<PAGE>
EXHIBIT 10.9
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Lease
FREMONT TECHNOLOGY PARK
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Between
APPLIED FIBER OPTICS, INC.
(Tenant)
and
CARRAMERICA REALTY CORPORATION
(Landlord)
<PAGE>
LEASE
THIS LEASE (the "Lease") is made as of August 27, 1998 (dated for reference
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purposes only) between CarrAmerica Realty Corporation, a Maryland corporation
(the "Landlord") and the Tenant as named in the Schedule below. The term
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"Project" means the six buildings (the "Project Buildings") and other
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improvements commonly known as the "Fremont Technology Park'' located in
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Fremont, California, as more particularly described in Exhibit A. The
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"Premises" means that portion of the Project Buildings described in the Schedule
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and cross-hatched on Exhibit A, attached hereto. Those Project Buildings in
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which the Premises are located shall be collectively referred to herein as the
"Building", and the other Project Buildings shall be referred to herein as the
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"Other Buildings"). The following schedule (the "Schedule") is an integral part
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of this Lease. Terms defined in this Schedule shall have the same meaning
throughout the Lease.
The following schedule (the "Schedule") is an integral part of this Lease.
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Terms defined in this Schedule shall have the same meaning throughout the Lease.
SCHEDULE
1. Tenant: Applied Fiber Optics, Inc., a California corporation
2. Premises: 46420 - 46430 Fremont Boulevard, City of Fremont, County of
Alameda. California
3. Rentable Square Feet of the Premises: 54,153 rsf
4. Tenant's Proportionate Share: 100% of Building and 18.62% of Project (based
upon a total of 290,840 rentable square feet in the Project)
5. Lease Deposit: Prepaid Rent = $70,398.90 and Security Deposit = $509,037.80
(of which up to $422,393.00 may be in the form of a Letter of Credit)
6. Permitted Use: Office, research, development, final assembly of parts
manufactured elsewhere, storage, distribution of fiber optic products
7. Tenant's Real Estate Broker for this Lease: CPS, the Commercial Property
Services Company
8. Landlord's Real Estate Broker for this Lease: None
9. Tenant Improvements, if any: See Section 3.A
10. Term: Seven Years
11. Commencement Date: April 1, 1999; provided if Tenant occupies any portion
of the Premises prior to such date for the purpose of conducting its
business activities therein, then the Commencement Date shall be revised to
be the earliest date on which Tenant commenced such business activities
within the Premises
12. Termination Date: March 31, 2006; provided if the Commencement Date is
accelerated as a result of Tenant conducting its business activities within
the Premises prior to April 1, 1999, then the Termination Date shall be
also accelerated to be the date which is 84 months after the revised
Commencement Date, unless the revised Commencement Date is not the first
day of the month, in which case the Termination Date shall be the date
which is 84 months after the first day of the calendar month immediately
following the revised Commencement Date
13. Parking Spaces: 201
14. Guarantor: None
1
<PAGE>
15. Base Rent:
<TABLE>
<CAPTION>
Period Monthly Base Rent Annual Base Rent
------ ----------------- ----------------
<S> <C> <C>
Months 1 through 12 99-00 $70,398.90 $ 844,786.80
Months 13 through 24 00-01 $73,106.55 $ 877,278.60
Months 25 thought 36 01-02 $75,814.20 $ 909,770.40
Months 37 thought 48 02-00 $78,521.85 $ 942,262.20
Months 49 thought 60 02-04 $81,229.50 $ 974,754.00
Months 61 thought 72 04-05 $83,937.15 $1,007,245.80
Months 73 through 84 05-07 $86,644.80 $1,039,737.60
</TABLE>
LIST OF EXHIBITS:
Exhibit A: Project Site Plan
Exhibit B: Landlord's Signage Standards
Exhibit C: Tenant Improvement Agreement
Exhibit D: Tenant Improvement Illustrations/Specifications
Exhibit E: Rules and Regulations
Exhibit F: Mortgages Currently Affecting the Project
1. LEASE AGREEMENT. On the terms stated in this Lease, Landlord
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leases the Premises to Tenant, and Tenant leases the Premises from Landlord, for
the Term beginning on the Commencement Date and ending on the Termination Date
unless extended or sooner terminated pursuant to this Lease.
A. Commencement Date. The commencement date ("Commencement
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Date") for this Lease shall be the date set forth in the Schedule. The
Commencement Date shall not be dependent upon the completion of the "Tenant
Improvements" (as defined in Section 3).
B. Termination Date. The termination date ("Termination
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Date") of this Lease shall be the date set forth in the Schedule.
2. RENT.
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A. Types of Rent. Tenant shall pay the following Rent in
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the form of a check or via wire transfer to Landlord pursuant to
instructions to be delivered by Landlord to Tenant prior to the
Commencement Date.
(i) Base Rent in monthly installments in
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advance, the first monthly installment payable concurrently with the
execution of this Lease and
2
<PAGE>
thereafter on or before Ac first day of each month of the Term in the
amount set forth on the Schedule.
(ii) Operating Cost Share Rent in an amount
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equal to the Tenant's Proportionate Share of the Operating Costs for
the applicable fiscal year of the Lease, paid monthly in advance in an
estimated amount. Definitions of Operating Costs and Tenant's
Proportionate Share, and the method for billing and payment of
Operating Cost Share Rent are set form in Sections 2B, 2C and 2D.
(iii) Tax Share Rent in an amount equal to the
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Tenant's Proportionate Share of the Taxes for the applicable fiscal
year of this Lease, paid monthly in advance in an estimated amount. A
definition of Taxes and the method for billing and payment of Tax
Share Rent are set forth in Sections 2B, 2C and 2D.
(iv) Additional Rent in the amount of all costs,
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expenses, liabilities, and amounts which Tenant is required to pay
under this Lease, excluding Base Rent, Operating Cost Share Rent, and
Tax Share Rent, but including any interest for late payment of any
item of Rent.
(v) Rent as used in this Lease means Base Rent,
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Operating Cost Share Rent, Tax Share Rent and Additional Rent.
Tenant's agreement to pay Rent is an independent covenant, with no
right of setoff, deduction or counterclaim of any kind.
B. Payment of Operating Cost Share Rent and Tax Share
Rent.
(i) Payment of Estimated Operating Cost Share
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Rent and Tax Share Rent. Landlord shall estimate the Operating Costs
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and Taxes of the Project by April 1 of each fiscal year, or as soon as
reasonably possible thereafter. Landlord may revise these estimates
whenever it obtains more accurate information, such as the final real
estate tax assessment or tax rate for the Project. Within ten (10)
days after receiving the original or revised estimate from Landlord,
Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's
Proportionate Share of this estimate, multiplied by the number of
months that have elapsed in the applicable fiscal year to the date of
such payment including the current month, minus payments previously
made by Tenant for the months elapsed. On the first day of each month
thereafter, Tenant shall pay Landlord one-twelfth (l/12th) of Tenant's
Proportionate Share of this estimate, until a new estimate becomes
applicable.
(ii) Correction of Operating Cost Share Rent.
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Landlord shall deliver to Tenant a report for the previous fiscal year
(the "Operating Cost Report") by May 15 of each year, or as soon as
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reasonably possible thereafter, setting form (a) the actual Operating
Costs incurred, (b) the amount of Operating Cost Share Rent due from
Tenant, and (c) the amount of Operating Cost Share Rent paid by
Tenant. Within twenty (20) days after such delivery, Tenant shall pay
to Landlord the amount due minus the amount paid. If the amount paid
exceeds the amount due, Landlord shall apply the excess to Tenant's
payments of
<PAGE>
Operating Cost Share Rent next coming due, or refund such excess for
any overpayments made during the last year of the Term within thirty
(30) days of the date on which the Operating Cost Report for such year
is completed.
(iii) Correction of Tax Share Rent. Landlord
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shall deliver to Tenant a report for the previous fiscal year (the
"Tax Report") by May 15 of each year, or as soon as reasonably
possible thereafter, setting forth (a) the actual Taxes, (b) the
amount of Tax Share Rent due from Tenant, and (c) the amount of Tax
Share Rent paid by Tenant. Within twenty (20) days after such
delivery, Tenant shall pay to Landlord the amount due from Tenant
minus the amount paid by Tenant. If the amount paid exceeds the amount
due, Landlord shall apply the excess to Tenant's payments of Tax Share
Rent next coming due, or refund such excess for any overpayments made
during the last year of the Term within thirty (30) days of the date
on which the Tax Report for such year is completed.
C. Definitions.
(i) Included Operating Costs. "Operating Costs"
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means any expenses, costs and disbursements of any kind other than
Taxes, paid or incurred by Landlord in connection with the management,
maintenance, operation, insurance, repair and other related activities
in connection with any part of the Project and of the personal
property, fixtures, machinery, equipment, systems and apparatus used
in connection therewith, including the cost of providing those
services required to be furnished by Landlord under this Lease and a
management fee in an amount equal to three percent (3%) of the monthly
Base Rent payable hereunder. Operating Costs shall also include the
costs of any capital improvements which are intended to reduce
Operating Costs (but only to the extent of any actual savings realized
from such improvements) or improve safety, and those made to keep the
Project in compliance with governmental requirements applicable from
time to time or to replace existing capital improvements, facilities
and equipment within the Building or the common areas of the Project,
such as the roof membrane and resurfacing of the parking areas
(collectively, "Included Capital Items"); provided, that the costs of
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any Included Capital Item shall be amortized by Landlord, together
with an amount equal to interest at ten percent (10%) per annum, over
the estimated useful life of such item and such amortized costs are
only included in Operating Costs for that portion of the useful life
of the Included Capital Item which falls within the Term, unless the
cost of the Included Capital Item is less than Ten Thousand Dollars
($10,000) in which case it shall be expensed in the year in which it
was incurred. If Landlord elects to maintain earthquake insurance,
then in the event of an earthquake any deductibles payable by Tenant
hereunder with respect to the Premises shall be amortized over the
remaining Term of the Lease and paid monthly by Tenant as part of the
Operating Cost Share Rent. If the Project contains more than one
building, then Operating Costs shall include (i) all Operating Costs
fairly allocable to the Building, including all Operating Costs paid
with respect to the maintenance, repair, replacement and use of the
Building, and (ii) a proportionate share (based on the gross rentable
area of the Building as
<PAGE>
a percentage of the gross leasable area of all of the Buildings in the
Project) of all Operating Costs which relate to the Project in general
and arc not fairly allocable to any one building in the Project.
If the Project is not fully occupied during any portion of any fiscal
year, Landlord may adjust (an "Equitable Adjustment") Operating Costs to equal
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what would have been incurred by Landlord had the Project been fully occupied.
This Equitable Adjustment shall apply only to Operating Costs which are variable
based, upon the occupancy of the Project (i.e., they increase as occupancy of
the Project increases). Landlord may incorporate the Equitable Adjustment in
its estimates of Operating Costs.
If Landlord does not furnish any particular service whose cost would
have constituted an Operating Cost to a tenant other than Tenant who has
undertaken to perform such service itself, Operating Costs shall be increased by
the amount which Landlord would have incurred if it had furnished the service to
such tenant.
(ii) Excluded Operating Costs. Operating Costs
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shall not include:
(a) costs of alterations of tenant
premises;
(b) costs of capital improvements other
than Included Capital Items;
(c) interest and principal payments on
mortgages or any other debt costs, or
rental payments on any ground lease of
the Project;
(d) real estate brokers' leasing
commissions;
(e) legal fees, space planner fees and
advertising expenses incurred with
regard to leasing the Building or
portions thereof;
(f) any cost or expenditure for which
Landlord is reimbursed, by insurance
proceeds or otherwise, except by
Operating Cost Share Rent;
(g) the cost of any service furnished to
any tenant of the Project which
Landlord does not make available to
Tenant;
(h) depreciation and amortization (except
on any Included Capital Items in the
manner described above;
(i) franchise or income taxes imposed upon
Landlord, except to the extent imposed
in lieu of all or any part of Taxes;
<PAGE>
(j) costs of correcting defects in
construction of the Building (as
opposed to the cost of normal repair,
maintenance and replacement expected
with the construction materials and
equipment installed in the Building in
light of their specifications);
(k) legal and auditing fees which are for
the benefit of Landlord such as
collecting delinquent rents, preparing
tax returns and other financial
statements, and audits other than
those incurred in connection with the
preparation of reports required
pursuant to Section 2B above;
(l) the wages of any employee for services
not related directly to the
management, maintenance, operation and
repair of the Building;
(m) fines, penalties and interest;
(n) any cost for the investigation,
monitoring, removal, cleanup or other
remediation of any Hazardous
Substances discovered in, on or under
the Building or the Project, which was
not caused or contributed to by
Tenant, provided that costs incurred
to respond to a governmental or quasi-
governmental order or mandate shall be
an Included Operating Cost if the
Project is not identified as a source
of such contamination (e.g., all
property owners are required to
conduct routine groundwater monitoring
on their property regardless of
whether their property was or is a
source of any contamination);
(o) repairs, maintenance or other work
occasioned by condemnation, fire or
other casualty;
(p) repairs or other work occasioned by
the gross negligence or intentional
misconduct of Landlord or Landlord's
employees, agents or contractors;
(q) fines, penalties or other costs
incurred due to violations by Landlord
or any other tenant of any
Governmental Requirements;
(r) costs incurred in connection with the
initial construction of the Building
Shell (as defined below);
(s) any amounts paid to a person, firm,
corporation, or other entity related
to Landlord which is in excess
<PAGE>
of the amount charged by unaffiliated
parties for comparable goods or
services;
(t) costs incurred by Landlord for the
operation of Landlord's corporation or
other business entity as opposed to
the operation of the Project, such as
accounting and legal expenses incurred
in connection with selling,
syndicating, financing, mortgaging or
hypothecating Landlord's interest in
the Project or with resolving
employer-employee disputes between
Landlord and its employees; and
(u) structural repairs to the Building to
the extent they are not required as a
result of Tenant's acts or omissions.
