers under this Agreement as are specifically delegatedto Agent by the terms hereof, together with all other powers reasonablyincidental thereto. The relationship of Agent to the Participants is only thatof one commercial bank acting as collateral agent for others, and nothing hereinshall be construed to constitute Agent a trustee or other fiduciary for anyParticipant or anyone claiming through or under a Participant nor to impose onAgent duties and obligations other than those expressly provided for in thisAgreement. With respect to any matters not expressly provided for in thisAgreement and any matters which this Agreement places within the discretion ofAgent, Agent shall not be required to exercise any discretion or take anyaction, and it may request instructions from BNPLC and Participants with respectto any such matter, in -17- which case it shall be required to act or to refrain from acting (and shall befully protected and free from liability to all Participants in so acting orrefraining from acting) upon the instructions of the Majority, as defined in theParticipation Agreement, including itself as a Participant and BNPLC; provided,however, that Agent shall not be required to take any action which exposes it toa risk of personal liability that it considers unreasonable or which is contraryto this Agreement or the other documents referenced herein or to Applicable Law. Section 11.2 Exculpation, Agent's Reliance, Etc. Neither Agent nor any of ----------------------------------its directors, officers, agents, attorneys, or employees shall be liable for anyaction taken or omitted to be taken by any of them under or in connection withthis Agreement, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that each shallbe liable for its own gross negligence or willful misconduct. Without limitingthe generality of the foregoing, Agent (1) may treat the rights of anyParticipant under its Participation Agreement as continuing until Agent receiveswritten notice of the assignment or transfer of those rights in accordance withsuch Participation Agreement, signed by such Participant and in formsatisfactory to Agent; (2) may consult with legal counsel (including counsel forExtreme), independent public accountants and other experts selected by it andshall not be liable for any action taken or omitted to be taken in good faith byit in accordance with the advice of such counsel, accountants or experts, unlessthe action taken or omitted constitutes misconduct; (3) makes no warranty orrepresentation and shall not be responsible for any statements, warranties orrepresentations made in or in connection with this Agreement or the otherdocuments referenced herein; (4) shall not have any duty to ascertain or toinquire as to the performance or observance of any of the terms, covenants orconditions of the Transaction Documents on the part of any party thereto, or toinspect the property (including the books and records) of any party thereto; (5)shall not be responsible to any Participant for the due execution, legality,validity, enforceability, genuineness, sufficiency or value of any TransactionDocument or any instrument or document furnished in connection therewith; (6)may rely upon the representations and warranties of Extreme, Participants andDeposit Takers in exercising its powers hereunder; and (7) shall incur noliability under or in respect of the Transaction Documents by acting upon anynotice, consent, certificate or other instrument or writing (including anytelecopy, telegram, cable or telex) believed by it to be genuine and signed orsent by the proper Person or Persons. Section 11.3 Participant's Credit Decisions. Each Participant acknowledges ------------------------------that it has, independently and without reliance upon Agent or any otherParticipant, made its own analysis of Extreme and the transactions contemplatedhereby and its own independent decision to enter into the Transaction Documentsto which it is a party. Each Participant also acknowledges that it will,independently and without reliance upon Agent or any other Participant and basedon such documents and information as it shall deem appropriate at the time,continue to make its own credit decisions in taking or not taking action underthe Transaction Documents. Section 11.4 Indemnity. Each Participant agrees to indemnify Agent (to the ---------extent not reimbursed by Extreme within ten days after demand) from and againstsuch Participant's Percentage of any and all Losses of any kind or naturewhatsoever which to any extent (in whole or in part) may be imposed on, incurredby, or asserted against Agent growing out of, resulting from or in any other wayassociated with any of the Collateral, the Transaction Documents and thetransactions and events (including the enforcement thereof) at any timeassociated therewith or contemplated therein. THE FOREGOING INDEMNIFICATIONSHALL APPLY WHETHER OR NOT SUCH LOSSES ARE IN ANY WAY OR TO ANY EXTENT OWED, INWHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED,IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT,PROVIDED ONLY THAT NO PARTICIPANT SHALL BE OBLIGATED UNDER THIS SECTION TOINDEMNIFY AGENT FOR THAT PORTION, IF ANY, OF ANY LOSS WHICH IS PROXIMATELYCAUSED BY AGENT'S OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, ASDETERMINED IN A -18- FINAL JUDGMENT RENDERED AGAINST AGENT. Cumulative of the foregoing, eachParticipant agrees to reimburse Agent promptly upon demand for suchParticipant's Percentage share of any costs and expenses to be paid to Agent byExtreme hereunder to the extent that Agent is not timely reimbursed by Extremeas provided in subsection 7.2.8. As used in this Section the term "Agent" shallrefer not only to the Person designated as such in the introductory paragraph ofthis Agreement, but also to each director, officer, agent, attorney, employee,representative and Affiliate of such Person. Section 11.5 Agent's Rights as Participant and Deposit Taker. In its -----------------------------------------------capacity as a Participant, BNP PARIBAS shall have the same rights andobligations as any Participant and may exercise such rights as though it werenot Agent. In its capacity as a Deposit Taker, BNP PARIBAS shall have the samerights and obligations as any Deposit Taker and may exercise such rights asthough it were not Agent. BNP PARIBAS and any of its Affiliates may acceptdeposits from, lend money to, act as Trustee under indentures of, and generallyengage in any kind of business with Extreme or its Affiliates, all as if BNPPARIBAS were not designated as the Agent hereunder and without any duty toaccount therefor to any other Participant. Section 11.6 Investments. Whenever Agent in good faith determines that it -----------is uncertain about how to distribute any funds which it has received hereunder,or whenever Agent in good faith determines that there is any dispute among BNPLCand Participants about how such funds should be distributed, Agent may choose todefer distribution of the funds which are the subject of such uncertainty ordispute. If Agent in good faith believes that the uncertainty or dispute willnot be promptly resolved, or if Agent is otherwise required to invest fundspending distribution, Agent shall invest such funds pending distribution, allinterest on any such investment shall be distributed upon the distribution ofsuch investment and in the same proportion and to the same Persons as suchinvestment. All moneys received by Agent for distribution to BNPLC orParticipants shall be held by Agent pending such distribution solely as Agenthereunder, and Agent shall have no equitable title to any portion thereof. Section 11.7 Benefit of Article XI. The provisions of this Article (other ---------------------than the following Section 11.8) are intended solely for the benefit of Agent,BNPLC and Participants, and Extreme shall not be entitled to rely on any suchprovision or assert any such provision in a claim or defense against Agent,BNPLC or any Participant. Agent, BNPLC and Participants may waive or amend suchprovisions as they desire without any notice to or consent of Extreme. Section 11.8 Resignation. Agent may resign at any time by giving written -----------notice thereof to BNPLC, Participants and Extreme. Upon any such resignation theMajority (as defined in the Participation Agreement) shall have the right toappoint a successor Agent, subject to Extreme's consent, such consent not to beunreasonably withheld. A successor must be appointed for any retiring Agent, andsuch Agent's resignation shall become effective when such successor accepts suchappointment. If, within thirty days after the date of the retiring Agent'sresignation, no successor Agent has been appointed and has accepted suchappointment, then the retiring Agent may appoint a successor Agent, which shallbe a commercial bank organized or licensed to conduct a banking or trustbusiness under the laws of the United States of America or of any state thereof.Upon the acceptance of any appointment as Agent hereunder by a successor Agent,the retiring Agent shall be discharged from its duties and obligations underthis Agreement. After any retiring Agent's resignation hereunder, the provisionsof this Article 10.1 shall continue to inure to its benefit as to any actionstaken or omitted to be taken by it while it was Agent. -19- ARTICLE XII MISCELLANEOUS Section 12.1 Provisions Incorporated From Other Operative Documents. ------------------------------------------------------Reference is made to the Common Definitions and Provisions Agreement (Land), tothe Purchase Agreement and to the Participation Agreement for a statement of theterms thereof. Without limiting the generality of the foregoing, the provisionsof Article II of the Common Definitions and Provisions Agreement (Land) areincorporated into this Agreement for all purposes as if set forth in thisArticle. Section 12.2 Cumulative Rights, etc. Except as herein expressly provided to ----------------------the contrary, the rights, powers and remedies of Agent, BNPLC and theParticipants under this Agreement shall be in addition to all rights, powers andremedies given to them by virtue of any Applicable Law, any other Document orany other agreement, all of which rights, powers, and remedies shall becumulative and may be exercised successively or concurrently without impairingtheir respective rights hereunder. Extreme waives any right to require Agent,BNPLC or any Participant to proceed against any Person or to exhaust anyCollateral or to pursue any remedy in Agent's, BNPLC's or such Participant'spower. Section 12.3 Survival of Agreements. All representations and warranties of ----------------------Extreme herein, and all covenants and agreements herein shall survive theexecution and delivery of this Agreement, the execution and delivery of anyother Transaction Documents and the creation of the Secured Obligations andcontinue until terminated or released as provided herein. Section 12.4 Other Liable Party. Neither this Agreement nor the exercise by ------------------Agent or the failure of Agent to exercise any right, power or remedy conferredherein or by law shall be construed as relieving any Other Liable Party fromliability on the Secured Obligations or any deficiency thereon. This Agreementshall continue irrespective of the fact that the liability of any Other LiableParty may have ceased or irrespective of the validity or enforceability of anyother agreement evidencing or securing the Secured Obligations to which Extremeor any Other Liable Party may be a party, and notwithstanding thereorganization, death, incapacity or bankruptcy of any Other Liable Party, orany other event or proceeding affecting any Other Liable Party. Section 12.5 Termination. Following the Designated Sale Date, upon -----------satisfaction in full of all Secured Obligations and upon written request for thetermination hereof delivered by Extreme to Agent, (i) this Agreement and thepledge and security interest created hereby shall terminate and all rights tothe Collateral shall revert to Extreme and (ii) Agent will, upon Extreme'srequest and at Extreme's expense execute and deliver to Extreme such documentsas Extreme shall reasonably request to evidence such termination and release. [The signature pages follow.] -20- IN WITNESS WHEREOF, Extreme, BNPLC, Agent and the Participants whosesignatures appear below have caused this Agreement to be executed as of June 1,2000. "Extreme" EXTREME NETWORKS, INC. By:_________________________ Name:____________________ Title:___________________ [Continuation of signature pages to Pledge Agreement (Land) dated to beeffective June 1, 2000] "BNPLC" BNP LEASING CORPORATION By: ____________________________ Lloyd G. Cox, Vice President [Continuation of signature pages to Pledge Agreement (Land) dated to beeffective June 1, 2000] "AGENT" BNP PARIBAS By:_______________________ Name:__________________ Title:_________________ "PARTICIPANT" BNP PARIBAS By:_______________________ Name:__________________ Title:_________________ ATTACHMENT 1 TO PLEDGE AGREEMENT ------------------- CERTIFICATE OF DEPOSIT (No. _________) [---------, -----][NAME OF THE ISSUINGDEPOSIT TAKER AND THEADDRESS OF ITS APPLICABLEACCOUNT OFFICE]Payable tothe order of: BNP PARIBAS, as Agent under the Pledge Agreement (Land) dated June 1, 2000, among Extreme Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Land) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants Dollars-------------------------------------------------------------------------------in current funds, without interest, seven days after presentment of thiscertificate properly endorsed.The bank issuing this certificate acknowledges and certifies that on the dateindicated above the payee deposited the dollar amount indicated above, and thatsuch amount shall be payable as provided above. _________________________ Authorized Signature ATTACHMENT 2 TO PLEDGE AGREEMENT ------------------- SUPPLEMENT TO PLEDGE AGREEMENT ------------------------------ [----------, ----]BNP PARIBAS_____________________________________________________________________Extreme Networks, Inc._____________________________________________________________________1. Reference is made to the Pledge Agreement (Land) (the "Pledge Agreement")dated June 1, 2000 among Extreme Networks, Inc. ("Extreme"), BNP LeasingCorporation ("BNPLC"), BNP PARIBAS and any other financial institutions whichare from time to time Participants under such Pledge Agreement (collectively,the "Participants") and BNP PARIBAS, acting in its capacity as agent for BNPLCand the Participants (in such capacity, "Agent"). Unless otherwise definedherein, all capitalized terms used in this Supplement have the respectivemeanings given to those terms in the Pledge Agreement.2. The undersigned hereby certifies to Agent and Extreme that the undersignedhas become a party to the Participation Agreement by executing a supplement asprovided therein and that its Percentage thereunder is ______%.3. The undersigned, by executing and delivering this Supplement to Extreme andAgent, hereby agrees to become a party to the Pledge Agreement and agrees to bebound by all of the terms thereof applicable to Participants. The Deposit Takerfor the undersigned shall be _________________, until such time as anotherDeposit Taker for the undersigned shall be designated in accordance withSections 4.4 or 4.5 of the Pledge Agreement. The undersigned certifies to Agentand Extreme that such Deposit Taker is an Initially Qualified Deposit Taker andsatisfies the requirements for a Deposit Taker set forth in Section 4.1 of thePledge Agreement.IN WITNESS WHEREOF, the undersigned has executed this Supplement as of the dayand year indicated above. [__________________________________________] By:_________________________________________ Name:_________________________________ Title:________________________________ ATTACHMENT 3 TO PLEDGE AGREEMENT ------------------- NOTICE OF EXTREME'S ELECTION TO CHANGE THE COLLATERAL PERCENTAGE ---------------------------------------------------------------- [---------, -----]BNP PARIBAS[address of BNP]Re: Pledge Agreement (Land) (the "Pledge Agreement") dated June 1, 2000 among -- Extreme Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen:Capitalized terms used in this letter are intended to have the meanings assignedto them in the Pledge Agreement referenced above. This letter constitutes noticeto you, as Agent under the Pledge Agreement, that pursuant to Section 3.1 of thePledge Agreement, Extreme elects to change the Collateral Percentage to: __________ percent (___%),on the following Base Rent Date (which will be the first day of a new Base RentPeriod): ----------, ----Extreme expects that multiplying the new Collateral Percentage specified aboveagainst Stipulated Loss Value of: ____________________________ Dollars ($__________),will result in an expected new Minimum Collateral Value of: ____________________________ Dollars ($__________).[NOTE: THE NEXT PARAGRAPH WILL BE INCLUDED ONLY IN A NOTICE OF AN INCREASE INTHE COLLATERAL PERCENTAGE, BECAUSE OF WHICH EXTREME WILL BE REQUIRED TO DELIVERADDITIONAL CASH COLLATERAL TO SATISFY THE MINIMUM COLLATERAL VALUE REQUIREMENTSIN SECTION 5.1 OF THE PLEDGE AGREEMENT:Because of the increase in the Collateral Percentage which will result fromthis notice and the corresponding increase in the Minimum Collateral Value,Extreme will deliver additional Cash Collateral to you as required by Section5.1 of the Pledge Agreement no later than 12:00 noon (San Francisco time) on theBase Rent Date specified above, in the amount of: ____________________________ Dollars ($__________).]To assure you that Extreme has satisfied the conditions to its right to changethe Collateral Percentage as provided in this notice, and to induce you to relyupon this notice in discharging your responsibilities under the PledgeAgreement, Extreme certifies to you that: 1. Extreme is giving this notice to you, BNPLC and the Participants atleast ten Business Days prior to the Base Rent Date specified above, and suchBase Rent Date is the commencement of a Base Rent Period. 2. No Event of Default or other event or circumstance that would, pursuant to Section 3.2 of the Pledge Agreement, preclude Extreme from designating the new Collateral Percentage above has occurred and is continuing, and Extreme does not anticipate that on the Base Rent Date specified above there will have occurred and be continuing any such Event of Default or other event or circumstance. 3. The new Collateral Percentage specified by Extreme above is not lessthan the Minimum Collateral Percentage currently in effect.NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE STATEMENTS ABOVE ARE-----NOT CORRECT. HOWEVER, WE ASK THAT YOU NOTIFY EXTREME IMMEDIATELY IF FOR ANYREASON YOU BELIEVE THIS NOTICE IS DEFECTIVE. EXTREME NETWORKS, INC. By:____________________________________ Name:_____________________________ Title:____________________________[cc BNPLC and all Participants] -2- ATTACHMENT 4 TO PLEDGE AGREEMENT ------------------- NOTICE OF SECURITY INTEREST --------------------------- [---------, -----][Name of Deposit Taker][Address of Deposit Taker]1. Reference is made to the Pledge Agreement (Land) (the "Pledge Agreement")dated June 1, 2000 among Extreme Networks, Inc. ("Extreme"), BNP LeasingCorporation ("BNPLC"), BNP PARIBAS and any other financial institutions whichare from time to time Participants under such Pledge Agreement (collectively,the "Participants") and BNP PARIBAS, acting in its capacity as agent for BNPLCand the Participants (in such capacity, "Agent"). Unless otherwise definedherein, all capitalized terms used in this Notice have the respective meaningsgiven to those terms in the Pledge Agreement.2. Extreme has informed Agent that Extreme has established with the addresseeof this Notice (the "Deposit Taker") the following non-interest bearingAccount(s) to be maintained at the following Account Office(s): Account Account Account Type Office Number------------ ------- -------Time Deposit _______ _______Time Deposit _______ _______Time Deposit _______ _______Extreme has further informed Agent that Extreme intends to maintain CashCollateral in such Account(s), and that to evidence such Account(s) and theamount of Cash Collateral held therein from time to time, Extreme has authorizedthe Deposit Taker to issue Certificates of Deposit payable to the order of Agentas provided in the Pledge Agreement. 3. Extreme and Agent hereby notify Deposit Taker that, pursuant to thePledge Agreement, Extreme has granted to Agent, for the ratable benefit of BNPLCand the Participants as security for the Secured Obligations, a pledge of andsecurity interest in all Accounts and other Collateral maintained by Extremewith Deposit Taker, including the Account(s) described in Section 2 above. 4. In furtherance of such grant, Extreme and Agent hereby authorize anddirect Deposit Taker to: (a) hold all Collateral for Agent and as Agent's bailee, separate and apart from all other property and funds of Extreme and all other Persons and to permit no other funds to be deposited or credited to the Account(s); (b) make a notation in its books and records of the interest of Agent in the Collateral and that the Account(s) and all deposits therein or sums credited thereto are subject to a pledge and security interest in favor of Agent; (c) issue and redeem Certificates of Deposit evidencing the Account(s), as directed by Agent pursuant to the Pledge Agreement; (d) take such other steps as Agent may reasonably request to record, maintain, validate and perfect its pledge of and security interest in the Collateral; and (e) upon receipt of notice from Agent that an Event of Default has occurred, transfer and deliver to Agent or its nominee, together with all necessary endorsements, all or such portion of the Collateral held by Deposit Taker as Agent shall direct; provided, however, that in connection therewith the Deposit Taker may require compliance by Agent with the provisions in Section 5.4 of the Pledge Agreement for redemption of any outstanding Certificates of Deposit which evidence the Account(s). 