(iii) Taxes. "Taxes" means any and all taxes,
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assessments and charges of any kind, general or special, ordinary or
extraordinary, levied against the Project, which Landlord shall pay or
become obligated to pay in connection with the ownership, leasing,
renting, management, use, occupancy, control or operation of the
Project or of the personal property, fixtures, machinery, equipment,
systems and apparatus used in connection therewith. Taxes shall
include real estate taxes, personal property taxes, sewer rents, water
rents, special or general assessments, transit taxes, ad valorem
taxes, and any tax levied on the rents hereunder or the interest of
Landlord under this Lease (the "Rent Tax"). Taxes shall also include
all reasonable fees and other reasonable costs and expenses paid by
Landlord in reviewing any tax and in seeking a refund or reduction of
any Taxes, whether or not the Landlord is ultimately successful. Taxes
shall also include any assessments or fees paid to any business park
owners association, or similar entity, which are imposed against the
Project pursuant to any Covenants, Conditions and Restrictions
("CC&R's") recorded against the Land and any installments of principal
and interest required to pay any existing or future general or special
assessments for public improvements, services or benefits, and any
increases resulting from reassessments imposed in connection with any
change in ownership or new construction.
For any year, the amount to be included in Taxes (a) from taxes or
assessments payable in installments, shall be the amount of the installments
(with any interest) due and payable during such year, and (b) from all other
Taxes, shall at Landlord's election be the amount accrued, assessed, or
otherwise imposed for such year or the amount due and payable in such year. Any
refund or other adjustment to any Taxes by the taxing authority shall apply
during the year for which the adjustment was made (i.e., if Taxes for any tax
year during the Term are adjusted, then such adjustment (whether it involves a
refund or additional payment) shall be made to or by Tenant. Taxes shall not
include any net income (except Rent Tax), capital, stock, succession, transfer,
franchise, gift, estate or inheritance tax, except to the extent that such tax
shall be imposed in lieu of any portion of Taxes.
<PAGE>
(iv) Lease Year. "Lease Year" means each
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consecutive twelve-month period beginning with the Commencement Date,
except that if the Commencement Date is not the first day of a
calendar month, then the first Lease Year shall be the period from the
Commencement Date through the final day of the twelve months after the
first day of the following month, and each subsequent Lease Year shall
be the twelve months following the prior Lease Year.
(v) Fiscal Year. "Fiscal Year" means the
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calendar year, except that the first fiscal year and the last fiscal
year of the Term may be a partial calendar year.
D. Computation of Base Rent and Rent Adjustments.
(i) Prorations. If this Lease begins on a day
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other than the first day of a month, the Base Rent, Operating Cost
Share Rent and Tax Share Rent shall be prorated for such partial month
based on the actual number of days in such month. If this Lease begins
on a day other than the first day, or ends on a day other than the
last day, of the fiscal year, Operating Cost Share Rent and Tax Share
Rent shall be prorated for the applicable fiscal year.
(ii) Default Interest. Any sum due from Tenant
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to Landlord not paid when due shall bear interest from the date due
until paid at the lesser of eighteen percent (18%) per annum or the
maximum rate permitted by law.
(iii) Rent Adjustments. The square footage of the
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Premises and the Building set forth in the Schedule are conclusively
deemed to be the actual square footage thereof, without regard to any
subsequent remeasurement of the Premises or the Building. If any
Operating Cost paid in one fiscal year relates to more than one fiscal
year, Landlord may proportionately allocate such Operating Cost among
the related fiscal years.
(iv) Books and Records. Landlord shall maintain
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books and records reflecting the Operating Costs and Taxes in
accordance with sound accounting and management practices. Tenant and
its certified public accountant shall have the right to inspect
Landlord's records at Landlord's office upon at least seventy-two (72)
hours' prior notice during normal business hours during the one
hundred twenty (120) days following the respective delivery of the
Operating Cost Report or the Tax Report. The results of any such
inspection shall be kept strictly confidential by Tenant and its
agents, and Tenant and its certified public accountant must agree
their contract for such services, to such confidentiality restrictions
and shall specifically agree that the results shall not be made
available to any other tenant of the Project. Unless Tenant sends to
Landlord any written exception to either such report within said one
hundred twenty (120) day period, such report shall be deemed final and
accepted by Tenant. Tenant shall pay the amount shown on both reports
in the manner prescribed in this Lease, whether or not Tenant takes
any such written exception, without any prejudice to such exception.
If Tenant makes a timely exception, Landlord shall cause its outside
certified public accountant or shall select and cause another firm
with at least five (5) years of experience in auditing the books and
records of commercial office
<PAGE>
projects to issue a final and conclusive resolution of Tenant's
exception. Tenant shall pay the cost of such certification unless
Landlord's original determination of annual Operating Costs or Taxes
in the aggregate overstated the amounts thereof by more than five
percent (5%).
(v) Miscellaneous. So long as Tenant is in default of any
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obligation under this Lease, Tenant shall nor be entitled to any
refund of any amount from Landlord. If this Lease is terminated for
any reason prior to the annual determination of Operating Cost Share
Rent or Tax Share Rent, either pay shall pay the full amount due to
the other within fifteen (15) days after Landlord's notice to Tenant
of the amount when it is determined. Landlord may commingle any
payments made with respect to Operating Cost Share Rent or Tax Share
Rent, without payment of interest.
3. CONSTRUCTION OF BUILDING SHELL. TENANT IMPROVEMENTS AND
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POSSESSION.
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A. Construction of Building Shell. Landlord, in its sole and
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absolute discretion, shall select a general contractor ("General
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Contractor") to construct the "Building Shell" (as defined below) for the
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Building in accordance with the final drawings, plans and specifications
(the "Final Plans") dated August 20, 1998 prepared by DES Architects
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("Architect"). As of the date hereof, Tenant has received and approved
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such Final Plans, Tenant may submit changes to the Final Plans for
Landlord's approval; provided that Landlord shall have no obligation to
approve such change request if it would (i) require a change to the permits
or approvals previously received by Landlord for the Project, (ii) cause a
material architectural modification to the Building Shell, or (iii) cause
any delay in the construction of any portion of the Project not to be
occupied by Tenant. The "Building Shell" shall mean the building structure,
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exterior walls, exterior glass, floor slab, roof, parking lot, parking lot
lighting, landscaping and the base for the monument sign for the Building
(the "Monument Sign"). As part of the construction of the Building
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Shell, Landlord shall also be responsible for bringing phone, gas,
electric, plumbing, fire and water service to the Building (i.e., stubbed
but not distributed), installing the main fire sprinkler trunks (i.e.,
installed but not distributed or "dropped"), and the pull section and meter
box for utilities. The base for the Monument Sign shall comply with
Landlord's Signage Standards attached hereto as Exhibit B). Landlord shall
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be responsible for all costs associated with the construction of the
Building Shell, including the design and permitting costs associated with
the Building Shell. The Building Shell does not include any elevators,
stairs, HVAC, roof screens or thermal insulation. In the event of any
conflict between the Preliminary Plans and/or Final Plans and the
definition of "Building Shell" contained herein, the parties agree that the
definitions contained in this Lease shall control any improvements made by
Landlord which do not constitute part of the "Building Shell" shall be
deemed to be part of the "Tenant Improvements".
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B. Construction of Tenant Improvements. Except as provided in
-----------------------------------
Section 3.C below, Landlord shall have no responsibility for the
construction of the Tenant Improvement. Tenant, at Tenant's sole cost and
expense (but subject to Section 3.C
<PAGE>
below), shall cause the Tenant Improvements to be constructed within the
Building in accordance with the "Tenant Improvement Agreement" attached
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hereto as Exhibit C and the "Tenant Improvement Guidelines", attached
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hereto as Exhibit D. Commencing on the "Access Date" (as defined in the
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Tenant Improvement Agreement, Tenant shall be granted access to the
Premises to commence construction of the Tenant Improvements Landlord
agrees that Tenant may choose to not construct the interior Tenant
Improvements all at once (i.e., Tenant may choose to perform certain
interior Tenant Improvements within the Premises at a later date, subject
to the limitations set forth in Section 3.C below).
C. Tenant Improvement Allowance. Landlord shall provide the
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following "Tenant Improvement Allowance" in connection with the construction of
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the Tenant Improvements on the terms and conditions set forth below. All of the
Tenant Improvement Allowance must be used on or prior to September 30, 1999 and
Landlord shall have no obligation to make any portion of the Tenant Improvement
Allowance available to Tenant after such date. The Tenant Improvement Allowance
shall be applied by Landlord against the costs and expenses incurred in
connection with the performance of the Tenant Improvement work, including
without limitation, the design, permitting, procurement of supplies and
materials, construction and installation of the Tenant Improvements.
(i) First Level Tenant Improvement Allowance. Included in
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the Base Rent payable hereunder, Landlord shall provide up to
$1,083,060.00 (i.e., $20.00 per square foot of the Building) (the
"First Level Tenant Improvement Allowance").
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(ii) Second Level Tenant Improvement Allowance. A second
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level Tenant Improvement Allowance ("Second Level Tenant Improvement
-------------------------------
Allowance") of up to $433,224.00 (i.e., $8.00 per square foot of the
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Building) shall be also made available by Landlord to Tenant for the
construction of the Tenant Improvements; provided that for each dollar
($1.00) of the Second Level Tenant Improvement Allowance used by
Landlord for the Tenant Improvements, the monthly Base Rent payable
hereunder shall be increased by $0.0166 per square foot per month.
Thus, if all of the Second Level Tenant Improvement Allowance is used,
the initial monthly Base Rent payable hereunder would be increased by
$7,191.52 (i.e., $433,224.00 x $0.0166/sq.ft.). In the event any
portion of the Second Level Tenant Improvement Allowance is used,
Landlord and Tenant agree to execute an amendment to this Lease to
increase the amount of Base Rent payable hereunder in the manner
described above and at such time Tenant shall be required to pay to
Landlord in a single cash lump sum all Base Rent increases for those
months which preceded the date of such amendment.
D. Tenant's Possession/Condition of Premises and Project.
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Tenant's taking possession of any portion of the Premises shall be
conclusive evidence that the Premises and Project were in good order,
repair and condition, subject only to those "punch list items" noted in
writing to Landlord within the thirty (30) day period immediately following
the Commencement Date, and to latent construction defects noted
<PAGE>
in writing to Landlord within the twelve (12) month period immediately
following the Commencement Date. Landlord shall correct any punch list
items and/or latent construction defects which are timely noted by Tenant
in writing to Landlord as soon as commercially reasonable following
Landlord's receipt of Tenant's written notice regarding the same.
4. SERVICES AND UTILITIES. Tenant shall promptly pay, as the same
----------------------
become due, all charges for water, gas, electricity, telephone, sewer service,
waste pick-up and any other utilities, materials and services furnished directly
to or used by Tenant on or about the Premises during the Term, including without
limitation, (i) meter, use and/or connection fees, hook-up fees, or standby fees
(excluding any connection fees or hook-up fees which relate to making the
existing electrical, gas, and water service available to the Premises as of the
Commencement Date), and (ii) penalties for discontinued interrupted service. If
any utility service is not separately metered to the Premises, then Tenant shall
pay its pro rata share of the cost of such utility service with all others
served by the service not separately metered. However, if Landlord reasonably
determines that Tenant is using a disproportionate amount of any utility service
not separately metered. then Landlord at its election may (i) periodically
charge Tenant, as Additional Rent, a sum equal to Landlord's reasonable estimate
of the cost of Tenant's excess use of such utility service, or (ii) install, at
Tenant's expense, a separate meter to measure the utility service supplied to
the Premises. Any interruption or cessation of utilities resulting from any
causes, including any entry for repairs pursuant to this Lease, and any
renovation, redecoration or rehabilitation of any area of the Project shall not
render Landlord liable for damages to either person or property or for
interruption or loss to Tenant's business, nor be construed as an eviction of
Tenant, nor work an abatement of any portion of Rent, nor relieve Tenant from
fulfillment of any covenant or agreement hereof; provided, however, in the event
that an interruption of the Project services causes the Premises (or any portion
thereof) to be untenantable for a period of at least five (5) consecutive
business days, and such interruption was caused by the negligence or willful
misconduct of Landlord or its agents, employees or contractors, then monthly
Rent shall be proportionately abated for such untenantable portion of the
Premises.