5. Extreme and Agent agree that (a) the possession by Deposit Taker ofall money, instruments, chattel paper and other property constituting Collateralshall be deemed to be possession by Agent or a person designated by Agent, forpurposes of perfecting the security interest granted to Agent hereunder pursuantto Section 9305, 8313 or 8213 of the UCC (as the case may be), and (b) -------------------------- notifications by Deposit Taker to other Persons holding any such property, andAcknowledgments, receipts or confirmations from such Persons delivered toDeposit Taker, shall be deemed notifications to, or Acknowledgments, receipts orconfirmations from, financial intermediaries, bailees or agents (as applicable)of the Deposit Taker for the benefit of Agent for the purposes of perfectingsuch security interests under applicable law. 6. As contemplated by the Pledge Agreement, please acknowledge DepositTaker's receipt of, and consent to, this notice and confirm the representationsand agreements set forth in the Acknowledgment and Agreement attached hereto byexecuting the same and returning this letter to Agent. For your files, a copy ofthis letter is enclosed which you may retain. The authorizations and directionsset forth herein may not be revoked or modified without the written consent ofAgent. "AGENT" BNP PARIBAS By: _________________________________ Name:____________________________ Title:___________________________ "EXTREME" EXTREME NETWORKS, INC. By: ___________________________________ Name:______________________________ Title:_____________________________ -2- ACKNOWLEDGMENT AND AGREEMENT OF DEPOSIT TAKER Deposit Taker hereby acknowledges receipt of, and consents to, theabove notice, acknowledges that it will hold the Collateral for Agent and asAgent's bailee, agrees to comply with the authorizations and directions setforth above and represents to and agrees with Extreme and Agent as follows: (a) Deposit Taker is a commercial bank, organized under the laws of the United States of America or a state thereof or under the laws of another country which is doing business in the United States of America. Deposit Taker is authorized to maintain deposit accounts for others through the Account Offices specified in the above notice, and Deposit Taker will not move the accounts described in the above notice to other offices without the prior written authorization of Agent and Extreme. (b) Deposit Taker has a combined capital, surplus and undivided profits of at least $500,000,000. (c) The information set forth above regarding the Account(s) is accurate. Such Account(s) is (are) currently open and Deposit Taker has no prior notice of any other pledge, security interest, Lien, adverse claim or interest in such Account(s). (d) Deposit Taker shall promptly notify Extreme and Agent if the representations made by Deposit Taker above cease to be true and correct. (e) Deposit Taker shall not (i) allow the withdrawal of funds from any Account by any Person other than Agent, or (ii) without in each case -------------------- first obtaining the prior written authorization of Agent, setoff or attempt -------------------------------------------------------- to setoff any Secured Obligations owed to Deposit Taker against any Collateral held from time to time by Deposit Taker, or (iii) without in ---------- each case first obtaining the prior written authorization of both Extreme ------------------------------------------------------------------------- and Agent, setoff or attempt to setoff any obligations owed to Deposit --------- Taker other than Secured Obligations, against any Collateral held from time to time by Deposit Taker. [__________________________________] By:_________________________________ Name:_________________________ Title:________________________ [Date] ATTACHMENT 5 TO PLEDGE AGREEMENT ------------------- EXAMPLES OF CALCULATIONS REQUIRED --------------------------------- TO AVOID A COLLATERAL IMBALANCE ------------------------------- The examples below are provided to illustrate the calculations requiredfor allocations of Cash Collateral in a manner that will avoid a CollateralImbalance. The examples are not intended to reflect actual numbers under thisAgreement or actual Percentages of BNPLC or any of the Participants; nor are theexamples intended to provide a formula for the allocations that would beappropriate in every case. The examples also reflect adjustments that would beappropriate if the Collateral Percentage were adjusted from time to time fromand after the Effective Date. EXAMPLE NO. 1Assumptions:-----------1. Two Participants ("Participant A" and "Participant B") are parties to the Participation Agreement with BNPLC. Participant A's Percentage is 50% and Participant B's Percentage is 45%, leaving BNPLC with a Percentage of 5%.2. On the Effective Date, the Initial Funding Advance was $12,000,000, resulting in a Stipulated Loss Value of $12,000,000, allocable as follows: A. BNPLC's Parent (providing BNPLC's share) (5%)...................................... $ 600,000 B. Participant A (50%)................................................................ 6,000,000 C. Participant B (45%)................................................................ 5,400,000 ---------- TOTAL.............................................................................. $12,000,00 3. The Minimum Collateral Value on the Effective Date was $7,200,000 (reflecting a Collateral Percentage of 60% times Stipulated Loss Value).4. On the Effective Date, Extreme had delivered to Agent Cash Collateral of $7,200,000, equal to the Minimum Collateral Value, as required by Section 5.1 of this Agreement.Allocation of Cash Collateral Required: To avoid a Collateral Imbalance under--------------------------------------these assumptions, Agent would be required to allocate the $7,200,000 to theDeposit Takers for BNPLC and the Participants as follows: A. BNPLC's Deposit Taker (5% of Minimum Collateral Value)............................. $ 360,000 B. Participant A's Deposit Taker (50% of Minimum Collateral Value).................... 3,600,000 C. Participant B's Deposit Taker (45% of Minimum Collateral Value)................... 3,240,000 ------------ TOTAL.............................................................................. $ 7,200,000 EXAMPLE NO. 2Assumptions: Assume the same facts as in Example No. 1, and in addition assume -----------that:1. Effective as of the first Base Rent Date, Extreme increased its Collateral Percentage from 60% to 80%, raising the Minimum Collateral Value to $9,600,000. Because of such increase, Extreme also delivered an additional $2,400,000 as Cash Collateral to Agent on the first Base Rent Date, bringing the total of all Cash Collateral delivered by Extreme to $9,600,000 as required by Section 5.1 of this Agreement.2. Also effective as of the first Base Rent Date, a new Participant approved by Extreme ("Participant C") became a party to this Agreement and the Participation Agreement, taking a Percentage of 20%. Simultaneously, Participant A and Participant B entered into supplements to the Participation Agreement which reduced their Percentages to 40% and 35%, respectively.Allocation of Cash Collateral Required: To avoid a Collateral Imbalance under--------------------------------------these assumptions, Agent would be required to allocate the Cash Collateral asrequired to leave the Deposit Takers for BNPLC and the Participants with thefollowing amounts: A. BNPLC's Deposit Taker (5% of Minimum Collateral Value)................................. $ 480,000 B. Participant A's Deposit Taker (40% of Minimum Collateral Value)........................ 3,840,000 C. Participant B's Deposit Taker (35% of Minimum Collateral Value)........................ 3,360,000 D. Participant C's Deposit Taker (20% of Minimum Collateral Value)....................... 1,920,000 ---------- TOTAL.................................................................................. $9,600,000 Thus, to prevent a Collateral Imbalance, Agent would have to allocate the$2,400,000 of additional Cash Collateral it received on the first Base Rent Dateas follows: A. BNPLC's Deposit Taker ($480,000 less $360,000 already on deposit) .................... $ 120,000 B. Participant A's Deposit Taker ($3,840,000 less $3,600,000 already on deposit)......... 240,000 C. Participant B's Deposit Taker ($3,360,000 less $3,240,000 already on deposit)......... 120,000 D. Participant C's Deposit Taker ($1,920,000 less $0 already on deposit)................ $1,920,000 ---------- TOTAL................................................................................. $2,400,000 EXAMPLE NO. 3Assumptions: Assume the same facts as in Example No. 2, except that:----------- -----------1. Instead of increasing its Collateral Percentage from 60% to 80%, Extreme increased its Collateral Percentage to 70% on the first Base Rent Date, raising the Minimum Collateral Value to $8,400,000. Because of such increase, Extreme delivered an additional $1,200,000 as additional Cash Collateral to Agent on the first Base Rent Date, bringing the total of all Cash Collateral delivered by Extreme to $8,400,000 as required by Section 5.1 of this Agreement.Allocation of Cash Collateral Required: To avoid a Collateral Imbalance under--------------------------------------these assumptions, Agent would be required to allocate the Cash Collateral asrequired to leave the Deposit Takers for BNPLC and the Participants with thefollowing amounts: A. BNPLC's Deposit Taker (5% of Minimum Collateral Value).............................. $ 420,000 B. Participant A's Deposit Taker (40% of Minimum Collateral Value)..................... 3,360,000 C. Participant B's Deposit Taker (35% of Minimum Collateral Value)..................... 2,940,000 D. Participant C's Deposit Taker (20% of Minimum Collateral Value).................... 1,680,000 ---------- TOTAL............................................................................... $8,400,000 -2- Thus, to prevent a Collateral Imbalance, Agent would have to allocate the$1,200,000 of additional Cash Collateral it received on the first Base Rent Dateas follows: A. BNPLC's Deposit Taker ($420,000 less $360,000 already on deposit) ........................ $ 60,000 B. Participant A's Deposit Taker ($3,360,000 less $3,600,000 already on deposit)............. (240,000) C. Participant B's Deposit Taker ($2,940,000 less $3,240,000 already on deposit)............. (300,000) D. Participant C's Deposit Taker ($1,680,000 less $0 already on deposit).................... 1,680,000 ---------- TOTAL..................................................................................... $1,200,000 NOTE: THE NEGATIVE AMOUNTS (IN PARENTHESIS) ABOVE REPRESENT REQUIRED WITHDRAWALS---- -----------RATHER THAN DEPOSITS. AS EXAMPLE NO. 3 ILLUSTRATES, TO AVOID A COLLATERALIMBALANCE AGENT MAY FROM TIME TO TIME HAVE TO WITHDRAW CASH COLLATERAL HELD BYTHE DEPOSIT TAKER FOR ONE PARTICIPANT AND DEPOSIT IT IN AN ACCOUNT MAINTAINED BYA DEPOSIT TAKER FOR ANOTHER PARTICIPANT. -3- ATTACHMENT 6 TO PLEDGE AGREEMENT ------------------- NOTICE OF EXTREME'S REQUIREMENT TO ---------------------------------- WITHDRAW EXCESS CASH COLLATERAL ------------------------------- [_________, _____]BNP PARIBAS[address of BNP] Re: Pledge Agreement (Land) dated June 1, 2000 among Extreme Networks, -- Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Land) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Land) referenced above (the "PledgeAgreement"). This letter constitutes notice to you, as Agent under the PledgeAgreement, that pursuant to Section 6.1 of the Pledge Agreement, Extremerequires you to withdraw from the Accounts and return to Extreme the followingamount: __________________ Dollars ($__________)on the following date: ----------, ---- To assure you that Extreme has satisfied the conditions to its right torequire such withdrawal, and to induce you to comply with this notice, Extremecertifies to you that: 1. Your withdrawal and delivery of the amount specified above to Extreme will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value. After giving effect to such withdrawal, the Collateral remaining in the Accounts maintained by the Deposit Takers will be: __________________ Dollars ($__________), and the Minimum Collateral Value on the date specified above will equal: __________________ Dollars ($__________). Such Minimum Collateral Value equals the Collateral Percentage of: __________ percent (___%), times the Stipulated Loss Value of: __________________ Dollars ($__________). 2. Extreme is giving this notice to you, BNPLC and the Participants at least ten days prior to the date specified above. 3. No Default or Event of Default has occurred and is continuing as of the date of this notice, and Extreme does not anticipate that any Default or Event of Default will have occurred and be continuing on the date upon which the withdrawal is required. 4. Extreme agrees that you may determine the Accounts from which to make any withdrawal required by Extreme pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance. NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE STATEMENTS ---- ABOVE ARE NOT CORRECT OR IF THE DATE FOR WITHDRAWAL SPECIFIED ABOVE IS LESS THAN TEN DAYS AFTER YOUR RECEIPT OF THIS NOTICE. HOWEVER, WE ASK THAT YOU NOTIFY EXTREME IMMEDIATELY IF FOR ANY REASON YOU BELIEVE THIS NOTICE IS DEFECTIVE. -2- Please remember that the express terms of Certificates of Deposit issuedpursuant to the Pledge Agreement require presentment of the Certificates ofDeposit seven days before Cash Collateral is to be withdrawn from the Accountsthey evidence. Accordingly, you must present Certificates of Deposit to DepositTakers seven days prior to the withdrawal of Cash Collateral required by thisnotice. For your convenience, we have attached a letter as Annex 1 to this -------notice that you might execute and send to Deposit Takers to advise them of yourintent to withdraw and of your presentment of Certificates of Deposit asrequired in connection therewith. The attached letter also sets forth theamounts Extreme believes you must withdraw from each Account to avoid aCollateral Imbalance. EXTREME NETWORKS, INC. By: ______________________________ Name:_______________________ Title:______________________[cc BNPLC and all Participants] -3- Annex 1 ------- TO EXTREME'S NOTICE OF REQUIREMENT TO ------------------------------------- WITHDRAW CASH EXCESS COLLATERAL ------------------------------- [_________, _____]Deposit Takers on theAttached Distribution List Re: Pledge Agreement (Land) dated June 1, 2000 among Extreme Networks, -- Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Land) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Land) referenced above (the "PledgeAgreement"). This letter constitutes notice from the undersigned, as Agent underthe Pledge Agreement, that pursuant to Section 6.1 of the Pledge Agreement,Extreme requires Agent to withdraw from the Accounts and return to Extreme theamounts listed below on the following date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw thefollowing amounts from the following Accounts, and with this letter theundersigned is presenting Certificates of Deposit as required in connection withsuch withdrawal: Deposit Taker Account No. Amount1.________________ ___________________ $________2.________________ ___________________ $________3.________________ ___________________ $________4.________________ ___________________ $________ TOTAL WITHDRAWALS: $======== BNP PARIBAS, AS AGENT By: ____________________________________ Name:_______________________________ Title:______________________________[cc BNPLC and Extreme] -4- ATTACHMENT 7 TO PLEDGE AGREEMENT ------------------- NOTICE OF EXTREME'S REQUIREMENT OF ---------------------------------- DIRECT PAYMENTS TO PARTICIPANTS ------------------------------- [_________, _____]BNP PARIBAS[address of BNP] Re: Pledge Agreement (Land) dated June 1, 2000 among Extreme Networks, -- Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Land) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Land) referenced above (the "PledgeAgreement"). This letter constitutes notice to you, as Agent under the PledgeAgreement, that pursuant to Section 6.2 of the Pledge Agreement, Extremerequires you to withdraw from the Accounts and pay directly to the Participants(in proportion to their respective Percentages) the following amount: ____________________________ Dollars ($__________)on the following date (which, Extreme acknowledges, must be the Designated SaleDate or a date thereafter prior to an Event of Default): __________, ____ The amount specified above equals the following percentage (equal tothe aggregate of all Participant's Percentages): ___________percent (___%),times the total of all Cash Collateral presently pledged under the PledgeAgreement: ____________________________ Dollars ($__________). To assure you that Extreme has satisfied the conditions to its right torequire such withdrawal, and to induce you to comply with this notice, Extremecertifies to you that Extreme is giving this notice to you, BNPLC and theParticipants at least ten days prior to the date of required withdrawal andpayment specified above. Please remember that the express terms of Certificates of Deposit issuedpursuant to the Pledge Agreement require presentment of the Certificates ofDeposit seven days before Cash Collateral is to be withdrawn from the Accountsthey evidence. Accordingly, you must present Certificates of Deposit to DepositTakers seven days prior to the withdrawal of Cash Collateral required by thisnotice. For your convenience, we have attached a letter as Annex 1 to this -------notice that you might execute and send to Deposit Takers to advise them of yourintent to withdraw and of your presentment of Certificates of Deposit asrequired in connection therewith. The attached letter also sets forth theamounts Extreme believes you must withdraw from each Account to comply withsubsection 6.2.2 of the Pledge Agreement. EXTREME NETWORKS, INC. By:______________________________________ Name:_______________________________ Title:______________________________[cc BNPLC and all Participants] -2- Annex 1 ------- TO EXTREME'S NOTICE OF REQUIREMENT TO ------------------------------------- WITHDRAW CASH COLLATERAL FOR ---------------------------- DIRECT PAYMENTS TO PARTICIPANTS ------------------------------- [_________, _____]Deposit Takers on theAttached Distribution List Re: Pledge Agreement (Land) dated June 1, 2000 among Extreme Networks, -- Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Land) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Land) referenced above (the "PledgeAgreement"). This letter constitutes notice from the undersigned, as Agent underthe Pledge Agreement, that pursuant to Section 6.2 of the Pledge Agreement,Extreme requires Agent to withdraw from the Accounts and pay to the Participants(in proportion to their respective Percentages) the amounts listed below on thefollowing date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw thefollowing amounts from the following Accounts, and with this letter theundersigned is presenting Certificates of Deposit as required in connection withsuch withdrawal:Deposit Taker Account No. Amount1._________________ __________________ $__________2._________________ __________________ $__________3._________________ __________________ $__________4._________________ __________________ $__________ TOTAL WITHDRAWALS: $========== BNP PARIBAS, AS AGENT By: __________________________________ Name:_____________________________ Title:____________________________[cc BNPLC and Extreme] -3- ATTACHMENT 8 TO PLEDGE AGREEMENT ------------------- NOTICE OF EXTREME'S REQUIREMENT OF ---------------------------------- DIRECT PAYMENT TO BNPLC ----------------------- [_________, _____]BNP PARIBAS[address of BNP] Re: Pledge Agreement (Land) dated June 1, 2000 among Extreme Networks, -- Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Land) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Land) referenced above (the "PledgeAgreement"). This letter constitutes notice to you, as Agent under the PledgeAgreement, that pursuant to Section 6.3 of the Pledge Agreement, Extremerequires you to withdraw from the Account maintained by the Deposit Taker forBNPLC and pay directly to BNPLC on behalf of Extreme as a payment required bythe Purchase Agreement the following amount: ____________________________ Dollars ($__________)on the following date (which, Extreme acknowledges, must be the Designated SaleDate or a date thereafter prior to an Event of Default): __________, ____ To assure you that Extreme has satisfied the conditions to its right torequire such withdrawal, and to induce you to comply with this notice, Extremecertifies to you that Extreme is giving this notice to you and BNPLC at leastten days prior to the date of required withdrawal and payment specified above. Please remember that the express terms of Certificates of Depositissued pursuant to the Pledge Agreement require presentment of the Certificatesof Deposit seven days before Cash Collateral is to be withdrawn from theAccounts they evidence. Accordingly, you must present Certificates of Deposit tothe Deposit Taker for BNPLC seven days prior to the withdrawal of CashCollateral required by this notice. For your convenience, we have attached aletter as Annex 1 to this notice that you might execute and send to the Deposit -------Taker for BNPLC to advise it of your intent to withdraw and of your presentmentof Certificates of Deposit as required in connection therewith. The attachedletter also sets forth the amount Extreme believes you must withdraw to complywith Section 6.3 of the Pledge Agreement. EXTREME NETWORKS, INC. By:________________________________ Name:________________________ Title:_______________________[cc BNPLC] Annex 1 ------- TO EXTREME'S NOTICE OF REQUIREMENT OF ------------------------------------- DIRECT PAYMENT TO BNPLC ----------------------- [_________, _____][Name of the Deposit Taker for BNPLC][Address of such Deposit Taker] Re: Pledge Agreement (Land) dated June 1, 2000 among Extreme Networks, -- Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Land) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Land) referenced above (the "PledgeAgreement"). This letter constitutes notice from the undersigned, as Agent underthe Pledge