5. ALTERATIONS.
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A. Landlord's Consent and Conditions. Tenant shall not
---------------------------------
make any improvements or alterations to the Premises (the "Work") without in
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each instance submitting plans and specifications for the Work to Landlord and
obtaining Landlord's prior written consent, unless (a) the cost thereof is less
than $20.000, (b) such Work does not impact the base structural components or
systems of the Building, (c) such Work will not impact any other tenant's
premises, and (d) such Work is not visible from outside the Premises. However,
even if Landlord's prior written consent is not required Tenant shall provide
Landlord with prior written notice at least five (5) days in advance of
commencing the Work so that Landlord may post and record a notice of
nonresponsibility or other notices deemed appropriate before the commencement or
such Work. Tenant shall pay Landlord's actual out-of-pocket costs incurred, if
any, for the review of all of the plans and all other items submitted by Tenant.
<PAGE>
Tenant shall pay for the cost of all Work, including the cost of any
and all approvals, permits, fees and other charges which may be required as a
condition of performing such Work.
The following requirements shall apply to all Work:
(i) Prior to commencement, Tenant shall furnish to
Landlord building permits, certificates of insurance satisfactory to
Landlord, and for any Work costing in excess of $20.000, at Landlord's
request, security for payment of all costs.
(ii) Tenant shall perform all Work so as to maintain peace
and harmony among other contractors serving the Project and shall
avoid interference with other work to be performed or services to be
rendered in the Project.
(iii) The Work shall be performed in a good and workmanlike
manner, meeting the standard for construction and quality of materials
in the Building, and shall comply with all insurance requirements and
all applicable governmental laws, ordinances and regulations
("Governmental Requirements").
-------------------------
(iv) Tenant shall perform all Work so as to minimize or
prevent disruption to other tenants, and Tenant shall comply with all
reasonable requests of Landlord in response to complaints from other
tenants.
(v) Tenant shall perform all Work in compliance with any
reasonable "Policies, Rules and Procedures for Construction Projects"
which may be in effect at the time the Work is performed so long as
Tenant has received written notice of the same at the time Landlord
gives its consent to the Work.
(vi) Tenant shall permit Landlord to supervise all Work.
Landlord may charge a supervisory fee not to exceed fifteen percent
(15%) of labor, material, and all other costs of the Work, if
Landlord's employees or contractors perform the Work.
(vii) Upon completion, Tenant shall furnish Landlord with
contractor's affidavits and full and final statutory waivers of liens,
as-built plans and specifications, and receipted bills covering all
labor and materials, and all other close-out documentation related to
the Work, including any other information required under any
"Policies, Rules and Procedures for Construction Projects" which may
be in effect at such time.
B. Damage to Systems. If any part of the mechanical,
-----------------
electrical or other systems in the Premises (e.g., HVAC, life safety or
automatic fire extinguisher/sprinkler system) shall be damaged during the
performance of the Work, Tenant shall promptly notify Landlord, and
Landlord shall repair such damage at Tenant's expense, but only to the
extent (i) such damage was not caused by Landlord or Landlord's employees,
agents or contractors, or (ii) such costs are not covered by insurance
carried by Landlord or Tenant pursuant to Section 9). Landlord may also at
any reasonable time make any repairs or alterations which Landlord deems
necessary for the safety or protection of the Project, or which Landlord is
required to make by any court or pursuant to any
<PAGE>
Governmental Requirement. The cost of any repairs made by Landlord on
account of Tenant's default, or on account of the misuse or neglect by
Tenant or its invitees, contractors or agents anywhere in the Project,
shall become Additional Rent payable by Tenant on demand.
C. No Liens. Tenant has no authority to cause or permit any
--------
lien or encumbrance of any kind to affect Landlord's interest in the
Project; any such lien or encumbrance shall attach to Tenant's interest
only. If any mechanic's lien shall be filed or claim of lien made for work
or materials furnished to Tenant, then Tenant shall at its expense within
ten (10) days after receipt of written notice from Landlord either
discharge or contest the lien or claim. If Tenant contests the lien or
claim, then Tenant shall (i) within such ten (10) day period, provide
Landlord adequate security for the lien or claim, (ii) contest the lien or
claim in good faith by appropriate proceedings that operate to stay its
enforcement, and (iii) pay promptly any final adverse judgment entered in
any such proceeding. If Tenant does not comply with these requirements,
Landlord may discharge the lien or claim, and the amount paid, as well as
attorney's fees and other expenses incurred by Landlord, shall become
Additional Rent payable by Tenant on demand.
D. Ownership of Improvements. All Work as defined in this
-------------------------
Section 5, including partitions, hardware, equipment, machinery, and all
other improvements installed or constructed in the Premises by Tenant
(collectively, "Tenant's Property"), shall (i) remain Tenant's legal
-----------------
property during shall (i) remain Tenant's legal property during the Term of
this Lease and shall be insured solely by Tenant pursuant to Section 8C(2),
and become Landlord's property upon the termination of this Lease without
compensation to Tenant (with the exception of any trade fixtures,
furniture, moveable equipment and other personal property which shall
remain Tenant's legal property and shall be removed by Tenant at the end of
the Term or earlier termination of the Lease pursuant to Section 5.E
below), and (ii) at Landlord's election (which shall be made at the time
Landlord gives its consent to the performance of such construction or
installation work, including the Tenant Improvements), Landlord may require
that Tenant's Property either (a) be surrendered to Landlord with the
Premises at the termination of the Lease or of Tenant's right to
possession, or (b) be removed in accordance with Subsection 5E below.
E. Removal Upon Termination. Upon the termination of this
------------------------
Lease or Tenant's right of possession Tenant shall remove from the Premises
and Project its trade fixtures, furniture, moveable equipment and other
personal property, any improvements and Tenant's Property which Landlord
has elected to be removed by Tenant pursuant to Section 5D, and any
improvements by Tenant to any portion of the Project other than the
Premises. Unless otherwise specified by Landlord at the time Landlord
approves the plans for the Tenant Improvements, Tenant shall not be
required to remove any of the initial Tenant Improvements constructed
within the Premises pursuant to Exhibit C. Tenant shall repair all damage
caused by the installation or removal of the foregoing items. If Tenant
does not timely remove such property, then Tenant shall be conclusively
presumed to have, at Landlord's election (i) conveyed such property to
Landlord without compensation or (ii) abandoned such property, and Landlord
may dispose of or score any part thereof in any manner at Tenant's sole
cost, without waiving Landlord's right to
<PAGE>
claim from Tenant all expenses arising out of Tenant's failure to remove
the property, and without liability to Tenant or any other person. Landlord
shall have no duty to be a bailee of any such personal property. If
Landlord elects abandonment. Tenant shall pay to Landlord, upon demand, any
expenses incurred for disposition.
6. USE OF PREMISES.
---------------
A. Limitation on Use. Tenant shall use the Premises only for
-----------------
the Permitted Use stated in the Schedule. Tenant shall not allow any use of
the Premises which will negatively affect the cost of coverage of
Landlord's insurance on the Project. Tenant shall not allow any inflammable
or explosive liquids or materials to be kept on the Premises. Tenant shall
not allow any use of the Premises which would cause the value or utility of
any part of the Premises to diminish or would unreasonably interfere with
any other tenant or with the operation of the Project by Landlord. Tenant
shall not permit any nuisance or waste upon the Premises, or allow any
offensive noise or odor in or around the Premises. At the end of each
business day, or more frequently if necessary, Tenant shall deposit all
garbage and other trash (excluding any inflammable, explosive and/or
hazardous materials) in trash bins or containers approved by Landlord in
locations designated by Landlord from time to time. If any governmental
authority shall deem the Premises to be a "place of public accommodation"
under the Americans with Disabilities Act or any other comparable law as a
result of Tenant's use, Tenant shall either modify its use to cause such
authority to rescind its designation or be responsible for any alterations,
structural or otherwise, required to be made to the Building or the
Premises under such laws; provided that Tenant shall have no obligation to
make any alterations to rectify any non-compliance matter which existed as
of the Commencement Date.
B. Signs. Tenant shall not place on any portion of the
-----
Premises any sign, placard, lettering, banner, displays or other
advertising or communicative material which is visible from the exterior of
the Building without the prior written approval of Landlord. Any approved
signs shall strictly conform to all Governmental Restrictions, any CC&R's
recorded against the Project, and any sign criteria which may be
established by Landlord and in effect at the time, and shall be installed
(and removed upon the Termination Date) at Tenant's expense. Tenant shall
maintain such signs in good condition and repair. Landlord current Signage
Standards are attached hereto as Exhibit B.
C. Parking. Tenant shall have the right to park in the
-------
Project's parking facilities in common with other tenants of the Project
upon terms and conditions, as may from time to time be established by
Landlord. Tenant agrees not to overburden the parking facilities and agrees
to cooperate with Landlord and other tenants in the Project in the use of
the parking facilities. Landlord reserves the right in its discretion to
determine whether the parking facilities are becoming crowded and to
allocate and assign parking spaces among Tenant and the other tenants in
the Project. Landlord shall not be liable to Tenant, nor shall this Lease
be affected, if any parking is impaired by moratorium, initiative,
referendum, law, ordinance, regulation or order passed, issued or made by
any governmental or quasi-governmental body.
<PAGE>
D. Prohibition Against Use of Roof and Structure of Building.
---------------------------------------------------------
During the period in which Tenant leases the entire space within the
Building, Tenant shall have access to the roof of the Building to perform
its obligations hereunder and for the installation, maintenance and repair
of a satellite dish. other telecommunications and/or HVAC equipment
(collectively "Roof Equipment") for Tenant's own use (i.e.. Tenant shall
not rent space on the roof to third parties). Tenant shall not install any
Roof Equipment on any of the roofs without the prior written consent of
Landlord, which consent shall not be unreasonably withheld. Tenant shall
obtain all necessary approvals at its sole expense and comply with all
applicable Governmental Requirements and any reasonable installation and
screening requirements imposed by Landlord. For instance, the Roof
Equipment shall be screened so that it is not visible from the public
streets surrounding the Project. Any work performed by Tenant on the roof
shall be subject to the terms and conditions set forth in Section 5 (i.e.,
the Alterations provision). Tenant shall be solely responsible for
repairing any damage to the roof and or Building caused by Tenant's
installation, operation or removal of such Roof Equipment. Upon the
termination of this Lease for any reason, or the expiration of this Lease
as to such Building, Tenant, at its sole cost and expense, shall at
Landlord's request, remove any or all of the Roof Equipment from me
Building(s) and repair any damage caused to the roof or Building during
such removal. Tenant's use of the roof (including any Roof Equipment
located thereon) shall not interfere with any other Tenant's use and
enjoyment of its space within the Project. Nothing herein shall limit
Landlord's rights under Section 11.N, or require Landlord to obtain
Tenant's consent prior to exercising such rights.
7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES. Tenant shall comply
--------------------------------------------
with all Governmental Requirements applying to its use of the Premises. Tenant
shall also comply with all reasonable rules for the Project which may be
established and amended from time to time by Landlord. The present rules and
regulations are contained in Exhibit E. Notwithstanding the foregoing, Tenant
shall not be responsible for making any capital or structural improvements to
the Premises, unless such improvements are required solely as a result of any
other alterations or improvements made by Tenant, or Tenant's particular use;
provided that such costs to the extent they are Included Capital Items may be
amortized and passed through to Tenant (and, if applicable, other tenants in the
Project) pursuant to the terms and conditions set forth in Section 2). Failure
by another tenant to comply with the rules or failure by Landlord to enforce
them shall not relieve Tenant of its obligation to comply with the rules or make
Landlord responsible to Tenant in any way. Landlord shall use reasonable efforts
to apply the rules and regulations uniformly with respect to Tenant and tenants
in the Project under leases containing rules and regulations similar to this
Lease. In the event of alterations and repairs performed by Tenant, Tenant shall
comply with the provisions of Section 5 of this Lease and any applicable
"Policies, Rules and Regulations for Construction Projects" which may be
established by Landlord and in effect at the time.
8. REPAIR AND MAINTENANCE.
----------------------
A. Landlord's Obligations. Landlord shall keep in good
----------------------
order, condition and repair (i) the structural parts of the Building, which
structural pans include only the foundation and subflooring of the Building
and the structural condition of the roof and
<PAGE>
the exterior walls of the Building (but excluding the interior surfaces of
exterior walls and exterior and interior of all windows, doors, ceiling and
plateglass which shall be maintained and repaired by Tenant), (ii) the roof
membrane, and (iii) the common areas of the Project. The costs incurred by
Landlord to perform the foregoing obligations to the extent they are deemed
"Operating Costs" (as defined in Section 2C) shall be passed through to
Tenant and other tenants in the Project, except that any damage to any of
the foregoing caused by the negligence or willful acts or omissions of
Tenant or of Tenant's agents, employees or invitees, or by reason of the
failure of Tenant to perform or comply with any terms of this Lease, or
caused by Tenant or Tenant's agents, employees or contractors during the
performance of the Work shall be repaired by Landlord, solely at Tenant's
expense, or at Landlord's election, such repairs shall be made by Tenant,
at Tenant's expense, with contractors approved by Landlord. It is an
express condition precedent to all obligations of Landlord to repair and
maintain that Tenant shall have notified Landlord of the need for such
repairs or maintenance. Tenant waives the provisions of Sections 1941 and
1942 of the California Civil Code and any similar or successor law
regarding Tenant's right to make repairs and deduct the expenses of such
repairs from the Rent due under this Lease.
B. Tenant's Obligations. Tenant shall at all times and at its
--------------------
own expense clean, keep and maintain in good order, condition and repair
every part of the Premises (including Tenant's fixtures and personal
property) which is not within Landlord's obligation pursuant to Section 8A.