Agreement, that pursuant to Section 6.3 of the Pledge Agreement,Extreme requires Agent to withdraw from the Account maintained by you, asDeposit Taker for BNPLC, the sum of: ____________________________ Dollars ($__________)and pay the same to BNPLC as a payment required by the Purchase Agreement on thefollowing date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw suchamount from the following Account maintained by you as Deposit Taker for BNPLC,and with this letter the undersigned is presenting Certificate(s) of Deposit asrequired in connection with such withdrawal. BNP PARIBAS, AS AGENT By: __________________________________ Name:_____________________________ Title:____________________________[cc BNPLC and Extreme] -2- ATTACHMENT 9 TO PLEDGE AGREEMENT ------------------- NOTICE OF EXTREME'S REQUIREMENT OF A WITHDRAWAL ----------------------------------------------- OF CASH COLLATERAL FROM ----------------------- A DISQUALIFIED DEPOSIT TAKER ---------------------------- [_________, _____]BNP PARIBAS[address of BNP] Re: Pledge Agreement (Land) dated June 1, 2000 among Extreme Networks, -- Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Land) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants Gentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Land) referenced above (the "PledgeAgreement"). This letter constitutes notice to you, as Agent under the PledgeAgreement, that pursuant to Section 6.4 of the Pledge Agreement, Extremerequires you to withdraw from the following Account maintained by the followingDeposit Taker: Deposit Taker Account No. ----------------------- -------------------Cash Collateral in the following amount: ______________________ Dollars ($__________)and to deposit such Cash Collateral with other Deposit Takers who are notDisqualified Deposit Takers no later than ten days after the date upon which youreceive this notice. To assure you that Extreme has the right to require such withdrawal, and toinduce you to comply with this notice, Extreme certifies to you that the DepositTaker specified above has become a Disqualified Deposit Taker because it nolonger satisfies the requirements listed in Section 4.1 of the Pledge Agreement.Specifically, such Deposit Taker no longer satisfies the following requirements:[EXTREME MUST INSERT HERE A DESCRIPTION OF WHICH REQUIREMENTS THE DEPOSIT TAKERNO LONGER SATISFIES AND HOW EXTREME HAS DETERMINED THAT THE REQUIREMENTS ARE NOLONGER SATISFIED, ALL IN SUFFICIENT DETAIL TO PERMIT THE PARTICIPANT FOR WHOMSUCH DEPOSIT TAKER HAS BEEN MAINTAINING AN ACCOUNT TO RESPOND IF IT BELIEVESTHAT EXTREME IS IN ERROR.] Please remember that the express terms of Certificates of Deposit issuedpursuant to the Pledge Agreement require presentment of the Certificates ofDeposit seven days before Cash Collateral is to be withdrawn from the Accountsthey evidence. Accordingly, you must present Certificates of Deposit to theDeposit Taker specified above seven days prior to the withdrawal of CashCollateral required by this notice. For your convenience, we have attached aletter as Annex 1 to this notice that you might execute and send to such Deposit -------Taker to advise it of your intent to withdraw and of your presentment ofCertificates of Deposit as required in connection therewith. The attached letteralso sets forth the amount Extreme believes you must withdraw to comply withSection 6.4 of the Pledge Agreement. EXTREME NETWORKS, INC. By:_________________________________ Name:__________________________ Title:_________________________[cc BNPLC] -2- Annex 1 ------- TO EXTREME'S NOTICE OF REQUIREMENT OF A WITHDRAWAL -------------------------------------------------- OF CASH COLLATERAL FROM ----------------------- A DISQUALIFIED DEPOSIT TAKER ---------------------------- [_________, _____][Name of the Deposit Taker for BNPLC][Address of such Deposit Taker] Re: Pledge Agreement (Land) dated June 1, 2000 among Extreme Networks, -- Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Land) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Land) referenced above (the "PledgeAgreement"). This letter constitutes notice from the undersigned, as Agent underthe Pledge Agreement, that pursuant to Section 6.4 of the Pledge Agreement,Extreme has advised Agent that you are a Disqualified Deposit Taker, and Extremerequires Agent to withdraw from the Account maintained by you, as a DepositTaker under the Pledge Agreement, the sum of: ____________________________ Dollars ($__________)no later than the following date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw such amountfrom the Account maintained by you as Deposit Taker (Account No. __________),and with this letter the undersigned is presenting Certificate(s) of Deposit asrequired in connection with such withdrawal. BNP PARIBAS, AS AGENT By: _______________________________ Name:__________________________ Title:_________________________[cc BNPLC and Extreme] -3- Schedule 1 TO PLEDGE AGREEMENT ------------------- [IN PLACE OF THIS PAGE, SUBSTITUTE SCHEDULE 1 ATTACHED TO THE LEASE] ================================================================================ EXHIBIT 10.13 PLEDGE AGREEMENT (IMPROVEMENTS) AMONG BNP LEASING CORPORATION ("BNPLC") BNP PARIBAS, AS AGENT ("Agent") EXTREME NETWORKS, INC. ("Extreme") AND PARTICIPANTS AS DESCRIBED HEREIN June 1, 2000================================================================================ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INTERPRETATION.......................................................................-1- Section 1.1 Capitalized Terms Used But Not Defined in This Agreement...................................-1- -------------------------------------------------------- Section 1.2 Definitions................................................................................-1- ----------- Account........................................................................................-1- Account Office.................................................................................-2- Agent..........................................................................................-2- BNPLC..........................................................................................-2- BNPLC's Corresponding Obligations to Participants..............................................-2- Cash Collateral................................................................................-2- Certificate of Deposit.........................................................................-2- Collateral.....................................................................................-2- Collateral Imbalance...........................................................................-2- Collateral Percentage..........................................................................-2- Default........................................................................................-3- Deposit Taker..................................................................................-3- Deposit Taker Losses...........................................................................-3- Deposit Taker's Acknowledgment and Agreement...................................................-3- Disqualified Deposit Taker.....................................................................-3- Event of Default...............................................................................-3- Extreme........................................................................................-4- Extreme's Purchase Agreement Obligations.......................................................-4- Initially Qualified Deposit Taker..............................................................-5- Lien...........................................................................................-5- Material Lease Default.........................................................................-5- Minimum Collateral Percentage..................................................................-5- Minimum Collateral Value.......................................................................-6- Notice of Security Interest....................................................................-6- Other Liable Party.............................................................................-6- Participants...................................................................................-6- Participation Agreement........................................................................-6- Percentage.....................................................................................-6- Qualified Pledge...............................................................................-6- Secured Obligations............................................................................-6- Supplement.....................................................................................-6- Transaction Documents..........................................................................-6- Value..........................................................................................-7- Section 1.3 Attachments................................................................................-7- ----------- Section 1.4 Amendment of Defined Instruments...........................................................-7- -------------------------------- Section 1.5 References and Titles......................................................................-7- ---------------------ARTICLE II SECURITY INTEREST...................................................................................-7- Section 2.1 Pledge and Grant of Security Interest......................................................-7- ------------------------------------- Section 2.2 Return of Collateral After the Secured Obligations are Satisfied in Full...................-8- ------------------------------------------------------------------------ARTICLE III DETERMINATION OF THE COLLATERAL PERCENTAGE.........................................................-8- Section 3.1 Determination of the Collateral Percentage Generally.......................................-8- ---------------------------------------------------- Section 3.2 Limitations on Extreme's Right to Lower the Collateral Percentage......................... -8- ----------------------------------------------------------------- Section 3.3 Minimum Collateral Percentages Dependent Upon the Adjusted EBITDAR Coverage Ratio......... -9- ---------------------------------------------------------------------------------ARTICLE IV PROVISIONS CONCERNING DEPOSIT TAKERS............................................................... -9- Section 4.1 Qualification of Deposit Takers Generally................................................. -9- ----------------------------------------- Section 4.2 Existing Deposit Takers................................................................... -9- ----------------------- Section 4.3 Replacement of Participants Proposed by Extreme...........................................-10- ----------------------------------------------- Section 4.4 Mandatory Substitution for Disqualified Deposit Takers....................................-10- ------------------------------------------------------ Section 4.5 Voluntary Substitution of Deposit Takers..................................................-10- ---------------------------------------- Section 4.6 Delivery of Notice of Security Interest by Extreme and Agent..............................-10- ------------------------------------------------------------ Section 4.7 Constructive Possession of Collateral.....................................................-11- ------------------------------------- Section 4.8 Attempted Setoff by Deposit Takers........................................................-11- ---------------------------------- Section 4.9 Deposit Taker Losses......................................................................-11- -------------------- Section 4.10 Losses Resulting from Failure of Deposit Taker to Comply with this Agreement.............-11- ----------------------------------------------------------------------------ARTICLE V DELIVERY AND MAINTENANCE OF CASH COLLATERAL.........................................................-12- Section 5.1 Delivery of Funds by Extreme..............................................................-12- ---------------------------- Section 5.2 Transition Account........................................................................-12- ------------------ Section 5.3 Allocation of Cash Collateral Among Deposit Takers........................................-12- -------------------------------------------------- Section 5.4 Issuance and Redemption of Certificates of Deposit........................................-13- -------------------------------------------------- Section 5.5 Status of the Accounts Under the Reserve Requirement Regulations..........................-13- ---------------------------------------------------------------- Section 5.6 Acknowledgment by Extreme that Requirements of this Agreement are Commercially Reasonable.-13- -----------------------------------------------------------------------------------------ARTICLE VI WITHDRAWAL OF CASH COLLATERAL......................................................................-14- Section 6.1 Withdrawal of Collateral Prior to the Designated Sale Date................................-14- ---------------------------------------------------------- Section 6.2 Withdrawal and Application of Cash Collateral to Reduce or Satisfy the Secured Obligations ------------------------------------------------------------------------------------------ to the Participants.......................................................................-14- ------------------ Section 6.3 Withdrawal and Application of Cash Collateral to Reduce or Satisfy the Secured Obligations ------------------------------------------------------------------------------------------ to BNPLC..................................................................................-15- -------- Section 6.4 Withdrawal of Cash Collateral From Accounts Maintained by Disqualified Deposit Takers.....-15- -------------------------------------------------------------------------------------ARTICLE VII REPRESENTATIONS AND COVENANTS OF Extreme..........................................................-15- Section 7.1 Representations of Extreme................................................................-15- -------------------------- Section 7.2 Covenants of Extreme......................................................................-16- --------------------ARTICLE VIII AUTHORIZED ACTION BY AGENT......................................................................-17- Section 8.1 Power of Attorney.........................................................................-17- -----------------ARTICLE IX DEFAULT AND REMEDIES..............................................................................-18- Section 9.1 Remedies..................................................................................-18- --------ARTICLE X OTHER RECOURSE.....................................................................................-18- Section 10.1 Recovery Not Limited.....................................................................-18- --------------------ARTICLE XI PROVISIONS CONCERNING AGENT........................................................................-19- Section 11.1 Appointment and Authority................................................................-19- ------------------------- Section 11.2 Exculpation, Agent's Reliance, Etc.......................................................-19- ---------------------------------- Section 11.3 Participant's Credit Decisions...........................................................-20- ------------------------------ Section 11.4 Indemnity................................................................................-20- --------- Section 11.5 Agent's Rights as Participant and Deposit Taker..........................................-20- ----------------------------------------------- Section 11.6 Investments..............................................................................-20- ----------- Section 11.7 Benefit of Article XI....................................................................-21- --------------------- Section 11.8 Resignation..............................................................................-21- -----------ARTICLE XII MISCELLANEOUS.....................................................................................-21- Section 12.1 Provisions Incorporated From Other Operative Documents....................................-21- ------------------------------------------------------ Section 12.2 Cumulative Rights, etc...................................................................-21- ---------------------- Section 12.3 Survival of Agreements...................................................................-21- ---------------------- Section 12.4 Other Liable Party.......................................................................-21- ------------------ Section 12.5 Termination..............................................................................-22- ----------- Attachment 1.........................................................................Form of Certificate of DepositAttachment 2..........................................................Supplement to Pledge Agreement (Improvements)Attachment 3.......................................Notice of Extreme's Election to Change the Collateral PercentageAttachment 4............................................................................Notice of Security InterestAttachment 5...............................................................................Examples of CalculationsAttachment 6.....................................Notice of Extreme's Requirement to Withdraw Excess Cash CollateralAttachment 7.....................................Notice of Extreme's Requirement of Direct Payments to ParticipantsAttachment 8.....................................Notice of Extreme's Requirement of Direct Payments to ParticipantsAttachment 9........................................................Notice of Extreme's Requirement of a Withdrawal of Cash Collateral from a Disqualified Deposit TakerSchedule 1...............................................................Financial Covenants and Negative Covenants---------- PLEDGE AGREEMENT (IMPROVEMENTS) This PLEDGE AGREEMENT (IMPROVEMENTS) (this "Agreement") is made as of June1, 2000 (the "Effective Date"), by EXTREME NETWORKS, INC., a Californiacorporation ("Extreme"); BNP LEASING CORPORATION, a Delaware corporation("BNPLC"); BNP PARIBAS ("BNPLC's Parent"), as a "Participant"; and BNP PARIBAS,acting in its capacity as agent for BNPLC and the Participants (in suchcapacity, "Agent"). RECITALS A. Extreme and BNPLC are parties to: (i) a Common Definitions andProvisions Agreement (Improvements) dated as of the Effective Date (the "CommonDefinitions and Provisions Agreement (Improvements)"); and (ii) a PurchaseAgreement (Improvements) dated as of the Effective Date (the "PurchaseAgreement"), pursuant to which Extreme has agreed to make a "SupplementalPayment" (as defined in the Common Definitions and Provisions Agreement(Improvements)), in consideration of the rights granted to Extreme by thePurchase Agreement. B. Pursuant to a Participation Agreement dated the date hereof (the"Participation Agreement"), BNPLC's Parent has agreed with BNPLC to participatein the risks and rewards to BNPLC of the Purchase Agreement and other OperativeDocuments (as defined in the Common Definitions and Provisions Agreement(Improvements)), and the parties to this Agreement anticipate that otherfinancial institutions may become parties to the Participation Agreement asParticipants, agreeing to participate in the risks and rewards to BNPLC of thePurchase Agreement and other Operative Documents. C. Extreme may from time to time deliver cash collateral for itsobligations to BNPLC under the Purchase Agreement and for BNPLC's correspondingobligations to Participants under the Participation Agreement. This Agreementsets forth the terms and conditions governing such cash collateral. AGREEMENT --------- NOW, THEREFORE, in consideration of the above recitals and for othergood and valuable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.1 Capitalized Terms Used But Not Defined in This Agreement. --------------------------------------------------------All capitalized terms used in this Agreement which are defined in Article I ofthe Common Definitions and Provisions Agreement (Improvements) and not otherwisedefined herein shall have the same meanings herein as set forth in the CommonDefinitions and Provisions Agreement (Improvements). All terms used in thisAgreement which are defined in the UCC and not otherwise defined herein shallhave the same meanings herein as set forth therein, except where the contextotherwise requires. Section 1.2 Definitions. When used in this Agreement, the following terms -----------shall have the following respective meanings: "Account" shall mean any deposit account maintained by a Deposit Taker into which Cash Collateral may be deposited at any time, excluding the Transition Account. "Account Office" shall mean, with respect to any Account maintained by any Deposit Taker, the office of such Deposit Taker in California or New York at which such Account is maintained as specified in the applicable Deposit Taker's Acknowledgment and Agreement. "Agent" shall have the meaning given to that term in the introductoryparagraph hereof. "BNPLC" shall have the meaning given to that term in the introductoryparagraph hereof. "BNPLC's Corresponding Obligations to Participants" shall mean BNPLC'sobligations under the Participation Agreement to pay Participants theirrespective Percentages of (or amounts equal to their respective Percentages of)sums "actually received by BNPLC" (as defined in the Participation Agreement) insatisfaction of Extreme's Purchase Agreement Obligations; provided, however, anymodification of the Participation Agreement executed after the date hereofwithout Extreme's written consent shall not be considered for purposes ofdetermining BNPLC's Corresponding Obligations to Participants under thisAgreement. "Cash Collateral" shall mean (i) all money of Extreme which Extremehas delivered to Agent for deposit with a Deposit Taker pursuant to thisAgreement, and (ii) any additional money delivered to Agent as Collateralpursuant to Section 4.9. "Certificate of Deposit" shall mean a certificate of deposit issued bya Deposit Taker as required by Section 5.4 below to evidence an Account intowhich Cash Collateral has been deposited pursuant to this Agreement. EachCertificate of Deposit shall be issued in an amount equal to the Value of theAccount which it evidences and shall otherwise be in the form set forth asATTACHMENT 1.