Tenant's repair and maintenance obligations shall include, all plumbing and
sewage facilities within the Premises, fixtures, interior walls and
ceiling, floors, windows, doors, entrances, plateglass. showcases,
skylights, all electrical facilities and equipment, including lighting
fixtures, lamps, fans and any exhaust equipment and systems, electrical
motors and all other appliances and equipment of every kind and nature
located in, upon or about the Premises. Tenant shall also be responsible
for all pest control within the Premises. Tenant shall obtain HVAC systems
preventive maintenance contracts with bimonthly or monthly service in
accordance with manufacturer recommendations, which shall be subject to the
reasonable prior written approval of Landlord and paid for by Tenant, and
which shall provide for and include replacement of filters, oiling and
lubricating of machinery, parts replacement, adjustment of drive belts, oil
changes and other preventive maintenance, including annual maintenance of
duct work, interior unit drains and caulking at sheet metal, and recaulking
of jacks and vents on an annual basis. Tenant shall have the benefit of all
warranties available to Landlord regarding the equipment in such HVAC
systems. Alternatively, Landlord may elect to perform all repairs and
maintenance itself, at Tenant's expense, to the Building's mechanical,
electrical or other systems in the Premises (e.g., HVAC, life safety and
automatic fire extinguisher/sprinkler systems). Landlord may also perform
any maintenance or repairs itself, at Tenant's expense, to the extent
Tenant fails to perform such maintenance or repairs as required herein;
provided that Tenant has failed to complete such repairs within thirty (30)
days of receipt of Landlord's written notice regarding the same (or
commenced such repairs within such 30-day period and diligently thereafter
completed such repairs within sixty (60) days of the receipt of Landlord's
written notice if the nature of such repairs required more than thirty
days).
9. WAIVER OF CLAIMS: INDEMNIFICATION: INSURANCE.
--------------------------------------------
<PAGE>
A. Waiver of Claims. To the extent permitted by law, Tenant
----------------
waives any claims it may have against Landlord or its officers, directors,
employees or agents for business interruption or damage to property
sustained by Tenant as the result of any act or omission of Landlord, its
agents or employees. To the extent permitted by law, Landlord waives any
claims it may have against Tenant or its officers, directors, employees or
agents for loss of rents (other than Rent) or damage to properly sustained
by Landlord as the result of any act or omission of Tenant, its agents or
employees.
B. Indemnification. Tenant shall indemnify, defend and hold
---------------
harmless Landlord and its officers, directors, employees and agents against
any claim by any third party for injury to any person or damage to or loss
of any property occurring in the Project and arising from the use of the
Premises or from any other act, omission, negligence or intentional
misconduct of Tenant, its employees, agents, or invitees, excluding any
claims by third parties for injuries, damages or losses solely and
proximately caused by the negligence or intentional conduct of Landlord or
its agents or employees. Tenant's obligations under this section shall
survive the termination of this Lease.
Landlord shall indemnify, defend and hold harmless Tenant and its
officers, directors, employees and agents against any claim by any third party
for injury or damage to person or the Premises to the extent caused by the
negligence or intentional misconduct of Landlord or any of Landlord's employees
or agents. Landlord's obligations under this section shall survive the
termination of this Lease.
C. Tenant's Insurance. Tenant shall maintain insurance as
------------------
follows, with such other terms, coverages and insurers, as Landlord shall
reasonably require from time to time, provided such terms and conditions
shall not exceed those customarily required in similar buildings located in
the vicinity of the Building:
(i) Commercial general liability insurance, with (a)
contractual liability including the indemnification provisions contained in this
Lease, (b) a severability of interest endorsement, (c) limits of not less than
Two Million Dollars ($2,000.000) combined single limit per occurrence and not
less than Two Million Dollars ($2,000,000) in the aggregate for bodily injury,
sickness or death, and property damage, and umbrella coverage of not less than
Five Million Dollars ($5,000,000).
(ii) Property Insurance against "All Risks" of physical
loss covering the replacement cost of all improvements, fixtures and personal
property and business interruption. Tenant waives all rights of subrogation, and
Tenant's property insurance shall include a waiver of subrogation in favor of
Landlord.
(iii) Workers' compensation or similar insurance in form and
amounts required by law, and Employer's Liability with not less than the
following limits:
Each Accident $500,000
Disease--Policy Limit $500,000
Disease-Each Employee $500,000
<PAGE>
Such insurance shall contain a waiver of subrogation provision in favor of
Landlord and its agents.
Tenant's insurance shall be primary and not contributory to that
carried by Landlord, its agents, or mortgagee. Landlord, and if any, Landlord's
building manager or agent, mortgagee and ground lessor shall be named as
additional insureds as respects to insurance required of the Tenant in Section
9C(1). The company or companies writing any insurance which Tenant is required
to maintain under this Lease, as well as the form of such insurance, shall at
all times be subject to Landlord's reasonable approval, and any such company
shall be licensed to do business in the state in which the Building is located.
Such insurance companies shall have a A.M. Best rating of A VI or better.
(iv) Tenant shall cause any contractor of Tenant performing work
on the Premises to maintain insurance as follows, with such other terms,
coverages and insurers, as Landlord shall reasonably require from time to time:
(a) Commercial General Liability Insurance, including
contractor's liability coverage, contractual liability
coverage, completed operations coverage, broad form
property damage endorsement, and contractor's
protective liability coverage, to afford protection
with limits, for each occurrence, of not less than One
Million Dollars ($1,000,000) with respect to personal
injury, death or property damage.
(b) Workers' compensation or similar insurance in form
and amounts required by law, and Employer's Liability
with not less than the following limits:
Each Accident $500,000
Disease-Policy Limit $500,000
Disease-Each Employee $500,000
Such insurance shall contain a waiver of subrogation provision in
favor of Landlord and its agents.
Tenant's contractor's insurance shall be primary and not contributory
to that carried by Tenant, Landlord, their agents or mortgagees. Tenant and
Landlord, and if any, Landlord's building manager or agent, mortgagee or ground
lessor shall be named as additional insured on Tenant's contractor's insurance
policies.
D. Insurance Certificates. Tenant shall deliver to Landlord
----------------------
certificates evidence all required insurance no later than five (5) days
prior to the Commencement Date and each renewal date. Each certificate will
provide for thirty (30) days prior written notice or cancellation to
Landlord and Tenant.
E. Landlord's Insurance. Landlord shall maintain "All-Risk"
--------------------
property insurance at replacement cost. including loss of rents, on the
Building, and commercial general liability insurance policies covering the
common areas of the Project, each with such terms, coverages and conditions
as are normally carried by reasonably prudent
<PAGE>
owners of properties similar to the Project. With respect to property insurance.
Landlord and Tenant mutually waive all rights of subrogation, and the respective
"All-Risk" coverage property insurance policies carried by Landlord and Tenant
shall contain enforceable waiver of subrogation endorsements.
10. FIRE AND OTHER CASUALTY.
-----------------------
A. Termination. If a fire or other casualty causes damage to
-----------
the Building or the Premises, and sufficient insurance proceeds will be
available to Landlord to cover the cost of any restoration to the Building and
the Premises, Landlord shall engage a registered architect to certify within one
(1) month of the casualty to both Landlord and Tenant the amount of time needed
to restore the Building and the Premises to tenantability, using standard
working methods without the payment of overtime and other premiums. If the time
needed exceeds nine (9) months from the date of the casualty, or two (2) months
from the date of the casualty if the restoration would begin during the last
twelve (12) months of the Lease, then in the case of the Premises, either
Landlord or Tenant may terminate this Lease, and in the case of the Building
(during any period in which Tenant does not lease the entire Building), Landlord
may terminate this Lease, by notice to the other party within ten (10) days
after the notifying party's receipt of the architect's certificate. If
sufficient insurance proceeds will not be available to Landlord to cover the
cost of any restoration to the Building or the Premises and the cost of such
restoration will exceed $350,000, then Landlord may terminate this Lease by
written notice to Tenant. Any termination pursuant to this Section 10A shall be
effective thirty (30) days from the date of such termination notice and Rent
shall be paid by Tenant to that date. with an abatement for any portion of the
Premises which has been untenantable after the casualty.
B. Restoration. If a casualty causes damage to the Building or
-----------
the Premises but this Lease is not terminated for any reason, then subject to
the rights of any mortgagees or ground lessors. Landlord shall obtain the
applicable insurance proceeds and diligently restore the Building and the
Premises subject to current Governmental Requirements. Landlord's obligation,
should it elect or be obligated to repair or rebuild, shall be limited to the
Building Shell and interior improvements substantially similar to the initial
Tenant Improvements; provided in no event shall Landlord have any obligation to
incur more than $25.00 per rentable square foot for such interior improvements.
Tenant shall, at Tenant's expense, replace or fully repair its damaged
improvements (including any Tenant Improvements in excess of $25.00 per rentable
square foot), personal property and fixtures. Rent shall be abated on a per diem
basis during the restoration for any portion of the Premises which is
untenantable, except to the extent that the casualty was caused by the
negligence or intentional misconduct of Tenant, its agents or employees (unless
such rent loss is covered by Landlord's third party insurance coverage). Tenant
shall not be entitled to any compensation or damages from Landlord for loss of
the use of the Premises, damage to Tenant's personal property and trade fixtures
or any inconvenience occasioned by such damage, repair or restoration. Tenant
hereby waives the provisions of Section 1932, Subdivision 2, and Section 1933,
<PAGE>
Subdivision 4, of the California Civil Code, and the provisions of any
similar law hereinafter enacted.
11. EMINENT DOMAIN. If a part of the Project is taken by eminent
--------------
domain or deed in lieu thereof which is so substantial that the Premises cannot
reasonably be used by Tenant for the operation of its business, then either
party may terminate this Lease effective as of the date of the taking. If any
substantial opinion of the Project is taken without affecting the Premises, then
Landlord may terminate this Lease as of the date of such taking. Rent shall
abate from the date of the taking in proportion to any part of the Premises
taken. The entire award for a taking of any kind shall be paid to Landlord, and
Tenant shall have no right to share in the award; provided, however, that
nothing contained herein shall be deemed to give Landlord any interest in or
require Tenant to assign to Landlord any separate award made to Tenant for the
taking of Tenant's personal property and trade fixtures, or its relocation
costs. All obligations accrued to the date of the taking shall be performed by
the party liable to perform said obligations as set forth herein.
12. RIGHTS RESERVED TO LANDLORD. Landlord may exercise at any time
---------------------------
any of the following rights respecting the operation of the Project without
liability to Tenant of any kind:
A. Name. To change the name of all or any of the
----
Buildings or the Project, or the street address of the Buildings or the
suite number(s) of the Premises. Notwithstanding the foregoing. Landlord
agrees that Tenant shall have the right to change the name of the Project
during any period in which Tenant leases all of the Project Buildings
(including a binding obligation to lease those Project Buildings which have
yet to be built). The name chosen by Tenant shall be subject to Landlord's
reasonable approval and must contain Tenant's name in it.
B. Signs. To install, modify and/or maintain any signs on
-----
the exterior and in the interior of the Buildings or on the Project, and to
approve at its sole discretion, prior to installation, any of Tenant's
signs in the Premises visible from the common areas or the exterior of the
Building.
C. Window Treatments. To approve, at its discretion, prior
-----------------
to installation, any shades, blinds, ventilators or window treatments of
any kind, as well as any lighting within the Premises that may be visible
from the exterior of the Building or any interior common area.
D. Keys. To retain and use at any time passkeys to enter
----
the Premises or any door within the Premises. Tenant shall not alter or add
any lock or bolt.
E. Access. To have access to the Premises with twenty
------
four hour prior notice (except in the case of an emergency in which case
Landlord shall have the right to immediate access) to inspect the Premises,
and to perform its obligations, or make repairs. alterations, additions or
improvements, as permitted by this Lease.
<PAGE>
F. Preparation for Reoccupancy. To decorate, remodel,
---------------------------
repair, alter or otherwise prepare the Premises for reoccupancy at any time
after Tenant abandons the Premises, without relieving Tenant of any
obligation to pay Rent.
G. Heavy Articles. To approve the weight, size. placement
--------------
and time and manner of movement within the Building of any safe, central
filing system or other heavy article of Tenant's property. Tenant shall
move its property entirely at its own risk.
H. Show Premises. To show the Premises to prospective
-------------
purchasers, tenants, brokers, lenders, mortgagees, investors, rating
agencies or others at any reasonable time, provided that Landlord gives at
least 24 hours prior notice to Tenant and does not materially interfere
with Tenant's use of the Premises.
I. Relocation of Tenant. Intentionally omitted.
--------------------
J. Use of Lockbox. To designate a lockbox collection agent
--------------
for collections of amounts due Landlord. In that case, the date of payment
of Rent or other sums shall be the date of the agent's receipt of such
payment or the date of actual collection if payment is made in the form of
a negotiable instrument thereafter dishonored upon presentment. However, in
the event of any monetary default beyond any applicable cure period,
Landlord may reject any payment for all purposes as of the date of receipt
or actual collection by mailing to Tenant within 21 days after such receipt
or collection a check equal to the amount sent by Tenant.