------------ "Collateral" shall have the meaning given to that term in Section 2.1hereof. "Collateral Imbalance" shall mean on any date prior to the DesignatedSale Date that the Value (without duplication) of Accounts maintained by andCertificates of Deposit issued by the Deposit Taker for any Participant (otherthan a Disqualified Deposit Taker) does not equal such Participant's Percentage,multiplied by the lesser of (1) the Minimum Collateral Value in effect on suchdate, or (2) the aggregate Value of all Collateral subject to this Agreement onsuch date. For purposes of determining whether a Collateral Imbalance exists,the Value of any Accounts maintained by a bank that is acting as Deposit Takerfor two or more Participants will be deemed to be held for them in proportion totheir respective Percentages, and the Value of any Accounts maintained by a bankas Deposit Taker for both a Participant and BNPLC (as in the case of BNPLC'sParent acting as Deposit Taker for itself, as a Participant, and for BNPLC) willbe deemed to be held for the Participant only to the extent necessary to preventor mitigate a Collateral Imbalance and otherwise for BNPLC. "Collateral Percentage" shall mean the percentage designated by Extremein accordance with this Agreement from time to time, but never less than theMinimum Collateral Percentage established as provided in Part III of Schedule 1. ---------- "Default" means any Event of Default and any default, event orcondition which would, with the giving of any requisite notices and the passageof any requisite periods of time, constitute an Event of Default. "Deposit Taker" for BNPLC shall mean BNPLC's Parent and for eachParticipant shall mean the Participant itself; provided, that each of BNPLC andthe Participants, for itself only, may from time to time designate anotherDeposit Taker as provided in Sections 4.4 and 4.5 below. -2- "Deposit Taker Losses" shall mean the Value of any Cash Collateraldelivered to a Deposit Taker, but that the Deposit Taker will not (because ofthe insolvency of the Deposit Taker, offsets by the Deposit Taker in violationof the Deposit Taker's Acknowledgment and Agreement, or otherwise) return toExtreme or return to Agent for disposition or application as provided herein oras required by applicable law. "Deposit Taker's Acknowledgment and Agreement" shall have the meaninggiven to that term in subsection 4.1.2 hereof. "Disqualified Deposit Taker" shall mean any Deposit Taker with whomAgent may decline to deposit Collateral pursuant to Section 4.1. "Event of Default" shall mean the occurrence of any of the following: (a) the failure by Extreme to pay all or any part of Extreme's Purchase Agreement Obligations when due, after giving effect to any applicable notice and grace periods expressly provided for in the Purchase Agreement; (b) the failure by Extreme to provide funds as and when required by Section 5.1 of this Agreement, if within seven Business Days after such failure commences Extreme does not (1) cure such failure by delivering the funds required by Section 5.1, and (2) pay to BNPLC as additional Rent under the Improvements Lease an amount equal to interest at the Default Rate (as defined in the Improvements Lease) on such funds for the period from which they were first due to the date of receipt by Agent; (c) the failure of the pledge or security interest contemplated herein in the Transition Account or any Account, Certificate of Deposit or Cash Collateral to be a Qualified Pledge (regardless of the characterization of the Transition Account or any Accounts, Certificates of Deposit or Cash Collateral as deposit accounts, instruments or general intangibles under the UCC), unless: (I) such failure would not exist but for a breach of this Agreement by Agent or a breach of a Deposit Taker's Acknowledgment and Agreement by a Deposit Taker, or (II) within five Business Days after Extreme becomes aware of such failure, Extreme shall (1) notify Agent, BNPLC and the Participants of such failure, and (2) cure such failure, and (3) to the extent required by Section 7.2.9, pay to BNPLC any additional Base Rent that has accrued under the Improvements Lease because of (or that would have accrued if BNPLC had been aware of) such failure, together with interest at the Default Rate on any such additional Base Rent; (d) the failure of any representation herein by Extreme to be true (other than a failure described in another clause of this definition of Event of Default), if such failure is not cured within thirty days after Extreme receives written notice thereof from Agent; (e) the failure of any representation made by Extreme in subsection 7.1.1 to be true, if within fifteen (15) days after Extreme becomes aware of such failure, Extreme does not (1) notify Agent, BNPLC and the Participants of such failure, and (2) cure such failure, and (3) pay to BNPLC any additional Base Rent that has accrued under the -3- Improvements Lease because of (or that would have accrued if BNPLC had been aware of) such failure, and (4) pay to BNPLC interest at the Default Rate on any such additional Base Rent; (f) the failure by Extreme timely and properly to observe, keep or perform any covenant, agreement, warranty or condition herein required to be observed, kept or performed (other than a failure described in another clause of this definition of Event of Default), if such failure is not cured within thirty days after Extreme receives written notice thereof from Agent; and (g) the failure by BNPLC to pay when due on or after the Designated Sale Date any of BNPLC's Corresponding Obligations to Participants, after giving effect to any applicable notice and grace periods expressly provided for in the Participation Agreement. Notwithstanding the foregoing, if ever the aggregate Value of Cash Collateral held by Agent and the Deposit Takers exceeds the Minimum ------- Collateral Value then in effect, a failure of the pledge or security interest contemplated herein in such excess Cash Collateral to be a valid, ----------- perfected, first priority pledge or security interest shall not constitute an Event of Default under this Agreement. Accordingly, to provide a cure as required to avoid an Event of Default under clauses (c) or (e) of this definition, Extreme could deliver additional Cash Collateral - the pledge of which or security interest in which created by this Agreement is a Qualified Pledge - sufficient in amount to cause the aggregate Value of the Cash Collateral then held by Agent and the Deposit Takers subject to a Qualified Pledge hereunder to equal or exceed the Minimum Collateral Value. "Extreme" shall have the meaning given to that term in the introductory paragraph hereof. "Extreme's Purchase Agreement Obligations" shall mean all of Extreme's obligations under the Purchase Agreement, including (i) Extreme's obligation to pay any Supplemental Payment as required under subparagraph ------------ 1(A) of the Purchase Agreement, and (ii) any damages incurred by BNPLC ---- because of (A) Extreme's breach of the Purchase Agreement or (B) the rejection by Extreme of the Purchase Agreement in any bankruptcy or insolvency proceeding. "Initially Qualified Deposit Taker" means (1) BNP PARIBAS, acting through any branch, office or agency that can lawfully maintain an Account as a Deposit Taker hereunder, and (2) any of the fifty largest (measured by total assets) U.S. banks, or one of the one hundred largest (measured by total assets) banks in the world, with debt ratings of at least (i) A- (in the case of long term debt) and A-1 (in the case of short term debt) or the equivalent thereof by Standard and Poor's Corporation, and (ii) A3 (in the case of long term debt) and P-2 (in the case of short term debt) or the equivalent thereof by Moody's Investor Service, Inc. The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, Extreme shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the status of any bank as an Initially Qualified Deposit Taker. "Lien" shall mean, with respect to any property or assets, any right or interest therein of a creditor to secure indebtedness of any kind which is owed to him or any other arrangement with such creditor which provides for the payment of such indebtedness out of such property or assets or which allows him to have such indebtedness satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale -4- agreement or lease substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or any other charge or encumbrance for security purposes, whether arising by law or agreement or otherwise, but excluding any right of setoff which arises without agreement in the ordinary course of business. "Lien" also means any filed financing statement, any registration with an issuer of uncertificated securities, or any other arrangement which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement is undertaken before or after such Lien exists. "Material Lease Default" shall mean any of the following: (1) any "Event of Default" under and as defined in the Improvements Lease, including any such Event of Default consisting of a failure of Extreme to comply with the requirements of Schedule I ---------- attached to the Improvements Lease; and (2)(a) any failure of Extreme to make any payment required by and when first due under the Improvements Lease, regardless of whether any period provided in the Improvements Lease for the cure of such failure by Extreme shall have expired, and (b) any other default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an "Event of Default" under and as defined in the Improvements Lease, if such other default, event or failure involves a material noncompliance with Applicable Law. (For purposes of this definition, "material" noncompliance with Applicable Law will include any noncompliance, the correction of which has been requested by a governmental authority, or because of which a threat of action against the Property or BNPLC has been asserted by a governmental authority.) "Minimum Collateral Percentage" shall mean the percentage established as such from time to time as described in Part III of Schedule 1. ---------- "Minimum Collateral Value" shall mean (1) as of the Designated Sale Date or any prior date, an amount equal to the Collateral Percentage multiplied by the Stipulated Loss Value determined as of that date in accordance with the Improvements Lease; and (2) as of any date after the Designated Sale Date, an amount equal to the Break Even Price plus any unpaid interest accrued on past due amounts payable pursuant to Paragraph 1(a) of the Purchase Agreement. "Notice of Security Interest" shall have the meaning given to that term in subsection 4.1.1 hereof. "Other Liable Party" shall mean any Person, other than Extreme, who may now or may at any time hereafter be primarily or secondarily liable for any of the Secured Obligations or who may now or may at any time hereafter have granted to Agent a pledge of or security interest in any of the Collateral. "Participants" shall mean BNPLC's Parent and any other financial institutions which may hereafter become parties to (i) this Agreement by completing, executing and delivering to Extreme and Agent a Supplement, and (ii) the Participation Agreement. "Participation Agreement" shall have the meaning given to such term in Recital B hereof. "Percentage" shall mean with respect to each Participant and the Deposit Taker for such Participant, such Participant's "Percentage" under and as defined in the Participation Agreement -5- for purposes of computing such Participant's right thereunder to receive payments of (or amounts equal to a percentage of) any sales proceeds or Supplemental Payment received by BNPLC under the Purchase Agreement. Percentages may be adjusted from time to time as provided in the Participation Agreement or as provided in supplements thereto executed as provided in the Participation Agreement. "Qualified Pledge" means a pledge or security interest that constitutes a valid, perfected, first priority pledge or security interest. "Secured Obligations" shall mean and include both Extreme's Purchase Agreement Obligations and BNPLC's Corresponding Obligations to Participants. "Supplement" shall mean a supplement to this Agreement in the form of ATTACHMENT 2. ------------ "Transaction Documents" shall mean, collectively, this Agreement, the Improvements Lease, the Purchase Agreement and the Participation Agreement. "Transition Account" shall have the meaning given it in Section 5.2. "UCC" shall mean the Uniform Commercial Code as in effect in the State of California from time to time, and the Uniform Commercial Code as in effect in any other jurisdiction which governs the perfection or non- perfection of the pledge of and security interests in the Collateral created by this Agreement. "Value" shall mean with respect to any Account, Certificate of Deposit or Cash Collateral on any date, a dollar value determined as follows (without duplication): (a) cash shall be valued at its face amount on such date; (b) an Account shall be valued at the principal balance thereof on such date; and (c) a Certificate of Deposit shall be valued at the face amount thereof. Section 1.3 Attachments. All attachments to this Agreement are a part -----------hereof for all purposes. Section 1.4 Amendment of Defined Instruments. Unless the context otherwise --------------------------------requires or unless otherwise provided herein, references in this Agreement to aparticular agreement, instrument or document (including references to theImprovements Lease, Purchase Agreement and Participation Agreement) also referto and include all valid renewals, extensions, amendments, modifications,supplements or restatements of any such agreement, instrument or document;provided that nothing contained in this Section shall be construed to authorizeany Person to execute or enter into any such renewal, extension, amendment,modification, supplement or restatement. Section 1.5 References and Titles. All references in this Agreement to ---------------------Attachments, Articles, Sections, subsections, and other subdivisions refer tothe Attachments, Articles, Sections, subsections and other subdivisions of thisAgreement unless expressly provided otherwise. Titles appearing at the beginningof any subdivision are for convenience only and do not constitute any part ofany such subdivision and shall be disregarded in construing the languagecontained in this Agreement. The words -6- "this Agreement", "herein", "hereof", "hereby", "hereunder" and words of similarimport refer to this Agreement as a whole and not to any particular subdivisionunless expressly so limited. The phrases "this Article," "this Section" and"this subsection" and similar phrases refer only to the Articles, Sections orsubsections hereof in which the phrase occurs. The word "or" is not exclusive,and the word "including" (in all of its forms) means "including withoutlimitation". Pronouns in masculine, feminine and neuter gender shall beconstrued to include any other gender, and words in the singular form shall beconstrued to include the plural and vice versa unless the context otherwiserequires. ARTICLE II SECURITY INTEREST Section 2.1 Pledge and Grant of Security Interest. As security for the -------------------------------------Secured Obligations, Extreme hereby pledges and assigns to Agent (for theratable benefit of BNPLC and the Participants) and grants to Agent (for theratable benefit of BNPLC and the Participants) a continuing security interestand lien in and against all right, title and interest of Extreme in and to thefollowing property, whether now owned or hereafter acquired by Extreme(collectively and severally, the "Collateral"): (a) All Cash Collateral, all Accounts, the Transition Account and all Certificates of Deposit issued from time to time and general intangibles arising therefrom or relating thereto (however, "general intangibles" as used in this clause shall not include any general intangibles not related to Cash Collateral, Accounts, the Transition Account or Certificates of Deposit issued from time to time, and thus will not include, without limitation, any intellectual property of Extreme); and all documents, instruments and agreements evidencing the same; and all extensions, renewals, modifications and replacements of the foregoing; and any interest or other amounts payable in connection therewith; and (b) All proceeds of the foregoing (including whatever is receivable or received when Collateral or proceeds is invested, sold, collected, exchanged, returned, substituted or otherwise disposed of, whether such disposition is voluntary or involuntary, including rights to payment and return premiums and insurance proceeds under insurance with respect to any Collateral, and all rights to payment with respect to any cause of action affecting or relating to the Collateral).The pledge, assignment and grant of a security interest made by Extremehereunder is for security of the Secured Obligations only; the parties to thisAgreement do not intend that Extreme's delivery of the Collateral to Agent asherein provided will constitute an advance payment of any Secured Obligations orliquidated damages, nor do the parties intend that the Collateral increase thedollar amount of the Secured Obligations. Section 2.2 Return of Collateral After the Secured Obligations are ------------------------------------------------------Satisfied in Full. If any proceeds of Collateral remain after all Secured-----------------Obligations have been paid in full, Agent will deliver or direct the DepositTakers to deliver such proceeds to Extreme or other Persons entitled thereto bylaw. ARTICLE III DETERMINATION OF THE COLLATERAL PERCENTAGE Section 3.1 Determination of the Collateral Percentage Generally. ---------------------------------------------------- Effective as of the date of this Agreement, and until a new CollateralPercentage becomes effective, the Collateral Percentage is 100%. Subject to theprovisions of this Article III, Extreme may from time to time designate a newCollateral Percentage which is any multiple of 10% from 0% to 100% (i.e., 0%,10%, 20%, 30%, etc.) by written notice delivered to Agent, BNPLC and theParticipants in the form of ATTACHMENT 3. Any new Collateral Percentage so ------------designated shall not become effective, however, until the commencement of thenext following Base Rent Period which is at least ten Business Days after thereceipt of such notice by Agent, BNPLC and the Participants. Further, if Extremeprovides more than one notice of a change in the -7- Collateral Percentage to be effective on a the first day of a particular BaseRent Period, then the latest such notice from Extreme which satisfies therequirements of the preceding sentence (and of Sections 3.2 and 3.3) willcontrol. Without limiting mandatory changes in the Collateral Percentagerequired by Section 3.3, in no event shall the Collateral Percentage be changedmore often than once in any calendar quarter because of any election by Extremeto designate a new Collateral Percentage as provided in this Section. After anyCollateral Percentage becomes effective as provided in this Article, it shallremain in effect until a different Collateral Percentage becomes effective asprovided in this Article. Section 3.2 Limitations on Extreme's Right to Lower the Collateral ------------------------------------------------------Percentage. Notwithstanding the foregoing, no designation by Extreme of a new----------Collateral Percentage will be effective to reduce the Collateral Percentage ifthe designation is given, or the reduction would otherwise become effective, onor after the Designated Sale Date or when any of the following shall haveoccurred and be continuing: 3.2.1 any Material Lease Default; 3.2.2 any Event of Default under and as defined in this Agreement; or 3.2.3 any Default under and as defined in this Agreement - excluding, however, any such Default limited to a failure of Extreme described in clause (c) or clause (e) of the definition of Event of Default above, with respect to which the time for cure specified in clause (c) or clause (e), as applicable, has not expired. Section 3.3 Minimum Collateral Percentages Dependent Upon the Adjusted ----------------------------------------------------------EBITDAR Coverage Ratio. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN----------------------CONTAINED, THE COLLATERAL PERCENTAGE SHALL NOT BE LESS THAN THE MINIMUMCOLLATERAL PERCENTAGE ESTABLISHED FROM TIME TO TIME AS DESCRIBED IN PART III OFSCHEDULE 1. Accordingly, and because a new Base Rent Period will begin on the----------first Business Day of the first calendar month following any Failed CollateralTest Date as provided in subparagraph 3(c)(ii)a) of the Improvements Lease, ----------------------- Extreme shall be required by Section 5.1 to deliver additional Collateral on thefirst Business Day of the first calendar month after any Failed Collateral TestDate. ARTICLE IV PROVISIONS CONCERNING DEPOSIT TAKERS Section 4.1 Qualification of Deposit Takers Generally. Agent may decline -----------------------------------------to deposit or maintain Collateral hereunder with any Person designated as aDeposit Taker, if such Person has failed to satisfy or no longer satisfies thefollowing requirements: 4.1.1 Such Person must have received from Agent and Extreme a completed, executed Notice of Security Interest in the form of ATTACHMENT 4 ------------ (a "Notice of Security Interest") which specifically identifies any and all Accounts in which such Person shall hold Cash Collateral delivered to it pursuant to this Agreement and which designates Account Offices with respect to all such Accounts in New York or California. 4.1.2 Such Person must have executed the Acknowledgment and Agreement at the end of such Notice of Security Interest (the "Deposit Taker's Acknowledgment and Agreement") and returned the same to Agent. Further, such Person must have complied with the Deposit Taker's Acknowledgment and Agreement, and the representations set forth therein with respect to such Person must continue to be true and correct. 4.1.3 Such Person must be a commercial bank, organized under the laws of the United States of America or a state thereof or under the laws of another country which is doing business -8- in the United States of America; must be authorized to maintain deposit accounts for others through Account Offices in New York or California (as specified in the Deposit Taker's Acknowledgment and Agreement); and must be an Affiliate of BNPLC or the Participant for whom such Person will act as Deposit Taker or must have a combined capital, surplus and undivided profits of at least $500,000,000. 4.1.4 Such Person must have complied with the provisions in this Agreement applicable to Deposit Takers, including the provisions of Section 5.4 concerning the issuance and redemption of Certificates of Deposit. Section 4.2 Existing Deposit Takers. BNPLC's Parent (as Deposit Taker -----------------------for itself and for BNPLC) has received a Notice of Security Agreement dated theEffective Date and has responded to such a notice with a Deposit Taker'sAcknowledgment and Agreement dated the Effective Date, as contemplated insubsections 4.1.1 and 4.1.2. Section 4.3 Replacement of Participants Proposed by Extreme. So long -----------------------------------------------as no Event of Default has occurred and is continuing, BNPLC shall notunreasonably withhold its approval for a substitution under the ParticipationAgreement of a new Participant proposed by Extreme for any Participant, theDeposit Taker for whom would no longer meet the requirements for an InitiallyQualified Deposit Taker; provided, however, that (A) the proposed substitutioncan be accomplished without a release or breach by BNPLC of its rights andobligations under the Participation Agreement; (B) the new Participant willagree (by executing a Supplement and a supplement to the Participation Agreementas contemplated therein and by other agreements as may be reasonably required byBNPLC and Extreme) to become a party to the Participation Agreement and to thisAgreement, to designate an Initially Qualified Deposit Taker as the DepositTaker for it under this Agreement and to accept a Percentage under theParticipation Agreement equal to the Percentage of the Participant to bereplaced; (C) the new Participant (or Extreme) will provide the funds requiredto pay the termination fee by Section 6.4 of the Participation Agreement to -----------accomplish the substitution; (D) Extreme (or the new Participant) agrees inwriting to indemnify and defend BNPLC for any and all Losses incurred by BNPLCin connection with or because of the substitution, including the cost ofpreparing supplements to the Participation Agreement and this Agreement andincluding any cost of defending and paying any claim asserted by the Participantto be replaced because of the substitution (but not including any liability ofBNPLC to such Participant for damages caused by BNPLC's bad faith or grossnegligence in the performance of BNPLC's obligations under the ParticipationAgreement prior to the substitution); (E) the new Participant shall be areputable financial institution having a net worth of no less than seven and onehalf percent (7.5%) of total assets and total assets of no less than$10,000,000,000.00 (all according to then recent audited financial statements);and (F) in no event will BNPLC be required to approve a substitution pursuant tothis Section 4.3 which will replace a Participant that is an Affiliate of BNPLC.BNPLC shall attempt in good faith to assist (and cause BNPLC's Parent to attemptin good faith to assist) Extreme in identifying a new Participant that Extrememay propose to substitute for an existing Participant pursuant to this Section,as Extreme may reasonably request from time to time. However, in no event shallBNPLC itself, or any of its Affiliates, be required to take the Percentage ofany Participant to be replaced. Section 4.4 Mandatory Substitution for Disqualified Deposit Takers. ------------------------------------------------------If any Deposit Taker shall cease to satisfy the requirements set forth inSection 4.1, the party for whom such Disqualified Deposit Taker has beendesignated as Deposit Taker (i.e., BNPLC or the applicable Participant) shallpromptly (1) provide notice thereof to Agent and Extreme, and (2) designate asubstitute Deposit Taker and cause the substitute to satisfy the requirementsset forth in Section 4.1. Pending the designation of the substitute and thesatisfaction by it of the requirements set forth in Section 4.1, Agent maywithdraw Collateral held by the Disqualified Deposit Taker and deposit suchCollateral with other Deposit Takers, subject to Section 5.3 below. -9- Section 4.5 Voluntary Substitution of Deposit Takers. With the ----------------------------------------written approval of Agent, which approval will not be unreasonably withheld,BNPLC or any Participant may at any time designate for itself a new DepositTaker (in replacement of any prior Deposit Taker acting for it hereunder);provided, the Person so designated has satisfied the requirements set forth inSection 4.1; and, provided further, unless the designation of a new DepositTaker is required by Section 4.4 to replace a Disqualified Deposit Taker, at thetime of the replacement such Person must be an Initially Qualified DepositTaker. Section 4.6 Delivery of Notice of Security Interest by Extreme and ------------------------------------------------------ Agent. To the extent required for the designation of a new Deposit Taker by-----BNPLC or any Participant pursuant to Section 4.5, or to permit the substitutionor replacement of a Deposit Taker for BNPLC or any Participant as provided inSections 4.4 and 4.5, Extreme and Agent shall promptly execute and deliver anyproperly completed Notice of Security Interest requested by BNPLC or theapplicable Participant. Section 4.7 Constructive Possession of Collateral. The possession by -------------------------------------a Deposit Taker of any deposit accounts, money, instruments, chattel paper orother property constituting Collateral or evidencing Collateral shall be deemedto be possession by Agent or a person designated by Agent, for purposes ofperfecting the security interest granted to Agent hereunder pursuant to the UCCor other Applicable Law; and notifications to a Deposit Taker by other Personsholding any such property, and Acknowledgments, receipts or confirmations fromany such Persons delivered to a Deposit Taker, shall be deemed notifications to,or Acknowledgments, receipts or confirmations from, financial intermediaries,bailees or agents (as applicable) of such Deposit Taker for the benefit of Agentfor the purposes of perfecting such security interests under Applicable Law. Section 4.8 Attempted Setoff by Deposit Takers. By delivery of a ----------------------------------Deposit Taker's Acknowledgment and Agreement, each Deposit Taker shall berequired to agree not to setoff or attempt a setoff, without in each case first --------------------------obtaining the prior written authorization of Agent, Secured Obligations owed to--------------------------------------------------it against any Collateral held by it from time to time. Further, by delivery ofa Deposit Taker's Acknowledgment and Agreement, each Deposit Taker shall berequired to agree not to setoff or attempt a setoff, without in each case first --------------------------obtaining the prior written authorization of both Extreme and Agent, obligations-------------------------------------------------------------------owed to it other than Secured Obligations against any Collateral held by it fromtime to time. Any Deposit Taker for BNPLC or a Participant shall not bepermitted by BNPLC or the applicable Participant, as the case may be, to violatesuch agreements. However, Extreme acknowledges and agrees (without limiting itsright to recover damages from a Deposit Taker that violates such agreements)that Agent shall not be responsible for, or be deemed to have taken any actionagainst Extreme because of, any Deposit Taker's violation of such agreements;and, neither BNPLC nor any Participant shall be responsible for, or be deemed tohave taken any action against Extreme because of, any violation of suchagreements by a Deposit Taker for another party. Section 4.9 Deposit Taker Losses. Agent shall not be responsible for --------------------any Deposit Taker Losses. However, Deposit Taker Losses with respect to aDeposit Taker for a particular Participant shall reduce the amount of BNPLC'sCorresponding Obligations to Participants which are payable to such Participantas provided in Section 2.2 of the Participation Agreement. Further, when Deposit ----------- Taker Losses with respect to a Deposit Taker for a particular Participant areincurred in excess of the payments of Secured Obligations that such Participantwould then have been entitled to receive under the Participation Agreement butfor such Deposit Taker Losses, such Participant must immediately pay the excessto Agent as additional Collateral hereunder, failing which Extreme may recoverany damages suffered by it because of the Deposit Taker Losses from such DepositTaker or such Participant. Section 4.10 Losses Resulting from Failure of Deposit Taker to Comply --------------------------------------------------------with this Agreement. Any Participant, the Deposit Taker for whom has failed to-------------------comply with the requirements of this Agreement or any Notices of SecurityInterest and any Deposit Taker's Acknowledgments and Agreements (the -10- "Responsible Participant") must defend, indemnify, and hold harmless BNPLC,Agent and the other Participants from and against any Losses resulting from suchfailure. Without limiting the foregoing, if the failure of a Deposit Taker for aResponsible Participant to comply strictly with the terms of this Agreement(including, without limitation, the provisions of Section 5.4 concerning theissuance and redemption of Certificates of Deposit and the requirement that anycash deposits be held in a deposit account located in either New York orCalifornia) causes, in whole or in part, the security interest of Agent in theCollateral held by such Deposit Taker to be unperfected, then any and all Lossessuffered as a result of such nonperfection shall be borne solely by theResponsible Participant and shall not be shared by BNPLC, Agent or the otherParticipants. ARTICLE V DELIVERY AND MAINTENANCE OF CASH COLLATERAL Section 5.1 Delivery of Funds by Extreme. On the first day of any ----------------------------Base Rent Period, and on any other date designated in a notice given by Agent toExtreme at least three Business Days prior to the date so designated, Extrememust deliver to Agent, subject to the pledge and security interest createdhereby, funds as Cash Collateral then needed (if any) to cause the Value of theCollateral to be no less than the Minimum Collateral Value. Each delivery offunds required by the preceding sentence must be received by Agent no later than12:00 noon (San Francisco time) on the date it is required; if received after12:00 noon it will be considered for purposes of the Improvements Lease asreceived on the next following Business Day. At least five Business Days priorto the first day of any Base Rent Period upon which it is expected that Extremewill be required to deliver additional funds pursuant to this Section, Extremeshall notify BNPLC, Agent and each of the Participants thereof and of the amountExtreme expects to deliver to Agent as Cash Collateral on the applicable BaseRent Date. In addition to required deliveries of Cash Collateral as provided inthe foregoing provisions, Extreme may on any date (whether or not the first dayof a Base Rent Period) deliver additional Cash Collateral to Agent as necessaryto prevent any Default from becoming an Event of Default. Upon receipt of anyfunds delivered to it by Extreme as Cash Collateral, Agent shall immediatelydeposit the same with the Deposit Takers in accordance with the requirements ofSections 5.3 and 5.4 below. Section 5.2 Transition Account. Pending deposit in the Accounts or ------------------other application as provided herein, all Cash Collateral received by Agentshall be credited to and held by Agent in an account (the "Transition Account")styled "Extreme Collateral Account, held for the benefit of BNP LeasingCorporation and the Participants," separate and apart from all other propertyand funds of Extreme or other Persons, and no other property or funds shall bedeposited in the Transition Account. The books and records of Agent shallreflect that the Transition Account and all Cash Collateral on deposit thereinare owned by Extreme, subject to a pledge and security interest in favor ofAgent for the benefit of BNPLC and Participants. Section 5.3 Allocation of Cash Collateral Among Deposit Takers. Funds --------------------------------------------------received by Agent from Extreme as Cash Collateral will be allocated for depositamong the Deposit Takers as follows: first, to the extent possible the funds will be allocated as required ----- to rectify and prevent any Collateral Imbalance; and second, the funds will be allocated to the Deposit Taker for BNPLC, ------ unless the Deposit Taker for BNPLC has become a Disqualified Deposit Taker, in which case the funds will be allocated to other Deposit Takers who are not Disqualified Deposit Takers as Agent deems appropriate.Further, if for any reason a Collateral Imbalance is determined by Agent toexist, Agent shall, as required to rectify or mitigate the Collateral Imbalance,promptly reallocate Collateral among Deposit Takers by withdrawing CashCollateral from some Accounts and redepositing it in other Accounts. (If anyparty to -11- this Agreement believes that the Value of the Accounts held by a particularDeposit Taker causes a Collateral Imbalance to exist, that party will promptlynotify BNPLC, Extreme and Agent.) Subject to the foregoing, and provided thatAgent does not thereby create or exacerbate a Collateral Imbalance, Agent maywithdraw and redeposit Cash Collateral in order to reallocate the same amongDeposit Takers from time to time as Agent deems appropriate. For purposes ofillustration only, examples of the allocations required by this Section are setforth in ATTACHMENT 5. ------------ Section 5.4 Issuance and Redemption of Certificates of Deposit. Upon --------------------------------------------------the receipt of any deposit of Cash Collateral from Agent, each Deposit Takershall issue a Certificate of Deposit evidencing the Account into which suchdeposit is made and deliver such Certificate of Deposit to Agent for the benefitof BNPLC and the Participants. Each Certificate of Deposit shall be issued in anamount equal to the Value of the Account which it evidences and shall otherwisebe in the form set forth as ATTACHMENT 1 to this Agreement. Upon depositing any ------------Cash Collateral into an Account that is already evidenced by an outstandingCertificate of Deposit, Agent will surrender the outstanding Certificate ofDeposit, and in exchange the Deposit Taker receiving the deposit will issue anew Certificate of Deposit, evidencing the total amount of Cash Collateral inthe Account after the deposit. A Deposit Taker that has issued a Certificate ofDeposit may require the surrender of the Certificate of Deposit as a conditionto a withdrawal from the Account evidenced thereby, including any withdrawalrequired or permitted by this Agreement. Upon surrender of a Certificate ofDeposit in connection with a withdrawal of less than all of the Cash Collateralin the Account evidenced thereby, the applicable Deposit Taker will concurrentlyissue a new Certificate of Deposit to Agent, evidencing the balance of the CashCollateral remaining on deposit in the Account after the withdrawal.Notwithstanding the foregoing, if any Certificate of Deposit held by Agent shallbe destroyed, lost or stolen, the Deposit Taker that issued the Certificate,upon the written request of Agent, shall issue a new Certificate of Deposit toAgent in lieu of and in substitution for the Certificate of Deposit sodestroyed, lost or stolen. However, as applicant for the substitute Certificateof Deposit, Agent must indemnify (at no cost to Extreme) the applicable DepositTaker against any liability on the Certificate of Deposit destroyed, lost orstolen, and Agent shall furnish to the Deposit Taker an affidavit of an officerof Agent setting forth the fact of destruction, loss or theft and confirming thestatus of Agent as holder of the Certificate of Deposit immediately prior to thedestruction, loss or theft. If any Certificate of Deposit held by Agent shallbecome mutilated, the Deposit Taker that issued the Certificate, upon thewritten request of Agent, shall issue a new Certificate of Deposit to Agent inexchange and substitution for the mutilated Certificate of Deposit. Agent shallhold all Certificates of Deposit for the benefit of BNPLC and the Participants,subject to the pledge and security interest created hereby. Section 5.5 Status of the Accounts Under the Reserve Requirement ----------------------------------------------------Regulations. Deposit Takers shall be permitted to structure the Accounts as-----------nonpersonal time deposits under 12 C.F.R., Part II, Chapter 204 (commonly knownas "Regulation D"). Accordingly, each Deposit Taker may require at least sevendays advance notice of any withdrawal or transfer of funds from Accounts itmaintains and may limit the number of withdrawals or transfers from suchAccounts to no more than six in any calendar month, notwithstanding anything tothe contrary herein or in any deposit agreement that Extreme and any DepositTaker may enter into with respect to any Account. As necessary to satisfy theseven days notice requirement with respect to withdrawals by Agent when requiredby Extreme pursuant to the provisions below, Agent shall notify Deposit Takerspromptly after receipt of any notice from Extreme described in subsection 6.1.2or 6.2.1 or in Section 6.3. Section 5.6 Acknowledgment by Extreme that Requirements of this ---------------------------------------------------Agreement are Commercially Reasonable. Extreme acknowledges and agrees that the-------------------------------------requirements set forth herein concerning receipt, deposit, withdrawal,allocation, application and distribution of Cash Collateral by Agent, includingthe requirements and time periods set forth in the next Article, arecommercially reasonable. -12- ARTICLE VI WITHDRAWAL OF CASH COLLATERALExtreme may not withdraw Cash Collateral, except as follows: Section 6.1 Withdrawal of Collateral Prior to the Designated Sale -----------------------------------------------------Date. Extreme may require Agent to present Certificates of Deposit for payment----and withdraw Cash Collateral from Accounts on any date prior to the DesignatedSale Date and to deliver such Cash Collateral to Extreme (which delivery shallbe free and clear of all liens and security interests hereunder); provided,however, that in each case: 6.1.1 Such withdrawal and delivery of the Cash Collateral to Extreme will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value. 6.1.2 by a notice in the form of ATTACHMENT 6, Extreme must ------------ give Agent, BNPLC and the Participants notice of the required withdrawal at least ten days prior to the date upon which the withdrawal is to occur. 6.1.3 No Default or Event of Default shall have occurred and be continuing at the time Extreme gives the notice required by the preceding subsection or on the date upon which the withdrawal is required. 6.1.4 Extreme must pay to Agent any and all costs incurred by Agent in connection with the withdrawal. 