K. Repairs and Alterations. With reasonable prior notice
-----------------------
to Tenant, to make repairs or alterations to the Project and in doing so
transport any required material through the Premises, to close entrances,
doors, corridors, elevators and other facilities in the Project, to open
any ceiling in the Premises, or to temporarily suspend services or use of
common areas in the Building. Landlord may perform any such repairs or
alterations during ordinary business hours, except that Tenant may require
any work in the Premises to be done after business hours if Tenant pays
Landlord for overtime and any other expenses incurred. Landlord may do or
permit any work on any nearby building, land, street, alley or way.
L. Landlord's Agents. If Tenant is in default under this
-----------------
Lease, possession of Tenant's funds or negotiation of Tenant's negotiable
instrument by any of Landlord's agents shall not waive any breach by Tenant
or any remedies of Landlord under this Lease.
M. Building Services. To install, use and maintain through
-----------------
the Premises, pipes, conduits, wires and ducts serving the Building,
provided that such installation, use and maintenance does not unreasonably
interfere with Tenant's use of the Premises.
N. Use of Roof. To permit Landlord (or any entity selected
-----------
by Landlord) to install, operate, maintain and repair any satellite dish,
antennae, equipment, or other facility on the roof of the Building or to
use the roof of the Building in any other manner, provided that such
installation, operation, maintenance, repair or use does not unreasonably
interfere with Tenant's use of or access to the Premises.
<PAGE>
O. Other Actions. To take any other action which Landlord
-------------
deems reasonable in connection with the operation, maintenance or
preservation of the Building and the Project.
13. TENANT'S DEFAULT. Any of the following shall constitute a default
----------------
by Tenant:
A. Rent Default. Tenant fails to pay any Rent within five
------------
(5) days after notice that such payment was not paid when due, provided
that Tenant acknowledges that such notice shall be in lieu of and not in
addition to any notice required to be given by Landlord to commence an
unlawful detainer action (or similar eviction proceeding) under the then
applicable law;
B. Assignment/Sublease or Hazardous Substances Default.
---------------------------------------------------
Tenant defaults in its obligations under Section 18 Assignment and Sublease
or Section 29 Hazardous Substances;
C. Other Performance Default. Tenant fails to perform any
-------------------------
other obligation to Landlord under this Lease, and this failure continues
for thirty (30) days after written notice from Landlord, except that if
Tenant begins to cure its failure within the thirty (30) day period but
cannot reasonably complete its cure within such period, then, so long as
Tenant continues to diligently attempt to cure its failure, the thirty (30)
day period shall be extended to sixty (60) days. or such lesser period as
is reasonably necessary to complete the cure;
D. Credit Default. One of the following credit defaults
--------------
occurs:
(i) Tenant commences any proceeding under any
law relating to bankruptcy, insolvency, reorganization or relief of
debts, or seeks appointment of a receiver, trustee, custodian or other
similar official for the Tenant or for any substantial part of its
property, or any such proceeding is commenced against Tenant and
either remains undismissed for a period of thirty (30) days or results
in the entry of an order for relief against Tenant which is not fully
stayed within seven (7) days after entry;
(ii) Tenant becomes insolvent or bankrupt, does
not generally pay its debts as they become due, or admits in writing
its inability to pay its debts, or makes a general assignment for the
benefit of creditors;
(iii) Any third party obtains a levy or attachment
under process of law against Tenant's leasehold interest; and
<PAGE>
E. Vacation or Abandonment Default. Tenant vacates or
-------------------------------
abandons the Premises.
14. LANDLORD REMEDIES. Upon a default. Landlord shall have the
-----------------
following remedies, in addition to all other rights and remedies provided by law
or otherwise provided in this Lease, to which Landlord may resort cumulatively
or in the alternative:
A. Termination of Lease or Possession. If Tenant defaults,
----------------------------------
Landlord may elect by notice to Tenant either to terminate this Lease or to
terminate Tenant's possession of the Premises without terminating this
Lease. In either case, Tenant shall immediately vacate the Premises and
deliver possession to Landlord, and Landlord may repossess the Premises and
may, at Tenant's sole cost, remove any of Tenant's signs and any of its
other property, without relinquishing its right to receive Rent or any
other right against Tenant. In the latter case, this Lease shall continue
in full force and effect as long as Landlord does not terminate this Lease,
and Landlord shall have the right to collect Rent when due.
B. Possession Termination Damages. If Landlord elects to
------------------------------
terminate Tenant's possession without terminating this Lease and Landlord
takes possession of the Premises itself, then Landlord may relet for
Tenant's account all or any portion of the Premises for such rent, length
of time and other terms as Landlord in its sole discretion shall determine,
without any obligation to do so prior to renting other vacant areas in the
Building. Tenant shall be liable immediately to Landlord for all costs
Landlord incurs in reletting the Premises or any part thereof, including,
without limitation, broker's commissions, expenses of cleaning and
redecorating the Premises required by the reletting and like costs. Tenant
shall pay to Landlord the Rent and other sums due under this Lease on the
date the Rent is due, less the rent and other sums received by Landlord
from any releasing of the Premises. No act by Landlord other than giving
written notice to Tenant shall terminate this Lease. Acts of maintenance,
efforts to relet the Premises or the appointment of a receiver on
Landlord's initiative to protect Landlord's interest under this Lease shall
not constitute a termination of Tenant's right to possession.
C. Lease Termination Damages. If Landlord elects to
-------------------------
terminate this Lease, then this Lease shall terminate on the date for
termination set forth in such notice. Tenant shall immediately vacate the
Premises and deliver possession to Landlord, and Landlord may repossess the
Premises and may, at Tenant's sole cost, remove any of Tenant's signs and
any of its other property, without relinquishing its right to receive Rent
or any other right against Tenant. On termination, Landlord has the right
to recover from Tenant as damages:
(i) The worth at the time of award of unpaid
Rent and other sums due and payable which had been earned at the time
of termination; plus
(ii) The worth at the time of award of the
amount by which the unpaid Rent and other sums due and payable which
after termination until the time of award exceeds the amount of such
Rent loss that Tenant proves could have been reasonably avoided; plus
<PAGE>
(iii) The worth at the time of award of the
amount by which the unpaid Rent and other sums due and payable for the
balance of the Term after the time of award exceeds the amount of such
Rent loss that Tenant proves could be reasonably avoided; plus
(iv) Any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure
to perform Tenant's obligations under this Lease, or which, in the
ordinary course of things, would be likely to result therefrom,
including, without limitation, any costs or expenses incurred by
Landlord: (i) in retaking possession of the Premises; (ii) in
maintaining, repairing, preserving, restoring, replacing, cleaning,
altering or rehabilitating the Premises or any portion thereof,
including such acts for reletting to a new tenant or tenants; (iii)
for leasing commissions; or (iv) for any other costs necessary or
appropriate to relet the Premises; plus
(v) At Landlord's election, such other amounts
in addition to or in lieu of the foregoing as may be permitted from
time to time by the laws of the State of California.
The "worth at the time of award" of the amounts referred to in
Sections 14C(1) and 14C(2) is computed by allowing interest at the maximum rate
permitted by law on the unpaid rent and other sums due and payable from the
termination date through the date of award. The "worth at the time of award" of
the amount referred to in Section 14C(3) is 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 %). Tenant waives redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or
under any other present or future law, in the event Tenant is evicted or
Landlord takes possession of the Premises by reason of any default of Tenant
hereunder.
D. Landlord's Remedies Cumulative. All of Landlord's remedies
------------------------------
under this Lease shall be in addition to all other remedies Landlord may
have at law or in equity. Waiver by either party of any breach of any
obligation by the other party shall be effective only if it is in writing,
and shall not be deemed a waiver of any other breach, or any subsequent
breach of the same obligation. Landlord's acceptance of payment by Tenant
shall not constitute a waiver of any breach by Tenant, and if the
acceptance occurs after Landlord's notice to Tenant, or termination of the
Lease or of Tenant's right to possession, the acceptance shall not affect
such notice or termination. Acceptance of payment by Landlord after
commencement of a legal proceeding or final judgment shall not affect such
proceeding or judgment. Landlord may advance such monies and take such
other actions for Tenant's account as reasonably may be required to cure or
mitigate any default by Tenant. Tenant shall immediately reimburse Landlord
for any such advance, and such sums shall bear interest at the default
interest rate until paid.
E. WAIVER OF TRIAL BY JURY. EACH PARTY WAIVES TRIAL BY JURY IN
-----------------------
THE EVENT OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH
THIS LEASE. EACH PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN
CONNECTION WITH THIS LEASE IN A FEDERAL OR STATE COURT LOCATED IN
CALIFORNIA, CONSENTS TO THE
<PAGE>
JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING
TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER VENUE OR
INCONVENIENT FORUM.
15. SURRENDER. Upon the expiration or earlier termination of this
---------
Lease for any reason. Tenant shall surrender the Premises to Landlord in its
condition existing as of the Commencement Date, normal wear and tear and damage
by fire or other casualty excepted, with all interior walls repaired if damaged,
all carpets vacuumed, all broken, marred or nonconforming acoustical ceiling
tiles replaced, all windows washed, the plumbing and electrical systems and
lighting in good order and repair, including replacement of any burned out or
broken light bulb or ballasts, the HVAC equipment serviced and repaired by a
reputable and licensed service firm acceptable to Landlord, and all floors
cleaned, all to the reasonable satisfaction of Landlord. Tenant shall remove
from the Premises all Tenant's personal property and all of Tenant's alterations
required to be removed pursuant to Section 5E, and restore the Premises to its
condition prior to their installation. If Tenant fails to remove any alterations
and/or Tenant's personal property, and such failure continues after the
termination of this Lease, Landlord may retain or dispose of such property and
all rights of Tenant with respect to it shall cease, or Landlord may place all
or any portion of such property in public storage for Tenant's account. Tenant
shall be liable to Landlord for costs of removal of any such alterations and
Tenant's personal property and storage and transportation costs of same, and the
cost of repairing and restoring the Premises, together with interest at the
Interest Rate from the date of expenditure by Landlord. If the Premises are not
so surrendered at the termination of this Lease, Tenant shall indemnify Landlord
against all loss or liability, including attorneys' fees and costs, resulting
from delay by Tenant in so surrendering the Premises.
16. HOLDOVER. Tenant shall have no right to holdover possession of
--------
the Premises after the expiration or termination of this Lease without
Landlord's prior written consent which Landlord may withhold in its sole and
absolute discretion. If, however, Tenant retains possession of any part of the
Premises after the Term, Tenant shall become a month-to-month tenant for the
entire Premises upon all of the terms of this Lease as might be applicable to
such month-to-month tenancy, except that Tenant shall pay all of Base Rent at
175% the rate in effect immediately prior to such holdover, computed on a
monthly basis for each full or partial month Tenant remains in possession.
Tenant shall also pay Landlord all of Landlord's direct and consequential
damages resulting from Tenant's holdover. No acceptance of Rent or other
payments by Landlord under these holdover provisions shall operate as a waiver
of Landlord's right to regain possession or any other of Landlord's remedies.
17. SUBORDINATION TO GROUND LEASES AND MORTGAGES.
--------------------------------------------
A. Subordination. This Lease shall be subordinate to any
-------------
present or future ground lease or mortgage respecting the Project, and any
amendments to such ground lease or mortgage, at the election of the ground
lessor or mortgagee as the case may be, effected by notice to Tenant in the
manner provided in this Lease. The subordination shall be effective upon
such notice, but at the request of Landlord or ground lessor or mortgagee.
Tenant shall within ten (10) days of the request, execute and deliver to
the requesting party any reasonable documents provided to evidence the
<PAGE>
subordination. Any mortgagee has the right, at its sole option, to
subordinate its mortgage to the terms of this Lease, without notice to, nor
the consent of Tenant. At any time that the Project is made subject to any
ground lease or mortgage. Landlord shall use commercially reasonable
efforts to cause the mortgagee or ground lessor to deliver to Tenant a
subordination non-disturbance agreement ("SNDA") reasonably acceptable to
----
Tenant, providing that so long as Tenant is not in default under this Lease
after the expiration of any applicable notice and cure periods, Tenant may
remain in possession of the Premises under the terms of this Lease, even if
the ground-lessor should terminate the ground lease or if the mortgagee or
its successor should acquire Landlord's title to the Project. Landlord
shall have no obligation to participate in or otherwise engage in any
negotiations regarding the SNDA. but if Landlord does so, at Tenant's
request, then Tenant shall pay Landlord's reasonable attorneys' fees
incurred in connection with such negotiations within thirty (30) days of
Tenant's receipt of an invoice therefor.
B. Termination of Ground Lease or Foreclosure of Mortgage.
------------------------------------------------------
If any ground lease is terminated or mortgage foreclosed or deed in lieu of
foreclosure given and the ground lessor, mortgagee, or purchaser at a
foreclosure sale shall thereby become the owner of the Project, Tenant
shall attorn to such ground lessor or mortgagee or purchaser without any
deduction or setoff by Tenant, and this Lease shall continue in effect as a
direct lease between Tenant and such ground lessor, mortgagee or purchaser.
The ground lessor or mortgagee or purchaser shall be liable only for the
performance of those obligations of Landlord which accrue during the time
such ground lessor or mortgagee or purchaser is the owner of the Project.
At the request of Landlord, ground lessor or mortgagee. Tenant shall
execute and deliver within ten (10) days of the request any document
furnished by the requesting party to evidence Tenant's agreement to attorn.