6.1.5 Agent shall determine the Accounts from which to make any withdrawal required by Extreme pursuant to this Section as necessary to prevent or mitigate any Collateral Imbalance. Section 6.2 Withdrawal and Application of Cash Collateral to Reduce or ----------------------------------------------------------Satisfy the Secured Obligations to the Participants. To reduce the "Break Even---------------------------------------------------Price" or "Supplemental Payment" required under (and as defined in) the PurchaseAgreement (and, thus, to reduce the Secured Obligations), Extreme may requireAgent to withdraw Cash Collateral then held by or for Agent pursuant to thisAgreement on the Designated Sale Date and to deliver the same on the DesignatedSale Date or on any date thereafter prior to an Event of Default (which deliveryshall be free and clear of all liens and security interests hereunder) directlyto the Participants in proportion to their respective rights to payment ofBNPLC's Corresponding Obligations to Participants and for application thereto orthe reduction thereof pursuant to Section 2.2 of the Participation Agreement; -----------provided, that: 6.2.1 by a notice in the form of ATTACHMENT 7, Extreme must ------------ have notified Agent, BNPLC and each of the Participants of the required withdrawal and payment to Participants at least ten days prior to the date upon which it is to occur; 6.2.2 the required withdrawal shall be made as determined by Agent, first, from the Accounts maintained by the Deposit Takers for the Participants, and then (to the extent necessary) from the Accounts maintained by the Deposit Taker for BNPLC; and 6.2.3 in any event, no withdrawals or payments directly to Participants shall be required by this Section 6.2 (or permitted over the objection of BNPLC) in excess of those required to satisfy BNPLC's Corresponding Obligations to Participants or to reduce such obligations to zero under the Participation Agreement. Section 6.3 Withdrawal and Application of Cash Collateral to Reduce or ----------------------------------------------------------Satisfy the Secured Obligations to BNPLC. To satisfy Extreme's Purchase----------------------------------------Agreement Obligations, Extreme may require -13- Agent to withdraw any Cash Collateral held by the Deposit Taker for BNPLCpursuant to this Agreement on the Designated Sale Date and to deliver the sameon the Designated Sale Date or on any date thereafter prior to an Event ofDefault (which delivery shall be free and clear of all liens and securityinterests hereunder) directly to BNPLC as a payment on behalf of Extreme ofamounts due under the Purchase Agreement; provided, that by a notice in the formof ATTACHMENT 8, Extreme must have notified Agent and BNPLC of the required ------------ withdrawal and payment to BNPLC at least ten days prior to the date upon whichit is to occur. Section 6.4 Withdrawal of Cash Collateral From Accounts Maintained by ---------------------------------------------------------Disqualified Deposit Takers. Extreme may from time to time prior to the---------------------------Designated Sale Date (regardless of the existence of any Default or Event ofDefault) require Agent to withdraw any or all Cash Collateral from any Accountmaintained by a Disqualified Deposit Taker and deposit it, still subject to thepledge and grant of security interest hereunder, with other Deposit Takers whoare not Disqualified Deposit Takers (in accordance with the requirements ofSections 5.3 and 5.4) on any date prior to the Designated Sale Date; provided,that by a notice in the form of ATTACHMENT 9, Extreme must have notified Agent,BNPLC and each of the Participants of the required withdrawal at least ten daysprior to the date upon which it is to occur. ARTICLE VII REPRESENTATIONS AND COVENANTS OF EXTREME Section 7.1 Representations of Extreme. Extreme represents to BNPLC, --------------------------Agent and the Participants as follows: 7.1.1 Extreme is the legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time Extreme acquires rights in the Collateral, will be the legal and beneficial owner thereof). No other Person has (or, in the case of after-acquired Collateral, at the time Extreme acquires rights therein, will have) any right, title, claim or interest (by way of Lien, purchase option or otherwise) in, against or to the Collateral, except for rights created hereunder. 7.1.2 Agent has (or in the case of after-acquired Collateral, at the time Extreme acquires rights therein, will have) a valid, first priority, perfected pledge of and security interest in the Collateral, regardless of the characterization of the Collateral as deposit accounts, instruments or general intangibles under the UCC, but assuming that the representations of each Deposit Taker in its Deposit Taker's Acknowledgment and Agreement are true. 7.1.3 Extreme has delivered to Agent, together with all necessary stock powers, endorsements, assignments and other necessary instruments of transfer, the originals of all documents, instruments and agreements evidencing Accounts, Certificates of Deposit or Cash Collateral. 7.1.4 Extreme's chief executive office is located at the address of Extreme set forth in Article II of the Common Definitions and Provisions Agreement (Improvements) or at another address in California specified in a notice that Extreme has given to Agent as required by Section 7.2.4. 7.1.5 To the knowledge of Extreme, neither the ownership or the intended use of the Collateral by Extreme, nor the pledge of Accounts or the grant of the security interest by Extreme to Agent herein, nor the exercise by Agent of its rights or remedies hereunder, will (i) violate any provision of (a) Applicable Law, (b) the articles or certificate of incorporation, charter or bylaws of Extreme, or (c) any agreement, judgment, license, order or permit applicable to or binding upon Extreme, or (ii) result in or require the creation of any Lien, charge or encumbrance upon any assets or properties of Extreme except as expressly contemplated in this Agreement. Except as -14- expressly contemplated in this Agreement, to the knowledge of Extreme no consent, approval, authorization or order of, and no notice to or filing with any court, governmental authority or third party is required in connection with the pledge or grant by Extreme of the security interest contemplated herein or the exercise by Agent of its rights and remedies hereunder. Section 7.2 Covenants of Extreme. Extreme hereby agrees as follows: -------------------- 7.2.1 Extreme, at Extreme's expense, shall promptly procure, execute and deliver to Agent all documents, instruments and agreements and perform all acts which are necessary, or which Agent may reasonably request, to establish, maintain, preserve, protect and perfect the Collateral, the pledge thereof to Agent or the security interest granted to Agent therein and the first priority of such pledge or security interest or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the preceding sentence, Extreme shall (A) procure, execute and deliver to Agent all stock powers, endorsements, assignments, financing statements and other instruments of transfer requested by Agent, (B) deliver to Agent promptly upon receipt all originals of Collateral consisting of instruments, documents and chattel paper, (C) cause the security interest of Agent in any Collateral consisting of securities to be recorded or registered in the books of any financial intermediary or clearing corporation requested by Agent, and (D) reimburse Agent upon request for any legal opinion Agent may elect to obtain from a nationally recognized commercial law firm authorized to practice in New York concerning the enforceability, first priority and perfection of Agent's security interest in any Collateral maintained in New York, if BNPLC or any Participant should at any time elect to use a Deposit Taker that will maintain one or more Accounts in New York. 7.2.2 Extreme shall not use or consent to any use of any Collateral in violation of any provision of this Agreement or any other Transaction Document or any Applicable Law. 7.2.3 Extreme shall pay promptly when due all taxes and other governmental charges, all Liens and all other charges now or hereafter imposed upon, relating to or affecting any Collateral. 7.2.4 Without thirty days' prior written notice to Agent, Extreme shall not change Extreme's name or place of business (or, if Extreme has more than one place of business, its chief executive office). 7.2.5 Extreme shall appear in and defend, on behalf of Agent, any action or proceeding which may affect Extreme's title to or Agent's interest in the Collateral. 7.2.6 Subject to the express rights of Extreme under Article VI, Extreme shall not surrender or lose possession of (other than to Agent or a Deposit Taker pursuant hereto), sell, encumber, lease, rent, option, or otherwise dispose of or transfer any Collateral or right or interest therein, and Extreme shall keep the Collateral free of all Liens. 7.2.7 Extreme will not take any action which would in any manner impair the value or enforceability of Agent's pledge of or security interest in any Collateral, nor will Extreme fail to take any action which is required to prevent (and which Extreme knows is required to prevent) an impairment of the value or enforceability of Agent's pledge of or security interest in any Collateral. 7.2.8 Extreme shall pay (and shall indemnify and hold harmless Agent from and against) all Losses incurred by Agent in connection with or because of (A) the interest acquired by Agent in any Collateral pursuant to this Agreement, or (B) the negotiation or administration of this Agreement, whether such Losses are incurred at the time of execution of this Agreement or at any time in the future. Costs and expenses included in such Losses may include, without limitation, all -15- filing and recording fees, taxes, UCC search fees and Attorneys' Fees incurred by Agent with respect to the Collateral. 7.2.9 Without limiting the foregoing, within five Business Days after Extreme becomes aware of any failure of the pledge or security interest contemplated herein in the Transition Account or any Account, Certificate of Deposit or Cash Collateral to be a valid, perfected, first priority pledge or security interest (regardless of the characterization of the Transition Account or any Accounts, Certificates of Deposit or Cash Collateral as deposit accounts, instruments or general intangibles under the UCC), Extreme shall notify Agent, BNPLC and the Participants of such failure. In addition, if the failure would not exist but for Extreme's delivery of Cash Collateral to Agent subject to prior Liens or other claims by one or more third parties, or but for the grant by Extreme itself of any Lien or other interest in the Collateral to one or more third parties, then, in addition to any other remedies available to BNPLC or Agent under the circumstances, Extreme must pay to BNPLC any additional Base Rent that has accrued under the Improvements Lease because of (or that would have accrued if BNPLC had been aware of) the failure, together with interest at the Default Rate on any such additional Base Rent. ARTICLE VIII AUTHORIZED ACTION BY AGENT Section 8.1 Power of Attorney. Extreme hereby irrevocably appoints -----------------Agent as Extreme's attorney-in-fact for the purpose of authorizing Agent toperform (but Agent shall not be obligated to and shall incur no liability toExtreme or any third party for failure to perform) any act which Extreme isobligated by this Agreement to perform, and to exercise, consistent with theother provisions of this Agreement, such rights and powers as Extreme mightexercise with respect to the Collateral during any period in which a Default orEvent of Default has occurred and is continuing, including the right to (a)collect by legal proceedings or otherwise and endorse, receive and receipt forall dividends, interest, payments, proceeds and other sums and property now orhereafter payable on or on account of the Collateral; (b) enter into anyextension, reorganization, deposit, merger, consolidation or other agreementpertaining to, or deposit, surrender, accept, hold or apply other property inexchange for the Collateral; (c) insure, process, preserve and enforce theCollateral; (d) make any compromise or settlement, and take any action it deemsadvisable, with respect to the Collateral; (e) pay any indebtedness of Extremerelating to the Collateral; and (f) execute UCC financing statements and otherdocuments, instruments and agreements required hereunder. Extreme agrees thatsuch care as Agent gives to the safekeeping of its own property of like kindshall constitute reasonable care of the Collateral when in Agent's possession;provided, however, that Agent shall not be obligated to Extreme to give any-------- -------notice or take any action to preserve rights against any other Person inconnection with the Secured Obligations or with respect to the Collateral. ARTICLE IX DEFAULT AND REMEDIES Section 9.1 Remedies. In addition to all other rights and remedies --------granted to Agent, BNPLC or the Participants by this Agreement, the ImprovementsLease, the Purchase Agreement, the Participation Agreement, the UCC and otherApplicable Laws, Agent may, upon the occurrence and during the continuance ofany Event of Default, exercise any one or more of the following rights andremedies, all of which will be in furtherance of its rights as a secured partyunder the UCC: (a) Agent may collect, receive, appropriate or realize upon the Collateral or otherwise foreclose or enforce the pledge of or security interests in any or all Collateral in any manner permitted by Applicable Law or in this Agreement; and -16- (b) Agent may notify any or all Deposit Takers to pay all or any portion of the Collateral held by such Deposit Taker(s) directly to Agent.Agent shall distribute the proceeds of all Collateral received by Agent afterthe occurrence of an Event of Default to BNPLC and the Participants forapplication to the Secured Obligations. If any proceeds of Collateral remainafter all Secured Obligations have been paid in full, Agent will deliver ordirect the Deposit Takers to deliver such proceeds to Extreme or other Personsentitled thereto. In any case where notice of any sale or disposition of anyCollateral is required, Extreme hereby agrees that seven (7) Business Daysnotice of such sale or disposition is reasonable. ARTICLE X OTHER RECOURSE Section 10.1 Recovery Not Limited. To the fullest extent permitted by --------------------applicable law, Extreme waives any right to require that Agent, BNPLC or theParticipants proceed against any other Person, exhaust any Collateral or othersecurity for the Secured Obligations, or to have any Other Liable Party joinedwith Extreme in any suit arising out of the Secured Obligations or thisAgreement, or pursue any other remedy in their power. Extreme waives any and allnotice of acceptance of this Agreement. Extreme further waives notice of thecreation, modification, rearrangement, renewal or extension for any period ofany of the Secured Obligations of any Other Liable Party from time to time andany defense arising by reason of any disability or other defense of any OtherLiable Party or by reason of the cessation from any cause whatsoever of theliability of any Other Liable Party. Until all of the Secured Obligations shallhave been paid in full, Extreme shall have no right to subrogation,reimbursement, contribution or indemnity against any Other Liable Party andExtreme waives the right to enforce any remedy which Agent, BNPLC or anyParticipant has or may hereafter have against any Other Liable Party, and waivesany benefit of and any right to participate in any other security whatsoever nowor hereafter held by Agent, BNPLC or any Participant. Extreme authorizes Agent,BNPLC and the Participants, without notice or demand and without any reservationof rights against Extreme and without affecting Extreme's liability hereunder oron the Secured Obligations, from time to time to (a) take or hold any otherproperty of any type from any other Person as security for the SecuredObligations, and exchange, enforce, waive and release any or all of such otherproperty, (b) after any Event of Default, apply or require the application ofthe Collateral (in accordance with this Agreement) or such other property in anyorder they may determine and to direct the order or manner of sale thereof asthey may determine, (c) renew, extend for any period, accelerate, modify,compromise, settle or release any of the obligations of any Other Liable Partywith respect to any or all of the Secured Obligations or other security for theSecured Obligations, and (d) release or substitute any Other Liable Party. ARTICLE XI PROVISIONS CONCERNING AGENT In the event of any conflict between the following and otherprovisions in this Agreement, the following will control: Section 11.1 Appointment and Authority. BNPLC and each Participant -------------------------hereby irrevocably authorizes Agent, and Agent hereby undertakes, to take allactions and to exercise such powers under this Agreement as are specificallydelegated to Agent by the terms hereof, together with all other powersreasonably incidental thereto. The relationship of Agent to the Participants isonly that of one commercial bank acting as collateral agent for others, andnothing herein shall be construed to constitute Agent a trustee or otherfiduciary for any Participant or anyone claiming through or under a Participantnor to impose on Agent duties and obligations other than those expresslyprovided for in this Agreement. With respect to any matters not expresslyprovided for in this Agreement and any matters which this Agreement placeswithin the discretion of Agent, Agent shall not be required to exercise anydiscretion or take any action, and it may request instructions from BNPLC andParticipants with respect to any such matter, in -17- which case it shall be required to act or to refrain from acting (and shall befully protected and free from liability to all Participants in so acting orrefraining from acting) upon the instructions of the Majority, as defined in theParticipation Agreement, including itself as a Participant and BNPLC; provided,however, that Agent shall not be required to take any action which exposes it toa risk of personal liability that it considers unreasonable or which is contraryto this Agreement or the other documents referenced herein or to Applicable Law. Section 11.2 Exculpation, Agent's Reliance, Etc. Neither Agent nor any ----------------------------------of its directors, officers, agents, attorneys, or employees shall be liable forany action taken or omitted to be taken by any of them under or in connectionwith this Agreement, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that eachshall be liable for its own gross negligence or willful misconduct. Withoutlimiting the generality of the foregoing, Agent (1) may treat the rights of anyParticipant under its Participation Agreement as continuing until Agent receiveswritten notice of the assignment or transfer of those rights in accordance withsuch Participation Agreement, signed by such Participant and in formsatisfactory to Agent; (2) may consult with legal counsel (including counsel forExtreme), independent public accountants and other experts selected by it andshall not be liable for any action taken or omitted to be taken in good faith byit in accordance with the advice of such counsel, accountants or experts, unlessthe action taken or omitted constitutes misconduct; (3) makes no warranty orrepresentation and shall not be responsible for any statements, warranties orrepresentations made in or in connection with this Agreement or the otherdocuments referenced herein; (4) shall not have any duty to ascertain or toinquire as to the performance or observance of any of the terms, covenants orconditions of the Transaction Documents on the part of any party thereto, or toinspect the property (including the books and records) of any party thereto; (5)shall not be responsible to any Participant for the due execution, legality,validity, enforceability, genuineness, sufficiency or value of any TransactionDocument or any instrument or document furnished in connection therewith; (6)may rely upon the representations and warranties of Extreme, Participants andDeposit Takers in exercising its powers hereunder; and (7) shall incur noliability under or in respect of the Transaction Documents by acting upon anynotice, consent, certificate or other instrument or writing (including anytelecopy, telegram, cable or telex) believed by it to be genuine and signed orsent by the proper Person or Persons. Section 11.3 Participant's Credit Decisions. Each Participant ------------------------------acknowledges that it has, independently and without reliance upon Agent or anyother Participant, made its own analysis of Extreme and the transactionscontemplated hereby and its own independent decision to enter into theTransaction Documents to which it is a party. Each Participant also acknowledgesthat it will, independently and without reliance upon Agent or any otherParticipant and based on such documents and information as it shall deemappropriate at the time, continue to make its own credit decisions in taking ornot taking action under the Transaction Documents. Section 11.4 Indemnity. Each Participant agrees to indemnify Agent (to ---------the extent not reimbursed by Extreme within ten days after demand) from andagainst such Participant's Percentage of any and all Losses of any kind ornature whatsoever which to any extent (in whole or in part) may be imposed on,incurred by, or asserted against Agent growing out of, resulting from or in anyother way associated with any of the Collateral, the Transaction Documents andthe transactions and events (including the enforcement thereof) at any timeassociated therewith or contemplated therein. THE FOREGOING INDEMNIFICATIONSHALL APPLY WHETHER OR NOT SUCH LOSSES ARE IN ANY WAY OR TO ANY EXTENT OWED, IN -WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED,IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT,PROVIDED ONLY THAT NO PARTICIPANT SHALL BE OBLIGATED UNDER THIS SECTION TOINDEMNIFY AGENT FOR THAT PORTION, IF ANY, OF ANY LOSS WHICH IS PROXIMATELY -CAUSED BY AGENT'S OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, ASDETERMINED IN A -18- FINAL JUDGMENT RENDERED AGAINST AGENT. Cumulative of the foregoing, eachParticipant agrees to reimburse Agent promptly upon demand for suchParticipant's Percentage share of any costs and expenses to be paid to Agent byExtreme hereunder to the extent that Agent is not timely reimbursed by Extremeas provided in subsection 7.2.8. As used in this Section the term "Agent" shallrefer not only to the Person designated as such in the introductory paragraph ofthis Agreement, but also to each director, officer, agent, attorney, employee,representative and Affiliate of such Person. Section 11.5 Agent's Rights as Participant and Deposit Taker. In its -----------------------------------------------capacity as a Participant, BNP PARIBAS shall have the same rights andobligations as any Participant and may exercise such rights as though it werenot Agent. In its capacity as a Deposit Taker, BNP PARIBAS shall have the samerights and obligations as any Deposit Taker and may exercise such rights asthough it were not Agent. BNP PARIBAS and any of its Affiliates may acceptdeposits from, lend money to, act as Trustee under indentures of, and generallyengage in any kind of business with Extreme or its Affiliates, all as if BNPPARIBAS were not designated as the Agent hereunder and without any duty toaccount therefor to any other Participant. Section 11.6 Investments. Whenever Agent in good faith determines that ----------- it is uncertain about how to distribute any funds which it has receivedhereunder, or whenever Agent in good faith determines that there is any disputeamong BNPLC and Participants about how such funds should be distributed, Agentmay choose to defer distribution of the funds which are the subject of suchuncertainty or dispute. If Agent in good faith believes that the uncertainty