C. Security Deposit. Any ground lessor or mortgagee shall
----------------
be responsible for the rerun of any security deposit by Tenant only to the
extent the security deposit is received by such ground lessor or mortgagee.
D. Notice and Right to Cure. The Project is subject to
------------------------
any ground lease and mortgage identified with name and address of ground
lessor or mortgagee in Exhibit F to this Lease (as the same may be amended
---------
from time to time by written notice to Tenant). Tenant agrees to send by
registered or certified mail to any ground lessor or mortgagee identified
either in such Exhibit or in any later notice from Landlord to Tenant a
copy of any notice of default sent by Tenant to Landlord. If Landlord fails
to cure such default within the required time period under this Lease, but
ground lessor or mortgagee begins to cure, within ten (10) days after such
period and proceeds diligently to complete such cure, then ground lessor or
mortgagee shall have such additional time as is reasonably necessary to
complete such cure. including any time necessary to obtain possession if
possession is necessary to cure, and Tenant shall not begin to enforce its
remedies so long as the cure is being diligently pursued.
E. Definitions. As used in this Section 17, "mortgage"
-----------
shall include "trust deed" and "deed of trust", and "mortgagee" shall
include "trustee", "beneficiary'' and the mortgagee of any ground lessee,
and "ground lessor," "mortgagee," and
<PAGE>
"purchaser at a foreclosure sale" shall include, in each case, all of its
successors and assigns, however remote.
18. ASSIGNMENT AND SUBLEASE.
-----------------------
A. In General. Except in the case of a "Permitted
----------
Transfer" (as defined below), Tenant shall not, without the prior consent
of Landlord in each case, (i) make or allow any assignment or transfer, by
operation of law or otherwise, of any part of Tenant's interest in this
Lease, (ii) grant or allow any lien or encumbrance, by operation of law or
otherwise, upon any part of Tenant's interest in this Lease, (iii) sublet
any part of the Premises, or (iv) permit anyone other than Tenant and its
employees to occupy any part of the Premises. Tenant shall remain primarily
liable for all of its obligations under this Lease, notwithstanding any
assignment or transfer. No consent granted by Landlord shall be deemed to
be a consent to any subsequent assignment or transfer, lien or encumbrance,
sublease or occupancy. Tenant shall pay all of Landlord's attorneys' fees
(which shall not exceed $500.00, as may be adjusted for increases in CPI
during the Term, unless Tenant challenges such disapproval or conditional
approval) and other expenses incurred in connection with any consent
requested by Tenant or in reviewing any proposed assignment or subletting.
Any assignment or transfer, grant of lien or encumbrance, or sublease or
occupancy without Landlord's prior written consent shall be void. If Tenant
shall assign this Lease or sublet the Premises in its entirety to any
entity other than a Tenant Affiliate (as defined below), any rights of
Tenant to renew this Lease, extend the Term or to lease additional space in
the Project shall be extinguished thereby and will not be transferred to
the assignee or subtenant, all such rights being personal to the Tenant
named herein. Notwithstanding the foregoing, if no default on the part of
Tenant has occurred and is continuing (after notice and expiration of
applicable cure periods), Tenant may assign this Lease or sublet any
portion of the Premises (hereinafter collectively referred to as a
"Permitted Transfer") to (i) a parent or subsidiary of Tenant, or an entity
------------------
under common control with Tenant, (ii) an entity into which Tenant is
merged or consolidated, or (iii) an entity to which substantially all of
Tenant's assets are transferred (collectively, "Tenant Affiliate"), without
----------------
first obtaining Landlord's written consent and without regard to the
recapture right in Section 18E, if Tenant notifies Landlord at least ten
(10) business days prior to the Permitted Transfer and provides Landlord
with information satisfactory to Landlord in order to determine the net
worth both of the successor entity and of Tenant immediately prior to such
assignment, and showing the net worth of the successor to be at least equal
to the net worth of Tenant.
B. Landlord's Consent. Landlord will not unreasonably
------------------
withhold its consent to any proposed assignment or subletting. It shall be
reasonable for Landlord to withhold its consent to any assignment or
sublease if (i) Tenant is in default under this Lease beyond any applicable
cure period, (ii) the financial responsibility, nature of business, and
character of the proposed assignee or subtenant are not all reasonably
satisfactory to Landlord, (iii) in the reasonable judgment of Landlord the
purpose for which the assignee or subtenant intends to use the Premises (or
a portion thereof) is not reasonably consistent with the Other users for
the Building or Project, or are in violation of the terms of this Lease or
any other leases in the Project, or (iv) the proposed assignee
<PAGE>
or subtenant is a government entity. The foregoing shall not exclude any
other reasonable basis for Landlord to withhold its consent.
C. Procedure. Tenant shall notify Landlord of any
---------
proposed assignment or sublease at least fifteen (15) days prior to its
proposed effective date. The notice shall include the name and address of
the proposed assignee or subtenant, its corporate affiliates in the case of
a corporation and its partners in a case of a partnership, an execution
copy of the proposed assignment or sublease, and sufficient information to
permit Landlord to determine the financial responsibility and character of
the proposed assignee or subtenant. As a condition to any effective
assignment of this Lease, the assignee shall execute and deliver in form
satisfactory to Landlord at least fifteen (15) days prior to the effective
date of the assignment, an assumption of all of the obligations of Tenant
under this Lease. As a condition to any effective sublease, subtenant shall
execute and deliver in form satisfactory to Landlord at least fifteen (15)
days prior to the effective date of the sublease, an agreement to comply
with all of Tenant's obligations under this Lease, and at Landlord's
option, an agreement (except for the economic obligations which subtenant
will undertake directly to Tenant) to attorn to Landlord under the terms of
the sublease in the event this Lease terminates before the sublease
expires.
D. Change of Management or Ownership. Any transfer of the
---------------------------------
direct or indirect power to affect the management or policies of Tenant or
direct or indirect change in 25% or more of the ownership interest in
Tenant shall constitute an assignment of this Lease.
E. Excess Payments. If Tenant shall assign this Lease or
---------------
sublet any part of the Premises for consideration in excess of the pro-rata
portion of Rent applicable to the space subject to the assignment or
sublet, then Tenant shall pay to Landlord as Additional Rent 50% of any
such excess immediately upon receipt; provided that Tenant shall first be
entitled to recover the reasonable brokerage commissions, advertising,
legal fees and alteration costs actually incurred by Tenant in connection
with such assignment or sublet.
F. Recapture. Except in the case of Permitted Transfer,
---------
if Tenant proposes to assign this Lease or sublet all or any portion of the
Premises for the balance of the Term. Landlord may, by giving written
notice to Tenant within thirty (30) days after receipt of Tenant's notice
of assignment or subletting, terminate this Lease with respect to the space
described in Tenant's notice, as of the effective date of the proposed
assignment or sublease and all obligations under this Lease as to such
space shall expire except as to any obligations that expressly survive any
termination of this Lease.
19. CONVEYANCE BY LANDLORD. If Landlord shall at any time transfer
----------------------
its interest in the Project or this Lease, Landlord shall be released of any
obligations occurring after such transfer, except the obligation to return to
Tenant any security deposit not delivered to its transferee, and Tenant shall
look solely to Landlord's successors for performance of such obligations. This
Lease shall not be affected by any such transfer.
<PAGE>
20. ESTOPPEL CERTIFICATE. Each party shall, within ten (10) days of
--------------------
receiving a request from the other party, execute, acknowledge in recordable
form. and deliver to the other party or its designee a certificate stating,
subject to a specific statement of any applicable exceptions, that the Lease as
amended to date is in full force and effect, that the Tenant is paying Rent and
other charges on a current basis, and that to the best of the knowledge of the
certifying party, the other party has committed no uncured defaults and has no
offsets or claims. The certifying party may also be required to state the date
of commencement of payment of Rent, the Commencement Date, the Termination Date,
the Base Rent. the current Operating Cost Share Rent and Tax Share Rent
estimates, the status of any improvements required to be completed by Landlord,
the amount of any security deposit, and such other matters as may be reasonably
requested. Failure to deliver such statement within the time required shall be
conclusive evidence against the non-certifying party that this Lease, with any
amendments identified by the requesting party, is in full force and effect, that
there are no uncured defaults by the requesting party, that not more than one
month's Rent has been paid in advance, that the non-certifying party has not
paid any security deposit except as specified in the Lease, and that the non-
certifying party has no claims or offsets against the requesting party.
21. LEASE DEPOSIT. Tenant shall deposit with Landlord on the date
-------------
Tenant executes and delivers this Lease to Landlord the cash sums set forth in
the Schedule for both Prepaid Rent and Security Deposit, including any Letter of
Credit (collectively, the "Lease Deposit"). Notwithstanding the foregoing,
-------------
Landlord agrees that a portion of the Security Deposit not to exceed $422,393.00
may be in the form of a "Letter of Credit", provided that the Letter of Credit
----------------
shall (i) be in the form of an unconditional and irrevocable letter of credit
which is acceptable to Landlord, (ii) name Landlord as beneficiary, (iii)
expressly allow Landlord to draw upon it at any time from time to time by
delivering to the issuer written certification that Landlord is entitled to draw
thereunder as a result of Tenant's default hereunder. (iv) be drawable on an
FDIC-insured financial institution satisfactory to Landlord. and (v) be
redeemable in the state of California in one of the nine counties comprising the
San Francisco-Oakland-San Jose (the "Bay Area"). As of the Commencement Date,
--------
and at all times during the Term, the sum of the amount drawable under the
Letter of Credit and the cash portion of the Security Deposit held by Landlord
shall be equal or greater than the total amount of the Security Deposit as set
forth in the Schedule (i.e., $509,037.80). If Tenant does not provide Landlord
with a substitute Letter of Credit complying with all of the requirements hereof
at least thirty (30) days before the stated expiration date of the current
Letter of Credit, then Landlord shall have the right to draw upon the current
Letter of Credit and hold the funds drawn as part of the Security Deposit. In
the event Landlord notifies Tenant in writing that the bank which issued the
Letter of Credit has become financially unacceptable (e.g., the bank is under
investigation by governmental authorities, has filed bankruptcy or
reorganization proceedings, or has closed two or more of its branches within the
Bay Area), then Tenant shall have thirty (30) days to provide Landlord with a
substitute Letter of Credit complying with all of the requirements hereof. The
cash portion of the Security Deposit and the Letter of Credit are collectively
referred to herein as the "Security Deposit". In the event Tenant initially pays
----------------
the entire Security Deposit to Landlord in cash, then Landlord agrees after its
receives a Letter of Credit which satisfies the requirements set forth above to
promptly refund to Tenant an amount equal to the lesser of: (i) the amount of
the Letter of Credit, or (ii) $422,393.00.
<PAGE>
The Prepaid Rent shall be applied by Landlord against the first full month's
Base Rent payment obligation hereunder. The cash Security Deposit and the Letter
of Credit (collectively, the "Security Deposit") shall be held by Landlord
----------------
during the Term as security for the performance of all of Tenant's obligations
hereunder. If Tenant defaults under this Lease, Landlord may apply all or any
part of the Security Deposit for the payment of any Rent or other sum in
default, the repair of any damage to the Premises caused by Tenant or the
payment of any other amount which Landlord may spend or become obligated to
spend by reason of Tenant's default or to compensate Landlord for any other loss
or damage which Landlord may suffer by reason of Tenant's default to the full
extent permitted by law. Tenant hereby waives any restriction on the use or
application of the Security Deposit by Landlord as set forth in California Civil
Code Section 1950.7. To the extent any portion of the Security Deposit is used,
Tenant shall within five (5) days (ten (10) days in the case of the Letter of
Credit) after demand from Landlord restore the deposit to its full amount.
Landlord may keep the Security Deposit in its general funds and shall not be
required to pay interest to Tenant on the deposit amount. If Tenant shall
perform all of its obligations under this Lease and return the Premises to
Landlord at the end of the Term, Landlord shall return all of the remaining
Security Deposit to Tenant within thirty (30) days after the end of the Term.
The Security Deposit shall not serve as an advance payment of Rent or a measure
of Landlord's damages for any default under this Lease.
If Landlord transfers its interest in the Project or this Lease,
Landlord may transfer the Security Deposit to its transferee. Upon such
transfer, Landlord shall have no further obligation to return the Security
Deposit to Tenant, and Tenant's right to the return of the Security Deposit
shall apply solely against Landlord's transferee.
Notwithstanding the foregoing, Landlord shall return the Letter of
Credit to Tenant if Tenant can demonstrate to the reasonable satisfaction of
Landlord that (i) Tenant's net worth is in excess of Twenty Million Dollars
($20,000,000.00), and (ii) Tenant has had six (6) consecutive profitable
quarters (and thereafter the amount of the Security Deposit required to be
maintained by Tenant hereunder shall be reduced to $86,644.80)
22. FORCE MAJEURE. Neither party shall be in default under this
-------------
Lease to the extent such party is unable to perform any of its obligations on
account of any prevention, delay, stoppage due to strikes, lockouts, inclement
weather, labor disputes, inability to obtain labor, materials, fuels, energy or
reasonable substitutes therefor, governmental restrictions, regulations,
controls, actions or inaction, civil commotion, fire or other acts of God,
national emergency, or any other cause of any kind beyond the reasonable control
of such party (except financial inability) (collectively "Force Majeure").
23. TENANT'S PERSONAL PROPERTY AND TRADE FIXTURES. Intentionally
---------------------------------------------
omitted.
<PAGE>
24. NOTICES. All notices, consents, approvals and similar
-------
communications to be given by one party to the other under this Lease, shall be
given in writing, mailed or personally delivered as follows:
A. Landlord. To Landlord as follows:
--------
CarrAmenca Realty Corporation
1810 Gateway Drive, Suite 150
San Mateo, California 94404
Attn: Market Officer
with a copy to: CarrAmerica Realty Corporation
1850 K Street. N.W., Suite 500
Washington, D.C. 20006
Attention: Lease Administration
or to such other person at such other address as Landlord may designate by
notice to Tenant.
B. Tenant. To Tenant as follows:
------
Prior to the Commencement Date: Applied Fiber Optics, Inc.
46758 Lakeview Boulevard
Fremont, California 94538
Attention: Wayne Franklin, Director of
Operations
After the Commencement Date: Applied Fiber Optics, Inc.
46420 Fremont Boulevard
Fremont, California 94538
Attention: Wayne Franklin, Director of
Operations
or to such other person at such other address as Tenant may designate by notice
to Landlord.
Mailed notices shall be sent by United States certified or registered mail, or
by a reputable national overnight courier service, postage prepaid. Mailed
notices shall be deemed to have been given on the earlier of actual delivery or
three (3) business days after posting in the United States mail in the case of
registered or certified mail, and one business day in the case of overnight
courier.
25. QUIET POSSESSION. So long as Tenant shall perform all of its
----------------
obligations under this Lease, Tenant shall enjoy peaceful and quiet possession
of the Premises against any party claiming through the Landlord, subject to all
of the terms of this Lease.
<PAGE>
26. REAL ESTATE BROKER. Tenant represents to Landlord that Tenant has
------------------
not dealt with any real estate broker with respect to this Lease except for any
broker(s) listed in the Schedule, and no other broker is in any way entitled to
any broker's fee or other payment in connection with this Lease. Tenant shall
indemnify and defend Landlord against any claims by any other broker or third
party for any payment of any kind in connection with this Lease.
27. MISCELLANEOUS.
-------------
A. Successors and Assigns. Subject to the limits on
----------------------
Tenant's assignment contained in Section 18, the provisions of this Lease
shall be binding upon and inure to the benefit of all successors and
assigns of Landlord and Tenant.
B. Date Payments Are Due. Except for payments to be made
---------------------
by Tenant under this Lease which are due upon demand or which are due in
advance (such as Base Rent), Tenant shall pay to Landlord any amount for
which Landlord renders a Statement of account within thirty (30) days of
Tenant's receipt of Landlord's statement.
C. Meaning of "Landlord," "Re-Entry," "including" and
--------------------------------------------------
"Affiliate". The term "Landlord" means only the owner of the Project and
-----------
the lessor's interest in this Lease from time to time. The words "re-entry"
and "re-enter" are not restricted to their technical legal meaning. The
words "including" and similar words shall mean "without limitation." The
word "affiliate" shall mean a person or entity controlling, controlled by
or under common control with the applicable entity. "Control" shall mean
the power directly or indirectly, by contract or otherwise, to direct the
management and policies of the applicable entity.
D. Time of the Essence. Time is of the essence of each
-------------------
provision of this Lease.
E. No Option. This document shall not be effective for any
---------
purpose until it has been executed and delivered by both parties; execution
and delivery by one party shall not create any option or other right in the
other party.
F. Severability. The unenforceability of any provision of
------------
this Lease shall not affect any other provision.
G. Governing Law. This Lease shall be governed in all
-------------
respects by the laws of the state in which the Project is located, without
regard to the principles of conflicts of laws.
H. Lease Modification. Tenant agrees to modify this Lease
------------------
in any way requested by a mortgagee which does not cause increased expense
to Tenant or otherwise materially adversely affect Tenant's rights or
interests under this Lease.
I. No Oral Modification. No modification of this Lease
--------------------
shall be effective unless it is a written modification signed by both
parties.
<PAGE>
J. Landlord's Right to Cure. If Landlord breaches any of
------------------------
its obligations under this Lease, Tenant shall notify Landlord in writing
and shall take no action respecting such breach so long as Landlord
promptly begins to cure the breach and diligently pursues such cure to its
completion. Landlord may cure any default by Tenant; any reasonable
expenses incurred by Landlord to cure the default shall become Additional
Rent due from Tenant on demand by Landlord.
K. Captions. The captions used in this Lease shall have
--------
no effect on the construction of this Lease.
L. Authority. Landlord and Tenant each represents to the
---------
other that it has full power and authority to execute and perform this
Lease.
M. Landlord's Enforcement of Remedies. Landlord may
----------------------------------
enforce any of its remedies under this Lease either in its own name or
through an agent.
N. Entire Agreement. This Lease, together with all
----------------
Appendices, constitutes the entire agreement between the parties. No
representations or agreements of any kind have been made by either party
which are not contained in this Lease.
O. Landlord's Title. Landlord's title shall always be
----------------
paramount to the interest of the Tenant, and nothing in this Lease shall
empower Tenant to do anything which might in any way impair Landlord's
title.
P. Light and Air Rights. Landlord does not grant in this
--------------------
Lease any rights to light and air in connection with Project. Landlord
reserves to itself, the Land, the Building below the improved floor of each
floor of the Premises, the Building above the ceiling of each floor of the
Premises, the exterior of the Premises and the areas on the same floor
outside the Premises, along with the areas within the Premises required for
the installation and repair of utility lines and other items required to
serve other tenants of the Building.
Q. Singular and Plural. Wherever appropriate in this
-------------------
Lease, a singular term shall be construed to mean the plural where
necessary, and a plural term the singular. For example, if at any time two
parties shall constitute Landlord or Tenant, then the relevant term shall
refer to both parties together.
R. No Recording by Tenant. Tenant shall not record in any
----------------------
public records any memorandum or any portion of this Lease.
S. Exclusivity. Landlord does not grant to Tenant in this
-----------
Lease any exclusive right except the right to occupy its Premises.
T. No Construction Against Drafting Party. The rule of
--------------------------------------
construction that ambiguities are resolved against the drafting party shall
not apply to this Lease.
U. Survival. All obligations of Landlord and Tenant under
--------
this Lease shall survive the termination of this Lease.
<PAGE>
V. Rent Not Based on Income. No Rent or other payment in
------------------------
respect of the Premises shall be based in any way upon net income or
profits from the Premises. Tenant may not enter into or permit any sublease
or license or other agreement in connection with the Premises which
provides for a rental or other payment based on net income or profit.
W. Building Manager and Service Providers. Landlord may
--------------------------------------
perform any of its obligations under this Lease through its employees or
third parries hired by the Landlord.
X. Late Charge and Interest on Late Payments. Without
-----------------------------------------
limiting the provisions of Section 13A, if Tenant fails to pay any
installment of Rent or other charge to be paid by Tenant pursuant to this
Lease within five (5) business days after the same becomes due and payable,
then Tenant shall pay a late charge equal to the greater of five percent
(5%) of the amount of such payment or $250. In addition, interest shall be
paid by Tenant to Landlord on any late payments of Rent from the date due
until paid at the rate provided in Section 2D(2). Such late charge and
interest shall constitute Additional Rent due and payable by Tenant to
Landlord upon the date of payment of the delinquent payment referenced
above.
Y. Tenant's Financial Statements. Within ten (10) days
-----------------------------
after Landlord's written request therefor, Tenant shall deliver to Landlord
the current financial statements of Tenant, and financial statements of the
two (2) years prior to the current financial statements year, with an
opinion of a certified public accountant, including a balance sheet and
profit and loss statement for the most recent prior year, all prepared in
accordance with generally accepted accounting principles consistently
applied.
Z. Attorneys' Fees. If either party shall bring any action
---------------
or legal proceeding for damages for an alleged breach of any provision of
this Lease, to recover Rent or other sums due to terminate the tenancy of
the Premises or to enforce, protect or establish any term, condition or
covenant of this Lease or right of either party, the prevailing party shall
be entitled to recover, as a part of the action or proceedings, or in a
separate action brought for that purpose, reasonable attorneys' fees and
related court costs, including expert witness fees, as may be fixed by the
court or jury. The prevailing party shall be the party that secures a final
judgment in its favor.
28. UNRELATED BUSINESS INCOME. If Landlord is advised by its counsel
-------------------------
at any time that any part of the payments by Tenant to Landlord under this Lease
may be characterized as unrelated business income under the United States
Internal Revenue Code and its regulations, then Tenant shall enter into any
amendment proposed by Landlord to avoid such income, so long as the amendment
does not require Tenant to make more payments or accept fewer services from
Landlord, than this Lease provides.
29. HAZARDOUS SUBSTANCES.
--------------------
A. Prohibition Against Hazardous Substances. Tenant shall
----------------------------------------
not produce, store, use, discharge or dispose of, nor permit its agents,
employees or contractors to
<PAGE>
produce, store, use, discharge or dispose of any Hazardous Substances in or
near the Project unless Landlord has consented to such storage or use in
its sole discretion of both the particular Hazardous Substances and the
maximum quantities thereof to be stored or used on the Premises at any
time. Prior to the use of any Hazardous Substances (including any changes
to the previously approved list), Tenant shall provide Landlord with a list
of those Hazardous Substances (and the maximum quantities thereof) which
Tenant proposes to use, for Landlord's review and approval, which approval
shall not be unreasonably delayed or withheld. Any handling,
transportation, storage, treatment, disposal or use of any Hazardous
Substances in or about the Project by Tenant, its agents, employees,
contractors or invitees shall strictly comply with all applicable
Governmental Requirements. Tenant shall indemnify, defend and hold Landlord
harmless from and against any liabilities, losses, claims, damages,
penalties, fines, attorneys' fees and court costs, remediation costs,
investigation costs and any other expenses which result from or arise out
of the use, storage, treatment, transportation, release, or disposal of any
Hazardous Substances on or about the Project by Tenant, its agents,
employees, contractors or invitees. If any lender or governmental agency
shall require testing for Hazardous Substances in the Premises, Tenant
shall pay for such testing, if (i) Tenant is in breach of any provision in
this Section 29, (ii) Tenant, its agents, employees or contractors was
responsible in any way for the presence of any of the Hazardous Substances
discovered by such testing, or (iii) the applicable governmental agency has
requested that such testing be performed as a result of Tenant's activities
within the Project.
B. "Hazardous Substances" means any hazardous or toxic
--------------------
substances, materials or waste which are or become regulated by any local
government authority, the state in which the Project is located or the
United States government, including those substances described in the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation
and Recovery Act, as amended. 42 U.S.C. Section 6901 et seq., any other
applicable federal, state or local law, and the regulations adopted under
these laws.
30. EXCULPATION. Landlord shall have no personal liability under this
-----------
Lease; its liability shall be limited to its interest in the Project and shall
not extend to any other property or assets of the Landlord. In no event shall
any officer, director, employee, agent, shareholder, partner, member or
beneficiary of Landlord be personally liable for any of Landlord's obligations
hereunder.
31. RIGHT OF FIRST REFUSAL. Subject to Subsections A and B below.
----------------------
Landlord hereby grants to Tenant a right of first refusal for the Easterly
portion of Building A shown on Exhibit A, containing approximately 22,399
rentable square feet and which is commonly known as 46410 Fremont Boulevard (the
"ROFR Space"), to be exercised in accordance with terms and conditions set forth
----------
below. This right of first refusal shall not apply to any lease renewal or
extension which Landlord may enter into in connection with any then existing
tenant of the ROFR Space (collectively, an "Existing Tenant").
---------------
<PAGE>
A. If Landlord desires to enter into a Lease for the ROFR
Space with a third party (other than an Existing Tenant), Landlord shall so
notify Tenant ("Landlord's ROFR Notice") identifying the terms and
----------------------
conditions upon which Landlord shall lease the ROFR Space to such third
party. Tenant shall notify Landlord within five (5) business days of
receipt of Landlord's ROFR Notice whether it desires to lease the Subject
ROFR Space on the terms and conditions set forth in Landlord's ROFR Notice.
If Tenant does not notify Landlord within such 5 business day period that
it will lease the ROFR Space on such terms and conditions, Tenant shall be
deemed to have refused the ROFR Space. After any refusal, Landlord shall be
free to lease such ROFR Space to any third party on substantially the same
terms and conditions set forth in Landlord's ROFR Notice. If Tenant
exercises its right of first refusal with respect to the ROFR Space, such
space shall be added to the Premises for all purposes of this Lease on (a)
the terms and conditions specified in Landlord's ROFR Notice, and (b) the
terms of this Lease, to the extent that they do not conflict with the terms
and conditions specified in Landlord's ROFR Notice, shall also apply to the
ROFR Space.