ordispute will not be promptly resolved, or if Agent is otherwise required toinvest funds pending distribution, Agent shall invest such funds pendingdistribution, all interest on any such investment shall be distributed upon thedistribution of such investment and in the same proportion and to the samePersons as such investment. All moneys received by Agent for distribution toBNPLC or Participants shall be held by Agent pending such distribution solely asAgent hereunder, and Agent shall have no equitable title to any portion thereof. Section 11.7 Benefit of Article XI. The provisions of this Article ---------------------(other than the following Section 11.8) are intended solely for the benefit ofAgent, BNPLC and Participants, and Extreme shall not be entitled to rely on anysuch provision or assert any such provision in a claim or defense against Agent,BNPLC or any Participant. Agent, BNPLC and Participants may waive or amend suchprovisions as they desire without any notice to or consent of Extreme. Section 11.8 Resignation. Agent may resign at any time by giving ----------- written notice thereof to BNPLC, Participants and Extreme. Upon any suchresignation the Majority (as defined in the Participation Agreement) shall havethe right to appoint a successor Agent, subject to Extreme's consent, suchconsent not to be unreasonably withheld. A successor must be appointed for anyretiring Agent, and such Agent's resignation shall become effective when suchsuccessor accepts such appointment. If, within thirty days after the date of theretiring Agent's resignation, no successor Agent has been appointed and hasaccepted such appointment, then the retiring Agent may appoint a successorAgent, which shall be a commercial bank organized or licensed to conduct abanking or trust business under the laws of the United States of America or ofany state thereof. Upon the acceptance of any appointment as Agent hereunder bya successor Agent, the retiring Agent shall be discharged from its duties andobligations under this Agreement. After any retiring Agent's resignationhereunder, the provisions of this Article 10.1 shall continue to inure to itsbenefit as to any actions taken or omitted to be taken by it while it was Agent. -19- ARTICLE XII MISCELLANEOUS Section 12.1 Provisions Incorporated From Other Operative Documents. ------------------------------------------------------ Reference is made to the Common Definitions and Provisions Agreement(Improvements), to the Purchase Agreement and to the Participation Agreement fora statement of the terms thereof. Without limiting the generality of theforegoing, the provisions of Article II of the Common Definitions and ProvisionsAgreement (Improvements) are incorporated into this Agreement for all purposesas if set forth in this Article. Section 12.2 Cumulative Rights, etc. Except as herein expressly ----------------------provided to the contrary, the rights, powers and remedies of Agent, BNPLC andthe Participants under this Agreement shall be in addition to all rights, powersand remedies given to them by virtue of any Applicable Law, any otherTransaction Document or any other agreement, all of which rights, powers, andremedies shall be cumulative and may be exercised successively or concurrentlywithout impairing their respective rights hereunder. Extreme waives any right torequire Agent, BNPLC or any Participant to proceed against any Person or toexhaust any Collateral or to pursue any remedy in Agent's, BNPLC's or suchParticipant's power. Section 12.3 Survival of Agreements. All representations and warranties ---------------------- of Extreme herein, and all covenants and agreements herein shall survive theexecution and delivery of this Agreement, the execution and delivery of anyother Transaction Documents and the creation of the Secured Obligations andcontinue until terminated or released as provided herein. Section 12.4 Other Liable Party. Neither this Agreement nor the ------------------exercise by Agent or the failure of Agent to exercise any right, power or remedyconferred herein or by law shall be construed as relieving any Other LiableParty from liability on the Secured Obligations or any deficiency thereon. ThisAgreement shall continue irrespective of the fact that the liability of anyOther Liable Party may have ceased or irrespective of the validity orenforceability of any other agreement evidencing or securing the SecuredObligations to which Extreme or any Other Liable Party may be a party, andnotwithstanding the reorganization, death, incapacity or bankruptcy of any OtherLiable Party, or any other event or proceeding affecting any Other Liable Party. Section 12.5 Termination. Following the Designated Sale Date, upon -----------satisfaction in full of all Secured Obligations and upon written request for thetermination hereof delivered by Extreme to Agent, (i) this Agreement and thepledge and security interest created hereby shall terminate and all rights tothe Collateral shall revert to Extreme and (ii) Agent will, upon Extreme'srequest and at Extreme's expense execute and deliver to Extreme such documentsas Extreme shall reasonably request to evidence such termination and release. [The signature pages follow.] -20- IN WITNESS WHEREOF, Extreme, BNPLC, Agent and the Participants whosesignatures appear below have caused this Agreement to be executed as of June 1,2000. "Extreme" EXTREME NETWORKS, INC. By:_______________________________ Name:__________________________ Title:_________________________ [Continuation of signature pages to Pledge Agreement (Improvements) dated to beeffective June 1, 2000] "BNPLC" BNP LEASING CORPORATION By:___________________________ Lloyd G. Cox, Vice President [Continuation of signature pages to Pledge Agreement (Improvements) dated to beeffective June 1, 2000] "AGENT" BNP PARIBAS By:_______________________________ Name:__________________________ Title:_________________________ "PARTICIPANT" BNP PARIBAS By:_______________________________ Name:__________________________ Title:_________________________ ATTACHMENT 1 TO PLEDGE AGREEMENT ------------------- CERTIFICATE OF DEPOSIT ---------------------- (No. _________) [_________, _____][NAME OF THE ISSUINGDEPOSIT TAKER AND THEADDRESS OF ITS APPLICABLEACCOUNT OFFICE]Payable tothe order of: BNP PARIBAS, as Agent under the Pledge Agreement (Improvements) dated June 1, 2000, among Extreme Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Improvements) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants Dollars--------------------------------------------------------------------------------in current funds, without interest, seven days after presentment of thiscertificate properly endorsed.The bank issuing this certificate acknowledges and certifies that on the dateindicated above the payee deposited the dollar amount indicated above, and thatsuch amount shall be payable as provided above. ___________________________________ Authorized Signature ATTACHMENT 2 TO PLEDGE AGREEMENT ------------------- SUPPLEMENT TO PLEDGE AGREEMENT ------------------------------ [__________, ____]BNP PARIBAS____________________________________________________________Extreme Networks, Inc.____________________________________________________________1. Reference is made to the Pledge Agreement (Improvements) (the "PledgeAgreement") dated June 1, 2000 among Extreme Networks, Inc. ("Extreme"), BNPLeasing Corporation ("BNPLC"), BNP PARIBAS and any other financial institutionswhich are from time to time Participants under such Pledge Agreement(collectively, the "Participants") and BNP PARIBAS, acting in its capacity asagent for BNPLC and the Participants (in such capacity, "Agent"). Unlessotherwise defined herein, all capitalized terms used in this Supplement have therespective meanings given to those terms in the Pledge Agreement.2. The undersigned hereby certifies to Agent and Extreme that the undersignedhas become a party to the Participation Agreement by executing a supplement asprovided therein and that its Percentage thereunder is ______%.3. The undersigned, by executing and delivering this Supplement to Extreme andAgent, hereby agrees to become a party to the Pledge Agreement and agrees to bebound by all of the terms thereof applicable to Participants. The Deposit Takerfor the undersigned shall be _________________, until such time as anotherDeposit Taker for the undersigned shall be designated in accordance withSections 4.4 or 4.5 of the Pledge Agreement. The undersigned certifies to Agentand Extreme that such Deposit Taker is an Initially Qualified Deposit Taker andsatisfies the requirements for a Deposit Taker set forth in Section 4.1 of thePledge Agreement.IN WITNESS WHEREOF, the undersigned has executed this Supplement as of the dayand year indicated above. [______________________________________] By:____________________________________ Name:_______________________________ Title:______________________________ ATTACHMENT 3 TO PLEDGE AGREEMENT ------------------- NOTICE OF EXTREME'S ELECTION TO CHANGE THE COLLATERAL PERCENTAGE ---------------------------------------------------------------- [_________, _____]BNP PARIBAS[address of BNP]Re: Pledge Agreement (Improvements) (the "Pledge Agreement") dated June 1, 2000-- among Extreme Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen:Capitalized terms used in this letter are intended to have the meanings assignedto them in the Pledge Agreement referenced above. This letter constitutes noticeto you, as Agent under the Pledge Agreement, that pursuant to Section 3.1 of thePledge Agreement, Extreme elects to change the Collateral Percentage to: __________ percent (___%),on the following Base Rent Date (which will be the first day of a new Base RentPeriod): __________, ____Extreme expects that multiplying the new Collateral Percentage specified aboveagainst Stipulated Loss Value of: ____________________________ Dollars ($__________),will result in an expected new Minimum Collateral Value of: ____________________________ Dollars ($__________).[NOTE: THE NEXT PARAGRAPH WILL BE INCLUDED ONLY IN A NOTICE OF AN INCREASE IN ----- -------- THE COLLATERAL PERCENTAGE, BECAUSE OF WHICH EXTREME WILL BE REQUIRED TO DELIVERADDITIONAL CASH COLLATERAL TO SATISFY THE MINIMUM COLLATERAL VALUE REQUIREMENTSIN SECTION 5.1 OF THE PLEDGE AGREEMENT:Because of the increase in the Collateral Percentage which will result from thisnotice and the corresponding increase in the Minimum Collateral Value, Extremewill deliver additional Cash Collateral to you as required by Section 5.1 of thePledge Agreement no later than 12:00 noon (San Francisco time) on the Base RentDate specified above, in the amount of: ____________________________ Dollars ($__________).]To assure you that Extreme has satisfied the conditions to its right to changethe Collateral Percentage as provided in this notice, and to induce you to relyupon this notice in discharging your responsibilities under the PledgeAgreement, Extreme certifies to you that: 1. Extreme is giving this notice to you, BNPLC and the Participants atleast ten Business Days prior to the Base Rent Date specified above, and suchBase Rent Date is the commencement of a Base Rent Period. 2. No Event of Default or other event or circumstance that would,pursuant to Section 3.2 of the Pledge Agreement, preclude Extreme fromdesignating the new Collateral Percentage above has occurred and is continuing,and Extreme does not anticipate that on the Base Rent Date specified above therewill have occurred and be continuing any such Event of Default or other event orcircumstance. 3. The new Collateral Percentage specified by Extreme above is not lessthan the Minimum Collateral Percentage currently in effect.NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE STATEMENTS ABOVE ARE-----NOT CORRECT. HOWEVER, WE ASK THAT YOU NOTIFY EXTREME IMMEDIATELY IF FOR ANYREASON YOU BELIEVE THIS NOTICE IS DEFECTIVE. EXTREME NETWORKS, INC. By:____________________________________ Name:_______________________________ Title:______________________________[cc BNPLC and all Participants] -2- ATTACHMENT 4 TO PLEDGE AGREEMENT ------------------- NOTICE OF SECURITY INTEREST --------------------------- [_________, _____][Name of Deposit Taker][Address of Deposit Taker]1. Reference is made to the Pledge Agreement (Improvements) (the "PledgeAgreement") dated June 1, 2000 among Extreme Networks, Inc. ("Extreme"), BNPLeasing Corporation ("BNPLC"), BNP PARIBAS and any other financial institutionswhich are from time to time Participants under such Pledge Agreement(collectively, the "Participants") and BNP PARIBAS, acting in its capacity asagent for BNPLC and the Participants (in such capacity, "Agent"). Unlessotherwise defined herein, all capitalized terms used in this Notice have therespective meanings given to those terms in the Pledge Agreement.2. Extreme has informed Agent that Extreme has established with the addresseeof this Notice (the "Deposit Taker") the following non-interest bearingAccount(s) to be maintained at the following Account Office(s): Account Account Account Type Office Number ---- ------ ------Time Deposit _________ _________Time Deposit _________ _________Time Deposit _________ _________Extreme has further informed Agent that Extreme intends to maintain CashCollateral in such Account(s), and that to evidence such Account(s) and theamount of Cash Collateral held therein from time to time, Extreme has authorizedthe Deposit Taker to issue Certificates of Deposit payable to the order of Agentas provided in the Pledge Agreement. 3. Extreme and Agent hereby notify Deposit Taker that, pursuant to thePledge Agreement, Extreme has granted to Agent, for the ratable benefit of BNPLCand the Participants as security for the Secured Obligations, a pledge of andsecurity interest in all Accounts and other Collateral maintained by Extremewith Deposit Taker, including the Account(s) described in Section 2 above. 4. In furtherance of such grant, Extreme and Agent hereby authorize anddirect Deposit Taker to: (a) hold all Collateral for Agent and as Agent's bailee, separate and apart from all other property and funds of Extreme and all other Persons and to permit no other funds to be deposited or credited to the Account(s); (b) make a notation in its books and records of the interest of Agent in the Collateral and that the Account(s) and all deposits therein or sums credited thereto are subject to a pledge and security interest in favor of Agent; (c) issue and redeem Certificates of Deposit evidencing the Account(s), as directed by Agent pursuant to the Pledge Agreement; (d) take such other steps as Agent may reasonably request to record, maintain, validate and perfect its pledge of and security interest in (e) upon receipt of notice from Agent that an Event of Default has occurred, transfer and deliver to Agent or its nominee, together with all necessary endorsements, all or such portion of the Collateral held by Deposit Taker as Agent shall direct; provided, however, that in connection therewith the Deposit Taker may require compliance by Agent with the provisions in Section 5.4 of the Pledge Agreement for redemption of any outstanding Certificates of Deposit which evidence the Account(s). 5. Extreme and Agent agree that (a) the possession by Deposit Taker ofall money, instruments, chattel paper and other property constituting Collateralshall be deemed to be possession by Agent or a person designated by Agent, forpurposes of perfecting the security interest granted to Agent hereunder pursuantto Section 9305, 8313 or 8213 of the UCC (as the case may be), and (b) --------------------------notifications by Deposit Taker to other Persons holding any such property, andAcknowledgments, receipts or confirmations from such Persons delivered toDeposit Taker, shall be deemed notifications to, or Acknowledgments, receipts orconfirmations from, financial intermediaries, bailees or agents (as applicable)of the Deposit Taker for the benefit of Agent for the purposes of perfectingsuch security interests under applicable law. 6. As contemplated by the Pledge Agreement, please acknowledge DepositTaker's receipt of, and consent to, this notice and confirm the representationsand agreements set forth in the Acknowledgment and Agreement attached hereto byexecuting the same and returning this letter to Agent. For your files, a copy ofthis letter is enclosed which you may retain. The authorizations and directionsset forth herein may not be revoked or modified without the written consent ofAgent. "AGENT" BNP PARIBAS By:________________________ Name:___________________ Title:__________________ "EXTREME" EXTREME NETWORKS, INC. By:________________________ Name:___________________ Title:__________________ -2- ACKNOWLEDGMENT AND AGREEMENT OF DEPOSIT TAKER Deposit Taker hereby acknowledges receipt of, and consents to, the abovenotice, acknowledges that it will hold the Collateral for Agent and as Agent'sbailee, agrees to comply with the authorizations and directions set forth aboveand represents to and agrees with Extreme and Agent as follows: (a) Deposit Taker is a commercial bank, organized under the laws of the United States of America or a state thereof or under the laws of another country which is doing business in the United States of America. Deposit Taker is authorized to maintain deposit accounts for others through the Account Offices specified in the above notice, and Deposit Taker will not move the accounts described in the above notice to other offices without the prior written authorization of Agent and Extreme. (b) Deposit Taker has a combined capital, surplus and undivided profits of at least $500,000,000. (c) The information set forth above regarding the Account(s) is accurate. Such Account(s) is (are) currently open and Deposit Taker has no prior notice of any other pledge, security interest, Lien, adverse claim or interest in such Account(s). (d) Deposit Taker shall promptly notify Extreme and Agent if the representations made by Deposit Taker above cease to be true and correct. (e) Deposit Taker shall not (i) allow the withdrawal of funds from any Account by any Person other than Agent, or (ii) without in each case -------------------- first obtaining the prior written authorization of Agent, setoff or attempt -------------------------------------------------------- to setoff any Secured Obligations owed to Deposit Taker against any Collateral held from time to time by Deposit Taker, or (iii) without in ---------- each case first obtaining the prior written authorization of both Extreme ------------------------------------------------------------------------- and Agent, setoff or attempt to setoff any obligations owed to Deposit --------- Taker other than Secured Obligations, against any Collateral held from time to time by Deposit Taker. [________________________________] By:_____________________________ Name:____________________ Title:___________________ [Date] ATTACHMENT 5 TO PLEDGE AGREEMENT ------------------- EXAMPLES OF CALCULATIONS REQUIRED --------------------------------- TO AVOID A COLLATERAL IMBALANCE ------------------------------- The examples below are provided to illustrate the calculations required forallocations of Cash Collateral in a manner that will avoid a CollateralImbalance. The examples are not intended to reflect actual numbers under thisAgreement or actual Percentages of BNPLC or any of the Participants; nor are theexamples intended to provide a formula for the allocations that would beappropriate in every case. The examples also reflect adjustments that would beappropriate if the Collateral Percentage were adjusted from time to time fromand after the Effective Date. EXAMPLE NO. 1Assumptions:-----------1. Two Participants ("Participant A" and "Participant B") are parties to the Participation Agreement with BNPLC. Participant A's Percentage is 50% and Participant B's Percentage is 45%, leaving BNPLC with a Percentage of 5%.2. On the Effective Date, the Initial Funding Advance was $12,000,000, resulting in a Stipulated Loss Value of $12,000,000, allocable as follows: A. BNPLC's Parent (providing BNPLC's share) (5%)........... $ 600,000 B. Participant A (50%)..................................... 6,000,000 C. Participant B (45%)..................................... 5,400,000 ----------- TOTAL................................................... $12,000,0003. The Minimum Collateral Value on the Effective Date was $7,200,000 (reflecting a Collateral Percentage of 60% times Stipulated Loss Value).4. On the Effective Date, Extreme had delivered to Agent Cash Collateral of $7,200,000, equal to the Minimum Collateral Value, as required by Section 5.1 of this Agreement.Allocation of Cash Collateral Required: To avoid a Collateral Imbalance under--------------------------------------these assumptions, Agent would be required to allocate the $7,200,000 to theDeposit Takers for BNPLC and the Participants as follows: A. BNPLC's Deposit Taker (5% of Minimum Collateral Value)........................ $ 360,000 B. Participant A's Deposit Taker (50% of Minimum Collateral Value)............... 3,600,000 C. Participant B's Deposit Taker (45% of Minimum Collateral Value).............. 3,240,000 ---------- TOTAL..........................................................................$7,200,000 EXAMPLE NO. 2Assumptions: Assume the same facts as in Example No. 1, and in addition assume-----------that:1. Effective as of the first Base Rent Date, Extreme increased its Collateral Percentage from 60% to 80%, raising the Minimum Collateral Value to $9,600,000. Because of such increase, Extreme also delivered an additional $2,400,000 as Cash Collateral to Agent on the first Base Rent Date, bringing the total of all Cash Collateral delivered by Extreme to $9,600,000 as required by Section 5.1 of this Agreement.2. Also effective as of the first Base Rent Date, a new Participant approved by Extreme ("Participant C") became a party to this Agreement and the Participation Agreement, taking a Percentage of 20%. Simultaneously, Participant A and Participant B entered into supplements to the Participation Agreement which reduced their Percentages to 40% and 35%, respectively.Allocation of Cash Collateral Required: To avoid a Collateral Imbalance under--------------------------------------these assumptions, Agent would be required to allocate the Cash Collateral asrequired to leave the Deposit Takers for BNPLC and the Participants with thefollowing amounts: A. BNPLC's Deposit Taker (5% of Minimum Collateral Value).............. $ 480,000 B. Participant A's Deposit Taker (40% of Minimum Collateral Value)..... 