B. Tenant's right of first refusal is subject to the
conditions that: (i) in the event Tenant cannot demonstrate to Landlord's
satisfaction (e.g., based on Tenant's most recently audited financial
statements) that Tenant's business operations at the Premises are
profitable as of the date Tenant elects to exercise its right of first
refusal hereunder, then notwithstanding any provision herein to the
contrary Landlord may require Tenant to provide additional lease/security
deposits or other alternative security (i.e., in excess of that which was
required in Landlord's ROFR Notice) which is acceptable to Landlord in its
sole and absolute discretion as a condition of exercising this right of
first refusal, (ii) on the date that Tenant delivers its notice exercising
its right of first refusal, Tenant is not in default under this Lease after
the expiration of any applicable notice and cure periods, and (iii) Tenant
shall not have assigned the Lease for the remainder of the Term, or sublet
all of the Premises under a sublease for the remainder of the Term, unless
pursuant to a Permitted Transfer.
C. Promptly after Tenant's exercise of its right of first
refusal, Landlord shall execute and deliver to Tenant an amendment to the
Lease to reflect changes in the Premises, Base Rent, Tenant's Proportionate
Share and any other appropriate terms changed by the addition of the ROFR
Space. Within 15 days thereafter, Tenant shall execute and return the
amendment to Landlord.
32. OPTION TO LEASE EXPANSION SPACE. Prior to January 1, 1999 and
-------------------------------
provided that Tenant is not then in default in the performance of any of its
obligations under this Lease (beyond any applicable cure period), Landlord
grants to Tenant the following option to lease Building F containing
approximately 53,312 rentable square feet (the "Expansion Space") on the same
terms and conditions as the Premises (including the annual $.05 per square foot
increases in the monthly Base Rent payable hereunder on the same rent
adjustments dates as set forth in the Schedule, and tenant improvement
allowance). Notwithstanding the foregoing, in the event Tenant cannot
demonstrate to Landlord's satisfaction (e.g., based on Tenant's most recently
audited financial statements) that Tenant's business operations at the Premises
are profitable as of the date Tenant elects to exercise its expansion option
hereunder, then notwithstanding any provision herein to the contrary Landlord
may require Tenant to provide additional lease/security
<PAGE>
deposits or other alternative security which is acceptable to Landlord in its
sole and absolute discretion as a condition of Tenant's exercising the foregoing
expansion option. Subject to the foregoing, if Tenant delivers written notice to
Landlord regarding its election to lease the Expansion Space prior to January 1,
1999 (the "Expansion Notice"), then Landlord shall commence the construction of
----------------
the Building Shell for Building F as soon as practicably possible thereafter and
Tenant shall commence paying Base Rent and the other amounts due hereunder for
the Expansion Space commencing on the date which is three (3) months after the
Substantial Completion of the Building Shell for Building F (the "Building F
----------
Commencement Date"; provided that the Building F Commencement Date will be
-----------------
delayed day for day for any construction which is commenced on the Building
Shell for Building F prior to January 1, 1999. In other words, if Landlord
commenced construction on the Building Shell for Building F (as evidenced by the
commencement of grading and other foundation work on the Building F land) on
November 1, 1998. then the Building F Commencement Date would be 5 months after
the Substantial Completion of the Building Shell for Building F (i.e., the
original 3 months, plus an additional 2 months because of the early commencement
of construction). To illustrate the timing of the rent increases which will
occur in connection with the Expansion Space, assume the Commencement Date for
the original Premises is January 1, 1999 and Tenant satisfies the financial
requirements set forth above and delivers the written expansion notice to
Landlord prior to January 1, 1999, then (a) as of the Building F Commencement
Date, Tenant would start paying monthly Base Rent in the amount of $69,305.60
per month (i.e., 53,312 rsf x $1.30/rsf), and the Tenant's Proportionate Share
of the Project would be increased from 18.62% to 36.95%, and (b) as of January
1, 2000 (i.e., the end of the first 12 months of the Term is the first Base Rent
adjustment date set forth in the Schedule), the monthly Base Rent for the
Expansion Space would be increased to $71,971.20 (i.e., 53,312 rsf x $1.35/rsf)
and thereafter the monthly Base Rent for the Expansion Space would be increased
by $.05 per square foot at the end of each twelve-month period thereafter in the
same manner and at the same time as the Base Rent increases occur for the
original Premises as set forth in the Schedule. Tenant's Expansion Notice shall
indicate whether Landlord or Tenant shall be constructing the interior tenant
improvements within the Expansion Space. Promptly after Tenant's delivery of its
Expansion Notice, Landlord shall execute and deliver to Tenant an amendment to
the Lease to reflect the addition of the Expansion Space, and the corresponding
changes to the definitions of Premises Base Rent, Tenant's Proportionate Share
and any other appropriate terms. Within 15 days thereafter, Tenant shall execute
and return the amendment to Landlord.
33. RIGHT OF FIRST NEGOTIATION. If Tenant does not deliver the
--------------------------
Expansion Notice to Landlord prior to January 1, 1999, then Tenant's expansion
option shall lapse. Provided notice is timely given and provided further that
Tenant is not then in default in the performance of any of its obligations under
this Lease (beyond any applicable cure period) and subject to the terms and
conditions set forth herein, Landlord grants to Tenant the following right of
first negotiation ("Right of First Negotiation") with respect to the Expansion
--------------------------
Space. Tenant's Right of First Negotiation shall not apply to any lease renewal
or extension which Landlord may enter into in connection with any then existing
tenant of the Expansion Space (collectively, an "Existing Tenant"). After
---------------
January 1, 1999 and subject to the terms and conditions set forth herein, Tenant
shall have the Right of First Negotiation with respect to the Expansion Space if
it becomes available for lease to a third party (other than to an Existing
Tenant) during the Term (including any extensions thereof). When the Expansion
Space
<PAGE>
becomes available for lease to any third party (other than an Existing Tenant),
Tenant shall have ten (10) calendar days following its receipt of Landlord's
notice that the Expansion Space is available to respond. Landlord's notice shall
be in writing and shall include the general terms on which Landlord proposes to
lease the Expansion Space. Tenant's failure to respond during such 10-day period
shall be deemed to be Tenant's election to pass on the Expansion Space. In the
event Landlord receives written notice from Tenant during such 10-day period of
Tenant's interest in the Expansion Space, then Landlord and Tenant shall have
the twenty (20) day period following Landlord's receipt of Tenant's notice to
meet, confer and agree in writing on the terms and conditions upon which Tenant
would lease the Expansion Space from Landlord. If Landlord and Tenant are able
to agree on the terms on which Landlord would lease the Expansion Space to
Tenant during such period, Landlord and Tenant agree to execute an amendment to
this Lease to incorporate the Expansion Space and those terms agreed to by
Landlord and Tenant. In the event Landlord and Tenant are unable to agree in
writing on the terms for the lease of the Expansion Space within such twenty
(20) day period (or in the event Tenant passes on such space, or is deemed to
have passed on such space), then Landlord shall be free to market the Expansion
Space to any third parties without any liability to Tenant. Landlord and Tenant
agree to negotiate in good faith taking into consideration the following
factors: (i) the rental rates of similar projects in the geographic area of the
Project (including the rent. operating costs, and all other monetary payments
that Landlord could obtain for the Expansion Space from a third party desiring
to lease such space, the services provided under the terms of the Lease, the
obligation, or lack thereof, to pay tenant improvement costs and leasing
commissions in connection with such renewal and all other monetary payments then
being obtained for new leases of space comparable to such space), (ii) it should
be assumed that the Expansion Space will be used for the highest and best use
allowed under the Lease, and (iii) in the event Tenant cannot demonstrate to
Landlord's satisfaction (e.g., based on Tenant's most recently audited financial
statements) that Tenant's business operations at the Premises are profitable as
of the date Tenant elects to exercise its Right of First Negotiation, then
Landlord may require Tenant to provide additional lease/security deposits or
other alternative security (i.e., in excess of that which was required by
Landlord for the original Premises) which is acceptable to Landlord in its sole
and absolute discretion as a condition of leasing the Expansion Space. The Right
of First Negotiation described herein is personal to Tenant and may not be
exercised or assigned, voluntarily or involuntarily, by or to any person or
entity other than Tenant, without Landlord's prior written consent, which
Landlord may withhold in its sole and absolute discretion. This Right of First
Negotiation shall automatically terminate upon the earlier of the following: (i)
Tenant's exercise of its Expansion Option as set forth in Section 32 above, or
(ii) Tenant's assignment of this Lease for the remainder of the Term, or
sublease of all of the Premises for the remainder of the Term, unless pursuant
to a Permitted Transfer.
34. OPTION TO EXTEND. Subject to the terms and conditions set form
----------------
below, Tenant may at its option extend the Term of this Lease for two (2)
successive periods of five (5) years each. Each such period is called a "Renewal
-------
Term." Each Renewal Term shall be upon the same terms contained in this Lease,
-----
except that (i) Landlord shall have no obligation to provide Tenant with any
Tenant Improvement Allowance in connection with such Renewal Terms, (ii) the
Base Rent during me Renewal Term shall be calculated as set forth below, and
(iii) any reference in the Lease to the "Term" or the Lease shall be deemed to
include any
<PAGE>
Renewal Term and apply thereto, unless it is expressly provided otherwise.
Tenant shall have no additional extension options.
A. The Base Rent during a Renewal Term shall be the
greater of (i) the Base Rent applicable to the last month prior to the
applicable Renewal Term, or (ii) the Market Rate (defined hereinafter) for
such space for a term commencing on the first day of the Renewal Term.
"Market Rate" shall mean the then prevailing market rate for a comparable
term commencing on the first day of the Renewal Term for tenants of
comparable size and creditworthiness for comparable space in the Building
and other first class office/R&D buildings of comparable age with similar
projects in the vicinity of the Building.
B. To exercise any option, Tenant must deliver a binding
notice to Landlord not sooner than ten (10) months nor later than six (6)
months prior to the expiration of the initial Term of this Lease, or the
then applicable Renewal Term, as the case may be. Immediately (and in no
event more than thirty (30) days) thereafter. Landlord and Tenant shall
commence the process of calculating the Market Rate for the particular
Renewal Term pursuant to the terms and conditions of Subsection C below and
following such process Landlord shall inform Tenant of the Market Rate.
Such calculations shall be final and shall not be recalculated at the
actual commencement of such Renewal Term. If Tenant fails to timely give
its notice of exercise, Tenant will be deemed to have waived its option to
extend.
C. Market Rate shall be determined as follows:
(i) If Tenant provides Landlord with its
binding notice of exercise pursuant to Subsection B above, then prior
to the commencement date of such Renewal Term Landlord and Tenant
shall commence negotiations to agree upon the Market Rate. If Landlord
and Tenant are unable to reach agreement within twenty-one (21) days,
then the Market Rate shall be determined in accordance with (ii)
below.
(ii) If Landlord and Tenant are unable to reach
agreement on the Market Rate within said twenty-one (21) day period,
then within seven (7) days, Landlord and Tenant shall each
simultaneously submit to the other in a sealed envelope its good faith
estimate of the Market Rate. If the higher of such estimates is not
more than one hundred five percent (105%) of the lower, then the
Market Rate shall be the average of the two. Otherwise, the dispute
shall be resolved by arbitration in accordance with (iii) below.
(iii) Within seven (7) days after the exchange of
estimates, the parties shall select as an arbitrator an independent
(i.e., one who has not previously worked for either Landlord or Tenant
or their affiliates) MAI appraiser with at least five (5) years of
experience in appraising office space in the metropolitan area in
which the Project is located (a "Qualified Appraiser"). If the parties
-------------------
cannot agree on a Qualified Appraiser, then within a second period of
seven (7) days, each shall select a Qualified Appraiser and within ten
(10) days
<PAGE>
thereafter, the two appointed Qualified Appraisers shall select a
third Qualified Appraiser and the third Qualified Appraiser shall be
the sole arbitrator. If one party shall fail to select a Qualified
Appraiser within the second seven (7) day period, then the Qualified
Appraiser chosen by the other party shall be the sole arbitrator.
(iv) Within twenty-one (21) days after
submission of the matter to the arbitrator, the arbitrator shall
determine the Market Rate by choosing whichever of the estimates
submitted by Landlord and Tenant the arbitrator judges to be more
accurate. The arbitrator shall notify Landlord and Tenant of its
decision, which shall be final and binding. If the arbitrator believes
that expert advice would materially assist him, the arbitrator may
retain one or more qualified persons to provide expert advice. The
fees of the arbitrator and the expenses of the arbitration proceeding,
including the fees of any expert witnesses retained by the arbitrator,
shall be shared equally by both parties. Each party shall pay the fees
of its respective counsel and the fees of any witness called by that
party.
D. Tenant's option to extend is personal to Tenant and may not
be exercised or assigned, voluntarily or involuntarily, by or to any person
or entity other than Tenant, without Landlord's prior written consent,
which Landlord may withhold in its sole and absolute discretion. Tenant's
option to extend this Lease is subject to the conditions that: (i) on the
date that Tenant delivers its binding notice exercising an option to
extend. Tenant is not in default under this Lease after the expiration of
any applicable notice and cure periods, and (ii) Tenant shall not have
assigned the Lease for the remainder of the Term, or sublet all of the
Premises for the remainder of the Term, unless pursuant to a Permitted
Transfer.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease.
LANDLORD:
CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By: /s/ Philip L. Hawkins
------------------------------
Print Name: Philip L. Hawkins
Print Title: Managing Director
Date: 9/14/98
----------------------------
TENANT:
APPLIED FIBER OPTICS, INC.,
a California corporation
By: /s/ Sheau Chen
------------------------------
Print Name: Sheau Chen
Print Title: President and CEO
Date: 8/31/98
----------------------------