3,840,000 C. Participant B's Deposit Taker (35% of Minimum Collateral Value)..... 3,360,000 D. Participant C's Deposit Taker (20% of Minimum Collateral Value).... 1,920,000 ---------- TOTAL............................................................... $9,600,000 Thus, to prevent a Collateral Imbalance, Agent would have to allocate the$2,400,000 of additional Cash Collateral it received on the first Base Rent Dateas follows: A. BNPLC's Deposit Taker ($480,000 less $360,000 already on deposit) .................... $ 120,000 B. Participant A's Deposit Taker ($3,840,000 less $3,600,000 already on deposit)......... 240,000 C. Participant B's Deposit Taker ($3,360,000 less $3,240,000 already on deposit)......... 120,000 D. Participant C's Deposit Taker ($1,920,000 less $0 already on deposit)................ 1,920,000 ---------- TOTAL................................................................................. $2,400,000 EXAMPLE NO. 3Assumptions: Assume the same facts as in Example No. 2, except that:----------- -----------1. Instead of increasing its Collateral Percentage from 60% to 80%, Extreme increased its Collateral Percentage to 70% on the first Base Rent Date, raising the Minimum Collateral Value to $8,400,000. Because of such increase, Extreme delivered an additional $1,200,000 as additional Cash Collateral to Agent on the first Base Rent Date, bringing the total of all Cash Collateral delivered by Extreme to $8,400,000 as required by Section 5.1 of this Agreement.Allocation of Cash Collateral Required: To avoid a Collateral Imbalance under--------------------------------------these assumptions, Agent would be required to allocate the Cash Collateral asrequired to leave the Deposit Takers for BNPLC and the Participants with thefollowing amounts: A. BNPLC's Deposit Taker (5% of Minimum Collateral Value).............................. $ 420,000 B. Participant A's Deposit Taker (40% of Minimum Collateral Value)..................... 3,360,000 C. Participant B's Deposit Taker (35% of Minimum Collateral Value)..................... 2,940,000 D. Participant C's Deposit Taker (20% of Minimum Collateral Value).................... 1,680,000 ---------- TOTAL............................................................................... $8,400,000 -2- TOTAL............................................................................... $8,400,000 Thus, to prevent a Collateral Imbalance, Agent would have to allocate the$1,200,000 of additional Cash Collateral it received on the first Base Rent Dateas follows: A. BNPLC's Deposit Taker ($420,000 less $360,000 already on deposit) .................. $ 60,000 B. Participant A's Deposit Taker ($3,360,000 less $3,600,000 already on deposit)...................................................... (240,000) C. Participant B's Deposit Taker ($2,940,000 less $3,240,000 already on deposit)...................................................... (300,000) D. Participant C's Deposit Taker ($1,680,000 less $0 already on deposit).............. 1,680,000 ---------- TOTAL............................................................................... $1,200,000 NOTE: THE NEGATIVE AMOUNTS (IN PARENTHESIS) ABOVE REPRESENT REQUIRED WITHDRAWALS----- -----------RATHER THAN DEPOSITS. AS EXAMPLE NO. 3 ILLUSTRATES, TO AVOID A COLLATERALIMBALANCE AGENT MAY FROM TIME TO TIME HAVE TO WITHDRAW CASH COLLATERAL HELD BYTHE DEPOSIT TAKER FOR ONE PARTICIPANT AND DEPOSIT IT IN AN ACCOUNT MAINTAINED BYA DEPOSIT TAKER FOR ANOTHER PARTICIPANT. -3- ATTACHMENT 6 TO PLEDGE AGREEMENT ------------------- NOTICE OF EXTREME'S REQUIREMENT TO ---------------------------------- WITHDRAW EXCESS CASH COLLATERAL ------------------------------- [________,_____]BNP PARIBAS[address of BNP] Re: Pledge Agreement (Improvements) dated June 1, 2000 among Extreme -- Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Improvements) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Improvements) referenced above (the"Pledge Agreement"). This letter constitutes notice to you, as Agent under thePledge Agreement, that pursuant to Section 6.1 of the Pledge Agreement, Extremerequires you to withdraw from the Accounts and return to Extreme the followingamount: ____________________________ Dollars ($__________)on the following date: __________, ____ To assure you that Extreme has satisfied the conditions to its right torequire such withdrawal, and to induce you to comply with this notice, Extremecertifies to you that: 1. Your withdrawal and delivery of the amount specified above to Extreme will not cause the Value of the remaining Collateral to be less than the Minimum Collateral Value. After giving effect to such withdrawal, the Collateral remaining in the Accounts maintained by the Deposit Takers will be: ____________________________ Dollars ($__________), and the Minimum Collateral Value on the date specified above will equal: ____________________________ Dollars ($__________).Such Minimum Collateral Value equals the Collateral Percentage of: __________ percent (___%),times the Stipulated Loss Value of: ____________________________ Dollars ($__________). 2. Extreme is giving this notice to you, BNPLC and the Participants atleast ten days prior to the date specified above. 3. No Default or Event of Default has occurred and is continuing as ofthe date of this notice, and Extreme does not anticipate that any Default orEvent of Default will have occurred and be continuing on the date upon which thewithdrawal is required. 4. Extreme agrees that you may determine the Accounts from which to makeany withdrawal required by Extreme pursuant to this Section as necessary toprevent or mitigate any Collateral Imbalance.NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE STATEMENTS ABOVE ARE-----NOT CORRECT OR IF THE DATE FOR WITHDRAWAL SPECIFIED ABOVE IS LESS THAN TEN DAYSAFTER YOUR RECEIPT OF THIS NOTICE. HOWEVER, WE ASK THAT YOU NOTIFY EXTREMEIMMEDIATELY IF FOR ANY REASON YOU BELIEVE THIS NOTICE IS DEFECTIVE. -2- Please remember that the express terms of Certificates of Deposit issuedpursuant to the Pledge Agreement require presentment of the Certificates ofDeposit seven days before Cash Collateral is to be withdrawn from the Accountsthey evidence. Accordingly, you must present Certificates of Deposit to DepositTakers seven days prior to the withdrawal of Cash Collateral required by thisnotice. For your convenience, we have attached a letter as Annex 1 to this -------notice that you might execute and send to Deposit Takers to advise them of yourintent to withdraw and of your presentment of Certificates of Deposit asrequired in connection therewith. The attached letter also sets forth theamounts Extreme believes you must withdraw from each Account to avoid aCollateral Imbalance. EXTREME NETWORKS, INC. By:_______________________ Name:________________ Title:_______________[cc BNPLC and all Participants] -3- Annex 1 ------- TO EXTREME'S NOTICE OF REQUIREMENT TO WITHDRAW CASH EXCESS COLLATERAL [_________, _____]Deposit Takers on theAttached Distribution List Re: Pledge Agreement (Improvements) dated June 1, 2000 among Extreme -- Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Improvements) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the Participants Gentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Improvements) referenced above (the"Pledge Agreement"). This letter constitutes notice from the undersigned, asAgent under the Pledge Agreement, that pursuant to Section 6.1 of the PledgeAgreement, Extreme requires Agent to withdraw from the Accounts and return toExtreme the amounts listed below on the following date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw thefollowing amounts from the following Accounts, and with this letter theundersigned is presenting Certificates of Deposit as required in connection withsuch withdrawal:Deposit Taker Account No. Amount1.__________________ ____________________ $______________ 2.__________________ ____________________ $______________ 3.__________________ ____________________ $______________ 4.__________________ ____________________ $______________ TOTAL WITHDRAWALS: $============== BNP PARIBAS, AS AGENT By:________________________ Name:_________________ Title:________________[cc BNPLC and Extreme] -4- ATTACHMENT 7 TO PLEDGE AGREEMENT ------------------- NOTICE OF EXTREME'S REQUIREMENT OF ---------------------------------- DIRECT PAYMENTS TO PARTICIPANTS ------------------------------- [_________, _____]BNP PARIBAS[address of BNP] Re: Pledge Agreement (Improvements) dated June 1, 2000 among Extreme -- Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Improvements) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Improvements) referenced above (the"Pledge Agreement"). This letter constitutes notice to you, as Agent under thePledge Agreement, that pursuant to Section 6.2 of the Pledge Agreement, Extremerequires you to withdraw from the Accounts and pay directly to the Participants(in proportion to their respective Percentages) the following amount: ____________________________ Dollars ($__________)on the following date (which, Extreme acknowledges, must be the Designated SaleDate or a date thereafter prior to an Event of Default): __________, ____ The amount specified above equals the following percentage (equal to theaggregate of all Participant's Percentages): __________ percent (___%),times the total of all Cash Collateral presently pledged under the PledgeAgreement: ____________________________ Dollars ($__________). To assure you that Extreme has satisfied the conditions to its right torequire such withdrawal, and to induce you to comply with this notice, Extremecertifies to you that Extreme is giving this notice to you, BNPLC and theParticipants at least ten days prior to the date of required withdrawal andpayment specified above. Please remember that the express terms of Certificates of Deposit issuedpursuant to the Pledge Agreement require presentment of the Certificates ofDeposit seven days before Cash Collateral is to be withdrawn from the Accountsthey evidence. Accordingly, you must present Certificates of Deposit to DepositTakers seven days prior to the withdrawal of Cash Collateral required by thisnotice. For your convenience, we have attached a letter as Annex 1 to this ------- notice that you might execute and send to Deposit Takers to advise them of yourintent to withdraw and of your presentment of Certificates of Deposit asrequired in connection therewith. The attached letter also sets forth theamounts Extreme believes you must withdraw from each Account to comply withsubsection 6.2.2 of the Pledge Agreement. EXTREME NETWORKS, INC. By:____________________________ Name:____________________ Title:___________________[cc BNPLC and all Participants] -2- Annex 1 ------- TO EXTREME'S NOTICE OF REQUIREMENT TO ------------------------------------- WITHDRAW CASH COLLATERAL FOR ---------------------------- DIRECT PAYMENTS TO PARTICIPANTS ------------------------------- [---------, -----]Deposit Takers on theAttached Distribution List Re: Pledge Agreement (Improvements) dated June 1, 2000 among Extreme -- Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Improvements) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Improvements) referenced above (the"Pledge Agreement"). This letter constitutes notice from the undersigned, asAgent under the Pledge Agreement, that pursuant to Section 6.2 of the PledgeAgreement, Extreme requires Agent to withdraw from the Accounts and pay to theParticipants (in proportion to their respective Percentages) the amounts listedbelow on the following date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw thefollowing amounts from the following Accounts, and with this letter theundersigned is presenting Certificates of Deposit as required in connection withsuch withdrawal: Deposit Taker Account No. Amount 1._______________________ ______________________ $_________________________ 2._______________________ ______________________ $_________________________ 3._______________________ ______________________ $_________________________ 4._______________________ ______________________ $_________________________ TOTAL WITHDRAWALS: $_________________________ BNP PARIBAS, AS AGENT By:_________________________________________ Name:________________________________ Title:_______________________________[cc BNPLC and Extreme] -3- ATTACHMENT 8 TO PLEDGE AGREEMENT ------------------- NOTICE OF EXTREME'S REQUIREMENT OF ---------------------------------- DIRECT PAYMENT TO BNPLC ----------------------- [_________, _____]BNP PARIBAS[address of BNP] Re: Pledge Agreement (Improvements) dated June 1, 2000 among Extreme -- Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Improvements) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Improvements) referenced above (the"Pledge Agreement"). This letter constitutes notice to you, as Agent under thePledge Agreement, that pursuant to Section 6.3 of the Pledge Agreement, Extremerequires you to withdraw from the Account maintained by the Deposit Taker forBNPLC and pay directly to BNPLC on behalf of Extreme as a payment required bythe Purchase Agreement the following amount: ____________________________ Dollars ($__________)on the following date (which, Extreme acknowledges, must be the Designated SaleDate or a date thereafter prior to an Event of Default): __________, ____ To assure you that Extreme has satisfied the conditions to its right torequire such withdrawal, and to induce you to comply with this notice, Extremecertifies to you that Extreme is giving this notice to you and BNPLC at leastten days prior to the date of required withdrawal and payment specified above. Please remember that the express terms of Certificates of Deposit issuedpursuant to the Pledge Agreement require presentment of the Certificates ofDeposit seven days before Cash Collateral is to be withdrawn from the Accountsthey evidence. Accordingly, you must present Certificates of Deposit to theDeposit Taker for BNPLC seven days prior to the withdrawal of Cash Collateralrequired by this notice. For your convenience, we have attached a letter asAnnex 1 to this notice that you might execute and send to the Deposit Taker for-------BNPLC to advise it of your intent to withdraw and of your presentment ofCertificates of Deposit as required in connection therewith. The attached letteralso sets forth the amount Extreme believes you must withdraw to comply withSection 6.3 of the Pledge Agreement. EXTREME NETWORKS, INC. By:____________________________________ Name:_____________________________ Title:____________________________[cc BNPLC] Annex 1 ------- TO EXTREME'S NOTICE OF REQUIREMENT OF ------------------------------------- DIRECT PAYMENT TO BNPLC ----------------------- [_________, _____][Name of the Deposit Taker for BNPLC][Address of such Deposit Taker] Re: Pledge Agreement (Improvements) dated June 1, 2000 among Extreme -- Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Improvements) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Improvements) referenced above (the"Pledge Agreement"). This letter constitutes notice from the undersigned, asAgent under the Pledge Agreement, that pursuant to Section 6.3 of the PledgeAgreement, Extreme requires Agent to withdraw from the Account maintained byyou, as Deposit Taker for BNPLC, the sum of: ____________________________ Dollars ($__________)and pay the same to BNPLC as a payment required by the Purchase Agreement on thefollowing date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw such amountfrom the following Account maintained by you as Deposit Taker for BNPLC, andwith this letter the undersigned is presenting Certificate(s) of Deposit asrequired in connection with such withdrawal. BNP PARIBAS, AS AGENT By: ________________________________ Name:___________________________ Title:__________________________[cc BNPLC and Extreme] -2- ATTACHMENT 9 TO PLEDGE AGREEMENT ------------------- NOTICE OF EXTREME'S REQUIREMENT OF A WITHDRAWAL ----------------------------------------------- OF CASH COLLATERAL FROM ----------------------- A DISQUALIFIED DEPOSIT TAKER ---------------------------- [_________, _____]BNP PARIBAS[address of BNP] Re: Pledge Agreement (Improvements) dated June 1, 2000 among Extreme -- Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Improvements) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Improvements) referenced above (the"Pledge Agreement"). This letter constitutes notice to you, as Agent under thePledge Agreement, that pursuant to Section 6.4 of the Pledge Agreement, Extremerequires you to withdraw from the following Account maintained by the followingDeposit Taker: Deposit Taker Account No. ---------------------------- --------------------Cash Collateral in the following amount: ____________________________ Dollars ($__________)and to deposit such Cash Collateral with other Deposit Takers who are notDisqualified Deposit Takers no later than ten days after the date upon which youreceive this notice. To assure you that Extreme has the right to require such withdrawal, and toinduce you to comply with this notice, Extreme certifies to you that the DepositTaker specified above has become a Disqualified Deposit Taker because it nolonger satisfies the requirements listed in Section 4.1 of the Pledge Agreement.Specifically, such Deposit Taker no longer satisfies the following requirements:[EXTREME MUST INSERT HERE A DESCRIPTION OF WHICH REQUIREMENTS THE DEPOSIT TAKERNO LONGER SATISFIES AND HOW EXTREME HAS DETERMINED THAT THE REQUIREMENTS ARE NOLONGER SATISFIED, ALL IN SUFFICIENT DETAIL TO PERMIT THE PARTICIPANT FOR WHOMSUCH DEPOSIT TAKER HAS BEEN MAINTAINING AN ACCOUNT TO RESPOND IF IT BELIEVESTHAT EXTREME IS IN ERROR.] Please remember that the express terms of Certificates of Deposit issuedpursuant to the Pledge Agreement require presentment of the Certificates ofDeposit seven days before Cash Collateral is to be withdrawn from the Accountsthey evidence. Accordingly, you must present Certificates of Deposit to theDeposit Taker specified above seven days prior to the withdrawal of CashCollateral required by this notice. For your convenience, we have attached aletter as Annex 1 to this notice that you might execute and send to such Deposit -------Taker to advise it of your intent to withdraw and of your presentment ofCertificates of Deposit as required in connection therewith. The attached letteralso sets forth the amount Extreme believes you must withdraw to comply withSection 6.4 of the Pledge Agreement. EXTREME NETWORKS, INC. By:______________________________ Name:______________________ Title:_____________________[cc BNPLC] -2- Annex 1 ------- TO EXTREME'S NOTICE OF REQUIREMENT OF A WITHDRAWAL -------------------------------------------------- OF CASH COLLATERAL FROM ----------------------- A DISQUALIFIED DEPOSIT TAKER ---------------------------- [_________, _____][Name of the Deposit Taker for BNPLC][Address of such Deposit Taker] Re: Pledge Agreement (Improvements) dated June 1, 2000 among Extreme -- Networks, Inc., BNP Leasing Corporation, BNP PARIBAS and any other financial institutions which are from time to time Participants under such Pledge Agreement (Improvements) and BNP PARIBAS, acting in its capacity as agent for BNPLC and the ParticipantsGentlemen: Capitalized terms used in this letter are intended to have the meaningsassigned to them in the Pledge Agreement (Improvements) referenced above (the"Pledge Agreement"). This letter constitutes notice from the undersigned, asAgent under the Pledge Agreement, that pursuant to Section 6.4 of the PledgeAgreement, Extreme has advised Agent that you are a Disqualified Deposit Taker,and Extreme requires Agent to withdraw from the Account maintained by you, as aDeposit Taker under the Pledge Agreement, the sum of: ____________________________ Dollars ($__________)no later than the following date: __________, ____ Accordingly, on such date, the undersigned intends to withdraw such amountfrom the Account maintained by you as Deposit Taker (Account No. __________),and with this letter the undersigned is presenting Certificate(s) of Deposit asrequired in connection with such withdrawal. BNP PARIBAS, AS AGENT By: ______________________________ Name:_________________________ Title:________________________[cc BNPLC and Extreme] -3- Schedule 1 TO PLEDGE AGREEMENT ------------------- [IN PLACE OF THIS PAGE, SUBSTITUTE SCHEDULE 1 ATTACHED TO THE LEASE] EXHIBIT 21.1 SUBSIDIARIES OF REGISTRANT --------------------------NAME LOCATION---- --------Extreme Networks International Cayman IslandsExtreme Networks Japan K.K. JapanExtreme Networks Hong Kong Limited Hong KongExtreme Networks IHC, Inc. DelawareExtreme Networks FSC, Inc. BarbadosExtreme Networks UK Limited United KingdomExtreme Networks B.V. The NetherlandsExtreme Networks GmbH GermanyExtreme Networks Sarl FranceExtreme Networks Srl ItalyExtreme Networks Canada, Inc. CanadaExtreme Networks YH KoreaIHC Networks AB SwedenExtreme Networks Australia AustraliaExtreme Networks EMEA Dubai EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (FormS-8 No. 333-83729) pertaining to the Amended 1996 Stock Option Plan, 1999Employee Stock Purchase Plan and an Individual Stock Option Agreement of ExtremeNetworks, Inc. of our report dated July 18, 2000, except for note 9, as to whichthe date is August 24, 2000, with respect to the consolidated financialstatements and schedule of Extreme Networks, Inc. included in the Annual Report(Form 10-K) for the year ended June 30, 2000. /s/ Ernst & Young LLPPalo Alto, CaliforniaSeptember 27, 2000

5 1,000 12-MOS JUL-02-2000 JUL-01-1999 JUL-02-2000 116,721 190,784 62,233 1,237 23,801 302,484 35,920 9,170 515,930 96,603 0 0 0 106 418,915 515,930 261,956 261,956 126,916 245,702 33 0 490 30,369 10,321 20,048 0 0 0 20,048 0.20 0.18

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Extreme Networks Annual Report 2000

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Extreme Networks
Annual Report 2000